The Inverse Rule of Dispensing Medicine: Oversupply Drives Up Prices

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I often tell my colleagues that pharmaceutical pricing and medical care in general do not follow the traditional rules of supply side economics. It is the threat of government regulation keeps prices in check. I am then accused of supporting socialized medicine and subscribing to a traditional liberal piety for subsidized healthcare. Hear my argument first before you pass judgement.
Let me compare Canada and Boston ...
as an example. There are far more MRI machines in Boston than there are in Canada. Boston has much higher healthcare costs compared to Canada. Canada has better quality health outcomes. Why is that? The oversupply of MRI machines in Boston leads to greater access to the machines. Health insurance insulates the customer from the true costs of the this diagnostic tool. Also, the Boston consumer tends to be highly educated and demands this level of care so it is prescribed more often. In this example the patient outcome is no different than Canada. This is because true need for MRI is always met in Canada. The MRI is often overused in Boston or the US in general for simple sprains or other injuries that could be easily tracked by a healthcare professional using traditional methods. Keep in mind that any diagnostic tool presents risk such as being exposed to radiation. Indiscriminate use of these machines may raise other risks in the patient's future.
Here is an example of my other point regarding pricing. Imagine that you have a life-threatening illness and a single tablet can cure you. What would pay for that tablet? Would you sell everything you own or otherwise risk dying? I suspect that there is little upper limit on pricing that could be charged unless companies were concerned governments would step in and control prices.

Which is exactly what happens in Canada.

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