More On Legal & Compliancefrom The Advisor's Professional Library
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As a student of logic (many years ago, admittedly), I came to realize that deductive reasoning has many limitations: perhaps most notably, that even the soundest of arguments rely on premises that can always be called into question. In fact, it’s only after we can agree on the premises that logic is useful. Yet logic is also helpful in that in enables us to boil down an argument into its key elements, so we can compare our reasoning in one situation to another, to determine if our thinking has been affected by our emotions or other factors.
Over the holidays, the notion struck me that comparing situations might be instructive during a discussion of medical ethics with my brother-in-law the doctor. What would it sound like if we applied some of the current reasonings in the advisor fiduciary debate to medical situations? If nothing else, it might be amusing.
Let’s start with the notion that “financial advisors” can wear two hats—that is, be professional advisors with a duty to act in the best interest of their clients some of the time, while serving as salespeople representing their brokerage firms at other times. Suppose doctors were allowed that same latitude?
Physicians would be subject to medical ethics and the Hippocratic Oath during some of their relationship with their patients, but could also be employees of a pharmaceutical company, representing its interests by selling drugs to those same patients. It would then be up to us as patients to determine when our doctor was giving us unbiased professional advice, and when the medicine she or he recommended was appropriate and the best treatment when compared to what was available from other physicians. Would this enhance or diminish our current medical care, such as it is?
Now let’s take it one step further, allowing our doctor to get paid based on the volume of drugs that they “recommended” though commissions, so not only does he or she only choose from a limited range of drugs, but has a financial incentive to recommend those drugs rather than other forms of treatment. See any problems with that? And since their income from drug sales is so good it’s eclipsing revenues from office visits (due to the fact that patients who trust their doctors tend to do whatever they are told), some enterprising physicians in larger practices hire chemists to create their own proprietary drugs, which of course have much higher profit margins.
Finally, when some clearly unenlightened patient advocates and start to raise concerns with the inherent conflicts of interest and potential for a decline in patient care in these practices, the FDA and state medical boards step in. Their solution? Regulations requiring that doctors disclose the situation to their patients—their relationship with a drug company, the fact that they get paid
commissions (but not the amount), and that they make their own drugs—all wrapped up in glowing language about the patient advantages of these practices, and not a peep about the potential effects on the care provided.
Obviously, anyone who understood the above situation would opt to go to a physician whom they (or their insurance company) could pay directly, without all those financial conflicts. But here’s the catch: those fee-only doctors would have to charge more for office visits, as they couldn’t supplement their income with commissions and/or proprietary revenues. So health insurance companies wouldn’t “approve” them, leaving only the “rich” who could afford to go to unbiased doctors. This is what logicians call reductio ad absurdum: reducing an argument to its absurd conclusion.
The real absurdity is that we have both the securities and insurance industries arguing that this scenario actually makes sense for financial consumers.