Headaches, Aspirin and a Welcome Economic Tsunami

by Tom Robertson

Executive Director, Vizient Research Institute

The use of willow bark and other salicylate-containing plants for pain relief dates back to Hippocrates. The first scientific description of the medicinal use of willow bark occurred in 1763. By 1838, salicylic acid, the active ingredient in willow bark, had been isolated at the Sorbonne in Paris. The modified form of acetylsalicylic acid, which turned out to be more tolerable to the digestive tract, was first formulated by the Bayer company in Germany. Their brand name for the product was Aspirin. 

It would be over 50 years before Dr. Lawrence Craven, an unknown general practitioner in Glendale, California, advanced the hypothesis that aspirin played a role in the prevention of heart attacks and strokes. And it would be several more decades before anyone conducted clinical trials to test Dr. Craven’s hypothesis.  

Aspirin did a remarkably good job at what it was initially intended to do…reduce pain and lower fevers. Its role in preventing cardiovascular events (arguably many times more valuable than its analgesic contributions) were an unexpected benefit that went unrecognized for nearly a century. A similar dynamic—namely an unexpected benefit with the potential to dwarf the primary rationale—looms as healthcare providers reconsider their supply chains. 

The vulnerability of healthcare providers from the pandemic’s interruption of critical supplies produced overseas was a startling realization. Stories of cargo ships changing course in response to international bidding wars, or of health systems driving shipments of personal protection equipment (PPE) in unmarked trucks to avoid potential hijacking were alarmingly common. In the wake of such vulnerability, not just healthcare but virtually every industry, is re-examining having so little of what they depend upon produced here at home.  

Whether it’s PPE or pharmaceuticals, auto parts or electrical components, or Defense Department computer chips, COVID-19 revealed threats to medical well-being, economic prosperity and even national security. Every industry on the economic horizon is considering the merits of bringing essential production back to the United States, even if that means higher unit costs. 

Like aspirin, domestic production of mission-critical product inputs has an immediate and visible benefit—reduced supply chain vulnerability. But also, like aspirin, domestic production of key inputs has a potentially greater benefit: stimulating the American economy at a time when it is desperately needed. The unexpected benefit lies in what economists call the Multiplier Effect. 

Imagine dropping a stone into a quiet pool of water. Concentric rings move out in an expanding circle around the point where the stone entered the water. Drop a larger stone and the waves get bigger and last longer. 

Any investment in the economy, like the stone, creates waves. Think of those waves as jobs. If you decide to build a car, someone must put it together, but someone else needs to fabricate the steel. Someone makes the tires, while someone else makes the windows, the radio, the electronics and the brake pads. You get the idea. Someone drives the truckload of cars to the dealership. The dealer employs folks to sell and to service the cars. The decision to build the car is the stone. The rings are all the jobs and resulting income created when the stone hits the water. 

When I was a kid, many of my friends’ fathers worked at a steel mill in the town where I was born. When General Motors made a car, the steel came from Pittsburgh. The iron ore to make the steel came from northern Michigan. The coal to fire the blast furnaces came from mines in West Virginia. When the railroads added track or skyscrapers needed girders, that steel came from the mills where my friends’ dads worked. The rubber tires came from Ohio. If someone from General Motors called someone from US Steel in Pittsburgh, they were talking on telephones made by Western Electric in Cicero, Illinois. The automotive industry in the 1960s had a very large multiplier effect. Today, the steel mills in my hometown are all closed. The steel comes from overseas. 

Healthcare has traditionally had a lower multiplier effect than manufacturing because a much higher proportion of the health care product is labor at the bedside. A lower proportion involves durable goods made with other labor. On the flip side, because healthcare labor has remained local, its multiplier effect has not eroded as much as in other industries, where so much of the downstream economic benefit has escaped to other countries in the form of imported inputs. On balance, health care provides considerable economic benefits in almost all communities. But its multiplier effect could be much higher if what we bought was made domestically rather than being imported. 

So as health care joins other industries in re-examining the merits of domestically produced equipment and supplies, it’s worth reflecting on the 100-year experience with aspirin. Reducing vulnerability to the potential disruption of mission-critical equipment and supplies is the primary benefit, like the anti-inflammatory or anti-pyretic benefits of aspirin. But the farther reaching—and potentially much larger- eventual benefit (like the anti-coagulation properties of the aspirin), will come in the form of a higher economic multiplier effect. 

If enough industries bring enough production of mission-critical product components back to domestic settings, the cumulative impact may be much larger than any stone being dropped into water. It could be a shift of tectonic plates on the ocean floor, setting off an economic tsunami…to the benefit of the American middle class.