Healthcare: No incentive to change

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  • “We have a $3.4 trillion industry, which is as much as the federal government raises every year, that basically feels pretty good about the system” according to Warren Buffett.
  • Health spending rose 3.9 percent in 2017 and now makes up nearly 18 percent of American economic output.
  • As long as there is money to be made in healthcare prices are going to keep going up.

“We’ve got this incredible economic machine but we shouldn’t be spending 18 percent when other countries are doing something pretty comparable in terms of doctors per capita and hospital beds per capita,” Buffett told Yahoo Finance. “We’re paying a price.” Indeed.

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A recent study by the Public Policy Institute that found that annual retail prices for more than 100 top brand name medications used by chronic sufferers have, on average, more than tripled in cost since 2006. A medicine that cost $100 in 2006 now costs more than $300; a $400 medicine is now more than $1,200. But who is getting the money? The answer is everyone but patients.

Manufacturer rebates grew from $39.7 billion in 2012 to $89.5 billion in 2016 and played a growing role in partially offsetting increases on list prices, which have risen more quickly than overall retail prescription drug spending. A survey of health plan and PBM personnel found that PBMs passed through 78 percent of manufacturer rebates to health plans in 2012 and 91 percent in 2016.

Single Payer?

On 30 November, a team of economists with the Political Economy Research Institute (Peri) at the University of Amherst published a highly credible, nearly 200-page economic analysisof Senator Bernie Sanders’ single-payer bill. The Peri study received essentially none of the media coverage lathered on the last such analysis — a flawed piece of work published by the conservative Mercatus Center last summer. But here’s the funny thing: though these two analyses came from economists from opposite ends of the political spectrum, they shared a similar finding: single-payer would reduce our nation’s healthcare spending bill by trillions of dollars over a decade (around $2tn and $5tn, respectively).

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There are hundreds of billions in potential savings in moving to single-payer, such as slimming down on the massive administrative bloat of the privatized American healthcare system and bringing down our sky-high drug prices.

Then there are health insurers

The 5 largest conglomerates combining health insurance and pharmacy benefits are on track this year to be bigger than the 5 preeminent tech companies. Anthem, Cigna, CVS Health, Humana and UnitedHealth Group cumulatively expect to collect almost $787 billion in 2019, compared with $783 billion of projected revenue for Facebook, Amazon, Apple, Netflix, and Google.

To be sure change is coming but only if we can take the money out of the political process. Healthcare costs are going to a cornerstone of the next election at a time when we have cut corporate taxes and raised the defense budget. Will pharma be ready?

Originally published at worldofdtcmarketing.com on March 20, 2019.

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Marketing contrarian with over 15 years of developing leading edge and award winning digital marketing initiatives.

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