When Mylan Pharmaceuticals CEO Heather Bresch raised the price of the allergic-response life-saving EpiPen six times, the public was outraged. Mylan backed off to offering a “generic” for just a 3-fold increase.
Before that, Martin Skreli had taken over as head of a drug company and raised the price of an HIV drug 5,556 percent (from US$13.5 to US$750 per tablet). His actions and attitude gained him few supporters.
And closer to home, many Kansans were victims of the Western U.S. Energy Crisis of 2000 and 2001. In that case, it was the Texas energy conglomerate Enron that illegally shut down pipelines to cause a fake shortage and drive up natural gas costs by 500 to 800 percent, an outrageous overnight hike. Poor families could barely afford to keep their houses warm enough to prevent pipes from bursting. Some children slept in their coats in near-freezing conditions.
These CEOs and shareholders only care about the bottom line. Why sell a product to ten customers at one dollar each when they can charge twenty dollars and only one customer can afford it? Under hands-off capitalism, outrageous profits are simply “good business.” They raise prices to whatever the market will bear.
The public outrage that resulted from these three cases was due to the hikes occurring virtually overnight. To avoid that pushback, they could have followed the model of public universities. Tuition at Kansas public universities—and nationwide—has been rising faster than inflation or even medical costs. “What the market will bear” is very much a factor in the hyperinflation of public college tuition. But by raising tuition gradually, you do not dramatically reduce the number of students. And they can be seduced into taking out larger and larger student loans.
So why is tuition going up?
The number one reason is clearly state legislators who now view a higher education as a private good. The student benefits so the student pays. State tuition support has moved from two dollars for every one dollar in student-paid tuition in the 1980s, to student tuition now providing the majority of university instructional cost.
Additional culprits include the local school administrators as well as our state and national educational leadership who are placing a guilt trip on any high school student who does not continue on to college. ACT scores show that 38 percent of high school students are college ready. But the President, the Governor, the Lumina Foundation, and the state boards of both K–12 and higher education want twice that percent in college. As a result, a growing number of non-college-able students are sitting in community college and public university classrooms, diverting state funding from the college-able.
The educational technology industry is also consuming massive funding as schools move from effective print textbooks and conventional classroom materials to expensive digital devices with unproven effectiveness and rapid obsolescence. Having the latest electronics in every classroom is not driven by better educational outcomes, but by the desire to look “state-of-the-art” to students and parents. It is marketing.
And until recently, only the online for-profit schools spent more on marketing than on their cheap hire-a-prof adjunct faculty. Today, public universities nationwide are hiring more adjuncts to cut costs while spending far more on marketing, especially to out-of-state students who pay higher tuition.
This spring, the Kansas Legislature removed the tuition cap and public universities are raising tuition as much as the market will bear, concerned only that total enrolment does not drop. It does not take many years of annual tuition inflation to produce cost hikes that are as exorbitant and outrageous as the overnight EpiPen or Enron affairs.
Administrator glut. Tech glut. Marketing glut. But not one word about “frugality.”