Alpha Dominance

With the National Health Care bill before congress the cost of health care has been on everyone’s minds lately.  Despite outspending other nations by orders of magnitude our level of national health is nowhere near as stellar.  First our spending:

Current estimates put U.S. health care spending at approximately 15.2% of GDP, second only to the tiny Marshall Islands among all United Nations member nations. The health share of GDP is expected to continue its historical upward trend, reaching 19.5 percent of GDP by 2017.

Next the level of health:

The World Health Organization (WHO) in 2000 ranked the U.S. health care system first in both responsiveness and expenditure, but 37th in overall performance and 72nd by overall level of health (among 191 member nations included in the study).

The conclusion here is that we massively overspend for what utility we are getting.  Part of the problem is of course the number of uninsured, who’s only option is often to go to the emergency room, the most expensive way to seek care, but there is more to the story.

A large part of the cost comes from the fact that American’s and our health care system do not focus on preventive medicine.  Like with most issues we wait until there is a crisis and are then forced to spend far more fixing a problem that could have been avoided.  This is illustrated by the fact that most of the major killers in America are lifestyle illnesses, that arise out of poor diet, lack of exercise, and toxicity and mutation due to the vile untested chemicals that pollute our environment, food, body-care products, and household goods, most untested for bioactivity.  Avoidable medical errors too account for a large number of the deaths in the US.

An outgrowth of this mode of treatment is our reliance on high-cost technological solutions to health issues that are best addressed by prevention in the first place.  This is comprised of medical equipment, which while expensive has a long life and the costs can be amortized over many patients, and pharmaceuticals.  Pharmaceutical drugs turn out to be one of the major culprits behind ballooning health care costs, and Americans massively overpay for them relative to any other nation in what amounts to a US subsidy to Pharmaceutical companies:

Prescription drug prices in the United States are the highest in the world. “The prices Americans pay for prescription drugs, which are far higher than those paid by citizens of any other developed country, help explain why the pharmaceutical industry is — and has been for years — the most profitable of all businesses in the U.S. In the annual Fortune 500 survey, the pharmaceutical industry topped the list of the most profitable industries, with a return of 17% on revenue.” The high price of prescription drugs is one of the major areas of discussion in the U.S. health care reform debate.

Prices of brand name drugs in the United States are significantly higher than in Canada, India, the UK and other countries, nearly all of which have price controls. Prices for generic drugs tend to be higher in Canada. The price differential for brand-name drugs between the U.S. and Canada has led Americans to purchase more than US$1 billion in drugs per year from Canadian pharmacies.

How can we let this happen you ask?  Largely because the Pharmaceutical cash cows consistently spend as much or more than any other industry on lobbying in Washington (Big Oil and Drug companies switch places for number one depending on the time-frame you look at):

The pharmaceutical and health products industry has spent more than $800 million in federal lobbying and campaign donations at the federal and state levels in the past seven years, a Center for Public Integrity investigation has found. Its lobbying operation, on which it reports spending more than $675 million, is the biggest in the nation. No other industry has spent more money to sway public policy in that period. Its combined political outlays on lobbying and campaign contributions is topped only by the insurance industry.The drug industry’s huge investments in Washington—though meager compared to the profits they make—have paid off handsomely, resulting in a series of favorable laws on Capitol Hill and tens of billions of dollars in additional profits. [See What the Industry Got.] They have also fended off measures aimed at containing prices, like allowing importation of medicines from countries that cap prescription drug prices, which would have dented their profit margins. Pfizer, the world’s largest drug company, made a profit of $11.3 billion last year, out of sales of $51 billion.

The industry’s multi-faceted influence campaign has also led to a more industry-friendly regulatory policy at the Food and Drug Administration, the agency that approves its products for sale and most directly oversees drug makers. [See FDA: A Shell of its Former Self]

Most of the industry’s political spending paid for federal lobbying. Medicine makers hired about 3,000 lobbyists, more than a third of them former federal officials, to advance their interests before the House, the Senate, the FDA, the Department of Health and Human Services, and other executive branch offices.

In 2003 alone, the industry spent nearly $116 million lobbying the government. That was the year that Congress passed, and President George W. Bush signed, the Medicare Modernization Act of 2003, which created a taxpayer-funded prescription drug benefit for senior citizens.

That figure was not anomalous. In 2004, drug makers upped their reported expenditures on lobbyists to $123 million, a record amount for the industry. Of the 1,291 lobbyists who were listed that year as prepresenting pharmaceutical corporations and their trade groups, some 52 percent were former federal officials.

By adding the benefit to Medicare, the government program that provides health insurance to some 41 million people, the industry found a reliable purchaser for its products. Thanks to a provision in the law for which the industry lobbied, government programs like Medicare are barred from negotiating with companies for lower prices.

Critics charge that the prescription drug benefit will transfer wealth from taxpayers, who provide the funding for Medicare, to pharmaceutical firms. According to a study done in October 2003 by Boston University professors Alan Sager and Deborah Socolar, 61 percent of Medicare money spent on prescription drugs will become profit for drug companies. Drug-makers will receive $139 billion in increased profits over eight years, the study predicts. The Medicare prescription drug benefit starts in 2006.

All this lobbying pays off in the companies avoiding scrutiny for charging astronomical margins on their pharmaceuticals.  These markups are enough to make any CFO swoon, and should make you blazing mad:

Did you ever wonder how much it costs a drug company for the active ingredient in prescription medications? Some people think it must cost a lot, since many drugs sell for more than $2.00 per tablet. We did a search of offshore chemical synthesizers that supply the active ingredients found in drugs approved by the FDA.As we have revealed in past issues of “Life Extension,” a significant percentage of drugs sold in the United State contain active ingredients made in other countries. In our independent investigation of how much profit drug companies really make, we obtained the actual price of active ingredients used in some of the most popular drugs sold in America. The chart below speaks for itself.

Celebrex 100 mg Consumer price (100 tablets): $130.27 Cost of general active ingredients: $0.60 Percent markup: 1,712%

Claritin 10 mg Consumer Price (100 tablets): $215.17 Cost of general active ingredients: $0.71 Percent markup: 30,306%

Keflex 250 mg Consumer Price (100 tablets): $157.39 Cost of general active ingredients: $1.88  Percent markup: 8,372%

Lipitor 20 mg Consumer Price (100 tablets): $272.37 Cost of general active ingredients: $5.80 Percent markup: 4,696%

Norvasec 10 mg Consumer price (100 tablets): $188.29 Cost of general active ingredients: $0.14 Percent markup: 134,493%

Paxil 20 mg Consumer price (100 tablets): $220.27 Cost of general active ingredients: $7.60 Percent markup: 2,898%

Prevacid 30 mg Consumer price (100 tablets): $44.77 Cost of general active ingredients: $1.01 Percent markup: 34,136%

Prilosec 20 mg Consumer price (100 tablets): $360.97 Cost of general active ingredients $0.52  Percent markup: 69,417%

Prozac 20 mg Consumer price (100 tablets): $247.47 Cost of general active ingredients: $0.11 Percent markup: 224,973%

Tenormin 50 mg Consumer price (100 tablets): $104.47 Cost of general active ingredients: $0.13 Percent markup: 80,362%

Vasotec 10 mg Consumer price (100 tablets): $10237 Cost of general active ingredients: $0.20 Percent markup: 51,185%

Xanax 1 mg Consumer price (100 tablets) : $136.79 Cost of general active ingredients: $0.024 Percent markup: 569,958%

Zestril 20 mg Consumer price (100 tablets) $89.89 Cost of general active ingredients $3.20 Percent markup: 2,809%

Zithromax 600 mg Consumer price (100 tablets): $1,482.19 Cost of general active ingredients: $18.78 Percent markup: 7,892%

Zocor 40 mg Consumer price (100 tablets): $350.27 Cost of general active ingredients: $8.63 Percent markup: 4,059%

Zoloft 50 mg Consumer price: $206.87 Cost of general active ingredients: $1.75 Percent markup: 11 ,821%

Worst of all, the cost of this price gouging is primarily borne by seniors living on a fixed income, and via Medicare by the US taxpayer.  Some subsidy indeed!  Meanwhile health care costs continue to grow at over three times the average rate of inflation:

A report from PricewaterhouseCoopers’ Health Research Institute found that companies can expect health care costs to increase by 9% in 2010, which is slightly less of an increase than in the past two years. While many employers will try to shift more of the costs to employees, they are not expected to drop their plans. “Health insurance is a benefit that is very much valued by employees,” said Pricewaterhouse principal Michael Thompson. “Companies will literally try everything else before dropping coverage altogether.”

This has to stop.  It amounts to a massive corporate tax since health care benefits are paid primarily by businesses, and a massive subsidy paid by the workers for the privilege of access to drugs available far more cheaply everywhere else.  These unfounded increases in benefit costs also act as a break on salary increases and a reason to cut jobs in our down economy.  Prices have completely departed from reason and now represent merely corporate extortion of a helpless public, much like the spike in oil prices we saw last summer and are again experiencing.  They are not based in economic fundamentals, but rather in opportunistic corporate profiteering. It is no accident that price gouging is occurring in the most heavily lobbied industries.  Lobbying is counter to democratic ideals as it gives outsized voice to a small group through corporate rent-seeking.

We are better than this people.  We must stop putting our elderly population on a diet of dog-food to ensure 1000% or greater profits for drug companies.  Hold the dogs accountable.  Lobby your congressman, senator and anyone else who has a stake in Washington.  Put the goons out of office if they put corporate cronyism ahead of National wellbeing, and most of all, take care of your health and boycott the fuckers.