How to Cut the Cost of Healthcare

Affordable healthcare is at the forefront of issues animating voters in next year’s elections. Prescription drugs are more expensive in the United States than anywhere else in the world, and Americans struggle to pay for treatment in the face of rising prescription-drug costs and insurance premiums. Several factors contribute to high drug costs, including the ability of pharmaceutical firms to determine their prices, as well as a patent system that guarantees companies sole-manufacturing rights for years.

While all people are entitled to the basic human compassion of reasonable healthcare when needed, the preservation of the free market is key to a dignified and happy future for mankind. Government should not impede research and development of medical advances but rather should act as a liaison between its citizenry’s needs and the rights of private enterprise. There are legitimate ways for government to do this.

First, as a powerful purchaser of drugs themselves, governments and insurance companies can demand lower prices, pinching the pharmaceutical firms to prevent reckless overcharging. They can make recommendations about how pharmaceutical companies may cut costs, specifically in packaging or nontherapeutic elements of drug manufacturing.

Second, government could pass legislation to restrict drug companies from public advertising.

And finally, the federal government could open up the international market, allowing medications to be imported from other countries, as President Trump announced he would do last month.

Pharmaceutical firms claim that the high cost of drugs corresponds to the costs of research and development. They argue that because of the number of drugs and products that fail, and due to the limited time frame in which they have to make their money back before generics may be sold, much of this R&D expense must be recaptured through the inevitable initial high costs to consumers. Because drug companies are at the forefront of medical advances, they claim, the costs are ultimately reinvested, and they should be entitled to large profits.

Yet the balance sheets of these companies reveal profits that amount to billions of dollars annually with very wide margins (20-30 percent) for big firms such as Pfizer and Merck. Such markups, ultimately, are difficult to justify.

The federal government is one of the largest purchasers of drugs, providing millions with subsidized programs such as Medicare, Medicaid, and care to veterans, military, and certain government employees. Governments and insurance companies thus have the power to influence prices by being willing only to pay a certain amount for brand-name drugs. This downward pressure over time would force pharmaceutical firms to cut costs. In a free market, the government has the right to bargain and it represents a significant enough fraction of national drug sales to affect the supply cost through demand.

Yet governments must tread cautiously, being reasonable about their demands and ensuring that companies can still cover their enormous production costs and continue efficient innovation. Federal grants and venture capital that funds scientific research should be taken into account when determining how much government should squeeze these firms.

Aside from research and development, beginning in the 1990s, drug companies have spent enormous sums on advertising. They promote their products directly to patients, many of whom may be uninformed about relevant information only professionals can interpret. (Hence, “Ask your doctor . . .”) The FDA could restrict these companies from anything other than wholesale advertising to healthcare professionals, and Congress might consider regulating and enforcing these new measures.

In most cases, it is illegal to purchase and import medicine from another country. Yet the cost of drugs in places like Canada and Mexico is substantially lower than it is in the United States. In addition, certain countries permit the sale of drugs for conditions that do not have a corresponding medication available here. Why couldn’t the FDA allow medical imports and establish an international cooperative effort to ensure quality and high standards of imported drugs?

Ultimately, the goal would be to increase competition, spurring pharmaceutical firms to lower their costs and still remain on the avant-garde of medical advances and breakthroughs.

In addition to these measures, pharmacies and drug dispensaries should be required to disclose when there are generic versions of a drug available to patients. Currently, many pharmacists don’t inform the patient because the process of getting the patient’s consent is bothersome. The patient-consent form should be made available on-site and given immediately to the patient in the event that a patient may like to switch to a generic drug.

And finally, government would do well to revisit patent expiration dates, especially for specialty drugs developed to treat rare diseases, allowing generic drugs to gain FDA approval sooner.

In order for these reforms to be implemented, Congress must rise above ideology and partisanship. They would need to find the courage to fight the pharmaceutical lobby and recognize that healthcare is a bipartisan issue that affects all Americans. The huge affordability gap among different socio-economic sectors in America is destabilizing to our democracy. But a multi-pronged approach would ensure free-market competition by encouraging private companies to cut costs in a way that doesn’t hinder the profits they require to maintain efficiency and innovation.

About Karys Rhea

Karys Rhea is a writer and musician living in Brooklyn. She is currently the New York associate of the Counter-Islamist Grid, where she researches, identifies, and investigates local Islamist groups, individuals, and fellow travelers to expose and counter Islamist networks working to establish influence on various sectors of society. She has worked previously with CAMERA, the Gatestone Institute, the Jewish National Fund, Birthright Israel, and the David Project. Her work has appeared in the New York Daily News, the Washington Examiner, and the Los Angeles Jewish Journal.  

Photo: iStock/Getty Images

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