My wife and I recently decided to do IVF. The doctor specifically told us that we needed to order the medicine (menopur, Gonal F, etc) from an American pharmacy. That alone made me suspicious, so I looked at foreign options. Altogether, the medication required would have cost us about $5000 from American pharmacies. We found out that we can just buy the exact same stuff from a German pharmacy for about $1000. So yes, Americans get wrecked by drug prices.
When my wife needed a rabies post-exposure shot course, it would have been around $25000 range for the shots without coverage. Our (expensive high end) insurance brought it down to "only" $2500 out of pocket for us. The alternative is to take the gamble of a possible horrible death.
For whom? I can't imagine this in particular would not be free at the point of use like almost everything else. That said, the UK has famously been free of (classical) rabies since the 1920s, so it's unclear if it would be easily available if there aren't other uses.
Was talking about from a private clinic [1]. Obviously it's free via NHS. It's a good example of a system in which the government in incentivized to not tolerate drug price gouging.
Most dispensed _items_ are free of charge (as in, the prescription charge is not paid - only around ~11% of items are paid). There isn't enough data to know how that breaks down to people though.
Well, for one ... it's illegal to import drugs that aren't FDA approved. You can import a few months personal supply of a prescribed drug that is FDA-approved but doesn't just mean that the active-ingredient is FDA-approved. It has to be the same exact product, manufactured in the same FDA-approved facility with the same packaging/labeling/etc to be considered "FDA-approved". The most expensive FDA-approved drugs are sold at US prices globally, so there's no geographic arbitration. Then other non-FDA approved brands are sold at lower prices - importing these is a smuggling offense, though enforcement was pretty low (but now with CBP's upcoming budget increases, who knows if this will continue to be practical or ultra-risky).
More practically - HMG is a very difficult drug to assay for purity. It's too complex to interpret with qNMR, HPLC testing is also very hard to interpret. The testing that exists evidently either has a very high margin of error or involves lots of rats and dissections.
Even testing for hCG, while it can be done reliably with HPLC, results between different labs are not comparable because the primary assay is also to test bioactivity on rodents, so they're not normalized to the same standard.
The lack of any independent testing for HMG means that some of the more accessible international manufacturers don't actually test their own product. Combined with its high price, that all makes it a very common target for counterfeit.
Yes, the American pharmaceutical system absolutely has quality-control issues. 80% of our generic pharmaceuticals come from overseas production. The pentagon wanted to independently test the drugs it was purchasing for the VA, so it worked with a company named Valisure who determined that about 10% of the drugs had issues with contamination or a lack of the active ingredient[0]. The FDA responded by shutting down Valisure's third-party testing.
But even with the problems we have here in the USA, HMG is the one drug I would particularly not trust from gray-market supply chains. It's conjecture, but I wouldn't be surprised if the doctor said that because other patients had tried it and had poor results.
Not only the drug has to be approved but the production process and laboratory.
There is a lot of bureaucracy and audits. It is but as if a European laboratory is allowed to sell a generic drug without at huge costs for certifications ( and viceversa)
I am not saying that buying your medicines to questionable online web is a good idea. Just that other countries have their own controls depending on their policies
Yes. There are a lot of good non-FDA drugs that have been available for online purchase by US citizens. It's illegal to get them shipped to you, but enforcement has historically been nearly non-existent and given that 75 million Americans are under-insured ... it probably has been the rational option for many. India, China, and Turkey are perfectly capable of making high quality pharmaceuticals when the business owner actually cares about quality.
Also, compounding pharmacies in the USA sometimes get their raw active ingredients from even the shadiest suppliers in China and India. It's not always perfectly legal, things aren't always QA/QC'd at any point in the process the way they should be, but it happens. So again, "buying American" isn't exactly a golden ticket.
European HMG from reputable pharmacies is probably great quality - but it's still rather expensive compared to Chinese HMG and there's really no way to trust anyone selling it online, you'd basically have to fly to Europe yourself. And taking it back on the airplane would still be illegal, and you'd be rather more likely to be caught by customs than a mailed package.
I'd assume it was their telling them specifically not to get it from a foreign country that was the odd part, as opposed to simply prescribing it from a US pharmacy since ofc that is what a US doctor will do. Maybe enough patients tried this, to save costs, that it resulted in some kind of issue for the doctor and that is why they brought it up.
You need to understand that the system is deliberately so opaque that doctors don't even know what your costs would be. Sure there's a sticker price, but for most medications that's so high as to be absurd. From there, it's entirely dependent on your insurance, coinsurance, pharma benefits, etc, etc.
They try, but they're not in a position to do anything about it.
> They try, but they're not in a position to do anything about it.
Well, somebody's got to be, and the doctors seem like the ones with the most leverage to get those people to do something about it, right? Customer/patient pressure obviously isn't working.
> the system is deliberately so opaque that doctors don't even know what your costs would be.
You're telling me professionals who make $300k after 20 years of education have 0 clue about what their patients might pay, or have never had patients who expressed concern over costs? Or don't have friends or relatives who expressed dissatisfaction with a high-deductible plan? Or aren't complicit in getting kickbacks for prescribing opioids?
We gotta stop absolving people of accountability. And that includes EVERYONE in the chain who benefits. Yes, this includes doctors.
Btw, I have had doctors who do try, and many more now will accept reasonable cash prices for their services. That should be encouraged and commended.
Indeed. At the end of the day, the entity underwriting the insurance plan decides the price. This is often the individual's employer. Your doctor does not know what your HR team decided to ask for when designing their health plan.
Pricing in healthcare is very tightly regulated and there isn't a simple one line answer for why certain prices are they way they are. Its easy to scapegoat bigpharma for being greedy, but they're just as greedy as any other US corporation.
I only brought up YouTube because when a company is free to set their price, you will still end up with a pricing model where the pricing is different based on region.
The problem with this argument is that pharmaceutical companies are private businesses trying to make a profit, not charities. If it were truly unprofitable to sell drugs in, say, Canada or France, pharmaceutical companies would just not sell their drugs in those countries. It is _less_ profitable to sell drugs in those countries than America but still profitable, which is why they still try to capture those markets. If America fixed this imbalance by forcing a lowering of drug prices in the American market, there's no reason to believe that this would cause raising of prices elsewhere. The only way this would be possible is if it were truly unprofitable to sell the drugs elsewhere, which can't be the case since these are corporations not charities. The real impact would be to slow down new drug development, since existing drugs are already profitable to sell everywhere in the world even in countries with more regulation, but if America fixed its market by lowering drug prices for Americans, the total profitability of pharmaceuticals would decrease, decreasing the incentive to create new pharmaceuticals. That's a totally different and very plausible impact. Rising drug prices for existing drugs in other countries is not a plausible impact.
> If it were truly unprofitable to sell drugs in, say, Canada or France, pharmaceutical companies would just not sell their drugs in those countries
You’re confusing capital and operating costs. Once you’ve developed the drug, selling everywhere you can makes sense. When considering whether to develop a drug or invest in something else, America’s biotech market absolutely turns keys. (But not as uniquely as we think. Europe has a thriving R&D market, it’s just directly subsidised.)
I think they are not saying it's unprofitable, but rather that the current government should shape the market so the environment levels more over US vs the rest. (of course please in a laissez-faire change the market style not the bad socialist stuff)
So basically if this true, you prove my point. If Americans weren’t paying these high costs then R&D would slow down and the whole world wouldn’t get these drugs.
America subsidizes these drugs for the rest of the world, which does not pay its fair share into R&D costs. If we’re to fix our healthcare system, this kind of thing can’t continue.
You think pharma companies won't bill the rest of countries whatever the market can bear? I can't think of why they possibly would lower their prices even if the American government stops subsidizing their businesses via using their monopoly on violence to enforce our perverted IP regimes.
Europe is highly regulated. Other countries with nationalist governments if pushed too far will make their own generic versions. So no, increasing prices in other countries to offset the loses in the American market is not that simple.
What's the problem with talking points? Talking is the purpose of an open forum like this one. Let's argue against the points and not against the commenters.
Fair point, I’ve corrected "talking point" to "propaganda" above. Not only does it not make any logical sense, but there is zero evidence that Big Pharma isn't pricing drugs to maximize profitability in every market in which they operate. Drug companies aren’t charities.
Besides, it also invites the immediate and rather fatal rejoinder of, "OK? So how about we... don't do that?"
Any negative response to that must suppose that everyone else would just give up on trying to advance drug R&D if the US stopped unilaterally self-sacrificing to subsidize it for the entire world... and when you lay it out like that, it seems like that must not actually be what's going on in the first place, because why the hell would we be do that, for that reason? So, very probably, we aren't, and further, if we are we should definitely stop.
>If America prohibited such gouging, would the rest of the world accept price increases on their drugs? If the current administration is so interested in inflicting harm on the rest of the world, maybe they should be convinced to lower drug prices.
I doubt governments elsewhere are itching to increase their healthcare spending even more. Realistically speaking the actual result will be cost cutting from pharma companies, mostly in the form of lower R&D spending for new drugs.
The sad reality is that if Americans stopped paying inflated prices the 40% of drugs discovered here would shrink to about 10% and world wide drug discovery would be massively reduced.
You literally have to get fucked or the world get fucked harder and drags you down with them. Same reason why NATO and the farm bill are good for America.
The greatest trick from the wealthy is to not just exploit you to get it, but to destroy any possibility of resistance to them. Even trying to resist does nothing but harms the under class even more than if you simply accept it.
“If you want a picture of the future, imagine a boot stamping on a human face—forever.“ - George Orwell, a communist/socialist
Edit: To the guy who claimed Orwell wasn't a communist, the POUM who he fought for in the Spanish Civil war was communist (https://en.wikipedia.org/wiki/POUM) and according to the soviet union was specifically trotskyist. If you fight for them you are a communist, even if and especially if you claim you weren't later in life.
Orwell was an anti-Communist, though especially anti Stalinist. He fell into the POUM, he didn't choose them, "I knew that I was serving in something called the POUM. (I had only joined the POUM militia rather than any other because I happened to arrive in Barcelona with ILP papers), but I did not realize that there were serious differences between the political parties."
He actually said "As far as my purely personal preferences went I would have liked to join the Anarchists." After the Stalinists illegalized the POUM, killed and tortured Orwell's friends and tried to kill him, forcing him flee Spain, his view on Communism grew ever more dim, and after that he grew more strongly anti-Communist than his earlier anti-Fascism.
The headline is terrible given the thesis of the short article.
The Economist's analysis creates a model that shows Pharma companies making "excess profits" (greater than 10% return on capital) second only to technology companies. In that sense, by the Economist's terms, they are in fact gouging.
But that's not really the point the Economist wants to make; rather, regardless of whatever profits Pharma is raking in, they're in fact a small component of overall health care spending. You could zero out Pharma profits (this is my point and not theirs) and not materially change US health spending.
In all these discussions about American health care, my first take is that everybody should go download the CMS National Health Expenditures, and make a beeline for "Expenditures by Type of Expenditure and Program" (it's just an Excel spreadsheet). It's an extremely intuitive breakdown of where all US health care spending goes, and who's paying for it, all on one sheet.
There are a lot of narratives about health care spending that do not survive first contact with that spreadsheet.
I don't think the spending story alone is helpful because it doesn't acknowledge where there's room for actual improvement. Of the $1.5T spent on "Hospital Care", if almost all of it went to medical staff, facilities, equipment etc, and if good data suggested that people aren't in hospital unnecessarily, maybe that number isn't a problem. But if private hospitals have very fat margins, and some significant share of patients could be served just as well through less expensive clinical services, maybe that's too much.
In the context of the cost of medication, the $449B on "prescription drugs" doesn't break out what goes to drug makers vs PBMs or anyone else. We can easily imagine a world without PBMs that still delivers drugs to patients, but someone has to actually make the drugs. We can also ask, are people on medications they don't actually need? Are we sometimes _causing_ later health issues when medicating (e.g. fueling a giant opioid crisis)? None of this is apparent in the top-line spending figures.
Whoah, that smuggles in an enormous assumption: that a dollar directed to a medical professional is automatically well spent. In reality, medical professionals in the US make drastically more money than they do in Europe and deliver way more procedures (they're often working on "RVU" scales that incentivize delivery of more procedures).
This is something that makes health care economics really difficult to discuss: everybody trusts their doctor and factors them out of the equation; the problem is every penny that doesn't go to their doctors and specialists. But that's not a valid analysis and your doctor and their support system is (after elder care) at the heart of US health spending.
What makes it hard to discuss is everyone at every level is gouging for various reasons.
Like, for example, doctors are going to be paid more than foreign counter parts, but they also end up needing very expensive schooling. (Similar thing happens to dentists).
Go into the hospital, and you end up paying 10x the amount for any medication (Tylenol being a good example) because either the hospital has an agreement with a medical supplier for exclusive supplies or they are trying to make up for ER treatments.
Then there's simply the added layer of bloat on top of everything. Health insurance ends up hiring a large staff of people to try and reject all claims while hospitals hire patient advocates to appeal the denials for the patients. All that ends up being paid for somehow (usually a large chunk is from the patient's insurance principle).
And, much like funerals, slap on "medical" on any piece of equipment and you get to raise the price by 10x. A $10 stethoscope ends up costing $100 from a medical supplier. Or one I've personally seen, a "medical" pocket protector made from $1 in fabric costing $50.
The reason non-us healthcare ends up being cheaper is because the governments are running most everything rather than having 3 or 4 private businesses duking it out over cost. It eliminates a huge amount of redundancy in the system when a government builds the hospitals, pays the doctors directly, and is the only one negotiating with medical equipment providers.
I don't disagree and wouldn't valorize anybody in the field† (though: of all the entities, I come closest to respecting Pharma's role and, if those companies were well-behaved, could make a pretty coherent argument for why they should be making much more money given what they produce).
But it remains important to get a picture of where the money is going, and the real picture disrupts a bunch of narratives.
Even in your comment: you're handwaving past physician comp and overdelivery!
> Even in your comment: you're handwaving past physician comp and overdelivery!
I'm really not. I'm simply pointing out exactly why they have such an oversized salary. It costs a ton of money to become a physician. In order to survive, they initially need a pretty sizable salary.
After the loans are paid off, that salary can't go down, there would be a revolt if it did.
Over delivery is really just a general attitude of wanting to test everything to make sure nothing is missed. I have a hard time faulting them over that.
IMO, the way to address this problem is addressing the cost of education for physicians. There's no reason getting an MD should cost $500,000, and yet it does.
And, of course, the best way to do this is to make medical school publicly funded and tuition free. A lot of small hospitals close down because they can't afford regular doctors. It's also next to impossible for a doctor to setup a private clinic.
That won't fully solve the current salary bloat, the only way to really address that is expanding the number of doctors being trained.
Sure it could. Physician compensation, RVU billing, upcoding, and overdelivery aren't facts of nature. In fact, a lot of these problems are caused by Medicare regulation; we deliberately restrict the supply of physicians by underfunding residency slots, which is something the AMA lobbied to do.
But when institutions try to take these problems on, like when Blue Cross (IIRC) went after anaesthesiology upcoding abuses, industry lobbyists spin people up to think that insurers are demanding surgeons wake people up in the middle of operations. It's a real problem. People understand so little about how our system works that they will vociferously take the side of practitioners who are screwing them over.
(Everybody is screwing everybody over; I'm not taking a side, except to point out that Table 19 of the NHE makes a pretty stark statement about where the money is going.)
It seems like you've been referring to "Hospital Services", which was 31% of all healthcare spending in 2023, and "Physician and Clinical Services", which was 20% of all healthcare spending in 2023, according to the CMS spreadsheet. But this is made up of revenue to the hospital or doctor's office, not just compensation for the medical professionals. These numbers include all the administration/dealing with insurance that has to be done at the hospital or physician office, as well as rent, malpractice insurance, drugs provided at the hospital, imaging costs and almost everything else that pays for capital spend, etc. The fees at the point of service basically have to account for all the bloat in the system, which of course includes some overdelivery and bloat inside the hospitals and clinics. But I really don't think this builds a case (like you seem to be doing) that doctors and nurses need to be squeezed in order to reduce US health care costs, especially when total healthcare expenditure has grown much faster than clinician pay over the past decades.
I agree that the figure includes administration costs. CMS won't tell you that US physicians are paid 2x-3x more than they are in Europe, but OECD numbers will. CMS won't tell you about upcoding and overprescription, but the Dartmouth Atlas will. Meanwhile: the CMS picture will at least tell you that the majority of spending in our system is in on the provider side, and not in either prescription or insurance.
Again: I'm not out on a limb with these claims. I'm literally just remembering things Jonathan Gruber told Derek Thompson on a podcast, then looking up and bookmarking the numbers to confirm them. Many of the most popular message board narratives about healthcare disintegrate in the face of even these simple CMS numbers!
I did _not_ make that assumption. I specifically called out the possibility that some hospital care may not be necessary. Regarding hospital care, the two sentences describing hypotheticals where spending is or is not improvable specifically included clauses:
> and if good data suggested that people aren't in hospital unnecessarily
> if ... some significant share of patients could be served just as well through less expensive clinical services, maybe that's too much
I don't think they were insinuating that _you_ were making that assumption, but rather that your line of reasoning must necessarily make that assumption if brought to fruition
Diagnostic imaging companies - each of the big ones (Siemens, GE, Philips) offer in-house financing for MRI, CT, etc., that they advertise to physicians. They also all offer specialist consulting help to facilitate you getting a CoN (Certificate of Need) for your facility. Hell, they also will help you find other physicians in your area who'd like to go in on setting up a DI facility (and will assist with spinning up the practice).
We then find that physicians who own a DI practice (or a share in one) refer their patients to diagnostic imaging at rates several standard deviations above other physicians and at rates that are "statistically improbable" when correlated to underlying ICD-10 diagnostic codes.
Upton Sinclair comes to mind ("It is difficult to get a man to understand something, when his salary depends on his not understanding it").
Is that a good thing or a bad thing? MRI machines are expensive, but very useful for certain conditions and with zero radiation exposure. We see a lot of affluent Canadians coming to the USA as medical tourists for imaging procedures and elective surgery due to long queues at home.
It's an indicator. By many accounts, the US drastically overuses imaging. For instance: it's not unlikely that a patient presenting with persistent back pain will be imaged quickly in the US. That imaging service is itself expensive and a cost driver, but far worse are the procedures the imaging results drive, most of which wouldn't be prescribed over the border in Canada. We do not on the whole get better results for back pain here!
Another example, though with a less comical indicator than the MRI thing: at least up until recently, hernia repairs in Europe were all inpatient procedures. The US innovated on laparoscopic hernia repair that's done outpatient. This is by itself a very good thing! But the knock-on result is that the US now delivers way more hernia repairs; we do medically unnecessary hernia repair because we made it so easy to do.
None of these are my insights; they're just things you learn about if you read and listen to podcasts about the problems with our health care economics.
It’s not purely a bad thing per se if it attracts doctors who excel and are the best.
However, it seems now more like straight-up profiteering the past decade or two by doctors as a whole but it’s harder to point a finger at. In contrast with “Big Pharma” the profits are fairly centralized and easy to point a finger at.
Personally I’ve for a while believed the biggest issue with wealth inequality in the US isn’t primarily due to billionaire class, but rather the millionaire class and “managerial class”, though I’d include doctors in that list. Most CEOs would also be in that list.
Doctors via the AMA keep salaries artificially high, just the same as similar tactics used by land lords using software to jack up rent prices.
Your claim here, were you to try to make it, would have to be that American doctors are across the board 2-3x better than European doctors, and that European pts are getting drastically fewer procedures than they need.
Specifically for doctors, that seems a reasonable point or question. I know intimately from my PhD studies that some procedures performed widely in the US aren't that effective (meniscectomies in particular). Though that's gotta be balanced with procedures that are helpful that Europeans don't do enough.
More broadly though, I believe what's occurring with doctors is also happening across the board in other professions. Landlords as an aggregate are charging more than if fair, and the median landlord isn't a billionaire or Blackrock but probably part of the professional managerial class (PMC) [1]. No idea if landlords as a whole are charging 25% or 250% more for rent, but rent seems to have outpaced inflation by a fair bit.
Similarly others here mention doctors owning portions of diagnostic imaging companies who go on to request unnecessary imaging. That's the PMC enrich-yourself-first mindset. Historically it was the local landed nobles.
Repeat that across more fields and professions and you see that the middle and lower classes will be squeezed much more by PMCs than by billionaires, IMO. For example, it'll be some VP at Google who's pushing to raise the cost of YouTube premium rather than Sergey Brin or the Youtube CEO. Another VP who's figuring out how to move software to a never-ending subscription, etc. Though it'd be hard to split out the effect of say PMC's vs corporate profiteering. Perhaps they are part of the same effect.
You know if the damn prices were not so hidden behind paperwork electronic or otherwise between the provider and insurance company, together with well disseminated facts about cost, and outcomes we could let market forces sort this out so poor service + high cost is mediated somewhat ...
Ideally the provider would bill the patient only without recourse to any insurer. The patient if satisfied could ask the insurance to pay. This way the bill "is out " in the sunlight, and providers have no way to get paid unless customers are happy. At bare bones it aligns provider with patient through a bill like anything else. Adversarial patients ... are another thing for later ... but i want people to start seeing US medicine up front rather that stuff that goes on behind the scenes.
I realize ppl get all kinds of paperwork now including sometimes bills ... but c'mon it's one thing if it's FYI after the fact" because it was all submitted to insurance yesterday anyway ... or ... this is it; the bill is due ... approve it ... or else ...
I mean, if the argument is that exogenous supply constraints are the root of most of our economic problems, and that the economy is rigged for the upper-middle class and the billionaires are just along for the ride, we probably share a lot of politics, but either way: my point on this thread is just: start with the total picture of where money in our system goes.
A lot of people think most of it is going to insurers and pharma companies, which is the literal opposite of what's happening.
Yeah agreed the issue with medical costs in the US isn’t primarily pharma or insurers.
It’s just easier to blame them companies because they’re more centralized. Easy to point and say “look at the billions in profit”. Doctors as a whole are likely make many billions more in profit but it’s harder to see and understand that.
I'm a bit confused.. are people suggesting that the poor pay in the EU is a _good_ thing? These aren't lawn maintenance or car mechanics here. We're talking about saving peoples lives. I would think the people in the EU would feel a bit of shame for paying them so poorly..
[disclaimer] my wife works in pediatric cardiology and saving kids lives seems worth a hell of a lot more than a software jockey job. The dead baby days are the worst and make a rough merge or code deployment appear as trivial as they really are. The EU should be ashamed of paying their people so poorly. None of that is to say that our system isn't broken and wasteful. It certainly needs fixing. But paying critical care givers less is a really bad suggestion.
Income equals expenditure. They are one and the same.
I had an endoscopy done, 15 minute procedure where they put you under. The bill came and the anesthesiologist charged $980 for those 15 minutes. And there was a gastroenterologist and two nurses in the room as well. While I understand that my life was literally in that professional's hands for those 15 minutes (i truly do get and respect that) I don't think "affordable healthcare" is compatible with billing almost a grand for 15 minutes of work. Whether my premiums pay it, or my taxes pay it, or I pay out of pocket, as long as people are charging $4k an hour, it's not going to be affordable. Simple as that.
You aren’t paying for the 15 mins. You are paying for the 20 years that got them qualified and the couple of times per year when shit gets wild and they do more than read the news.
Over paid? Yes. Worth their pay and 10x more when it goes bad. Yes.
So is Germany. But they pay less. And their outcomes aren't worse. So we're overpaying. Probably more precisely: we're unnecessarily restricting the supply of physicians, which is the same thing.
> But if private hospitals have very fat margins, and some significant share of patients could be served just as well through less expensive clinical services, maybe that's too much.
The second chart shows how many companies have return on capital greater than 10%, which basically covers the "very fat margins" you're looking for.
I saw the economist chart, and am responding to tptacek advocating for a specific _spending_ based spreadsheet.
But _no_, the Economist category of "Healthcare Services" includes hospitals, insurers and PBMs and other "middlemen" (see the last paragraph of the article), and so based on their analysis we cannot separate out hospital margins.
The Economist charts are a rhetorical tool designed to highlight a point they're making (I think the points are valid and the charts are good and interesting).
The spreadsheet I'm "advocating" is less like that, and more like the tables in a 10K filing. It's simply an accounting of where US health dollars go, and where the money comes from.
I'm not saying that spreadsheet rebuts any claim this article makes (though it might). I'm saying it's a remarkably simple and comprehensive piece of data to fit onto a single screen, and when we discuss health care economics, it's extraordinarily helpful to have that data available.
Drug costs are contentious because they're easily visible and often no covered by insurance. The other costs are obfuscated in complex billing and hidden under principle/agent veils.
E.g. my son has a peanut allergy and so we need to buy EpiPens. They were hundreds of dollars, and the vendor played MBA-nonsense games like requiring two to be purchased at a time. Meanwhile I was able to drive to Canada and buy the exact same thing (and as many or as few as I needed) for tens of dollars.
We know where all the health spending in the system ends up, and while Pharma pricing is quite high and those companies are quite profitable, most of our health spending doesn't go to either Pharma or insurers.
I've suffered from dry eyes for many years and have tried all the over the counter options available in the US with no success, especially for overnight dryness. Could you please share a hint for the Irish pharmacy delivering to the US?
> and the vendor played MBA-nonsense games like requiring two to be purchased at a time
Washington State, the vendors lobbied on the back of a tragic incident to require a variety of people and places to have EpiPens physically present at all times...
... including in the back of ambulances, when we (I am, or was, a paramedic) we had epinephrine already available.
Which resulted in a huge amount of waste, throwing out expired EpiPens, etc. The number of hoops we had to jump through with the DOH to eventually allow us to have a specific "epi jump kit" (a small tackle box with syringes and a vial, alcohol, etc.) was enormous, but the net result was a replacement cost of $28 for the kit (actually less, because the $28 included the tackle box) versus the $600+ for EpiPens.
I mean, this is a bit of circular logic isn't it...
"Medicine being expensive doesn't impact care being expensive"
Which is almost exactly the opposite. If people could get cheap general doctor visits and be able to afford their medicines then this would reduce the number of emergency visits allowing less beds/doctors/hospitals.
Are you specifically referring to `Table 19 National Health Expenditures by Type of Expenditure and Program.xlsx` in the ZIP archive which can be downloaded at https://www.cms.gov/files/zip/nhe-tables.zip ?
My understanding also is that pharma is a case where you can often show you spend $X on a medicine and it gives $10X or more in savings.
For instance inhaled steroids for asthma can cost an eye-popping $300 a month but some people with asthma get hospitalized once a year at a cost upwards of $8000 so the inhaler is really a bargain.
That's like saying smoke detectors should cost thousands of dollars bc they can save a 500K+ building. That's a poor way to look at value in these situations. It's cheap and easy to make, so it should be cheap to the consumer if there weren't all sorts of red-tape and opaque pricing schemes used as an excuse to prop of extortion.
Why is that a poor way of looking at the situation? The reason smoke detectors don't cost thousands of dollars is that there are lots of different smoke detectors competing the price down.
While that is a great point and should be done, one of the most dysfunctional part of the healthcare system is that the end user / patient doesn’t know how much they will pay if they opt to get a thing done. The obscurity of the price _before_ agreeing to get it done is not reflected at all in data which is 100% hindsight.
My old boss described it this way: without price transparency medical care isn’t a market, it’s a racket. And all of the managers in health care are working to remove price transparency to increase their margins.
As someone who wasted the good years of their life trying to improve the medical system in the USA, there is no piecemeal way to fix it. We were able to save a ton of money but it didn't matter, the saving just vanished into the void that is US medical care and costs went up.
For people who only read the title, note that the article is actually about a slightly different point:
>America is a lucrative market for the world’s drug giants. Many pharma bosses admit that is where they make most of their profits. But are these profits really responsible for America’s ballooning health-care bill? The short answer is no.
I don't think the article is disputing that Americans pay more for drugs than other countries, only that the pharma industry isn't the top gouger (or even above average) in the healthcare industry.
> The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity.
Did a ctrl+F for "PBM," and when that failed, "pharmacy" :P And yeah, the thing about drug manufacturers is that they _are_ ripping us off, but at least they do actually provide a useful service. PBMs, by contrast, inflate costs without any real benefit to consumers.
Which, to anyone who knows even the basic econ ideology that would suggest such a claim, is "duh".
You can choose to not repair your car. You cannot choose to not repair your body except in extreme cases.
Demand will always be infinite. We don't have the technology to saturate the healthcare market any time soon.
Meanwhile, plenty of Americans still insist that they "Don't want to pay for freeloaders" as the current system means hospitals overcharge them to subsidize people with no insurance who come into the emergency room (a much much much more expensive healthcare onramp) and require care.
But Americans will fix that shortly. Once hospitals are allowed to just let uninsured people die, you can rest assured that your money will not be used to subsidize poor people. Instead, every excess dime you spend will go right into the profit column of some executive's spreadsheet!
That's your insurance provider that told you no - not "Big Pharma".
Which is what TFA points out as well:
"The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity. They have higher costs of capital than drugmakers, but they also clear our 10% hurdle much more comfortably (chart 3)"
Everyone is guilty here, because once one sector forms a monopoly, they have monopoly pricing power, and so their counterparty sectors have to form a monopoly as well to keep leverage in negotiations.
50 years ago, there were many more pharma companies, many more insurance companies, and many more hospitals under individual ownership. First the pharma companies consolidated, which give them monopoly pricing power over insurers. So then the insurance companies consolidated to they could negotiate on equal footing, but then they had monopoly pricing power over the hospitals. So then hospitals consolidated so they could negotiate. And now after decades of this, we're right back we're started, except for consumers, who can't consolidate and hence get fucked.
The two solutions here are either breaking up all the monopolies at the same time-- pharma, insurance, and hospitals-- so that everyone has market competition again, or letting health care consumers consolidate so they have pricing leverage-- i.e., forming a single-payer health-care system where the government negotiates deals on behalf of a 330+-million payer pool.
It does not make sense to either blame or spare one single sector: the pharmas, insurers and hospitals are all guilty, though in a sense all of their hands were forced by their counterparties. It's a coordination problem of exactly the kind government is supposed to solve, hence why government-run health care eventually seems like the only option.
Health insurers are limited by law as to profit margins. So how to make more money? Raise prices, or signal to providers that you'll pay higher. Because if your incoming premiums have to rise, then that percentage that can be captured as profit rises.
But wait... what if you (an insurer) build/buy a middle-man to route prescription money through? That isn't covered by those profit margin constraints. So you can just up the prices of prescriptions and siphon profits that way.
Even better, you can do entirely sketchy BS (looking at you, Aetna, but also others): "Sure, you can get your scripts filled at your local pharmacy... but only for <=30 day supplies. We'll reject any script authorization for a supply of 31+ days, like those extremely convenient 90 day refills... unless you use the mail-order pharmacy that is wholly owned by us", thus making people choose between convenience and pricing.
A lot of corporate insurance is self funded by the company, with the insurance company being paid for administration of the plan rather than underwriting.
I suppose it is possible that the buyers of these plans agree to link the payments to the cost of the care provided, but I doubt it.
I used to work for a company that built claims benefit management systems, for both direct insurers, and then TPAs (third party administrators).
The flip side of what you say is this - employers are not actuaries in the world of healthcare. So, while an employer can say "hey, whatever else we're doing, we want to give every employee a massage a week, covered 100%, no copay" and the TPA will facilitate the pricing of that, for the general spectrum of care, they will say "We want basically this level of care" and really just choose a plan already provided by the insurer, because all the actuarial effort has been done and the employer has less risk of getting slammed with a multi-million bill because of unexpected incidences.
I don't think govt run healthcare is the only option... but could serve as a baseline competition if Federal Employees, VA Medical, Medicare/Medicaid were all serviced by an NPO that is govt funded in terms of providing for those federal groups AND allow anyone to buy into a policy as an individual or employer. As an NPO it would provide a baseline for competition and a minimal cost floor with greater negotiating power, that has been artificially limited by the current implementations.
On the Pharma and Devices side, there should be hard FDA requirements for dual sourcing (completely separate ownership structures) and 50% domestic production (for security) as a requirement to even offer medications/devices requiring a prescription in the US.
It could still allow for private competition for better servicing and support without federalizing everything.
I feel like you explained how we got there and our options to fix it perfectly. As you point out we have monopolies (or close to) at every single step. Whatever bandaid people and politician can come up with will quickly be neutralized by these conglomerates, at this point, any half measure is basically useless or has severe tradeoffs.
> So then hospitals consolidated so they could negotiate. And now after decades of this, we're right back we're started, except for consumers, who can't consolidate and hence get fucked.
Consumer consolidation is called voting. Its too bad most consumers have voted in politicians who don't represent their best interests
17% of the US GDP is healthcare so that's probably about 20% of the country that will scream bloody murder if you try and touch it in any way that makes it cost the other 80% less.
The more the middle men, the more the cost. It’s not rocket science that big pharma aren’t the only reason why the costs are high.
Proof:
- I can get plenty of drugs cheaper if I don’t use my insurance
- I can get hospital services cheaper if I don’t use my insurance. There have been times where my copay after meeting the deductible and the insurance coverage is higher than my entire out of pocket cost if I don’t use my insurance.
It is really surreal to see the Americans on here jump to the conclusion that prices should rise everywhere else, rather than that their prices are simply unnecessarily high as there are no proper pricing mechanisms in the US.
If you do have that view please show me some evidence that the US prices cross fund other countries rather than just pad shareholders' profits and CEO pay. No, not partisan papers (plenty of US right wing think-tank papers which confuse corporate income with actual R&D) but actual data on research subsidies per capita or a similar comparable unit.
Population of the USA is about 340 million, population of Canada is about 42 million. Assuming similar statistics of people needing a given medicine, proper cost sharing to result in the same profits would put it much closer to the USA cost than the Canada cost.
The people paying the most in healthcare costs should be getting priority to treatments and medicine don’t you think? Isn’t that fair?
If you are getting cheap healthcare because these people are basically subsidizing it for you, and they’re not even getting anything, then you’re the leech.
These people laughing at Americans having to go bankrupt to afford $1000 medicine that they only have to pay $10 for in their country: fuck em. How I wish we could distribute the costs evenly…
Since most non-biological medicines don't cost very much to manufacture at all; enough profit is enough to cover that drug's R&D and the R&D of the 9 other drugs that didn't pan out. If the US market can cover all those costs, then whatever you get out of other countries is gravy. If that ceases to be true, then other countries will have to pony up more money or go without.
I'm not certain if there's a specific example you have in mind but as a Canadian familiar with the pharma market you can rest assured that Canada (sometimes through the hidden mechanism of government subsidies) pays well above cost for every medication and medical device I'm familiar with.
Sure, companies are gouging the US worse - but they still make a tidy profit in the Canadian market.
This theory that American prices subsidise the rest of the world has really caught on in the US but I have never seen any evidence for it.
Most common drugs are out of patent anyway, so there should be no barrier to low cost production anywhere.
Moreover the EU and China give huge funding to basic and specific research, which forms the basis of many drugs. For instance the RNA research that gave us COVID vaccines was completely European from start to finish, only production then involved American companies due to scale benefits and market access.
On the contrary where the evidence is obvious is that the US pharma companies have amazing profits (such as the few Europeans that sell at scale in the US).
My personal, unscientific, take is that the entire narrative that the US prices fund global low prices is completely unfounded and just an attempt by big pharma to get the US government on their side to break fair pricing mechanisms in other countries.
The COVID vaccine is such a great example too, because the US government negotiated it's price as part of getting it regulated and distributed, just like other countries do for all sorts of medicine.
The US admin negotiated them down to $20 a dose IIRC. Billions of dollars to just do scale manufacturing of a drug someone else slaved over, invented, stood behind for a decade while nobody else cared, and quickly utilized to deal with a novel virus that seemed to evade normal vaccine strategies.
$20 ain't nothing, but in our terrible system, it's almost a bargain.
And the shareholders of the Pharma company involved were fucking incensed that they didn't get more money.
They are ghouls.
But no, lets keep insisting that the US government couldn't negotiate prices for drugs to save Americans a significant chunk of change despite the fact we have a recent and obvious example of them doing a good job of it. Let's keep insisting that Democrats are in bed with Pharma and profit off our costs even though it was republicans who banned import of cheap drugs from Canada and republicans who refuse to allow Medicaid to negotiate meaningfully.
Pharma companies are public. You can see how much they spend on R&D. The claim is false.
I did a calculation once. US spends $4.9T on healthcare: $2T on personnel, $500B on non-acute drugs (ie OTC + prescribed) and $2.4T on something else.
Germany spends $550B on healthcare: $430B on personnel, $80B on non-acute drugs and $31B on something else.
My guess is that the "something else", which is non transparent, is actually private insurance jacking prices up.
>That something else could also be stuff like malpractice insurance, legal settlements, etc.
This claim is regularly brought forth as why US healthcare is expensive and it just doesn't work.
First of all, are you aware Texas has fairly rigorous limits to rewards for Medical Malpractice suits? You can only get half a million dollars above what the malpractice cost you. There's also a two year statute of limitations from when you found out about the malpractice, and if you find out that your surgeon willfully fucked up your treatment more than 10 years after it happened, too bad, no case for you period.
Does Texas have cheaper healthcare than the rest of the country?
Nope.
Second, the primary cost of a medical malpractice suit is fixing the medical problem which is only a large number because medical care in the US is stupid expensive. Blaming the cost of healthcare on malpractice suits and insurance is putting the cart before the horse.
Meanwhile, most medical lawsuits never even come close to large sums.
When my sister was being born, the doctor broke her shoulder to get her unstuck. There is a correct way to do this, but he did it wrong and permanently disabled her. Turns out, he was literally not allowed to practice medicine in some states for doing exactly that to several other babies, and ended up doing exactly the same thing to another baby a few years later in the same town.
We got $10k. Permanent, life altering disability with no treatment or fix for outright malicious incompetence. My sister isn't supposed to be left handed, but she is.
$10k
If you've ever gotten upset about the McDonalds "hot coffee" lawsuit for example, you should be aware that the plaintiff originally was only asking for $20k to treat her fused labia and permanent damage. The court awarded significant damages because it was discovered that McDonalds had done this to multiple people and was purposefully keeping their coffee hotter than they were supposed to despite how it had directly harmed multiple people. They also ran a literal propaganda campaign to libel this woman that it was somehow her fault for not knowing the coffee was hot or something. You can bet they spent more than $20k on that. Oh, and the $2.7 million she got in punitive damages for McDonalds willfully contravening safety and helping melt her lady parts? It was specifically equal to 2 days of coffee sales. And then the judge said "no" and only gave her $600k. Then McDonalds appealed the case and settled privately.
A lot of the cost of US drugs isn't even the drugs or pharmacies, it is the fact that you need an expensive doctors appointment just to have access to those drugs. There are toe nail fungus lacquers that you can buy over the counter pretty much anywhere else in the world, but require a prescription in the US. And even if other places have restrictions on it, it usually amounts to "talk to the pharmacist for 2 minutes first", and not go drop a few hundred bucks on visiting a doctors office first just to say "yep, you got nail fungus!"
Many Americans are literally taking farm animal drugs because it is the only access to those drugs they can afford.
I'm intrigued by the premise - I have my own large burden of health care costs and my own suspicions about where it is going - but does anyone else find their charts unreadable? I'm trying to parse the first one and I keep trying to put the pieces together. "Health care services" is 60 out of 101bn ... excess profits?
The second one I can hardly start on, "health care services" is a medium circle ( circle size = combined market capitalization ) with the second highest "Aggregate return on invested capital" and in the middle of "median weighted-average cost of capital".
I know its called "the economist" but they usually make their articles readable by people without a econ degree. If I had a suspicious mind ( I do ) I'd think this was deliberate obfuscation.
Also "health care services ... such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity"
That is a lot of different interests bundled together. How can they say insurers are the true money makers when they are not even broken out?
For drugmakers, we treat research and development as an asset that is depreciated over 15 years, which is more or less the lifetime of their patents.
This is not a good assumption. It's a super complicated subject, but what really matters is market exclusivity and I think most industry people would use 8–12 years as a realistic range for small molecule market exclusivity.†
I'm unsure how this revised assumption would alter the conclusions.
I think the problem is the article detaches "Pharmacy-Benefit Managers" from Pharma costs and into "Services" as a separate category... they're definitely closer to Pharma in terms of the structure, where that money goes is up for debate.
There should probably be trade (FTC) violation of some kind from this layer of man in the middle gouging, which is on top of the higher direct prices of the medications to begin with in the US.
> The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity.
This category of "providers of health-care services" is rather over-broad, and I wish they had split it up more. Shouldn't hospitals (which actually _provide health care_ and are necessary parts of the healthcare system) be in a separate bucket from the "middlemen"?
And within the hospital category, don't we need to draw some distinctions? Currently in the US there's been press about how recent funding changes are causing a bunch of rural hospitals to shut down. It seems that some hospitals are major money losers, though we as a society may want them to continue to exist (or else a rural person in a medical emergency has no chance of getting care in time). But what's happening at the hospitals that _are_ collecting "rents", esp since in more urban contexts there are often multiple hospitals and one might expect more competition?
Seems like net income margin for an average US company is about ~10% and for big pharm it's ~14%. Regulations are probably what keeps pharma unusually profitable.
I work for a large mail order pharmacy and I will tell you we make no money on over 90% of our prescriptions. Our margin is less than 4%. The space is hyper competitive and obviously consumers are price sensitive. We are incredibly lean - less than 50 staff to run the pharmacy and a fully robotic dispensing line doing the vast majority of the dispensing.
The drug manufacturers are making massive profits, and nobody is stopping them.
Hilariously the whole TrumpRx card is kind of a step in the right direction, I've screamed for years that manufacturers blatantly rip everyone off and if just use a made up discount card system all of a sudden the drug is 30-90% off.
Ideally the government just says the global price is the US price, and eliminates discount cards entirely.
The list price is mostly a starting point for negotiations with PBMs and payers. Drugs are also often aggregated and bundled. So in a lot of cases is unclear what a drug actually costs.
You only get access to the government-negotiated discount, which is from the pharma company list price, if you buy without insurance. But your insurance company already negotiated a discount from that list price (they're not dumb, and any excess dollar they give to Pfizer is a dollar they don't get to deploy elsewhere). From what little we know of the government discount, it is likely in most cases to be a worse price than what you already have access to.
Everything in healthcare is a "small component" if you squint or ask those benefitting but this death by a thousand cuts adds up to a hair under 1/5th of the US GDP. Go single payer or deregulate the living crap out of it, I don't care. I just want this leech of my back.
Single payer doesn't do anything though. Doctors and nurses have significantly better social standing than politicians, so when push comes to shove, the politicians won't be able to make the required structural changes that reduce the labor components of healthcare costs.
Single payer absolutely does something it's insane you would suggest otherwise. It's a basic counting argument: if 60 out of 100 are paying into the system but we have to pay ER fees for the other 40 not paying, then there is an undo burden on the original 60.
If everyone is paying then the burden is shared. Let's not even imagine the utopia of a progressive healthcare tax! The shame of a "self-made business man" losing 5% more of their income earned over 200k!
Everything else being horrendously expensive does exert an upward lift on pharma prices. Yes, pharma does gouge Americans, no doubt about it.
This is not easy to analyze with complements vs substitutes. Sometimes drugs can be substitutes for other treatments, and sometimes they are complements.
Also, people may be desperately needing one or the other or both. It's not like quitting coffee when the prices are high.
Say that for a certain drug and certain set of medical treatments, they are complementary. If the treatment is jacked up to be expensive, less of it will be performed, and that will create less demand for the drug. So you would think the drug would go cheaper. But the drug vendors can simply use their market power (say it is a patented drug with no generic version available) to stick to their guns and jack their prices too. Then they exert the reverse effect; the more expensive drug will put downward pressure on the complementary treatment.
In this manner, both the drug and the procedures can gradually become expensive together. Though each one is not as expensive as it would be if the other didn't move.
The Economist's analysis concludes that the bulk of exorbitant rents in the US is captured by providers of health-care services who take advantage of the healthcare system's opacity:
I'm surprised on the comments here that go: "I had to pay $$$$ for a medication when I could buy that same medication somewhere else for a fraction of it. Therefore Big Pharma gouges America".
That is not evidence that "Big Pharma gouges America". It is evidence that Americans pay a lot more than other countries. Only that. The conclusion doesn't necessarily follow from the premises.
Want to understand why? Read the article's last paragraph:
> The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity.
Insurers make even less money than Pharma companies do. To a first approximation essentially all health care spending goes to companies that deliver health services directly.
Yea in fact the ACA law caps insurers to a maximum of 15% profit. Anything extra must be rebated back to the customers.
The debatable part is the rebate is back to the employer who is allowed to simply pocket the money, though one could argue its returning the amount the employer is covering, often more than the employee. :shrug:
Believe or not, I get yearly notices from UHC about rebates for the prior year.
> Yea in fact the ACA law caps insurers to a maximum of 15% profit.
These are plan-by-plan, not on the company overall, and notably this doesn't apply to:
1) Self-funded plans. Name-brand insurance companies manage these, but big companies fund them and take on the risk (with re-insurance and all that good stuff in the mix, of course). A large proportion of the US population is on these kinds of plans, and that limit does not apply to them.
2) New plans in their first (IIRC) two years. I've not looked into whether insurance companies are playing games with this such that a larger set of their plans are "new" ones than would be if this rule didn't exist, but if it's at all possible for them to do that, I guarantee they are.
> Insurers make even less money than Pharma companies do.
In the whole or in relative terms? Source, even if personal or anecdotal?
I am willing to consider your point because, to be fair, the article doesn't show any data that indicts the insurers. They just blame them at the end without any evidence.
> all health care spending goes to companies that deliver health services directly.
Well, that wouldn't explain why medication alone is more expensive in America, right?
But accepting your argument: is it because of greed and oligopolies, incompetence or excess of regulation?
No, he's right. Insurance profits are legally capped, and this keeps them from representing an outsized fraction of spending even in cases when they might partially be the driver behind it. They have to spend N% of their income on actual health care benefits. They're not absurdly high, you could look them up, but I don't think it's possible to exceed something like 10% profit.
This means the only way for insurance companies to increase profits is to increase the price of healthcare, and they have zero incentive to try and lower the amount of money they pay out for healthcare which might otherwise have been split between profits and lower premiums.
My guess is that if you found NHE data from before the ACA cap insurance would remain a small component of overall health spending (the ACA was very important and I am in no way downplaying it).
Mostly I'm saying: you don't have to axiomatically derive why this is. Medicare collects and synthesizes this data.
How would you derive it from medicare? Isn't medicare supposed to be non-profit? They should occupy 0% of health care spending once you remove the pass-through transfer payments that go back into medical care, minus some administration overhead.
The CMS collects these statistics in the same way that the BLS collects labor statistics. It has nothing specifically to do with the part of CMS that directly administers Medicare. The point is that we have very high quality data on this stuff.
I’d like to see a deeper analysis here though. Insurers don’t make that much money on a percentage profit basis, but profit’s derived after expenses. Hypothetically, their sheer existence could be a huge burden to everyone involved, their costs to employ legions of make-work employees processing/rejecting/questioning claims could result in low profits even if the work isn’t necessary, they could take advantage of transfer pricing to hide profits in their wholly owned but separately reported PBMs…
I'm not even looking at profit; you don't have to, because insurance is such a small component of US health spending. This is the value of having the NHE data in front of you in discussions like this; we don't even have to debate how much of US health insurance is administered by nonprofit firms, or whether for-profit firms are gouging, because the whole thing is too small a component to matter.
Not sure you're understanding. The insurance companies can't gouge by jacking up profits because that's illegal. They can't ever become a big component of healthcare spending nominally, but they can be the actor that causes a big component of health care costs to baloon.
The way insurance companies might gouge is by jacking up healthcare prices, since they act as a government-captured oligopoly block and thus don't have normal free market forces. That is how they could increase nominal profits without increasing % profits.
They could jack up health care prices massively while only being measured as a small % of the total. Whether this is actually the case or not, I'm not sure, but the incentives demand that they do it if they can. It should be impossible to pull off such a cartel in any unregulated market, but due to the way healthcare works it seems more likely it could be true.
The overwhelming majority of the money they'd be diverting by doing that would be going to health providers, not to payers and underwriters. Therefore, the hypo you're offering isn't interesting to me. I'd still be starting by looking at the institutions that actually end up with the money.
>The overwhelming majority of the money they'd be diverting by doing that would be going to health providers, not to payers and underwriters.
Yes exactly. Imagine for a moment you have a market where every payer has to pay every healthcare provider, and a free market of health care providers. It would be impossible to create a cartel of buyers raising the price.
Then imagine, say you have universal healthcare insurance. The insurance provider is capped at say, 1% profit. Since they have a monopoly, they can walk up to the healthcare providers and say "hey, please jack your costs 3x" so we can get 3x the profit. And then you can turn around and do a study and say, well insurance profits haven't changed -- and then wrongly conclude the insurance companies aren't to blame for the inflated prices, as they are only capturing 1% of the health care industry despite being responsible for 200% price increase.
I believe the nature of health insurance industry probably leaves them somewhere in a gray area in-between these two extremes, especially when you consider the insurance companies also often own under an umbrella company health care providers.
Seems like motivated reasoning. I'm looking at a single-page spreadsheet that tells a very different story, and I'm going to stick with that rather than the hypo.
Based on what you've told me so far I'm not understanding how you can be sure of that. After the ACA caps was passed (limiting % profit) nominal health care spending went up significantly.
Medicare doesn't really do administration in the way that you think. There are something like 10-12 regions within the US, and for each region, Medicare contracts with a private health insurer to manage insurance administration within that region. Medicare just moves the money around to cover the admin contracts and to backstop the claims.
And this is before you get to Medicare Advantage, which is where Medicare just pays for private insurance premiums for people who think vanilla Medicare sucks.
OK, but if that's the case the medicare data should show the spending went significantly up after the ACA caps, which doesn't prove the thesis but is necessary condition for it.
Hah, I wouldn't need "personal" or "anecdotal" evidence for this; it's right there in black and white in the NHE data; literally in the first row of the sheet. I posted about this across the thread.
>> The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity.
> As always, no one reads anything.
The implication of the article was the "bulk of the rents" applies to healthcare costs in total, not just to drug costs. I.e. drug costs are not a huge part of the healthcare costs.
That by itself doesn't guarantee an understanding of why specific medication costs are sometimes 10x or whatever of other 1st world countries.
(but I didn't read the article; just the rest of the comments)
https://archive.is/FFvWh
My wife and I recently decided to do IVF. The doctor specifically told us that we needed to order the medicine (menopur, Gonal F, etc) from an American pharmacy. That alone made me suspicious, so I looked at foreign options. Altogether, the medication required would have cost us about $5000 from American pharmacies. We found out that we can just buy the exact same stuff from a German pharmacy for about $1000. So yes, Americans get wrecked by drug prices.
When my wife needed a rabies post-exposure shot course, it would have been around $25000 range for the shots without coverage. Our (expensive high end) insurance brought it down to "only" $2500 out of pocket for us. The alternative is to take the gamble of a possible horrible death.
In the UK? Around £150-£300 total.
> In the UK? Around £150-£300 total.
For whom? I can't imagine this in particular would not be free at the point of use like almost everything else. That said, the UK has famously been free of (classical) rabies since the 1920s, so it's unclear if it would be easily available if there aren't other uses.
Was talking about from a private clinic [1]. Obviously it's free via NHS. It's a good example of a system in which the government in incentivized to not tolerate drug price gouging.
https://www.citydoc.org.uk/conditions/rabies
Not quite free for most people, we have to pay the prescription charge of about £12
Not in Northern Ireland weirdly, they have free prescriptions there
Most dispensed _items_ are free of charge (as in, the prescription charge is not paid - only around ~11% of items are paid). There isn't enough data to know how that breaks down to people though.
Is it a good example of drug price gouging? I would bet the major part of the price is that provider.
> doctor specifically told us that we needed to order the medicine (menopur, Gonal F, etc) from an American pharmacy
Why do they care? Referral bonus?
Did you report them?
Well, for one ... it's illegal to import drugs that aren't FDA approved. You can import a few months personal supply of a prescribed drug that is FDA-approved but doesn't just mean that the active-ingredient is FDA-approved. It has to be the same exact product, manufactured in the same FDA-approved facility with the same packaging/labeling/etc to be considered "FDA-approved". The most expensive FDA-approved drugs are sold at US prices globally, so there's no geographic arbitration. Then other non-FDA approved brands are sold at lower prices - importing these is a smuggling offense, though enforcement was pretty low (but now with CBP's upcoming budget increases, who knows if this will continue to be practical or ultra-risky).
More practically - HMG is a very difficult drug to assay for purity. It's too complex to interpret with qNMR, HPLC testing is also very hard to interpret. The testing that exists evidently either has a very high margin of error or involves lots of rats and dissections.
Even testing for hCG, while it can be done reliably with HPLC, results between different labs are not comparable because the primary assay is also to test bioactivity on rodents, so they're not normalized to the same standard.
The lack of any independent testing for HMG means that some of the more accessible international manufacturers don't actually test their own product. Combined with its high price, that all makes it a very common target for counterfeit.
Yes, the American pharmaceutical system absolutely has quality-control issues. 80% of our generic pharmaceuticals come from overseas production. The pentagon wanted to independently test the drugs it was purchasing for the VA, so it worked with a company named Valisure who determined that about 10% of the drugs had issues with contamination or a lack of the active ingredient[0]. The FDA responded by shutting down Valisure's third-party testing.
But even with the problems we have here in the USA, HMG is the one drug I would particularly not trust from gray-market supply chains. It's conjecture, but I wouldn't be surprised if the doctor said that because other patients had tried it and had poor results.
0: https://archive.ph/ubLmg
Not only the drug has to be approved but the production process and laboratory.
There is a lot of bureaucracy and audits. It is but as if a European laboratory is allowed to sell a generic drug without at huge costs for certifications ( and viceversa)
I am not saying that buying your medicines to questionable online web is a good idea. Just that other countries have their own controls depending on their policies
Yes. There are a lot of good non-FDA drugs that have been available for online purchase by US citizens. It's illegal to get them shipped to you, but enforcement has historically been nearly non-existent and given that 75 million Americans are under-insured ... it probably has been the rational option for many. India, China, and Turkey are perfectly capable of making high quality pharmaceuticals when the business owner actually cares about quality.
Also, compounding pharmacies in the USA sometimes get their raw active ingredients from even the shadiest suppliers in China and India. It's not always perfectly legal, things aren't always QA/QC'd at any point in the process the way they should be, but it happens. So again, "buying American" isn't exactly a golden ticket.
European HMG from reputable pharmacies is probably great quality - but it's still rather expensive compared to Chinese HMG and there's really no way to trust anyone selling it online, you'd basically have to fly to Europe yourself. And taking it back on the airplane would still be illegal, and you'd be rather more likely to be caught by customs than a mailed package.
It is often illegal to purchase drugs from other sources?
The named drugs are injectable and require cold storage so it is not trivial to safely source them from overseas.
Fear of counterfeit/low quality drugs?
what do you mean? you expect american doctors to prescribe you medicines from german pharmacies?
I'd assume it was their telling them specifically not to get it from a foreign country that was the odd part, as opposed to simply prescribing it from a US pharmacy since ofc that is what a US doctor will do. Maybe enough patients tried this, to save costs, that it resulted in some kind of issue for the doctor and that is why they brought it up.
I actually do expect doctors to have even a tiny concern for not making their patients go bankrupt, yes.
Is that really such a high bar?
You need to understand that the system is deliberately so opaque that doctors don't even know what your costs would be. Sure there's a sticker price, but for most medications that's so high as to be absurd. From there, it's entirely dependent on your insurance, coinsurance, pharma benefits, etc, etc.
They try, but they're not in a position to do anything about it.
> They try, but they're not in a position to do anything about it.
Well, somebody's got to be, and the doctors seem like the ones with the most leverage to get those people to do something about it, right? Customer/patient pressure obviously isn't working.
> the system is deliberately so opaque that doctors don't even know what your costs would be.
You're telling me professionals who make $300k after 20 years of education have 0 clue about what their patients might pay, or have never had patients who expressed concern over costs? Or don't have friends or relatives who expressed dissatisfaction with a high-deductible plan? Or aren't complicit in getting kickbacks for prescribing opioids?
We gotta stop absolving people of accountability. And that includes EVERYONE in the chain who benefits. Yes, this includes doctors.
Btw, I have had doctors who do try, and many more now will accept reasonable cash prices for their services. That should be encouraged and commended.
They often don't. There are a lot of variables that affect the price. The doctor is not going to know all of them.
Indeed. At the end of the day, the entity underwriting the insurance plan decides the price. This is often the individual's employer. Your doctor does not know what your HR team decided to ask for when designing their health plan.
The only reason Americans complain about drug prices is because that’s the one they usually pay directly.
The other parts of the healthcare system are hidden behind taxes and insurance.
Not to be unnecessarily sparky here, but are we limiting this discussion to legal drugs?
Drugs like Oxy are both "legal" yet also consumed illegally. Made by a perfectly legit pharma company.
And that's before we discuss the river of fentanyl apparently flowing across the Canadian border...
I think insurance prices are very much a part of the overall healthcare conversation too though.
YouTube Premium is also cheaper in Bangladesh.
Is it cheaper in the UK, Canada, Germany, etc?
Pricing in healthcare is very tightly regulated and there isn't a simple one line answer for why certain prices are they way they are. Its easy to scapegoat bigpharma for being greedy, but they're just as greedy as any other US corporation.
https://en.wikipedia.org/wiki/External_reference_pricing
I only brought up YouTube because when a company is free to set their price, you will still end up with a pricing model where the pricing is different based on region.
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The problem with this argument is that pharmaceutical companies are private businesses trying to make a profit, not charities. If it were truly unprofitable to sell drugs in, say, Canada or France, pharmaceutical companies would just not sell their drugs in those countries. It is _less_ profitable to sell drugs in those countries than America but still profitable, which is why they still try to capture those markets. If America fixed this imbalance by forcing a lowering of drug prices in the American market, there's no reason to believe that this would cause raising of prices elsewhere. The only way this would be possible is if it were truly unprofitable to sell the drugs elsewhere, which can't be the case since these are corporations not charities. The real impact would be to slow down new drug development, since existing drugs are already profitable to sell everywhere in the world even in countries with more regulation, but if America fixed its market by lowering drug prices for Americans, the total profitability of pharmaceuticals would decrease, decreasing the incentive to create new pharmaceuticals. That's a totally different and very plausible impact. Rising drug prices for existing drugs in other countries is not a plausible impact.
> If it were truly unprofitable to sell drugs in, say, Canada or France, pharmaceutical companies would just not sell their drugs in those countries
You’re confusing capital and operating costs. Once you’ve developed the drug, selling everywhere you can makes sense. When considering whether to develop a drug or invest in something else, America’s biotech market absolutely turns keys. (But not as uniquely as we think. Europe has a thriving R&D market, it’s just directly subsidised.)
I don't think they're "confusing" it, considering they specifically said what you said elsewhere in their comment.
I think they are not saying it's unprofitable, but rather that the current government should shape the market so the environment levels more over US vs the rest. (of course please in a laissez-faire change the market style not the bad socialist stuff)
So basically if this true, you prove my point. If Americans weren’t paying these high costs then R&D would slow down and the whole world wouldn’t get these drugs.
America subsidizes these drugs for the rest of the world, which does not pay its fair share into R&D costs. If we’re to fix our healthcare system, this kind of thing can’t continue.
You think pharma companies won't bill the rest of countries whatever the market can bear? I can't think of why they possibly would lower their prices even if the American government stops subsidizing their businesses via using their monopoly on violence to enforce our perverted IP regimes.
Europe is highly regulated. Other countries with nationalist governments if pushed too far will make their own generic versions. So no, increasing prices in other countries to offset the loses in the American market is not that simple.
For anyone reading not familiar with this, "America's drug prices are high because we're subsidizing the rest of the world" is MAGA propaganda, and is not based on logic. https://www.msn.com/en-us/news/politics/pfizer-agrees-to-dea...
What's the problem with talking points? Talking is the purpose of an open forum like this one. Let's argue against the points and not against the commenters.
Fair point, I’ve corrected "talking point" to "propaganda" above. Not only does it not make any logical sense, but there is zero evidence that Big Pharma isn't pricing drugs to maximize profitability in every market in which they operate. Drug companies aren’t charities.
Besides, it also invites the immediate and rather fatal rejoinder of, "OK? So how about we... don't do that?"
Any negative response to that must suppose that everyone else would just give up on trying to advance drug R&D if the US stopped unilaterally self-sacrificing to subsidize it for the entire world... and when you lay it out like that, it seems like that must not actually be what's going on in the first place, because why the hell would we be do that, for that reason? So, very probably, we aren't, and further, if we are we should definitely stop.
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>If America prohibited such gouging, would the rest of the world accept price increases on their drugs? If the current administration is so interested in inflicting harm on the rest of the world, maybe they should be convinced to lower drug prices.
I doubt governments elsewhere are itching to increase their healthcare spending even more. Realistically speaking the actual result will be cost cutting from pharma companies, mostly in the form of lower R&D spending for new drugs.
Seems like an interesting hypothesis to explore.
You didn't provide any context of why you think that could be the case or the mechanism through the alleged subsidies happen.
The sad reality is that if Americans stopped paying inflated prices the 40% of drugs discovered here would shrink to about 10% and world wide drug discovery would be massively reduced.
You literally have to get fucked or the world get fucked harder and drags you down with them. Same reason why NATO and the farm bill are good for America.
The greatest trick from the wealthy is to not just exploit you to get it, but to destroy any possibility of resistance to them. Even trying to resist does nothing but harms the under class even more than if you simply accept it.
“If you want a picture of the future, imagine a boot stamping on a human face—forever.“ - George Orwell, a communist/socialist
Edit: To the guy who claimed Orwell wasn't a communist, the POUM who he fought for in the Spanish Civil war was communist (https://en.wikipedia.org/wiki/POUM) and according to the soviet union was specifically trotskyist. If you fight for them you are a communist, even if and especially if you claim you weren't later in life.
Orwell was an anti-Communist, though especially anti Stalinist. He fell into the POUM, he didn't choose them, "I knew that I was serving in something called the POUM. (I had only joined the POUM militia rather than any other because I happened to arrive in Barcelona with ILP papers), but I did not realize that there were serious differences between the political parties."
He actually said "As far as my purely personal preferences went I would have liked to join the Anarchists." After the Stalinists illegalized the POUM, killed and tortured Orwell's friends and tried to kill him, forcing him flee Spain, his view on Communism grew ever more dim, and after that he grew more strongly anti-Communist than his earlier anti-Fascism.
Orwell was not a communist.
Later
"Orwell was a communist even if he said otherwise" is a telling argument.
The headline is terrible given the thesis of the short article.
The Economist's analysis creates a model that shows Pharma companies making "excess profits" (greater than 10% return on capital) second only to technology companies. In that sense, by the Economist's terms, they are in fact gouging.
But that's not really the point the Economist wants to make; rather, regardless of whatever profits Pharma is raking in, they're in fact a small component of overall health care spending. You could zero out Pharma profits (this is my point and not theirs) and not materially change US health spending.
In all these discussions about American health care, my first take is that everybody should go download the CMS National Health Expenditures, and make a beeline for "Expenditures by Type of Expenditure and Program" (it's just an Excel spreadsheet). It's an extremely intuitive breakdown of where all US health care spending goes, and who's paying for it, all on one sheet.
There are a lot of narratives about health care spending that do not survive first contact with that spreadsheet.
I don't think the spending story alone is helpful because it doesn't acknowledge where there's room for actual improvement. Of the $1.5T spent on "Hospital Care", if almost all of it went to medical staff, facilities, equipment etc, and if good data suggested that people aren't in hospital unnecessarily, maybe that number isn't a problem. But if private hospitals have very fat margins, and some significant share of patients could be served just as well through less expensive clinical services, maybe that's too much.
In the context of the cost of medication, the $449B on "prescription drugs" doesn't break out what goes to drug makers vs PBMs or anyone else. We can easily imagine a world without PBMs that still delivers drugs to patients, but someone has to actually make the drugs. We can also ask, are people on medications they don't actually need? Are we sometimes _causing_ later health issues when medicating (e.g. fueling a giant opioid crisis)? None of this is apparent in the top-line spending figures.
Whoah, that smuggles in an enormous assumption: that a dollar directed to a medical professional is automatically well spent. In reality, medical professionals in the US make drastically more money than they do in Europe and deliver way more procedures (they're often working on "RVU" scales that incentivize delivery of more procedures).
This is something that makes health care economics really difficult to discuss: everybody trusts their doctor and factors them out of the equation; the problem is every penny that doesn't go to their doctors and specialists. But that's not a valid analysis and your doctor and their support system is (after elder care) at the heart of US health spending.
What makes it hard to discuss is everyone at every level is gouging for various reasons.
Like, for example, doctors are going to be paid more than foreign counter parts, but they also end up needing very expensive schooling. (Similar thing happens to dentists).
Go into the hospital, and you end up paying 10x the amount for any medication (Tylenol being a good example) because either the hospital has an agreement with a medical supplier for exclusive supplies or they are trying to make up for ER treatments.
Then there's simply the added layer of bloat on top of everything. Health insurance ends up hiring a large staff of people to try and reject all claims while hospitals hire patient advocates to appeal the denials for the patients. All that ends up being paid for somehow (usually a large chunk is from the patient's insurance principle).
And, much like funerals, slap on "medical" on any piece of equipment and you get to raise the price by 10x. A $10 stethoscope ends up costing $100 from a medical supplier. Or one I've personally seen, a "medical" pocket protector made from $1 in fabric costing $50.
The reason non-us healthcare ends up being cheaper is because the governments are running most everything rather than having 3 or 4 private businesses duking it out over cost. It eliminates a huge amount of redundancy in the system when a government builds the hospitals, pays the doctors directly, and is the only one negotiating with medical equipment providers.
I don't disagree and wouldn't valorize anybody in the field† (though: of all the entities, I come closest to respecting Pharma's role and, if those companies were well-behaved, could make a pretty coherent argument for why they should be making much more money given what they produce).
But it remains important to get a picture of where the money is going, and the real picture disrupts a bunch of narratives.
Even in your comment: you're handwaving past physician comp and overdelivery!
† writ-large, I mean; I know some awesome doctors
> Even in your comment: you're handwaving past physician comp and overdelivery!
I'm really not. I'm simply pointing out exactly why they have such an oversized salary. It costs a ton of money to become a physician. In order to survive, they initially need a pretty sizable salary.
After the loans are paid off, that salary can't go down, there would be a revolt if it did.
Over delivery is really just a general attitude of wanting to test everything to make sure nothing is missed. I have a hard time faulting them over that.
IMO, the way to address this problem is addressing the cost of education for physicians. There's no reason getting an MD should cost $500,000, and yet it does.
And, of course, the best way to do this is to make medical school publicly funded and tuition free. A lot of small hospitals close down because they can't afford regular doctors. It's also next to impossible for a doctor to setup a private clinic.
That won't fully solve the current salary bloat, the only way to really address that is expanding the number of doctors being trained.
Sure it could. Physician compensation, RVU billing, upcoding, and overdelivery aren't facts of nature. In fact, a lot of these problems are caused by Medicare regulation; we deliberately restrict the supply of physicians by underfunding residency slots, which is something the AMA lobbied to do.
But when institutions try to take these problems on, like when Blue Cross (IIRC) went after anaesthesiology upcoding abuses, industry lobbyists spin people up to think that insurers are demanding surgeons wake people up in the middle of operations. It's a real problem. People understand so little about how our system works that they will vociferously take the side of practitioners who are screwing them over.
(Everybody is screwing everybody over; I'm not taking a side, except to point out that Table 19 of the NHE makes a pretty stark statement about where the money is going.)
It seems like you've been referring to "Hospital Services", which was 31% of all healthcare spending in 2023, and "Physician and Clinical Services", which was 20% of all healthcare spending in 2023, according to the CMS spreadsheet. But this is made up of revenue to the hospital or doctor's office, not just compensation for the medical professionals. These numbers include all the administration/dealing with insurance that has to be done at the hospital or physician office, as well as rent, malpractice insurance, drugs provided at the hospital, imaging costs and almost everything else that pays for capital spend, etc. The fees at the point of service basically have to account for all the bloat in the system, which of course includes some overdelivery and bloat inside the hospitals and clinics. But I really don't think this builds a case (like you seem to be doing) that doctors and nurses need to be squeezed in order to reduce US health care costs, especially when total healthcare expenditure has grown much faster than clinician pay over the past decades.
I agree that the figure includes administration costs. CMS won't tell you that US physicians are paid 2x-3x more than they are in Europe, but OECD numbers will. CMS won't tell you about upcoding and overprescription, but the Dartmouth Atlas will. Meanwhile: the CMS picture will at least tell you that the majority of spending in our system is in on the provider side, and not in either prescription or insurance.
Again: I'm not out on a limb with these claims. I'm literally just remembering things Jonathan Gruber told Derek Thompson on a podcast, then looking up and bookmarking the numbers to confirm them. Many of the most popular message board narratives about healthcare disintegrate in the face of even these simple CMS numbers!
I did _not_ make that assumption. I specifically called out the possibility that some hospital care may not be necessary. Regarding hospital care, the two sentences describing hypotheticals where spending is or is not improvable specifically included clauses:
> and if good data suggested that people aren't in hospital unnecessarily
> if ... some significant share of patients could be served just as well through less expensive clinical services, maybe that's too much
I don't think they were insinuating that _you_ were making that assumption, but rather that your line of reasoning must necessarily make that assumption if brought to fruition
> and deliver way more procedures
Diagnostic imaging companies - each of the big ones (Siemens, GE, Philips) offer in-house financing for MRI, CT, etc., that they advertise to physicians. They also all offer specialist consulting help to facilitate you getting a CoN (Certificate of Need) for your facility. Hell, they also will help you find other physicians in your area who'd like to go in on setting up a DI facility (and will assist with spinning up the practice).
We then find that physicians who own a DI practice (or a share in one) refer their patients to diagnostic imaging at rates several standard deviations above other physicians and at rates that are "statistically improbable" when correlated to underlying ICD-10 diagnostic codes.
Upton Sinclair comes to mind ("It is difficult to get a man to understand something, when his salary depends on his not understanding it").
My favorite statistic is that there are more MRI machines in Massachusetts than there are in all of Canada.
Is that a good thing or a bad thing? MRI machines are expensive, but very useful for certain conditions and with zero radiation exposure. We see a lot of affluent Canadians coming to the USA as medical tourists for imaging procedures and elective surgery due to long queues at home.
It's an indicator. By many accounts, the US drastically overuses imaging. For instance: it's not unlikely that a patient presenting with persistent back pain will be imaged quickly in the US. That imaging service is itself expensive and a cost driver, but far worse are the procedures the imaging results drive, most of which wouldn't be prescribed over the border in Canada. We do not on the whole get better results for back pain here!
Another example, though with a less comical indicator than the MRI thing: at least up until recently, hernia repairs in Europe were all inpatient procedures. The US innovated on laparoscopic hernia repair that's done outpatient. This is by itself a very good thing! But the knock-on result is that the US now delivers way more hernia repairs; we do medically unnecessary hernia repair because we made it so easy to do.
None of these are my insights; they're just things you learn about if you read and listen to podcasts about the problems with our health care economics.
Hey! You got it right!
It's almost like I wasn't commenting in bad faith or out of ignorance in the first place.
RVU is presumably "relative value units": <https://medicalbillingservicereview.com/rvu-explained/>.
> medical professionals in the US make drastically more money than they do in Europe and deliver way more procedures
Do you have a source on that? I ant to understand how that works. The US is ludicrously inefficient per dollar spent, so how does that work?
By us compensating medical professionals more and allowing them to perform more procedures.
It's weird to see people startled by this claim because it's a pretty basic and accepted one!
It’s not purely a bad thing per se if it attracts doctors who excel and are the best.
However, it seems now more like straight-up profiteering the past decade or two by doctors as a whole but it’s harder to point a finger at. In contrast with “Big Pharma” the profits are fairly centralized and easy to point a finger at.
Personally I’ve for a while believed the biggest issue with wealth inequality in the US isn’t primarily due to billionaire class, but rather the millionaire class and “managerial class”, though I’d include doctors in that list. Most CEOs would also be in that list.
Doctors via the AMA keep salaries artificially high, just the same as similar tactics used by land lords using software to jack up rent prices.
Your claim here, were you to try to make it, would have to be that American doctors are across the board 2-3x better than European doctors, and that European pts are getting drastically fewer procedures than they need.
(I think we agree though).
Specifically for doctors, that seems a reasonable point or question. I know intimately from my PhD studies that some procedures performed widely in the US aren't that effective (meniscectomies in particular). Though that's gotta be balanced with procedures that are helpful that Europeans don't do enough.
More broadly though, I believe what's occurring with doctors is also happening across the board in other professions. Landlords as an aggregate are charging more than if fair, and the median landlord isn't a billionaire or Blackrock but probably part of the professional managerial class (PMC) [1]. No idea if landlords as a whole are charging 25% or 250% more for rent, but rent seems to have outpaced inflation by a fair bit.
Similarly others here mention doctors owning portions of diagnostic imaging companies who go on to request unnecessary imaging. That's the PMC enrich-yourself-first mindset. Historically it was the local landed nobles.
Repeat that across more fields and professions and you see that the middle and lower classes will be squeezed much more by PMCs than by billionaires, IMO. For example, it'll be some VP at Google who's pushing to raise the cost of YouTube premium rather than Sergey Brin or the Youtube CEO. Another VP who's figuring out how to move software to a never-ending subscription, etc. Though it'd be hard to split out the effect of say PMC's vs corporate profiteering. Perhaps they are part of the same effect.
1: https://en.wikipedia.org/wiki/Professional%E2%80%93manageria...
You know if the damn prices were not so hidden behind paperwork electronic or otherwise between the provider and insurance company, together with well disseminated facts about cost, and outcomes we could let market forces sort this out so poor service + high cost is mediated somewhat ...
Ideally the provider would bill the patient only without recourse to any insurer. The patient if satisfied could ask the insurance to pay. This way the bill "is out " in the sunlight, and providers have no way to get paid unless customers are happy. At bare bones it aligns provider with patient through a bill like anything else. Adversarial patients ... are another thing for later ... but i want people to start seeing US medicine up front rather that stuff that goes on behind the scenes.
I realize ppl get all kinds of paperwork now including sometimes bills ... but c'mon it's one thing if it's FYI after the fact" because it was all submitted to insurance yesterday anyway ... or ... this is it; the bill is due ... approve it ... or else ...
I mean, if the argument is that exogenous supply constraints are the root of most of our economic problems, and that the economy is rigged for the upper-middle class and the billionaires are just along for the ride, we probably share a lot of politics, but either way: my point on this thread is just: start with the total picture of where money in our system goes.
A lot of people think most of it is going to insurers and pharma companies, which is the literal opposite of what's happening.
Yeah agreed the issue with medical costs in the US isn’t primarily pharma or insurers.
It’s just easier to blame them companies because they’re more centralized. Easy to point and say “look at the billions in profit”. Doctors as a whole are likely make many billions more in profit but it’s harder to see and understand that.
Physicians in the US are paid, on average, more than 2x what Physicians in Germany make and more than 3.5x what Physicians in France are paid [1].
[1] https://www.statista.com/statistics/1094939/physician-earnin...?
Similar ratio for nurses too. Nurses in the UK are on 26k GBP a year and a nurse in a US hospital is generally making no less than $80k USD
I'm a bit confused.. are people suggesting that the poor pay in the EU is a _good_ thing? These aren't lawn maintenance or car mechanics here. We're talking about saving peoples lives. I would think the people in the EU would feel a bit of shame for paying them so poorly..
[disclaimer] my wife works in pediatric cardiology and saving kids lives seems worth a hell of a lot more than a software jockey job. The dead baby days are the worst and make a rough merge or code deployment appear as trivial as they really are. The EU should be ashamed of paying their people so poorly. None of that is to say that our system isn't broken and wasteful. It certainly needs fixing. But paying critical care givers less is a really bad suggestion.
Income equals expenditure. They are one and the same.
I had an endoscopy done, 15 minute procedure where they put you under. The bill came and the anesthesiologist charged $980 for those 15 minutes. And there was a gastroenterologist and two nurses in the room as well. While I understand that my life was literally in that professional's hands for those 15 minutes (i truly do get and respect that) I don't think "affordable healthcare" is compatible with billing almost a grand for 15 minutes of work. Whether my premiums pay it, or my taxes pay it, or I pay out of pocket, as long as people are charging $4k an hour, it's not going to be affordable. Simple as that.
You aren’t paying for the 15 mins. You are paying for the 20 years that got them qualified and the couple of times per year when shit gets wild and they do more than read the news.
Over paid? Yes. Worth their pay and 10x more when it goes bad. Yes.
I don't think anesthesiologists are worth $400k+ per year. I simply do not.
So is Germany. But they pay less. And their outcomes aren't worse. So we're overpaying. Probably more precisely: we're unnecessarily restricting the supply of physicians, which is the same thing.
> But if private hospitals have very fat margins, and some significant share of patients could be served just as well through less expensive clinical services, maybe that's too much.
The second chart shows how many companies have return on capital greater than 10%, which basically covers the "very fat margins" you're looking for.
I saw the economist chart, and am responding to tptacek advocating for a specific _spending_ based spreadsheet.
But _no_, the Economist category of "Healthcare Services" includes hospitals, insurers and PBMs and other "middlemen" (see the last paragraph of the article), and so based on their analysis we cannot separate out hospital margins.
The Economist charts are a rhetorical tool designed to highlight a point they're making (I think the points are valid and the charts are good and interesting).
The spreadsheet I'm "advocating" is less like that, and more like the tables in a 10K filing. It's simply an accounting of where US health dollars go, and where the money comes from.
I'm not saying that spreadsheet rebuts any claim this article makes (though it might). I'm saying it's a remarkably simple and comprehensive piece of data to fit onto a single screen, and when we discuss health care economics, it's extraordinarily helpful to have that data available.
Drug costs are contentious because they're easily visible and often no covered by insurance. The other costs are obfuscated in complex billing and hidden under principle/agent veils.
E.g. my son has a peanut allergy and so we need to buy EpiPens. They were hundreds of dollars, and the vendor played MBA-nonsense games like requiring two to be purchased at a time. Meanwhile I was able to drive to Canada and buy the exact same thing (and as many or as few as I needed) for tens of dollars.
We know where all the health spending in the system ends up, and while Pharma pricing is quite high and those companies are quite profitable, most of our health spending doesn't go to either Pharma or insurers.
Similar story. I suffer from dry eyes, and I like perfluorohexyloctane eye drops. They require a prescription and cost $800 here in the US.
I am now ordering them from an Irish pharmacy. They are over the counter there, and cost $20.
They are literally exactly the same, you can tell by the lot numbers on the bottles.
I've suffered from dry eyes for many years and have tried all the over the counter options available in the US with no success, especially for overnight dryness. Could you please share a hint for the Irish pharmacy delivering to the US?
Search for "EvoTears" or "NovoTears", it's the European brand for it. I've been using this pharmacy: https://www.opticalrooms.ie/product/evotears/
There are others that apparently can ship to the US.
> and the vendor played MBA-nonsense games like requiring two to be purchased at a time
Washington State, the vendors lobbied on the back of a tragic incident to require a variety of people and places to have EpiPens physically present at all times...
... including in the back of ambulances, when we (I am, or was, a paramedic) we had epinephrine already available.
Which resulted in a huge amount of waste, throwing out expired EpiPens, etc. The number of hoops we had to jump through with the DOH to eventually allow us to have a specific "epi jump kit" (a small tackle box with syringes and a vial, alcohol, etc.) was enormous, but the net result was a replacement cost of $28 for the kit (actually less, because the $28 included the tackle box) versus the $600+ for EpiPens.
That is annoying, but not a huge cost driver. If you son ended up in the ER it would cost multiple lifetimes of epipens (even at an inflated price).
I mean, this is a bit of circular logic isn't it...
"Medicine being expensive doesn't impact care being expensive"
Which is almost exactly the opposite. If people could get cheap general doctor visits and be able to afford their medicines then this would reduce the number of emergency visits allowing less beds/doctors/hospitals.
Are you specifically referring to `Table 19 National Health Expenditures by Type of Expenditure and Program.xlsx` in the ZIP archive which can be downloaded at https://www.cms.gov/files/zip/nhe-tables.zip ?
Yeah the one I have hotlinked in Google Sheets is a "Table 19" but I didn't want to presume it's Table 19 every year.
My understanding also is that pharma is a case where you can often show you spend $X on a medicine and it gives $10X or more in savings.
For instance inhaled steroids for asthma can cost an eye-popping $300 a month but some people with asthma get hospitalized once a year at a cost upwards of $8000 so the inhaler is really a bargain.
That's like saying smoke detectors should cost thousands of dollars bc they can save a 500K+ building. That's a poor way to look at value in these situations. It's cheap and easy to make, so it should be cheap to the consumer if there weren't all sorts of red-tape and opaque pricing schemes used as an excuse to prop of extortion.
Why is that a poor way of looking at the situation? The reason smoke detectors don't cost thousands of dollars is that there are lots of different smoke detectors competing the price down.
While that is a great point and should be done, one of the most dysfunctional part of the healthcare system is that the end user / patient doesn’t know how much they will pay if they opt to get a thing done. The obscurity of the price _before_ agreeing to get it done is not reflected at all in data which is 100% hindsight.
My old boss described it this way: without price transparency medical care isn’t a market, it’s a racket. And all of the managers in health care are working to remove price transparency to increase their margins.
Thanks - I've adapted your phrase for the title above. If anyone can suggest a better (i.e. more accurate and neutral), we can change it again.
As someone who wasted the good years of their life trying to improve the medical system in the USA, there is no piecemeal way to fix it. We were able to save a ton of money but it didn't matter, the saving just vanished into the void that is US medical care and costs went up.
For people who only read the title, note that the article is actually about a slightly different point:
>America is a lucrative market for the world’s drug giants. Many pharma bosses admit that is where they make most of their profits. But are these profits really responsible for America’s ballooning health-care bill? The short answer is no.
I don't think the article is disputing that Americans pay more for drugs than other countries, only that the pharma industry isn't the top gouger (or even above average) in the healthcare industry.
> The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity.
Did a ctrl+F for "PBM," and when that failed, "pharmacy" :P And yeah, the thing about drug manufacturers is that they _are_ ripping us off, but at least they do actually provide a useful service. PBMs, by contrast, inflate costs without any real benefit to consumers.
https://www.ama-assn.org/sites/ama-assn.org/files/2025-04/20...
My friend’s daughter needs an eczema crème and was told the price was $1000 per tube and wasn’t covered under insurance.
The price in Canada is around $100. Yes, Big Pharma gouges Americans.
Issue is more like 'the cure for high prices is high prices' does not seem to work in healthcare
Which, to anyone who knows even the basic econ ideology that would suggest such a claim, is "duh".
You can choose to not repair your car. You cannot choose to not repair your body except in extreme cases.
Demand will always be infinite. We don't have the technology to saturate the healthcare market any time soon.
Meanwhile, plenty of Americans still insist that they "Don't want to pay for freeloaders" as the current system means hospitals overcharge them to subsidize people with no insurance who come into the emergency room (a much much much more expensive healthcare onramp) and require care.
But Americans will fix that shortly. Once hospitals are allowed to just let uninsured people die, you can rest assured that your money will not be used to subsidize poor people. Instead, every excess dime you spend will go right into the profit column of some executive's spreadsheet!
That's your insurance provider that told you no - not "Big Pharma".
Which is what TFA points out as well:
"The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity. They have higher costs of capital than drugmakers, but they also clear our 10% hurdle much more comfortably (chart 3)"
Both are counterparties to negotiations that set price and availability, so it probably doesn't make sense to separate their role.
Everyone is guilty here, because once one sector forms a monopoly, they have monopoly pricing power, and so their counterparty sectors have to form a monopoly as well to keep leverage in negotiations.
50 years ago, there were many more pharma companies, many more insurance companies, and many more hospitals under individual ownership. First the pharma companies consolidated, which give them monopoly pricing power over insurers. So then the insurance companies consolidated to they could negotiate on equal footing, but then they had monopoly pricing power over the hospitals. So then hospitals consolidated so they could negotiate. And now after decades of this, we're right back we're started, except for consumers, who can't consolidate and hence get fucked.
The two solutions here are either breaking up all the monopolies at the same time-- pharma, insurance, and hospitals-- so that everyone has market competition again, or letting health care consumers consolidate so they have pricing leverage-- i.e., forming a single-payer health-care system where the government negotiates deals on behalf of a 330+-million payer pool.
It does not make sense to either blame or spare one single sector: the pharmas, insurers and hospitals are all guilty, though in a sense all of their hands were forced by their counterparties. It's a coordination problem of exactly the kind government is supposed to solve, hence why government-run health care eventually seems like the only option.
You're also neglecting the insurers and PBMs.
Health insurers are limited by law as to profit margins. So how to make more money? Raise prices, or signal to providers that you'll pay higher. Because if your incoming premiums have to rise, then that percentage that can be captured as profit rises.
But wait... what if you (an insurer) build/buy a middle-man to route prescription money through? That isn't covered by those profit margin constraints. So you can just up the prices of prescriptions and siphon profits that way.
Even better, you can do entirely sketchy BS (looking at you, Aetna, but also others): "Sure, you can get your scripts filled at your local pharmacy... but only for <=30 day supplies. We'll reject any script authorization for a supply of 31+ days, like those extremely convenient 90 day refills... unless you use the mail-order pharmacy that is wholly owned by us", thus making people choose between convenience and pricing.
A lot of corporate insurance is self funded by the company, with the insurance company being paid for administration of the plan rather than underwriting.
I suppose it is possible that the buyers of these plans agree to link the payments to the cost of the care provided, but I doubt it.
I used to work for a company that built claims benefit management systems, for both direct insurers, and then TPAs (third party administrators).
The flip side of what you say is this - employers are not actuaries in the world of healthcare. So, while an employer can say "hey, whatever else we're doing, we want to give every employee a massage a week, covered 100%, no copay" and the TPA will facilitate the pricing of that, for the general spectrum of care, they will say "We want basically this level of care" and really just choose a plan already provided by the insurer, because all the actuarial effort has been done and the employer has less risk of getting slammed with a multi-million bill because of unexpected incidences.
I don't think govt run healthcare is the only option... but could serve as a baseline competition if Federal Employees, VA Medical, Medicare/Medicaid were all serviced by an NPO that is govt funded in terms of providing for those federal groups AND allow anyone to buy into a policy as an individual or employer. As an NPO it would provide a baseline for competition and a minimal cost floor with greater negotiating power, that has been artificially limited by the current implementations.
On the Pharma and Devices side, there should be hard FDA requirements for dual sourcing (completely separate ownership structures) and 50% domestic production (for security) as a requirement to even offer medications/devices requiring a prescription in the US.
It could still allow for private competition for better servicing and support without federalizing everything.
I feel like you explained how we got there and our options to fix it perfectly. As you point out we have monopolies (or close to) at every single step. Whatever bandaid people and politician can come up with will quickly be neutralized by these conglomerates, at this point, any half measure is basically useless or has severe tradeoffs.
>As you point out we have monopolies (or close to) at every single step.
This is happening to a huge number of industries in the US, not just healthcare.
Fair enough, but
- Healthcare is almost 20% of the economy
- Demand for Healthcare is largely inelastic
> So then hospitals consolidated so they could negotiate. And now after decades of this, we're right back we're started, except for consumers, who can't consolidate and hence get fucked.
Consumer consolidation is called voting. Its too bad most consumers have voted in politicians who don't represent their best interests
17% of the US GDP is healthcare so that's probably about 20% of the country that will scream bloody murder if you try and touch it in any way that makes it cost the other 80% less.
The more the middle men, the more the cost. It’s not rocket science that big pharma aren’t the only reason why the costs are high.
Proof:
- I can get plenty of drugs cheaper if I don’t use my insurance - I can get hospital services cheaper if I don’t use my insurance. There have been times where my copay after meeting the deductible and the insurance coverage is higher than my entire out of pocket cost if I don’t use my insurance.
The $1000 price is without insurance so what you're saying doesn't apply.
It is really surreal to see the Americans on here jump to the conclusion that prices should rise everywhere else, rather than that their prices are simply unnecessarily high as there are no proper pricing mechanisms in the US.
If you do have that view please show me some evidence that the US prices cross fund other countries rather than just pad shareholders' profits and CEO pay. No, not partisan papers (plenty of US right wing think-tank papers which confuse corporate income with actual R&D) but actual data on research subsidies per capita or a similar comparable unit.
So it should cost $550 in America and $550 in Canada.
Population of the USA is about 340 million, population of Canada is about 42 million. Assuming similar statistics of people needing a given medicine, proper cost sharing to result in the same profits would put it much closer to the USA cost than the Canada cost.
It depends on your moral system. Equalizing costs across markets almost certainly reduces the number of people who can be served by a medication.
I'd be really interested to see these costs averaged (like parent post) but then re-distributed by average income...
Um it also increases the number of Americans who can now access those drugs? So whose healthcare is more important to you?
It decreases the total number of people with access. Like I said: it depends on your moral system.
The people paying the most in healthcare costs should be getting priority to treatments and medicine don’t you think? Isn’t that fair?
If you are getting cheap healthcare because these people are basically subsidizing it for you, and they’re not even getting anything, then you’re the leech.
These people laughing at Americans having to go bankrupt to afford $1000 medicine that they only have to pay $10 for in their country: fuck em. How I wish we could distribute the costs evenly…
Depends on your moral system.
How do you know what their profit margins are in each country?
How much profit is enough?
Since most non-biological medicines don't cost very much to manufacture at all; enough profit is enough to cover that drug's R&D and the R&D of the 9 other drugs that didn't pan out. If the US market can cover all those costs, then whatever you get out of other countries is gravy. If that ceases to be true, then other countries will have to pony up more money or go without.
This is flamebait. Nobody with a cursory understanding of a market economy thinks in these terms.
Yeah man that's what they do. They sell it at a loss in Canada and then profit in the US to make up the loss. That's definitely how it works.
Let's hope they never discover that they could just not sell it in Canada at all and make even more money.
I'm not certain if there's a specific example you have in mind but as a Canadian familiar with the pharma market you can rest assured that Canada (sometimes through the hidden mechanism of government subsidies) pays well above cost for every medication and medical device I'm familiar with.
Sure, companies are gouging the US worse - but they still make a tidy profit in the Canadian market.
I was being sarcastic
Oh my apologies - the internet and my habit to take things literally got the best of me.
No worries, I should have added /s to make it clearer.
This theory that American prices subsidise the rest of the world has really caught on in the US but I have never seen any evidence for it.
Most common drugs are out of patent anyway, so there should be no barrier to low cost production anywhere.
Moreover the EU and China give huge funding to basic and specific research, which forms the basis of many drugs. For instance the RNA research that gave us COVID vaccines was completely European from start to finish, only production then involved American companies due to scale benefits and market access.
On the contrary where the evidence is obvious is that the US pharma companies have amazing profits (such as the few Europeans that sell at scale in the US).
My personal, unscientific, take is that the entire narrative that the US prices fund global low prices is completely unfounded and just an attempt by big pharma to get the US government on their side to break fair pricing mechanisms in other countries.
The COVID vaccine is such a great example too, because the US government negotiated it's price as part of getting it regulated and distributed, just like other countries do for all sorts of medicine.
The US admin negotiated them down to $20 a dose IIRC. Billions of dollars to just do scale manufacturing of a drug someone else slaved over, invented, stood behind for a decade while nobody else cared, and quickly utilized to deal with a novel virus that seemed to evade normal vaccine strategies.
$20 ain't nothing, but in our terrible system, it's almost a bargain.
And the shareholders of the Pharma company involved were fucking incensed that they didn't get more money.
They are ghouls.
But no, lets keep insisting that the US government couldn't negotiate prices for drugs to save Americans a significant chunk of change despite the fact we have a recent and obvious example of them doing a good job of it. Let's keep insisting that Democrats are in bed with Pharma and profit off our costs even though it was republicans who banned import of cheap drugs from Canada and republicans who refuse to allow Medicaid to negotiate meaningfully.
Pharma companies are public. You can see how much they spend on R&D. The claim is false.
Where does healthcare spending go?
https://www.ama-assn.org/sites/ama-assn.org/files/2025-04/20...
I did a calculation once. US spends $4.9T on healthcare: $2T on personnel, $500B on non-acute drugs (ie OTC + prescribed) and $2.4T on something else. Germany spends $550B on healthcare: $430B on personnel, $80B on non-acute drugs and $31B on something else. My guess is that the "something else", which is non transparent, is actually private insurance jacking prices up.
Can you adjust those to for a per capita and CoL basis?
That something else could also be stuff like malpractice insurance, legal settlements, etc.
>That something else could also be stuff like malpractice insurance, legal settlements, etc.
This claim is regularly brought forth as why US healthcare is expensive and it just doesn't work.
First of all, are you aware Texas has fairly rigorous limits to rewards for Medical Malpractice suits? You can only get half a million dollars above what the malpractice cost you. There's also a two year statute of limitations from when you found out about the malpractice, and if you find out that your surgeon willfully fucked up your treatment more than 10 years after it happened, too bad, no case for you period.
Does Texas have cheaper healthcare than the rest of the country?
Nope.
Second, the primary cost of a medical malpractice suit is fixing the medical problem which is only a large number because medical care in the US is stupid expensive. Blaming the cost of healthcare on malpractice suits and insurance is putting the cart before the horse.
Meanwhile, most medical lawsuits never even come close to large sums.
When my sister was being born, the doctor broke her shoulder to get her unstuck. There is a correct way to do this, but he did it wrong and permanently disabled her. Turns out, he was literally not allowed to practice medicine in some states for doing exactly that to several other babies, and ended up doing exactly the same thing to another baby a few years later in the same town.
We got $10k. Permanent, life altering disability with no treatment or fix for outright malicious incompetence. My sister isn't supposed to be left handed, but she is.
$10k
If you've ever gotten upset about the McDonalds "hot coffee" lawsuit for example, you should be aware that the plaintiff originally was only asking for $20k to treat her fused labia and permanent damage. The court awarded significant damages because it was discovered that McDonalds had done this to multiple people and was purposefully keeping their coffee hotter than they were supposed to despite how it had directly harmed multiple people. They also ran a literal propaganda campaign to libel this woman that it was somehow her fault for not knowing the coffee was hot or something. You can bet they spent more than $20k on that. Oh, and the $2.7 million she got in punitive damages for McDonalds willfully contravening safety and helping melt her lady parts? It was specifically equal to 2 days of coffee sales. And then the judge said "no" and only gave her $600k. Then McDonalds appealed the case and settled privately.
A lot of the cost of US drugs isn't even the drugs or pharmacies, it is the fact that you need an expensive doctors appointment just to have access to those drugs. There are toe nail fungus lacquers that you can buy over the counter pretty much anywhere else in the world, but require a prescription in the US. And even if other places have restrictions on it, it usually amounts to "talk to the pharmacist for 2 minutes first", and not go drop a few hundred bucks on visiting a doctors office first just to say "yep, you got nail fungus!"
Many Americans are literally taking farm animal drugs because it is the only access to those drugs they can afford.
I'm intrigued by the premise - I have my own large burden of health care costs and my own suspicions about where it is going - but does anyone else find their charts unreadable? I'm trying to parse the first one and I keep trying to put the pieces together. "Health care services" is 60 out of 101bn ... excess profits?
The second one I can hardly start on, "health care services" is a medium circle ( circle size = combined market capitalization ) with the second highest "Aggregate return on invested capital" and in the middle of "median weighted-average cost of capital".
I know its called "the economist" but they usually make their articles readable by people without a econ degree. If I had a suspicious mind ( I do ) I'd think this was deliberate obfuscation.
Also "health care services ... such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity"
That is a lot of different interests bundled together. How can they say insurers are the true money makers when they are not even broken out?
I'm unsure how this revised assumption would alter the conclusions.
†one reference of many in support: https://pmc.ncbi.nlm.nih.gov/articles/PMC10242760/
I think the problem is the article detaches "Pharmacy-Benefit Managers" from Pharma costs and into "Services" as a separate category... they're definitely closer to Pharma in terms of the structure, where that money goes is up for debate.
There should probably be trade (FTC) violation of some kind from this layer of man in the middle gouging, which is on top of the higher direct prices of the medications to begin with in the US.
Americans created "big-pharma", "big-medical" and "big-insurance" for themselves and now they are living the consequences...
> The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity.
This category of "providers of health-care services" is rather over-broad, and I wish they had split it up more. Shouldn't hospitals (which actually _provide health care_ and are necessary parts of the healthcare system) be in a separate bucket from the "middlemen"?
And within the hospital category, don't we need to draw some distinctions? Currently in the US there's been press about how recent funding changes are causing a bunch of rural hospitals to shut down. It seems that some hospitals are major money losers, though we as a society may want them to continue to exist (or else a rural person in a medical emergency has no chance of getting care in time). But what's happening at the hospitals that _are_ collecting "rents", esp since in more urban contexts there are often multiple hospitals and one might expect more competition?
Seems like net income margin for an average US company is about ~10% and for big pharm it's ~14%. Regulations are probably what keeps pharma unusually profitable.
10% consistent profit margin is above average for publicly listed US companies.
https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile...
>Total Market 8.67%
I work for a large mail order pharmacy and I will tell you we make no money on over 90% of our prescriptions. Our margin is less than 4%. The space is hyper competitive and obviously consumers are price sensitive. We are incredibly lean - less than 50 staff to run the pharmacy and a fully robotic dispensing line doing the vast majority of the dispensing.
The drug manufacturers are making massive profits, and nobody is stopping them.
Hilariously the whole TrumpRx card is kind of a step in the right direction, I've screamed for years that manufacturers blatantly rip everyone off and if just use a made up discount card system all of a sudden the drug is 30-90% off.
Ideally the government just says the global price is the US price, and eliminates discount cards entirely.
The list price is mostly a starting point for negotiations with PBMs and payers. Drugs are also often aggregated and bundled. So in a lot of cases is unclear what a drug actually costs.
You only get access to the government-negotiated discount, which is from the pharma company list price, if you buy without insurance. But your insurance company already negotiated a discount from that list price (they're not dumb, and any excess dollar they give to Pfizer is a dollar they don't get to deploy elsewhere). From what little we know of the government discount, it is likely in most cases to be a worse price than what you already have access to.
Everything in healthcare is a "small component" if you squint or ask those benefitting but this death by a thousand cuts adds up to a hair under 1/5th of the US GDP. Go single payer or deregulate the living crap out of it, I don't care. I just want this leech of my back.
Single payer doesn't do anything though. Doctors and nurses have significantly better social standing than politicians, so when push comes to shove, the politicians won't be able to make the required structural changes that reduce the labor components of healthcare costs.
Single payer absolutely does something it's insane you would suggest otherwise. It's a basic counting argument: if 60 out of 100 are paying into the system but we have to pay ER fees for the other 40 not paying, then there is an undo burden on the original 60.
If everyone is paying then the burden is shared. Let's not even imagine the utopia of a progressive healthcare tax! The shame of a "self-made business man" losing 5% more of their income earned over 200k!
Every individual component of health care is a small portion of spending.
The answer: Well, that depends on how you define "Big Pharma."
Everything else being horrendously expensive does exert an upward lift on pharma prices. Yes, pharma does gouge Americans, no doubt about it.
This is not easy to analyze with complements vs substitutes. Sometimes drugs can be substitutes for other treatments, and sometimes they are complements.
Also, people may be desperately needing one or the other or both. It's not like quitting coffee when the prices are high.
Say that for a certain drug and certain set of medical treatments, they are complementary. If the treatment is jacked up to be expensive, less of it will be performed, and that will create less demand for the drug. So you would think the drug would go cheaper. But the drug vendors can simply use their market power (say it is a patented drug with no generic version available) to stick to their guns and jack their prices too. Then they exert the reverse effect; the more expensive drug will put downward pressure on the complementary treatment.
In this manner, both the drug and the procedures can gradually become expensive together. Though each one is not as expensive as it would be if the other didn't move.
Just gonna leave this here…
https://en.m.wikipedia.org/wiki/Betteridge's_law_of_headline...
The Economist's analysis concludes that the bulk of exorbitant rents in the US is captured by providers of health-care services who take advantage of the healthcare system's opacity:
* hospitals,
* insurers,
* pharmacy-benefit managers, and
* other middlemen.
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I'm surprised on the comments here that go: "I had to pay $$$$ for a medication when I could buy that same medication somewhere else for a fraction of it. Therefore Big Pharma gouges America".
That is not evidence that "Big Pharma gouges America". It is evidence that Americans pay a lot more than other countries. Only that. The conclusion doesn't necessarily follow from the premises.
Want to understand why? Read the article's last paragraph:
> The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity.
As always, no one reads anything.
Insurers make even less money than Pharma companies do. To a first approximation essentially all health care spending goes to companies that deliver health services directly.
Yea in fact the ACA law caps insurers to a maximum of 15% profit. Anything extra must be rebated back to the customers.
The debatable part is the rebate is back to the employer who is allowed to simply pocket the money, though one could argue its returning the amount the employer is covering, often more than the employee. :shrug:
Believe or not, I get yearly notices from UHC about rebates for the prior year.
> Yea in fact the ACA law caps insurers to a maximum of 15% profit.
These are plan-by-plan, not on the company overall, and notably this doesn't apply to:
1) Self-funded plans. Name-brand insurance companies manage these, but big companies fund them and take on the risk (with re-insurance and all that good stuff in the mix, of course). A large proportion of the US population is on these kinds of plans, and that limit does not apply to them.
2) New plans in their first (IIRC) two years. I've not looked into whether insurance companies are playing games with this such that a larger set of their plans are "new" ones than would be if this rule didn't exist, but if it's at all possible for them to do that, I guarantee they are.
Whatever the reasons are, I don't need first principles to make this claim, because Medicare presents this particular data quite clearly.
> Insurers make even less money than Pharma companies do.
In the whole or in relative terms? Source, even if personal or anecdotal?
I am willing to consider your point because, to be fair, the article doesn't show any data that indicts the insurers. They just blame them at the end without any evidence.
> all health care spending goes to companies that deliver health services directly.
Well, that wouldn't explain why medication alone is more expensive in America, right?
But accepting your argument: is it because of greed and oligopolies, incompetence or excess of regulation?
No, he's right. Insurance profits are legally capped, and this keeps them from representing an outsized fraction of spending even in cases when they might partially be the driver behind it. They have to spend N% of their income on actual health care benefits. They're not absurdly high, you could look them up, but I don't think it's possible to exceed something like 10% profit.
This means the only way for insurance companies to increase profits is to increase the price of healthcare, and they have zero incentive to try and lower the amount of money they pay out for healthcare which might otherwise have been split between profits and lower premiums.
My guess is that if you found NHE data from before the ACA cap insurance would remain a small component of overall health spending (the ACA was very important and I am in no way downplaying it).
Mostly I'm saying: you don't have to axiomatically derive why this is. Medicare collects and synthesizes this data.
How would you derive it from medicare? Isn't medicare supposed to be non-profit? They should occupy 0% of health care spending once you remove the pass-through transfer payments that go back into medical care, minus some administration overhead.
The CMS collects these statistics in the same way that the BLS collects labor statistics. It has nothing specifically to do with the part of CMS that directly administers Medicare. The point is that we have very high quality data on this stuff.
I’d like to see a deeper analysis here though. Insurers don’t make that much money on a percentage profit basis, but profit’s derived after expenses. Hypothetically, their sheer existence could be a huge burden to everyone involved, their costs to employ legions of make-work employees processing/rejecting/questioning claims could result in low profits even if the work isn’t necessary, they could take advantage of transfer pricing to hide profits in their wholly owned but separately reported PBMs…
I'm not even looking at profit; you don't have to, because insurance is such a small component of US health spending. This is the value of having the NHE data in front of you in discussions like this; we don't even have to debate how much of US health insurance is administered by nonprofit firms, or whether for-profit firms are gouging, because the whole thing is too small a component to matter.
Not sure you're understanding. The insurance companies can't gouge by jacking up profits because that's illegal. They can't ever become a big component of healthcare spending nominally, but they can be the actor that causes a big component of health care costs to baloon.
The way insurance companies might gouge is by jacking up healthcare prices, since they act as a government-captured oligopoly block and thus don't have normal free market forces. That is how they could increase nominal profits without increasing % profits.
They could jack up health care prices massively while only being measured as a small % of the total. Whether this is actually the case or not, I'm not sure, but the incentives demand that they do it if they can. It should be impossible to pull off such a cartel in any unregulated market, but due to the way healthcare works it seems more likely it could be true.
The overwhelming majority of the money they'd be diverting by doing that would be going to health providers, not to payers and underwriters. Therefore, the hypo you're offering isn't interesting to me. I'd still be starting by looking at the institutions that actually end up with the money.
>The overwhelming majority of the money they'd be diverting by doing that would be going to health providers, not to payers and underwriters.
Yes exactly. Imagine for a moment you have a market where every payer has to pay every healthcare provider, and a free market of health care providers. It would be impossible to create a cartel of buyers raising the price.
Then imagine, say you have universal healthcare insurance. The insurance provider is capped at say, 1% profit. Since they have a monopoly, they can walk up to the healthcare providers and say "hey, please jack your costs 3x" so we can get 3x the profit. And then you can turn around and do a study and say, well insurance profits haven't changed -- and then wrongly conclude the insurance companies aren't to blame for the inflated prices, as they are only capturing 1% of the health care industry despite being responsible for 200% price increase.
I believe the nature of health insurance industry probably leaves them somewhere in a gray area in-between these two extremes, especially when you consider the insurance companies also often own under an umbrella company health care providers.
Seems like motivated reasoning. I'm looking at a single-page spreadsheet that tells a very different story, and I'm going to stick with that rather than the hypo.
Based on what you've told me so far I'm not understanding how you can be sure of that. After the ACA caps was passed (limiting % profit) nominal health care spending went up significantly.
Medicare doesn't really do administration in the way that you think. There are something like 10-12 regions within the US, and for each region, Medicare contracts with a private health insurer to manage insurance administration within that region. Medicare just moves the money around to cover the admin contracts and to backstop the claims.
And this is before you get to Medicare Advantage, which is where Medicare just pays for private insurance premiums for people who think vanilla Medicare sucks.
OK, but if that's the case the medicare data should show the spending went significantly up after the ACA caps, which doesn't prove the thesis but is necessary condition for it.
https://paragoninstitute.org/wp-content/uploads/2024/03/9DG_...
https://truthout.org/app/uploads/2024/12/insurers-profits-bi...
Hah, I wouldn't need "personal" or "anecdotal" evidence for this; it's right there in black and white in the NHE data; literally in the first row of the sheet. I posted about this across the thread.
>> The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity.
> As always, no one reads anything.
The implication of the article was the "bulk of the rents" applies to healthcare costs in total, not just to drug costs. I.e. drug costs are not a huge part of the healthcare costs.
That by itself doesn't guarantee an understanding of why specific medication costs are sometimes 10x or whatever of other 1st world countries.
(but I didn't read the article; just the rest of the comments)