With the Ebola virus confined to impoverished states in Africa until 2014, drug companies had little financial incentive to develop a vaccine. “A profit-driven industry does not invest in products for markets that cannot pay,” Margaret Chan, the director general of the World Health Organization, said in late 2014. At the time, at least 13,567 people were known to have contracted the virus in the outbreak, with nearly 5,000 people dead. It cannot be said that the profit-motive in a market economy is efficient in this case.
As a few cases made their way to the U.S. and E.U. in the Fall of 2014, elected officials quickly felt the fear among their respective constituents. As a result, the U.S. sent troops to West Africa to help contain the illness. In short, money began entering the equation in significant amounts as soon as the people in developed countries perceived themselves as being at risk. Doubtless public funds went to drug companies for expedited research toward a viable vaccine. The arrow here goes from governments to private companies in the marketplace, rather than coming out of the “efficient market hypothesis.” In other words, relying on private companies and the market mechanism, moreover, may be suboptimal in the field of medicine.
The implication for the Affordable Care Act, or “Obamacare,” is that the president erred in caving into the health-insurers lobbyist on including a public option. Relying on private insurance companies may be suboptimal, though admittedly they are not drug companies. Even so, if the market mechanism itself is deficient in the case of a vaccine, then perhaps the healthcare industry, including health insurance, ought to rely chiefly on government rather than the private sector.