What Drives Up The Cost Of Health Care?

High drug prices often put desperately needed care out of reach for the Americans who need it most. Here's a look at what drives those costs.
Senate Democrats’ press conference on drug prices (June 12, 2019)

Senate Democrats’ press conference on drug prices (June 12, 2019)

At every Democratic debate, this question comes up: how should our nation pay for health care? Most agree that we need a mechanism that enables everyone to afford medical expenses. I agree. Meanwhile, health costs keep rising.

The unasked question: what’s driving these skyrocketing costs?

Blame usually goes to private insurance companies. I don’t understand why, since their mission is to pay for exorbitant prices they do not create. Yes, we certainly need to reform our method of payment. But it’s only a short term fix unless we reimagine the health care industry itself. In this article, we’ll focus on the biggest issue of all: drug prices.

Full disclaimer: I have multiple sclerosis. I am doing well, am virtually symptom-free. However, that costs a lot of money, easily $10,000 a month if out of pocket. I am lucky, I have good insurance. Without these meds, I’d probably live with crippling fatigue, visual problems, urinary problems, difficulty walking if at all. But I take these meds and lead a full, active life.

However, the question of expensive meds is not really an insurance question.

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Why are drugs so expensive?

Ezekiel Emanuel, oncologist and vice provost at the University of Pennsylvania, wrote about this in The New York Times. He pointed out that the United States “has just over 4 per cent of the world’s population, and yet it accounts for nearly half of global drug spending.”

Why? Citizens in other countries also use medications, often the same ones. According to one source, Americans use fewer prescription medications than Europeans. And we are more likely than Europeans to use generics. We must rule our usage as a factor.

But in the United States, we have an increasing use of, and demand for, expensive blockbuster drugs. Their commercials are ubiquitous. We see happy, healthy people whose use of these make medications makes everything better. We hear the side effects listed, but we see these people who are cured.

According to Drugwatch, “Convincing people they are sick and need a drug is a multi-billion dollar industry.” Further, the advertising promotes the most expensive drugs and convinced viewers that they must have these medications. Not only does Big Pharma spend a lot of money on advertising, they spend less on research.! That’s right. For years we’ve heard that American drug prices are high because of costly research and development. And who’d want them to cut down on research? But that’s not true. They spend more money making and airing commercials.

Then there are the “orphan drugs.” They treat diseases so rare and with such limited demand that they generally require government assistance to induce pharmaceutical companies to develop them. For many, this is a lifesaver.

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However, there are glitches. The ODA, the Orphan Drug Act, has certainly provided research and treatment for a number of diseases that would have gone untreated. However:

“A key provision of the ODA is that each time a medication gets approved by the FDA to treat a rare disease, it gains an additional seven years of market exclusivity for the specified condition, giving companies the ability to charge high fees for an extended period of time. In 2015, a Kaiser Health News (KHN) investigation revealed that a number of pharmaceutical companies gamed the system to sell orphan drugs at astronomical prices by using two key strategies: repurposing commonly used drugs and getting approval to use one product for multiple orphan diseases.”

Drug companies have other techniques to both increase the use and cost of orphan drugs.

A number of European nations regulate and negotiate drug costs. While this varies by country, European drug costs are considerably lower than in the United States. For instance, Aubagio, a treatment for multiple sclerosis, costs approximately $66,000 a year in America. In Europe, it averages $12,000 a year! Break this down into monthly cost. In the U.S., it’s $5,500 a month. In Europe, it’s still expensive, but $1,000 a month is a big difference.

The House of Representatives does have a bill that would reduce drug costs. In fact, Speaker Nancy Pelosi announced that it would be named for the late Rep. Elijah Cummings. The bill would principally, but not solely, address Medicare drug prices. At present, the Health and Human Services Secretary is not allowed to negotiate drug costs on behalf of Medicare. Private plans offering Medicare Part D may negotiate, but their bargaining power does not have the leverage of the federal government. The newly negotiated prices would also be available to private insurers. Prices would be based on prices in other wealthy countries. As we have seen, these prices are considerably lower than what Americans pay.

The bill is set to pass the House, but it still has to face the hurdles of the Senate and President Trump.

Spiraling health care costs are only one of many drivers of rising health care costs. But it’s a major one. If we are to tackle health care costs, we must not stomp with insurance plans. We should see that health care itself is affordable and not confuse that with insurance and who pays the bills.

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Healthcare // Democratic Party / Healthcare