As a physician, I have my own personal index of health care costs, and it is this: I look at how many of my patients tell me they can’t afford their medications.
Drug costs are so high that some take only the drugs they “really, really need.” Or they start cutting dosages, which is nothing new. This has long been a dangerous problem.
But the problem is growing, not improving. Even near-universal access to insurance and access to care have not solved this problem of high health care costs.
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Pharmaceuticals are a huge part of this problem.
Prescription drug costs have been rising faster than general inflation. Actually, they’ve been rising faster than health care costs overall. Last year alone, according to the Truveris National Drug Index, the cost of branded drugs was up 14.77 percent, the cost of specialty drugs was up 9.21 percent, and even the cost of generics rose 2.93 percent.
In just one case that hit the headlines last September, Martin Shkreli, a pharmaceutical executive who has since been disgraced, announced he was increasing the cost of an important HIV medication from $13.50 to $750 — for a single pill. That’s roughly a 5,000 percent increase.
While the move was perfectly legal, it was only public outrage that led to a reversal.
But without any fanfare, Pfizer began the New Year by raising prices on over 100 of its medications — some by as much as 20 percent. In the aggregate, a 20-percent increase on hundreds of drugs can have a much larger effect on health care costs than raising the price of a single drug, even an important one, by 5,000 percent.
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To understand the magnitude of the drug cost issue, consider a single disease, not even one of the biggest killers. In 2015, Medicare spent $4.5 billion on expensive new medications to cure hepatitis C. That is more than 15 times what it spent the year before on older treatments for the disease. This is only one of the hundreds of ailments we expect modern medicine to cure, or hold at bay. Think of the drugs under development for cancer and heart disease, the major causes of death.
New drugs are generally much better than the drugs they replace, but they almost always cost more. Older drugs eventually drop in price once they go “generic.” That’s not necessarily a bad thing. Paying much more for the latest drugs is how we pay for the years of research, experimentation, and testing needed to bring new treatments to market.
We certainly don’t want to stop that progress. But we need to keep the prices from hitting the stratosphere.
How to Solve This
One way to attack that problem is by stopping a practice that many Americans are totally unaware of: providing American subsidies for the medical care provided by other industrialized countries, such as Canada.
Many critics point to the supposed success of the single-payer health care programs in other western countries, but are oblivious that American consumers and taxpayers are actually subsidizing those foreign programs. Instead of making more ill-considered changes to our health care system, why not terminate the substantial subsidies we Americans provide to health care recipients around the world?
How Those Subsidies Arise
When drug companies charge Medicare or Blue Cross $100 for a prescription drug sold throughout the world, part of that $100 price in the U.S. is a hidden subsidy — say, for Canadian or British or French patients. Their national health care system may get the same drug for $60. Globally, the “true” price may be $80, with Americans paying an extra $20 so that an equal number of foreigners can pay only $60, without sacrificing the revenues and profits the drug companies need to keep developing new products.
If there were one worldwide price, as with crude oil or pork bellies traded on the world commodity markets, prices for Americans would generally come down.
A simple rule could make that possible: No drug company can sell drugs here at a higher price than the price it charges outside of the United States. The rule would obviously apply to Medicare and Medicaid as well as private insurers.
In effect — to use a term from international trade law — the United States would be a “most favored nation.” Drug companies could not discriminate against Americans by charging a higher price. They could not treat America worse than they treat other countries.
This policy would recognize the economic reality that drug companies must charge market prices for the products they spend decades developing, or else they will stop spending money on research and development. But it demands that consumers across the globe make an equal contribution to those costs.
To be sure, some exceptions might be justified. For example, many in Africa might not be able to purchase HIV drugs if they were offered at anything close to the drugs’ market price. If necessary, drug companies might be allowed to set aside up to 10 percent of their inventory to provide drugs at no charge to very, very poor countries. But there is no justification for asking Americans to pay higher prices in the United States to allow the drug companies to cut a sweetheart deal with the users of single-pay systems in Canada, France, Germany, or the U.K.
This approach is even simpler — and probably more effective — than allowing or requiring Medicare or Medicaid to negotiate with drug companies, or allowing Americans to buy drugs by mail order from Canada, or to travel to foreign countries for their treatments. It will guarantee Americans no longer subsidize health care consumers in other countries.
In foreign policy, “realists” of all stripes have been arguing we can’t afford to be the world’s policeman. Whether or not that’s true, it may be time to recognize we can’t be the world’s doctor — or the discount pharmacy of the world.
Dr. Ramin Oskoui, a cardiologist in the D.C. metropolitan area, is CEO of Foxhall Cardiology PC.