One catch phrase in health care reform is cost-effectiveness. To paraphrase, this label means that a medical treatment is worth the price. For example, influenza vaccine, or ‘flu shot’, is effective in reducing the risk of influenza infection. If the price of each vaccine were $1,000, it would still be medically effective, but it would no longer be cost-effective considering that over 100 million Americans need the vaccine. Society could not bear this cost as it would drain too many resources from other worthy health endeavors. Economists argue as to which price point determines cost-effectiveness for specific medical treatments. As you might expect, insurance companies and pharmaceutical companies might reach different conclusions when the each perform a cost-benefit analysis. Remember, it’s not just cost we’re focusing on here, but also effectiveness. If a medicine is dirt cheap, but it doesn’t work, it’s not cost-effective. Get it? Pharmaceutical companies who are
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