FTC head says he supports AMA. He should be investigating it.

Federal Trade Commission Chairman Jon Leibowitz assured the American Medical Association today that he is not a socialist — despite the FTC’s record of prosecuting physicians who refuse to sign contracts tied to government price controls:

One doctor accused the FTC of causing a shortage of physicians – another complained our actions “defy logic” – still another told us that our decision “goes beyond socialism, it is a return to serfdom.”

The picture painted by these comments is not pretty. By a few doctors – and I am glad it is only a few – we are seen as surreptitious socialists bent on keeping you from charging a fair price for your services – as heartless regulators holding you to outdated antitrust rules that no other health care player has to follow – as fastidious bureaucrats rejecting any change that would allow you to care for patients more efficiently.

Step back from those stereotypes, though, and you see that the FTC is, more often than not, on your side – as doctors who care about your patients and as consumers yourselves.

Surreptitious socialists didn’t conduct a major law enforcement sweep last year targeting bogus cancer cures – the FTC did. Heartless regulators didn’t set-up the national “Do Not Call” registry that lets you eat your dinner without sales pitches interrupting every bite – the FTC did.

Before proceeding any further, let’s consider Leibowitz’s audience, the American Medical Association — a politically connected trade group known for helping to erect government barriers to entry in the healthcare market. As Dale Steinreich wrote recently for Mises.org:

The American Medical Association (AMA) had [] been formed in 1847 by Nathan Smith Davis. Davis had been working at the Medical Society of New York with issues of licensing and education. While the pretense was always more rigorous standards toward the supposed end of effective treatments, exclusion was the reality. Hence it was no surprise that in 1870, Davis worked successfully to prohibit female and black physicians from becoming members of the AMA.

The AMA formed its Council on Medical Education in 1904 as a tool to artificially restrict education. However, the AMA’s conflict of interest was too obvious. This is where Abraham Flexner and the Carnegie Foundation entered the picture. Flexner’s older brother Simon was the director of the Rockefeller Institute for Medical Research and he recommended his brother Abraham for the Carnegie job. Abraham’s acceptance of the role was the perfect special-interest symbiosis. Carnegie’s desire was to advance secularism through higher education, thus it saw the AMA’s agenda as favorable toward that end. Rockefeller’s benefactors were allied with allopathic drug companies and hated for-profit schools that couldn’t be controlled by the big-business, state-influenced foundations. Last of all, the AMA got an objective-appearing front in Carnegie.

Not only was Abraham Flexner not even an allopathic physician; he was not a widely known authority on education, never mind medical education, as he had never even seen the inside of a medical school before joining Carnegie. His report was already effectively written, since it was essentially the AMA’s unpublished 1906 report on US medical schools. Furthermore, Flexner was accompanied on his inspection by the AMA’s N.P. Colwell to insure the inspection would arrive at the preordained conclusions. Flexner then spent time at the AMA’s Chicago headquarters preparing what portion of the final product was his actual work.

Regardless of these scandalous circumstances, state medical boards and legislatures used the report as a basis for closing medical schools. Around the time of Flexner, there was a high of a 166 medical schools; by the 1940s there were just 77 — a 54 percent reduction. Most small rural schools were closed, and only two African-American schools were allowed to remain open. By 1963, despite advances in technology and a huge growth in demand, one effect of the report was to keep the number of doctors per 100,000 people in the United States — 146 — at the same level it was at in 1910.[17] Of the approximately 375,000 physicians in practice in 1977, only about 6,300 or 1.7% were African-American.

Much like Abraham Flexner, Jon Leibowitz is a convenient proxy for those who want to indirectly restrict consumer choice in the healthcare market. For example, when Leibowitz brags to the AMA that he’s helped them by “targeting bogus cancer cures,” he’s referring to cases like William Isely, where Commission lawyers censor Internet content that gives consumers access to research and information deemed unscientific — i.e., non-FDA-approved — by the lawyers.

If Leibowitz really cared about consumers, he’d be targeting the AMA rather then try to be its friend. But Leibowitz know the AMA is too valuable as a political ally for his own agenda — or should I say, the Democratic Party’s agenda: “The recently enacted health care bill – and I congratulate the AMA leadership on your involvement in its passage – gives us much more on which we can agree – and more than that, on which we can work together going forward.” Why is the chairman of a nominally independent executive branch agency congratulating the AMA for support of a bill that has nothing to do with his agency’s jurisdiction?

Because Leibowitz also wants AMA support for his pet project — giving the FTC a veto over settlements in drug patent infringement lawsuits. Leibowitz claims he needs this power to lower drug prices. While many Mises readers share Leibowitz’s aversions to patents, keep this in mind: What Leibowitz wants is not a repeal of the patent laws, or even limits to patent excess; he wants to graft an entirely new antitrust regime on top of the existing patent litigation system. In the long run, this will simply increase costs, not lower consumer prices.

Indeed, the whole thrust of Leibowitz’s remarks is not that he wants to promote free markets and consumer choice; it’s that he wants the FTC to play a central role in all future healthcare decision-making throughout the country. This mirrors recent remarks by Leibowitz’s Justice Department counterpart, Christine Varney, who told a group of lawyers last month, “antitrust has — and will continue to have — an essential role to play in health care.”

To that end, Leibowitz told the AMA he plans to convene — wait for it — “a public workshop” on how the FTC can use the new Obamacare law to expand its control over healthcare policy. No doubt the AMA will provide essential political cover. Heck, with Leibowitz’s FTC term expiring this fall, it wouldn’t surprise me to find him working as an AMA lobbyist come 2011.

UPDATE: Another gem from Leibowitz’s speech:

[The health care law] establishes pilot programs for Medicare called “accountable care organizations” or ACOs as possible devices to improve quality and lower the cost of health care. Each ACO will be responsible for both the cost and the quality of care for at least 5,000 patients. ACOs will share with Medicare any savings that they generate because of their efficiency in meeting HHS performance targets. While the details of the ACO program are not yet available, so long as the government purchases the services and unilaterally sets payment levels and terms, there won’t be an antitrust issue. (italics added)

So to recap, Leibowitz is no socialist, but he endorses the government setting prices for healthcare. Makes perfect sense.

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