Why is Healthcare So Expensive in the United States?

Why is healthcare so expensive in the United States? The rising cost of healthcare is one of the most pressing problems facing the United States today. According to a recent study, the average American family now spends more on healthcare than on housing or food.


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Here are the highlights from the episode:



| How much does the US spend on healthcare?


JOHN :

It's not only expensive, but on a international comparison, we're spending twice as much as other countries of equivalent development. Like Norway I think is the closest, but if you look at the average of Western Europe plus Japan, we're spending twice as much, our costs are going up faster, and by the way, not with great outcomes, but just on the cost side, everything is cheaper, and in most of those countries, if not all of them, they've got much better access to healthcare. So they've got better access to healthcare that costs less and delivers a better outcome. What are we doing wrong here, David?


DAVID :

John, I guess the first answer is that we're doing a lot wrong. Used to be we had hard time with this conversation, right? Because we would say, yeah we spend more but the system's obviously better here. And I think what people realize now is that not only do we not get all the extra that we pay for, but we spend twice as much and we only get half as much as a result of it. I mean just a real obvious thing is actually that among the OECD countries that we're comparing ourselves with, we actually have the lowest life expectancy of the group of comparable countries. And so that alone is a big thing. I think John, what I'm gonna suggest today is that we actually go through it kind of one by one and tick off some of those key areas, 'cause it's not just one thing, it's a lot of things that add up to four trillion dollars.


| Why are drug prices so high?


DAVID :

So why don't we start off with prescription drug pricing, John? And in particular, I mean what is going on with prescription drug pricing that makes prescription drugs so expensive here?


JOHN :

Well, before we go there, David, I think it's worth, in addition to having the lowest life expectancy, if you look at kind of healthy years after 65, we're slightly ahead of Turkey and Mexico and slightly behind Brazil and not even close to those industrialized countries that we would consider our near peers, a Switzerland, a France, Britain. Japan's extraordinary, they have the longest life after 65. So digging into these individual components is actually pretty critical, digging in and then maybe coming up with some solutions. So let's start with prescription drugs, which is a great place to start because we are the source of the vast majority of branded and novel drugs. There's prescription drug manufacturers in the rest of the world, but we really are the innovation kings with a lot of great companies.


There's some great ones in Europe and Japan, but we have the vast majority. Unfortunately, we also have the lousiest negotiating ability 'cause we prevented the federal government from negotiating drug prices. And drug prices are through the roof compared to the rest of the OECD countries and they are rising faster. That's true of branded drugs. It's true of generic drugs. And if you look at novel drugs, when they are created, they're introduced at the highest possible price, in you guessed it, the US of A. David, one third of all people with chronic illness who are prescribed drugs, don't take those drugs 'cause they can't afford it. So we create the drugs that serve the world, we pay the highest prices that our own citizens can't afford.


DAVID :

John, the Commonwealth Fund has a few recommendations, five about how to actually resolve this. The first one is actually letting the federal government negotiate drug prices, which is one thing that you are just mentioning and is part of the Inflation Reduction Act. So we're actually gonna see at least a taste of that. There's another piece that has to do with stopping patent abuse and anti-competitive practices, which means that you'd think a patent expires and the drug company might be satisfied, okay, I had it during that term, but there are some ways that they may unfairly try to extend the patent or make a deal with somebody else to keep a generic drug off the market.


JOHN :

Well let's pause on that because the patent protection is actually critical to protect our industry, but I think it's the Hatch-Waxman Act that created that. Patents are those protections to allow people who create new drugs that solve really big challenges, that have helped transform cancer from a deadly disease to a chronic disease. So it's really important to protect those novel formulations. And the law lays out that you should get a monopoly on being able to sell that novel drug once it's through the FDA for 14 years. Of the 12 most common branded drugs, I think with all of the fake patent litigation that big pharma lards onto their original 14 years, I think the average patented drug has got 38 years of protection.


The vast majority of patent litigation, that is litigation that's where that's lawsuits generated by big pharma to protect and extend their patents. It's not to protect that first 14 year period. It's to come up with new ways to slow, delay, defer or deny the ability for competition to come in and bring those prices down. So in addition to paying the highest prices, we've allowed big pharma, and this is by the way, something that's been identified by democratic and Republican administrations, to manipulate the patent system and the litigation system around it to either extend patents for drugs that have already gotten protection, you go from an eight hour formulation to a four hour formulation of the same drug and it's considered a new patent protection or you just delay or deny or make it harder for competitors to come in by putting up a litigation wall.


I think, David, this is a huge opportunity just to get big pharma to play by the rules of the game for us to, could be a focus of reform that could actually create more competition and bring down drug prices for the average, for people like you and me..


 

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CareTalk is a weekly podcast that provides an incisive, no B.S. view of the US healthcare system. Join co-hosts John Driscoll (CEO, CareCentrix) and David Williams (President, Health Business Group) as they debate the latest in US healthcare news, business and policy.

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