Costs of health care in the US are higher than they are in most countries of the world. And the US does not deliver better care.
In the current election cycle, Mrs. Hillary Clinton has received more money from Big Pharma than any other candidate. This does not bode well for health care costs if she achieves the Presidency. People don’t contribute to campaign coffers with no expectations. While the US Supreme Court is trying to limit corruption’s definition to quid pro quo, Zephyr Teachout, a law professor, has shown in her profound book published by the Harvard University Press, that corruption should be conceived more broadly as the breach of the trust between citizen and elected official.
Writing in the Wall Street Journal, jeanne Whalen says that the drug industry has unusual clout in the US. She reports: The state-run health systems in Norway and many other developed countries drive hard bargains with drug companies: setting price caps, demanding proof of new drugs’ value in comparison to existing ones and sometimes refusing to cover medicines they doubt are worth the cost.
The government systems also are the only large drug buyers in most Scandanavian countries, giving them substantial negotiating power. The U.S. market, by contrast, is highly fragmented, with bill payers ranging from employers to insurance companies to federal and state governments.
Medicare, the largest single U.S. payer for prescription drugs, is by law unable to negotiate pricing. For Medicare Part B, companies report the average price at which they sell medicines to doctors’ offices or to distributors that sell to doctors. By law, Medicare adds 6% to these prices before reimbursing the doctors. Beneficiaries are responsible for 20% of the cost.
The arrangement means Medicare is essentially forfeiting its buying power, leaving bargaining to doctors’ offices that have little negotiating heft, said Sean Sullivan, dean of the School of Pharmacy at the University of Washington.
Asked to comment on the higher prices Medicare pays compared with foreign countries, the Centers for Medicare & Medicaid Services said: “The payment rate for Medicare Part B drugs is specified in statute.” Medicare Part B, for example, typically covers drugs and services deemed “reasonable and necessary.”
Big Pharma argues that higher U.S. prices also help drug makers afford hefty marketing budgets that in the U.S. include consumer advertising—something Europe doesn’t allow. Pharmaceutical and biotechnology companies in the S&P 1500 earn an average net profit margin of 16%, compared with an average of about 7% for all companies in the index, according to S&P Capital IQ.
No question that the US is currently a captive of Big Pharma.