Libertarian Capitalism Incompatible with Healthcare

The pure model of libertarian capitalism says that the mystical invisible hand of the market will necessarily produce ideal outcomes. But, as the article linked here shows, pure capitalism is inherently incompatible with effective healthcare.

To summarize the Ars Technica article: A report by Goldman Sachs says outright that curing diseases is incompatible with a sustainable business model. They point to Gilead Sciences which created a gene-based cure for hepatitis C. The cure is so effective that it is exceeding the transmission rate of the disease such that the number of people to sell the cure to has been decreasing. Therefore, revenue from marketing the cure is now decreasing.

Of course, for pure capitalists, this is an anathema.

What should be done to encourage a company seeking cures, because the forces of the market and market gurus (e.g., Goldman Sachs) encourages avoiding finding cures.

The government could offer a ‘soft landing’, something like granting 1/2 of the difference between a previous year’s earnings and last year’s reduced earnings for the life of the patent. Maybe the government could grant a perpetual patent rather than expiring patent for treatments that meet a definition of ‘cure’ (e.g., the Gilead Sciences treatment has a 90% cure rate).

More radically would be to remove pure capitalism from healthcare. Besides a properly socialized system such as every other western democracy has, the government can provide rewards for cure, exclusive sales licensing, guaranteed incomes for drug companies that develop such cures, etc.

But, as things sit, the incentives are weak for creating cures compared to the incentives for selling interminable treatments.