NCPA - National Center for Policy Analysis

Trading Blood for Profit

July 16, 2012

Entrepreneurs Ben Bowman and David Mitchell are attempting to free up the market for blood from inefficient and outdated business practices. Creating a new startup, General Blood, Bowman and Mitchell are eager to offer hospitals nationwide lower prices for blood than are currently available, taking advantage of their novel approach to the blood sector, says Forbes.

That a nascent enterprise could have such ambitious objectives speaks to the gross misalignment of the market's status.

  • The American Red Cross is easily the largest player in the sector -- it controls 44 percent of the nation's blood supply -- and its lack of innovation has allowed for stagnation.
  • Under the status quo, hospitals rely upon donations from local donors who are within driving distance, creating an inefficient market that sells the same goods at different prices simply because they are in different locations.
  • For example, a pint of blood might cost a hospital $210 in Wisconsin but $265 in New Jersey.

Furthermore, the current market does not only allow for market inefficiencies in terms of price, but also allows these isolated regional markets to waste product.

  • By confining purchases to local operations, some hospitals find themselves with unexpected surpluses while other hospitals in other areas are in dire need.
  • Additionally, hospitals with surpluses often fail to use blood before it expires, contributing to national figures for wasted blood that government data peg at between 5 and 14 percent.
  • Given that red blood cells have a shelf life of 42 days and platelets can last for five, there is no reason that blood resources cannot be more efficiently allocated among the nation's health care providers.

In addition to trying to become a middleman for a national blood market, Bowman and Mitchell would also like to see the creation of an online marketplace for different types of blood. Because different types of blood have different uses (O- is much more versatile than AB+, for example) pricing is not a simple matter. Allowing buyers and sellers to settle on prices would fix this market failure.

Source: Erin Carlyle, "The Guys Who Trade Your Blood for Profit," Forbes, June 27, 2012.

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