The attributes of different blood collection systems

 

It has been argued that ‘the issue of paid versus unpaid donation continues to be used as a rather poor weapon by those in the blood transfusion service seeking a monopoly on the supply of blood products” [1]. While such a statement may simply appear to be the view from someone bitter at being excluded from operating in this medical sector, there is some substance to the allegation that critics have often adopted a one-sided position towards the concept of paid blood donation. This is because, in general, they have only made comparisons between the benefits provided by altruistic blood donation against the failings of paid donation without taking into account either the numerous advantages that the use of paid donors offers or the liabilities that may exist in the undue reliance on unpaid blood donors.

 

This section attempts to rectify this imbalance by examining, in some detail, the relative strengths and weaknesses of both these systems. In addition, we look at how some of their properties tie in to the concept of market failure since, to some extent, each system has unique features that make it susceptible to particular problems. For convenience, we employ the same four criteria that Titmuss used when he alleged that a commercial market in blood, as exemplified by the one then in existence in the USA, would always be inferior to an altruistic system of unpaid donation, as found in the UK.

 

i) Purity, potency and safety- quality per unit

One of the underlying arguments against the use of blood acquired from paid donors revolves around the issue of blood quality. Here, it is asserted that in comparison to altruistic collection systems, “commercial markets are much more likely to distribute contaminated blood” [2], with the negative implications being suffered not only by blood recipients, but also by donors.

 

While blood safety issues normally focus on protecting the welfare of recipients, critics of paid donation have also expressed concern at the effect that such activities may have on blood sellers. This is since there is a widespread fear that if people depend on their income from selling blood for survival, they may have an incentive to bypass any regulations that limit the quantity of blood they can provide. This may then cause them to sell blood at a faster rate than their bodies can replace it, thereby endangering their health by disrupting the functioning of organs and other bodily systems. While these concerns are legitimate, as some donors may indeed over-donate (as was seen when looking at the situation in Asia), there are certain points that must be addressed relating not only to the optimal frequency of donation, but also to the feasibility of introducing measures that prevent such behaviour from occurring.

 

First, one noticeable aspect of the improvements made in blood collection revolves around the fact that the annual rate at which blood has been drawn from human donors has increased over time, with no noticeable problems being detected in donor health. In the late 1960s, Titmuss derided American blood banks for usually collecting blood five times per annum by remarking that the twice a year British donation limit was “probably the lowest and most rigorous standard in the world from the viewpoint of the safety of both donors and recipients” [3]. In the intervening years, the frequency with which British donors could donate has fallen in line with the current globally accepted standard used in the USA, with donors in effect being permitted to provide whole blood about 6 times per annum in each country. Given that the constitution of the human body has hardly changed in the last 30 years, it could be argued that this change in NBTS policy is an admission that critics were wrong in their allegations of “excessive” bleeding by commercial blood banks. While there are obviously limits as to how often donors can safely give blood, it seems that commercial blood services had a more accurate assessment of the capacity of people to give blood without suffering undue harm. With this point, we can then ponder two questions: 1) if a paid donor gives blood with the same frequency as an unpaid donor, why is it that critics feel that his health is at a greater risk of deteriorating than that of the altruist?; 2) if paid donors need restrictions to prevent them from over-donating due to their excessive greed, should not restrictions also be imposed on unpaid donors to prevent them from being too zealous in their altruism?

 

Second, various safeguards can be implemented to ensure that blood is not acquired from paid donors more often than is medically sustainable. Arguably the easiest solution would be to make all blood sellers present their national identity documents or similarly acceptable papers (such as drivers licenses) whenever they wanted to sell blood, in order to allow a blood bank to determine from its records when last they donated. The problem with this method is that documents can be forged, which means that potential donors may obtain several cards that permit them to make multiple donations at different centres using different names [4]. An alternative, yet complementary approach would be to use a phosphorescent based dye similar to the one applied to the fingers of voters in elections to prevent them from casting more than one ballot, even if they have several identity documents. This dye, which might be visible through an ultraviolet light only, can be chemically formulated to last for set periods of time, which enables them to deter donors from returning too soon after their last donation session, although it sometimes has the defect of fading away sooner than desired. The third possibility is to introduce advanced identification systems similar to the ones used in the banking and pensions industries, where people are given credit card type documents with smart chips that enable them to be identified by means of fingerprint or eye-scan software. Here, the personal and medical profiles of all donors can either be recorded on their cards or in a centralised database, with blood banks and other key parties being able to immediately access whatever information is of relevance to their particular needs. While these systems are not cheap, their saving grace is that they have high security levels that make them virtually tamper proof, thereby serving as an effective deterrent against people who may wish to sell blood during periods when they are not allowed to do so.

 

The main health arguments against paid donation have, however, centred on the safety of recipients, as it is generally held that the quality of blood provided by paid donors is of a lower standard than that which is obtained from unpaid donors. Consequently, the health of blood recipients would be needlessly compromised, as their probability of being infected with fatal diseases such as HIV and hepatitis would not only be greater, but they would also be more likely to suffer from lesser infections that could retard their recuperation (with obvious economic repercussions).

 

In economic terms, what we effectively have is a market failure when it comes to paid blood donation, which appears in the guise of an information asymmetry problem. Here, one party, the blood donor, may have an incentive to withhold pertinent information from the other party, the blood bank, which, if discovered, could jeopardise any agreement to transact or have an impact on the final price charged. As paid donors have a direct financial interest in being able to sell blood, there is a fear that they will always attempt to conceal personal information that could prevent them from being able to do so, such as not acknowledging that they suffer from major infections or engage in risky sexual practices or intravenous drug use (IVDU). By contrast, as unpaid donors do not receive financial rewards for their blood, it is felt that there is no reason for them to be elusive about their personal histories and engage in deceptive behaviour. Due to this major difference in potential donor behaviour, it has been implied that the only way in which blood banks could avoid engaging in adverse selection would be to use unpaid donors, who apparently made up the good risks in the donor pool. In contrast, a total ban was suggested as being the only way of eliminating the risks associated with the use of paid donors, who were believed to constitute the bad risks in the donor pool as there was no way of detecting whether they were lying or had bad blood. Unfortunately, this argument that adverse selection can only be overcome through the sole use of unpaid donors is simplistic, for not only do some paid donors have a major incentive to remain healthy and be truthful about their personal histories, but some altruistic donors are, conversely, inclined to donate blood even though they know that they should not be doing so.

 

If paid donors wish to sell their blood on a regular basis, they will have an incentive to build and maintain a reputation of being able to provide high quality blood to the blood bank that serves as their buyer. In such a case, being healthy and honestly disclosing all relevant details is of greater importance than concealing information, for if they were to be discovered cheating, they could risk being banned from selling blood in future. This would not be a profit maximising action, since any profits that they could make in the short term while evading detection would probably be significantly lower than the stream of income they could expect to earn if they had developed a long term relationship with the buyer, especially since their probability of being detected early on is very high [5].

 

While it has been alleged that “the deliberate concealment of personal information … is thus a particular characteristic of the paid blood donor and of the private market in blood generally” [6], this assessment is not entirely valid, since altruistic donors too may conceal vital information from blood banks. For example, some donors who are under the observation of their peers may decide that it would be better to engage in the act of donation rather than publicly refuse to do so, even if they know that their blood could be unsafe for consumption by another person [7]. While critics may feel that such a fear is unlikely to exist in real life and poses only a theoretical hazard, we should note that in one recent large scale survey of donor behaviour, it was found that 1.9% of altruistic donors did not report that they had recently engaged in high risk activities that would have immediately led to the rejection of their donations or their expulsion from a blood bank, such as engaging in IVDU or consorting with a prostitute [8]. While such a figure is admittedly low relative to the equivalent figure for paid donation, where up to 20% of donors in some cases continued to give blood after commencing IVDU [9], it is nevertheless an incongruous result, as the whole adverse selection issue rests on the point that unpaid donors would never go so far as to conceal important details about their personal behaviour from blood banks.

 

Fortunately, the issue of whether or not the compensation of donors will make them attempt to conceal personal information has become less relevant in recent years. This is largely because the introduction of screening tests that can search for the presence of known diseases has made it much harder for any donor, whether paid or unpaid, to engage in deceptive behaviour. This is in contrast to the situation that existed in the late 1960s, when very little was known about the constitution of blood borne diseases or how to screen for them. For example, the first screening tests for hepatitis, which was, at the time, the most important transfusion linked disease, were only introduced on a wide scale from the early 1970s, shortly after the virus was identified. Nowadays though, there has been a substantial improvement in this area, for as we saw when examining the issue of blood disease, technological advances have led to the introduction of a range of continuously evolving screening tests that have allowed blood banks to detect the presence of infectious agents with ever better precision. If anything, the only major constraint preventing the introduction of more advanced screening tests has been the question of funding, as some tests have just not represented value for money, even though, from a technical perspective, they are even more accurate than the tests currently used.

 

Commercial blood banks have reaped the most benefit from the introduction of these tests, for in the past 20-30 years, they have been able to ensure that only blood provided by healthy donors would be processed into final products. At the same time, these tests allowed them to systematically filter out those unhealthy donors who were a moral hazard in that they had bad blood yet did not say anything about it. In this way, these blood banks have, over time, been able to ensure that their donors, while paid, have been able to attain similar risk profiles and medical characteristics to those of altruistic donors [10].

 

Another factor that has significantly eroded any safety advantage that unpaid blood collection systems had over commercial systems has been the introduction of techniques that can be used to make blood safer for use. This can be achieved through viral inactivation, where certain viruses that may be present in a unit of blood are either killed off entirely or simply rendered inoperative. Several types of viral inactivation procedure exist, with the effectiveness of each method depending on the blood products they are applied to. These methods include pasteurisation, ultraviolet inactivation, heat treatment (a popular process whereby plasma is heated at 80° C for 72 hours), cold storage (effective for eliminating parasites and some bacteria), and washing (where small volumes of plasma are literally cleaned of any viruses by a solvent detergent). Due to the widespread success of these treatment methods, by the late 1970s, the FDA felt confident enough to issue the following declaration:

“No available data demonstrates that final plasma derivative products derived from volunteer donor plasma carry a lower risk of transmitting hepatitis to recipients than do similar products from paid donor plasma” [11].   

 

While this statement dates prior to the arrival of HIV, the conclusions remain valid, for it became known early on that this virus, like hepatitis, could be inactivated, in particular by heat treatment, to which it is highly sensitive. The value of these diverse measures in limiting the potential damage that could be created by disease has been substantial, with their greatest value probably being in their application to plasma pools, where large volumes of healthy donated plasma could be contaminated by a single infected donation. While the risk remains that these pools can be tainted by blood provided by donors who are in the window period of seroconversion, to all intents and purposes, any safety advantage that blood provided by unpaid donors had over paid blood has been literally eradicated.

 

While these screening measures and neutralisation processes have been effective in reducing risk from a technical perspective, this does not necessarily mean that the health status of people in the donor pool is no longer of relevance when it comes to the question of safety.  However, contrary to the impression that may be offered by critics of paid donation, there is not always a definite link between the quality of the donor pool and whether or not the donors therein are remunerated for giving blood. This can be seen by reconsidering the previously examined experience of the Japanese blood services when they switched from a system of paid donation to one based on unpaid altruism. While there was a considerable decrease in the recorded hepatitis infection rate, approximately 1 in 7 Japanese blood recipients continued to be infected with this virus after the switchover had been completed, which is a rate that would have been deemed absolutely unacceptable during the relevant period in the UK, even though both countries were now working along similar lines. Most recently, a similar phenomenon has been observed through a comparison of the situations in Africa and the USA, where the likelihood of being infected with HIV via blood was much greater in the former area than in the latter, even in African states where only unpaid donors were utilised.

 

These two examples demonstrate several important points about the composition of blood donor pools. First, if paid and unpaid donors come from similar backgrounds with comparable disease profiles, then the issue of payment is largely irrelevant. While it may be true that paid donors are more likely to come from poor, less healthy sectors of society, there is no reason why they should be discriminated against due to this – after all, altruistic blood banks would not, ceteris paribus, object to accepting blood from them if instead of asking for payment they had offered it for free, despite their health status remaining identical in both situations. This leads us to the second point, that, if anything, the offer of payment may actually be a good course of action to follow if it leads to healthier people coming forward to offer their blood, as this may improve the quality of the donor pool. This is since the health of a donor should always be of greater concern to a blood bank than his or her motivations, for it is possible that even when they act with the best of intentions, altruistic donors may do more harm than good (and vice versa with respect to paid donors).

 

The third point is that it is not an impossible task to ensure that a pool of paid blood donors is of a high standard. As the German example has shown in recent years, if enough effort if taken in the selection of paid donors, then they do not necessarily have to pose an increased risk of transmitting disease relative to their unpaid counterparts [12]. Indeed, the Germans were not the first or only ones to discover and exploit this approach, for while the former Soviet Union relied on paid donors to meet half of its annual blood requirements in the mid 1960s, “there was said to be little post transfusion hepatitis – attributable to the careful screening of donors” [13].

 

The final point is that it is of little value making wild inferences, as Titmuss did, about what system should be adopted in a country if there are fundamental differences in their respective disease profiles. If one country has a greater prevalence of a particular disease than another, then it is only to be expected that the probability of acquiring that disease should be greater in the more risky country, even if all other factors are held constant. While the UK had a much lower incidence of hepatitis transmission via blood than Japan in the 1960s, this was only partly due to the fact that its blood came from unpaid donors. Rather, a possibly more important risk factor was that the prevalence of this disease among the general population was much lower in Britain than it was Japan (or, for that matter, the USA). Likewise, a similar risk exists in Africa today, where a substantially lower quality donor pool across much of the continent means that the chance of coming across unpaid blood donors with HIV is higher than elsewhere, even though they may be motivated by the same altruistic factors to give blood as their counterparts in the rest of the world.

 

It has thus been shown that the safety related weaknesses that may have existed in the past with respect to paid donation are no longer applicable to the present. With the judicious use of neutralisation techniques, coupled with the careful screening of people wishing to be admitted to the donor pool, there is no reason why commercial blood banks need to be considered inferior to altruistic blood banks when it comes to maintaining the safety of both blood donors and recipients.

 

ii) Economic efficiency

Together with the issue of blood safety, the other main area of contention concerns that of economic efficiency, where Titmuss described the blood system of the USA in the following manner: “In terms of economic efficiency, it is highly wasteful of blood; shortages, chronic and acute, characterise the demand and supply position and make illusory the concept of equilibrium” [14].

 

The justification behind such a claim rested on there being a substantial declared difference between the number of blood units donated and transfused, with a rudimentary analysis suggesting that of the approximately 4.5 million units of blood collected in the USA in 1956, only 3.2 million units were used, leaving about 1.3 million units, or 30% of the total level unaccounted for [15]. Most of this allegedly lost blood was attributed by Titmuss to the “administrative waste” arising as a result of defects and inadequacies in planning, administration and organisation by hospitals and blood banks. However, several questions must be raised about the validity of these claims regarding waste, and about what link this alleged misuse of resources has to do with whether or not donors are paid for their blood.

 

Firstly, a considerable portion of this missing blood could be attributed to the hospitals and doctors that had ordered and then misused it. In this case, it is they who were solely responsible for any lack of economic efficiency that may have occurred, with the blood banks, who had merely acted to meet their demands, being innocent of any claims of waste as this blood had been legitimately passed on and was no longer under their control. There are various possible reasons why hospitals had a haphazard approach to blood use, with one of the key reasons being that in the 1960s, at least, many medical institutions in the USA were organised primarily as charitable bodies rather than as for-profit organisations such as hospital chains and HMOs. Due to their charitable status, these bodies often had no reason to control their blood use, as they were secure in the knowledge that altruistic donors could subsidise their waste, either directly, through the donation of free blood, or indirectly, by the giving of free money that could acquire paid blood. Consequently, they had no major incentive to restrain their use of blood or other resources, with the subsequent injections of federal funding, via the Medicare and Medicaid programmes, probably making them even more lavish in their provision of care, while stimulating medical inflation by bidding up the price of the resources that were available.

 

This brings us then to the related issue of ascertaining which types of blood bank were inefficient and guilty of misusing blood. From an analysis of the data provided by Titmuss, it seems unlikely that the commercial blood banks were the only ones responsible for this waste, which means that altruistic blood banks running along similar lines to the NBTS, such as those affiliated to the ARC, were also inefficient [16]. If this was the case, then the blood sector of the USA as a whole was inefficient, with the altruistic blood banks and their method of operation being most at fault in light of the fact that they could count on community support to literally get blood for free. Indeed, the fact that there was even a commercial sector could simply be a realistic admission by the Americans that the concept of altruistic giving was inadequate, as they had to rely on paid donors to meet some of their supply requirements.

 

Second, not all of this waste could really be deemed undesirable or economically inefficient [17]. If a society is to value the health of all citizens equally, then the principle of strict equality would dictate that it maintain buffer stocks of blood products to meet the needs of all people at all times. Now, it is highly likely that there would often be times when not all of this blood would be put to use, and so some of it would invariably be deemed to have been wasted, especially if it could not be recycled into alternative products. While it is possible that smaller blood stocks could have been held with a lower degree of variance from the normal level of use over time, this may have imposed greater financial costs on blood banks due to the stricter management and operating standards they would need to operate at. Consequently, having more blood available than would usually have been needed may simply have been seen by the American blood banks as being the optimum course of action to follow, even if, to Titmuss, it was metaphorically similar to pouring blood down the drain. 

 

A third factor worthy of consideration is that of blood exports, where a lack of regulation may have meant that no comprehensive records existed at that time indicating how much locally acquired blood was sent to the rest of the world by the USA (or brought in, for that matter). As we now know, the USA was, at the time, more advanced than other countries in the production of pharmaceutical and immunological products derived from blood, so it is highly likely that these products were exported to many countries without the domestic facilities or expertise to make these products. This may, for example, have been the case with those plasma products sent to the UK from the USA, even though records in neither country seem to reveal that this happened at the time. If so, is it not possible that a large part of these apparently missing blood stocks were either unaccounted for and fell into the black hole of international trade statistics, or were simply classified as falling into the largely ambiguous category of “other pharmaceutical products”?

 

Finally, during much of the period under study, the USA was deeply involved in the bitter conflict of the Vietnam War. In this war, blood played a major role in keeping the number of American dead down to an abnormally low rate, with transfusion being performed on casualties during their evacuation flights as well as in the operating theatres and recovery wards. Treating injuries and wounds rarely found in the peacetime world required the consumption of large volumes of blood, with over 300,000 units of blood being declared for military use in 1968 alone [18].  While some of this blood was imported from paid donors in countries such as Japan, other supplies were obtained from donors in the USA, despite the widespread public hostility to the war. As such, it is possible that the US military simply used covert means of collecting blood in the USA, in which case an additional quantity of this “wasted” blood may have actually found a useful home [19]. This is worth considering, since there did not seem to be any “crowding out” effects in the USA where declared military needs led to a reduction in the quantity of blood stocks available to the civilian sector.

 

Before looking at more recent developments, it would be worthwhile to comment on the economic merits of the British system itself in the 1960s, using data provided by Titmuss. As proof of the efficiency of the NBTS in boosting supply, Titmuss pointed out that between 1948 and 1968, the number of effective civilian blood donors increased by 243%, while the number of blood donations rose by 277% [20], with the change taking place at an “orderly, progressive and sustained rate”[21]. While these figures appeared impressive and indicative of a strong and healthy system, as any economist knows, the true approach to determining economic efficiency lies in calculating the situation at the margin. If we perform an analysis similar in structure to the one previously undertaken with the SABTS data, we can see that in the 1960, the NBTS was much less efficient than it was made out to be.

 

In Table 7, data relating to British blood collections during the late 1950s and late 1960s is presented. From the figures in columns 2 and 4, we can understand that Titmuss had much to be pleased about, as the number of effective donors and quantity of units collected were always rising. However, column 6 shows that the average number of blood donations made per annum by British donors was steadily decreasing, with only 1.13 units of blood being given per donor in 1968 against a comparable figure of 1.25 units a decade earlier. The explanation for these falling values are provided by an examination of the columns that reflect the annual changes in blood donor and unit supply numbers – while in the late 1950s the annual increase in donations made exceeded the number of newly enrolled donors, in the late 1960s, the converse was true, with the increase in donor numbers being significantly greater than the change in donations made. Thus, while the UK was indeed getting more new donors, at the margin, diminishing returns in donation levels were noticed, since the number of units provided by the new donors could not compensate for the lower quantity of blood provided by those people who were already in the donor pool.

 

This decreased efficiency can be seen in a different context if we look at the figures in column 7, which show the percentage of donors in the UK pool that gave only the minimum quantity of one unit of blood per year, rather than the permitted limit of two annual donations. From the figures, we can deduce that the proportion of donors in the pool who gave blood only once per annum was steadily rising, which is a clear sign that while the NBTS was signing more donors on, it was not making good use of them by convincing them to donate for their full allowance. What thus becomes apparent is that by the late 1960s, the British appeared to have reached the limit in their efforts to get more blood. As such, it is perhaps understandable that shortly thereafter, the annual donation limit was increased in order to allow for a greater volume of blood to be collected, despite earlier opposition to this approach.

 

Table 7: British blood collection efficiency [22]

Year	Effective donors per annum	Marginal change in donor numbers	Units collected per year	Marginal change in units collected	Average  donation level	Percentage of single unit donations
1956   1957   1958 :   : 1966   1967   1968	639,319   674,117   715,911 :    : 1,178,111   1,243,957   1,280,901	34,798   41,794         65,846   36,944	803,522   846,202   895,575 :    : 1,374,884   1,418,549   1,446,551	42,680   49,373       43,665   28,002	1.26   1.26   1.25 :  : 1.17   1.14   1.13	74.3%   74.5%   74.9% :  : 83.3%   86.0%   87.1%

  

iii) Administrative efficiency

While dismissive of commercial blood markets in general, Titmuss had particular misgivings about their administrative structure, arguing that “the so-called mixed pluralism of the American market results in more bureaucratisation, avalanches of paper and bills, and much greater administrative, accounting and computer overheads” [23] than its altruistic counterpart. While secondary sources were cited as substantiation for these claims, he did not provide many details that would enable us to see the magnitude of this inefficiency, nor did he explain which parts of the “mixed” American system were responsible for this inefficiency and why this was so [24]. As such, we would be well advised to remain sceptical about such sweeping claims and made some deductions of our own on this topic.

 

Given that Titmuss was used to the monopsonistic collection and monopolistic distribution activities of the NHS, it would not be surprising if he was struck by the difference between it and the decentralised American system. At face value, the latter could appear to be extremely chaotic. However, it is possible that these “avalanches” and “overheads” were perfectly acceptable to the Americans, who operated according to different social, legal and economic norms to the British, otherwise they would surely have acted to eliminate them. For example, while the NBTS would be accountable only to the authorities in the NHS, it is possible that American blood banks had to use different and more complex accounting and management standards, as they not only had to respond to their shareholders or trustees, but also had to act according to different federal, state, county and local laws. In addition, the sheer size of the USA could mean that communication and transportation costs would be greater, while the lack of market concentration could prevent individual blood banks from exploiting the economies of scale available to the NBTS [25]. Finally, there is no reason why the charges of bureaucratisation could not be levelled just as easily at the NBTS which, as a government agency, would easily have an incentive to engage in inefficient activities as it would be subsidised by the taxpayer.

 

iv) Price- the cost per unit to the patient

When looking at many economic issues, often the best way of determining how efficient a particular economic system is lies in measuring the cost at which it is able to provide a specific good or service. In this, the British system appeared to have the upper hand over the American system in the 1960s due to 2 factors. First, as it apparently did not have to pay donors anything for their blood, it was possible for it to both acquire and distribute blood products at a significantly lower cost than its American counterparts. While the cost of collecting, testing and processing a unit of blood in the UK stood at only ₤2, in the USA the equivalent cost was said to be ₤10-20 [26], due primarily to the fact that there were said to be a series of payments and mark-ups to various parties in the American system that were not found in the UK [27]. In addition, the British system was deemed superior in a pricing sense from the perspective of the average recipient, for while NHS policy at the time dictated that no patients, even those receiving private care outside of the national system, were to be charged for receiving blood transfusions, in the USA, hospitals would charge patients $30-100 for each unit of blood used, with costs being substantially higher whenever blood was acquired from paid rather than unpaid donors [28]. 

 

There are a number of criticisms with this overall assertion that the British system was superior to the American system from a pricing point of view because it ensured that patients did not pay for their blood use, no matter how much was transfused [29]. While this exemption may have been deemed ethical and indicative of society’s concern for the ill, from the perspective of overall social welfare, it was not an economically desirable action, as the altruistic provision of blood involves both direct and indirect costs that are not always accounted for. In a direct sense, blood in Britain was never truly free, as the relevant handling and processing charges were borne by the general British population through their tax contributions to the NHS, in what amounted to a simple transfer of wealth from the healthy to the sick, with all the administrative and ethical costs that such an involuntary approach involved being totally overlooked by Titmuss [30].  

 

In addition to paying what is essentially a health tax for blood, another problem with altruistic blood donation is that indirectly, most people, as consumers, incur higher costs for many of the goods that they purchase since blood has no direct market price. By introducing direct payment for blood, we may be able to eliminate the externalities that exist within the current system of unpaid donation, where social benefits and costs are not always aligned to their private equivalents. While blood collected from altruistic donors may have the veneer of being supplied at zero cost, the cost to the economy as a whole is not necessarily zero. As was previously noted when looking at donor motivations, the provision of fringe benefits and inducements, especially by employers, may be a significant factor in convincing people to donate blood. Despite this, these benefits are very often not accounted for, even though they have an economic effect on the distribution of resources (as they are not free). Among the costs borne by an employer are a direct loss of output and lower productivity that arises when an employee must take time off work in order to attend a donation session, as well as the costs that arise from having to provide workers with an incentive to donate. There are also other costs that arise in the economy as a whole whenever the flow of resources is distorted in order to gain more blood. For example, one such expense that often goes unmentioned is that of the free publicity offered by the media to blood banks whenever they have publicity drives, which although given freely, does not reflect true economic actions that are involved with the collection of something that is meant to be free.

 

There were a couple of other points dealing with these price evaluations that could make any inferences about the economic superiority of an altruistic system inappropriate, both in the 1960s and the present. First, international price comparisons of goods in different countries are often of limited value in policy making, as distortions in exchange rates may mean that the true value of a good differs substantially from its nominal price. In the case of blood, for example, a comparison of costs with respect to national purchasing power would perhaps have been of greater value, since a direct price comparison may not have shown whether the relative costs of labour, testing, equipment, transport, etc were different in each country. Nevertheless, it is worth noting that nominal processing costs in the USA were higher than those of the UK, regardless of whether the blood was provided by paid or unpaid donors, with even charitable American blood banks having higher processing costs than the NBTS. As such, it would have been an error to infer that if the USA had adopted the same system as the UK, then its blood would also cost ₤2 per unit to process and handle in the 1960s [31].

 

In addition, a widely held misconception is that as commercial blood banks must pay for blood, they will logically have a more expensive product on offer than blood banks using unpaid donors. This is not a correct assumption, because while blood might be provided “free” by altruistic donors, this does not mean that an altruistic banking system does not have certain unique expenses that would be borne in a similar fashion by commercial blood banks. As one recent American study demonstrated, the acquisition cost of collecting one unit of whole blood makes up only one portion of the total price of that unit (37%), with the remaining costs being allocated towards handling (13%), screening tests (43%) and administration (7%) [32]. While non-profit blood banks do not pay donors for blood, they may have to incur substantial costs in order to enrol new donors and retain old donors, such as engaging in fund raising or public awareness campaigns, which would not need to be carried out by commercial blood banks. In addition, their costs of doing business may be greater than those of commercial blood banks, as their non-profit status may cause them to be seen as higher risk borrowers whenever they need to raise capital, resulting them in getting capital at higher interest rates than would otherwise be possible [33].

 

While it may be difficult to comment on the efficiency with which commercial blood banks could collect whole blood due to their withdrawal from this sector of the market, it is clear that they are very effective in the provision of plasma derived products, where “it is well known, in all parts of the world, that the cost of collecting plasma from unpaid donors is higher than the cost of collecting it from unpaid donors” [34]. The reason is that plasma firms, motivated by the prospect of turning a profit, are more likely to ensure that costs are contained whilst collecting blood in a safe yet effective manner, even though, at the outset, they are at a disadvantage relative to altruistic blood banks of having to pay people to provide them with plasma. The degree of this efficiency is most evident by noting that in the early 1990s, one kilogram of plasma processed in the UK from unpaid donors cost ₤60 to produce, while the equivalent product acquired from paid donors had a market price in the USA of $60 per litre [35]. If we assume that the exchange rate was set at ₤1: $1.50, then paid plasma was at least 50% cheaper than unpaid plasma in nominal terms, although in real terms, it was even cheaper, as purchasing power was higher in the USA than in the UK. Despite charging lower prices for their products, commercial plasma firms have been responsible for many of the innovations that have been introduced with respect to blood products in recent years, which is an additional indicator of their efficiency. This is hardly surprising, since these firms, like their counterparts in the more general pharmaceutical industry, allocate a large portion of their turnover towards research and development programmes, as they know that any new products that they develop will only serve to increase their profits further in the future.

 

In this section, it has been shown that commercial blood markets are in no way inherently inferior to systems that rely on the altruism of unpaid donors to supply their needs, for not only can they collect and distribute blood to the same safety and quality standards as the latter, but very often, they can do so in a more economical manner too. This then begs the question: If paid donation is at least as good as unpaid donation, why is it that there is such negative public sentiment towards the idea of allowing paid blood donation? Perhaps, after all, the answer can indeed be found in the statement used to open the discussion in this section, namely, that the voluntary blood banks have an interest in holding a monopoly in this field. If this is the case, then we have come across what is the second market failure in the collection of blood, although in this case, the altruistic blood banks are the ones who are responsible for the problem.

 

As we saw in the prior examination of the behaviour of NGOs, there are several possible reasons why blood banks, which are non-profit charities structured like NGOs, seek to have the exclusive right to collect and distribute blood, with the most likely explanation being that they feel threatened by and envious of the success achieved by commercial blood banks. Indeed, this seems to be the inference drawn by the National Academy of Sciences in the USA during the blood debate of the late 1960s, which reported that, in part, altruistic blood banks were unhappy about commercial blood banks as these could provide blood to their clients both quickly and inexpensively [36]. When discussing the functions of altruistic blood banks, it is worthwhile to recall that “the comparative advantage of these organizations in the blood market is solicitation, that is, begging for blood and money” [37]. By being able to be get their required resources for free, these bodies do not need to be as efficient as they would otherwise have to be, which means that they can engage in activities that would otherwise have driven them out of business. For example, one investigation into the behaviour of these organisations found that they tended to engage in output maximisation rather than efficiency maximisation (as evidenced in the search for profits), leading to higher costs than would otherwise be desired [38]. As rent-seekers, they are able to engage activities that support this sort of inefficiency since they can expropriate any payment that would have otherwise gone to people who actually provide blood, with such opportunities not being available to those bodies that had to pay people for blood.

 

If they were to face unrestrained competition, as would happen in a market, it is reasonable to expect that blood banks in the voluntary sector would suffer badly in a financial sense. This is since institutions that bought blood for final use, such as hospitals, would be more likely to transact with whoever offered them the best service at the lowest price, in which case, commercial banks were ideally placed to serve a large portion of this market. While the altruistic banks may have, in the past, retained a comparative advantage with respect to safety that allowed them to charge a premium over their competitors, this edge has now been eliminated, which means that they also faced losing a large part of the “captive” market that traditionally avoided commercial sellers due to safety fears. This risk of losing clients would be compounded by the fear of losing suppliers, as altruistic blood banks could believe that many of their donors would no longer be willing to provide them with blood if they were paid for it elsewhere. This is since many blood banks seem to believe, for some unclear reason, that donors “belong” to them only, and so they will do whatever is possible to retain them and prevent them from being poached - here, Titmuss himself admited in the 1960s that voluntary American blood banks were unhappy that “their” donors were being ‘lured’ away by the commercial blood banks [39].

 

Along with rents that enable blood bank administrators to engage in less efficient activities that enable them to engage in superfluous activities, such as recruit excess staff or engage in costly ventures, altruistic blood donors would also seek to retain a non-pecuniary rent for themselves through the continuation of unpaid blood donation. Here, it has previously been noted that unpaid donors may receive a degree of utility from knowing that they are engaged in something apparently unique and of such great value that its overall worthiness would, in their eyes, be greatly diminished if paid blood donation was permitted. To overcome the possible problem of partaking in an act that would give them lower utility, these donors too will attempt to mobilise in order to oppose paid donation if they feel that this is in their best interests. Given that all those who belong to a voluntary blood bank share similar beliefs on this issue, it is relatively easy for them to unite and lobby the government to support their point of view, but for people who support commercial blood donation, mobilisation is harder to implement as not all of the vast number of potential blood donors are ever likely to support them due to a lack of suitable benefits to them.

 

There are various ways in which these altruistic bodies seek to gain a monopolistic hold on the blood market. Arguably the easiest and most effective approach to stifle unwanted competition is to lobby the government to pass legislation favourable to them that would either hamper the activities of their commercial competitors or ban them outright. In these rent-seeking activities, they may be assisted by various parties, including bureaucrats and global bodies with interests in the field of health care, which can also reap some reward if they get a monopoly. The benefits that accrue to civil servants are clear, as these individuals are able to extend their sphere of influence, either directly, if the blood banks are run by government (as happens with the British NBTS), or indirectly, if blood banks are to operate as charitable bodies (in which case, the bureaucrats enter into a symbiotic relationship of leniently monitoring the blood banks) [40]. International organisations also stand to benefit from moves to curb the trade in blood, as these allow them to engage in a form of empire building that expands their influence. In this, the moral authority that they have is useful in getting their agendas across, for not only are they able to speak out without restriction at forums against paid donation, but they are also often able to take decisions at consultative meetings to which commercial blood banks may be denied access. Here, for example, it is perhaps no surprise that the International Red Cross is one of the most vocal critics of paid donation, for in many parts of the world, its local affiliates are often heavily involved in all aspects of blood transfusion, and would thus be eager to avoid competition [41].

 

In addition to lobbying government decision makers directly, these interest groups also attempt to convince the public to support them, allowing for indirect pressure to be mounted upon legislators. This can be done through the use of politically correct phrases and emotive language that appeals to the base instincts of people by arguing that what they are involved in is the handling of something so vital that it should not be entrusted to the care of private firms, who would simply “commodify” it and remove all its inherent spiritual value. If this approach does not work, then their other course of action is to scare the public into believing that only they provide blood safely, by churning out horror stories of how commercial blood banks abuse the medical system whilst charging exorbitant prices for their products. In this, they may be helped by the press, which may not be able to resist the chance of writing sensationalistic stories about faulty blood supplies entering the medical system, especially if they can phrase it in David and Goliath terms, with David being the voluntary blood banks while Goliath is made to be the commercial blood banks of “big business” [42].

 

Unfortunately, these arguments against commercial blood banking are designed to appeal to the emotions, rather than being designed for rational comment. While it is tragic that some people continue to get infected by tainted blood, we should however place such incidents into their proper perspective by noting that if paid blood donors were not used to provide essential blood components, then even greater numbers of people would suffer due to the fact that no blood whatsoever was available when they needed it. With this in mind, we move on in the next section to look at how a system of paid donation could operate in ensuring that blood is treated like the economic good that it is so that the optimum level of it can be supplied.

 

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