The Microsoft model is a term used to describe the relationship between healthcare providers and health insurance companies. Rather than paying each other for services, they pay royalties to each other for access to patents. This means that if an MRI machine is made by GE, then GE gets paid every time someone uses it. The same thing happens with pharmaceuticals before patients are prescribed them. Whenever a provider prescribes for something covered under patent, what they're doing is paying the drug maker via the insurance company before patients ever use their medicine.

This was originally conceived as a way of giving smaller companies, without a significant market share in either industry, leverage over larger corporations. However, now it's become an integral part of both industries and has allowed both to become more monopolistic.

The Microsoft Business Model

For years, Microsoft ruled the computer sector with its Windows software; Apple was an afterthought for more than a decade while Microsoft held control. Before Google Web browsing gained dominance in the market, Microsoft offered Internet Explorer for free, forcing Netscape and other competitors to go out of business.
Then, in 1998, the Federal Court of Appeals for the District of Columbia Circuit forced Microsoft to license certain technologies that it had acquired from other companies. The ruling included requiring that Microsoft produce Windows without its Media Player product, which allowed videos and music to be played on computers. As part of the decree, Microsoft was required to offer computer makers three versions of Windows without Media Player pre-installed (Nasdaq).

The result of this is that every time someone uses Internet Explorer, pays royalties will go back to Microsoft; more people are using IE than ever before. But many consumers aren't aware their money is going straight into Steve Ballmer's pockets while they're trying to access free information on the Web with their favorite browser.

How The Microsoft Model Affects Healthcare

The first thing that the model does is increase costs, which I'm sure you can understand under its name. Instead of just paying for health care services directly, providers are also paying royalties on patented products before they're ever put to use. Since the patent restricts who can manufacture a particular product, patients have to wait for an existing company to produce it so they can buy it. This may not seem like a big deal, but when something does need to be used immediately or isn't available in time, the prices of the royalties become more important. If someone has a heart attack and needs a stent, they don't have time to wait for GE to make a new one.

The problem is that this isn't the only way that patents increase costs. As I pointed out before, providers are also essentially paying royalties when prescribing patented drugs. This means that anytime you're given a prescription from your doctor for medication, they're paying the pharmaceutical company their cut. The patent restriction makes doctors unable to prescribe different drugs when there isn't an exact substitute available at that moment.

However, since branded drugs are usually significantly more expensive than unbranded generics, this means that patented medication is usually more expensive in practice.


So patents do increase prices, but there is another way they affect costs. When someone files for a patent, they can claim it's confidential; meaning that nobody will ever know that the product exists at all. This means that pharmaceutical companies can keep their drugs hidden from generic manufacturers who would otherwise be able to produce them (and sell them for cheaper). Since most drug makers only offer competing patented medicine after years of exclusivity, this delay increases costs even more by preventing generics from coming onto the market sooner.

This probably isn't something you've thought about before because it's not like your doctor is telling you how much of your money is going to GE every time they give you an MRI. But when you look into it, it's pretty clear that patents are a great deal for the pharmaceutical companies, but not so much for consumers. It's just another way that the government has taken away people's power and given it to corporations that don't have their best interests in mind.