The world was glued to the TV screen last February as a teenager was victimized by a tragic error at a major medical institution and given a mismatched heart-lung transplant. The frenzy that followed to find yet another organ donor captured our imaginations and hopes until it came to its tragic end. It was barely mentioned, as to who was going to pay for her procedures and the use of the array of medical equipment. The public assumed both the medical center and philanthropists, via their tax-deductible donations, were bankrolling the whole venture. After all, how could money ever be an issue when the life and health of a young girl was at stake? True in theory; not so in practice. Indeed, the health-care-for-profit system generates huge returns for drug and medical equipment companies, matching those made from the latest purveyors of health care – the insurance complex that controls health care through its health maintenance organization (HMO) system.

The burgeoning medical care equipment industry grabbed a new brass ring on the merry-go-round that is US health care. Totally privatized, and rather highly specialized, it becomes almost an automatic monopoly. In just one typical example, a company in Dallas, Texas makes not the actual parts or components of medical prostheses but only materials, like the screws, bolts, and nuts that are vital to the units’ applications. This one factory is capable of handling the world’s business needs. Without any cost controls from either competition or government, it is only hoped their prices are within reason. No one is quite sure. There is no watchdog.

The pharmaceuticals, with a markup at least 40 times greater than any other industry in the world, including major industries like automobiles, appliances, computers and even some retailing, have resorted to consumer advertising in all major media to attract new customers. The drug houses are busy hiring Madison Avenue agencies and celebrity spokespersons to entice viewers to implore their doctors for this and that. It apparently helps the bottom line. We are seeing more and more such ads. The medical appliance industry is following suit, making appeals to the medical community and plying them with all sorts of enticements, from four-star restaurant dinners to weekend golfing or tennis jaunts or a cruise of your choice. Costly and exorbitant? No need to fret. The mark-up more than allows for such practices.
Obstetrics is particularly ripe for such shenanigans. Home monitoring and pre-labor documentation with paraphernalia that fill up an average-size living room all appeal especially to first-time, mothers-to-be. Besides, who can resist the smiling sales people who add, “After all, we want what’s best for your baby.” They suggest you may be an abusive parent if you refuse or even question their validity.

The consumer is not the only target. Hospital services, especially in this highly litigious era of medicine, do not want to be without the latest state-of-the-art devices. One new father visited his wife and baby son on the delivery night and looked through the windowed nursery filled with gurgling and healthy newborns. “My,” he remarked, “I didn’t know if I were in my son’s nursery or the NASA ground control center in Houston. I couldn’t see the nurses for all the stainless steel machinery.” This is more real than imagined. Many nurseries and hospital rooms are now being monitored by electronic equipment plotting vital signs and patient-attached Rube Goldberg devices rather than live nurses. I leave it to your imagination as to who is paying for all this. One noted professor of obstetrics recently published his impression of modern–day university OBGYN training in a major journal entitled The Modern Day Obstetrical Resident – A Marvel in Hi-tech Medicine.

Medical investigator Hal Strelnick pointed out in his HealthPac review some years ago, while pharmaceuticals have to undergo reasonably extensive laboratory animal and human testing for their Federal Drug Agency (FDA) approvals, despite concerns about fast-shuffle tests and inside lobbying for necessary sanctions, marketers for new medical technology have a minimum oversight. There is more and more talk on Capitol Hill of tightening regulations, but for the most part, none have been put into effect. Stay tuned. The rumbles are getting louder.

Just as major conglomerates, like Proctor & Gamble, Colgate-Palmolive and Bristol Myers, have gotten into the drug business, their counterparts and giants in other industries have jumped on the medical machinery bandwagon. And not coincidentally, they are also major suppliers of the Pentagon’s needs. The roster coincides with the upper echelon of the Fortune 500 – McDonnell-Douglas, General Electric, General Dynamics, Lockheed Aeronautics, Hewlett-Packard, Honeywell, RCA and Raytheon. And like the pharmaceuticals and the HMO/insurance combines, the list is getting smaller, as one gobbles up the others. As HealthPac documented, Revlon, for example, has quite a monopoly on eye care, from mascara to intraocular lenses. McDonnell-Douglas, the Pentagon’s major supplier of F-16 jets, has now expanded into the medical supply industry, with all sorts of hospital monitoring and computer systems. This list goes on and on.

Just how big is the medical equipment industry? Interestingly, for reasons that are still unclear, those figures are somewhat vague. Standard & Poors, the New York Stock Exchange and even a variety of world almanacs report different statistics, probably because much of the equipment gets buried in other parts of the parent company or conglomerate. It is well upwards of a $45 billion business: and its gross doubles every decade. It passed the pharmaceuticals back in the mid-1970s and is still climbing rapidly. Based on HealthPac statistics, hospitals supplies and equipment hit $15,000 per bed nationwide. With a shrinking number of outlets and the acquisitions and mergers of whatever is left, the industry has been an investment banker’s dream. Like everything else in the market, capitalism’s recession hits them all, but the medical supply commercial outlets are holding on better than most others.

Yet another facet of this industry is what are considered disposables – equipment in which replacements are the mainstay of the business. Disposable needles, syringes, catheters, trocars, scoping sleeves and shields, specula and even scalpels and other surgical instruments are now produced in all forms of plastics – another boondoggle for suppliers. In this area, there are obvious kingpins. HealthPac listed Hewlett-Packard, the computer people, as the runaway producer of patient monitoring devices, from fetal to cardiac. By far, needles and syringes are the domain of Becton-Dickinson (now almost all disposable). Other industrial giants such as Boeing, Microsoft, IBM, MacDonald’s, Wal-Mart, Proctor & Gamble, Exxon-Mobil, Goodyear and GM and Ford have entered the highly contested field of medical equipment and supplies. Competition, the only hope left for a needy public in a free enterprise system to keep costs at affordable levels, becomes more and more of a dinosaur. As long as the industry remains privatized, the buying public is at its mercy.

The medical supply industry is so secure that it has seemingly even survived the rule of thumb that says with volume, costs decline. That is obviously how chains and franchising have squeezed out mom and pop stores and small businesses. Fast food, office supplies and hardware/household outlets are just three obvious cases in point. The corner drug store is no more; the downtown diner has gone by the wayside; the local hardware merchant is difficult to find. The medical supply people have overcome the volume-is-cheaper adage. As hospitals merge and become medical empires as they try to stay afloat in the era of the HMO and banking takeovers that slash their reimbursements daily, the suppliers are still in charge. The costs of equipment now sold to combination buyers of merged hospitals have been nudged just a tad. The industry has held the line, knowing its product is life demanding. Hospitals, no matter how humongous their buying power, are still captured by supply and demand. Many an investigative reporter has been impressed by the nature of the medical supply industry. With its usurpation by major conglomerates, the competitive protection that mirrors the pharmaceutical industry has it going one better. The field is narrowing as we speak.

The HealthPac report also described the internationalization of production that is marking the industry. The globalization that Gus Hall described as the final stages of capitalism is marked by certain traits it calls “accomplishments.” One is that as the computer and air travel have made access all the easier. Mergers and acquisitions have made survivors all the more powerful. Factories and maquiladoras degrade wage scales and have working conditions that are near subhuman, and with general worker, exploitation that surpasses the developed world manyfold. The medical supply industry is no exception.

Domestic regulations have forced a relatively high standard for products. These have essentially kept foreign competitors from gaining access to the US market. As a side benefit, many of the world’s physicians-in-training pass through US hospitals and medical centers for specialty training. They become familiar with the hi-tech equipment, making for an added demand when they return home. Blue jeans, rock and roll and McDonald’s quarter-pounders are not the only legacies of middle America’s affluence and influence.

The medical equipment supply industry stands out from the rest of the Fortune 500 in certain aspects. It enjoys the impression of being an “ethical” industry via its association with health care, and therefore a step above the crowd. One major manufacturer of suturing materials and other surgical instrumentation took advantage of that public image and calls itself Ethicon, since snatched up by Johnson & Johnson.

An often accepted myth ballyhooed by these corporations’ PR departments is that much of the need for the high markup is the funding needed for research and development (R & D). They always remind an unaware public that for every successful medication or piece of medical equipment there are many more that took time and personnel but failed. We are not told the vast bulk of financing for such ventures was either allocated by the Congress through various governmental agency grants from the National Institute of Health (NIH) on down to tax write offs. Because of this finding Wall Street has described the industry as near “recession proof,” similar to the banking and insurance enterprises. Today’s recession is an example of that very occurrence.

Then there is built-in obsolescence. Car models and household appliances usually become outmoded not so much because of vast improvement in technology but from cosmetics and bourgeois appeal. The pace of medical technology is moving along so quickly that x-ray cameras, cardiac monitors, dialysis units, CAT scans, electronic tomography devices (PET) and nuclear devices (NMR) become archaic when morbidity and mortality are improved with replacements. The public demands such updating, even when they are sometimes not real advancements, and the industry responds. But then come more R & D federal funding and more profits. Astoundingly, taxpayers shell out for failures, but when devices become successes, patents and profits are turned over to the private corporate entity lock, stock and barrel.

Part of the campaign that denies health care as a right is to continually orchestrate programs that keep it within the private sector. The industry is resisting those who are working to create a single-payer federally financed and managed health care plan. Such a plan must include a strict socialization of the nation’s pharmaceutical and medical supply industries. They must go hand in hand.

It was back in 1942, as the US was readying for a full-scale war against fascism, that the Department of Defense (then called the War Department) awarded a major contract to the Picker X-ray Corporation, the then leading manufacturer of radiological equipment. It was for the construction of the Norden bombsight, the state-of-the-art unit that was an integral need of the US Air Force and attributed to being a major contributor to the victory over fascism. It was Harvey Picker who came to President Franklin Delano Roosevelt in a famous White House meeting and informed the president that no contract was needed. The Picker Company CEO stated he would convert the major portion of its facilities away from x-ray needs to the Norden contract. The price would be tabulated strictly on a cost basis. War against fascism, Picker told FDR, is not a time for profit.

That vignette has been told many a time, and has been cited as a reason why many aware medical buyers and physicians have remained loyal to the Picker Company. Regrettably, this was the exception that makes the rule. The profit-before-people philosophy that guides the medical supply industry has contributed so mightily to the shameful way health care is now delivered in the US. This year, it is hoped that the Dellums bill calling for a government-run single-payer plan will gain momentum, and with it strict control on the pharmaceuticals and medical equipment needs of a grateful nation.

--Don Sloan is assistant editor of Political Affairs.