The Washington Post reports on a Blue Cross Blue Shield Association report on prices for hip and knee replacement surgeries. Presumably to no one's surprise, the report concludes that high prices do not correlate with high quality. Because the article uses the terms "price" and "cost" rather interchangeably, it is important to understand that price and cost are independent variables. Prices do not necessarily reflect cost. Prices reflect what the market will bear.
In a similar vein, the Wall Street Journal's Pharmalot blog reports on a National Bureau of Economic Research study about the high cost of cancer treatment drugs. The report attributes the high cost of these drugs to several factors, including the facts that health coverage acts as a price support, doctors are used to rising prices and
the effect of the growing 340B Drug Discount program in which drug makers must offer discounts of up to 50% on all outpatient drugs to hospitals and clinics that serve indigent populations. Drug makers, they speculate, may offset the growth in this program by setting higher prices elsewhere.
“We argue that, under these conditions, manufacturers are able to set the prices of new products at or slightly above the prices of existing therapies, giving rise to an upward trend in launch prices,” write the authors, one of which is Peter Bach, a physician at Memorial Sloan Kettering Cancer Center in New York, who has been outspoken about the rising prices for cancer treatments.Also with respect to medical advances, the New York Times reports that "A patient who received an artificial heart in August has recovered sufficiently to return home, the French company that makes the device said on Monday, signaling a milestone toward the possible commercialization of the device." The patient who received the device was suffering from congestive heart failure.