My wife and I recently decided to do IVF. The doctor specifically told us that we needed to order the medicine (menopur, Gonal F, etc) from an American pharmacy. That alone made me suspicious, so I looked at foreign options. Altogether, the medication required would have cost us about $5000 from American pharmacies. We found out that we can just buy the exact same stuff from a German pharmacy for about $1000. So yes, Americans get wrecked by drug prices.
JumpCrisscross 2 hours ago [-]
> doctor specifically told us that we needed to order the medicine (menopur, Gonal F, etc) from an American pharmacy
Why do they care? Referral bonus?
Did you report them?
apwell23 19 minutes ago [-]
what do you mean? you expect american doctors to prescribe you medicines from german pharmacies?
georgemcbay 1 minutes ago [-]
> what do you mean? you expect american doctors to prescribe you medicines from german pharmacies?
The GP post didn't specify one way or the other, but its reasonable to believe that the fact that it was seen as suspicious that the doctor told the poster that they needed to order the medicine from an American pharmacy suggests pretty strongly it wasn't an American doctor.
deadbabe 2 hours ago [-]
I think it’s even worse than this, perhaps America is subsidizing the rest of the world’s cheap medicines with its high prices. It makes sense to me. Extract everything you can from the American whales then throw out cheaper prices to the rest of the world long tail.
If America prohibited such gouging, would the rest of the world accept price increases on their drugs? If the current administration is so interested in inflicting harm on the rest of the world, maybe they should be convinced to lower drug prices.
9question1 2 hours ago [-]
The problem with this argument is that pharmaceutical companies are private businesses trying to make a profit, not charities. If it were truly unprofitable to sell drugs in, say, Canada or France, pharmaceutical companies would just not sell their drugs in those countries. It is _less_ profitable to sell drugs in those countries than America but still profitable, which is why they still try to capture those markets. If America fixed this imbalance by forcing a lowering of drug prices in the American market, there's no reason to believe that this would cause raising of prices elsewhere. The only way this would be possible is if it were truly unprofitable to sell the drugs elsewhere, which can't be the case since these are corporations not charities. The real impact would be to slow down new drug development, since existing drugs are already profitable to sell everywhere in the world even in countries with more regulation, but if America fixed its market by lowering drug prices for Americans, the total profitability of pharmaceuticals would decrease, decreasing the incentive to create new pharmaceuticals. That's a totally different and very plausible impact. Rising drug prices for existing drugs in other countries is not a plausible impact.
JumpCrisscross 2 hours ago [-]
> If it were truly unprofitable to sell drugs in, say, Canada or France, pharmaceutical companies would just not sell their drugs in those countries
You’re confusing capital and operating costs. Once you’ve developed the drug, selling everywhere you can makes sense. When considering whether to develop a drug or invest in something else, America’s biotech market absolutely turns keys. (But not as uniquely as we think. Europe has a thriving R&D market, it’s just directly subsidised.)
smallnix 2 hours ago [-]
I think they are not saying it's unprofitable, but rather that the current government should shape the market so the environment levels more over US vs the rest. (of course please in a laissez-faire change the market style not the bad socialist stuff)
mothballed 2 hours ago [-]
You think pharma companies won't bill the rest of countries whatever the market can bear? I can't think of why they possibly would lower their prices even if the American government stops subsidizing their businesses via using their monopoly on violence to enforce our perverted IP regimes.
tedggh 2 hours ago [-]
Europe is highly regulated. Other countries with nationalist governments if pushed too far will make their own generic versions. So no, increasing prices in other countries to offset the loses in the American market is not that simple.
What's the problem with talking points? Talking is the purpose of an open forum like this one. Let's argue against the points and not against the commenters.
CharlesW 2 hours ago [-]
Fair point, I’ve corrected "talking point" to "propaganda" above. Not only does it not make any logical sense, but there is zero evidence that Big Pharma isn't pricing drugs to maximize profitability in every market in which they operate. Drug companies aren’t charities.
retr0rocket 2 hours ago [-]
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gruez 1 hours ago [-]
>If America prohibited such gouging, would the rest of the world accept price increases on their drugs? If the current administration is so interested in inflicting harm on the rest of the world, maybe they should be convinced to lower drug prices.
I doubt governments elsewhere are itching to increase their healthcare spending even more. Realistically speaking the actual result will be cost cutting from pharma companies, mostly in the form of lower R&D spending for new drugs.
badosu 2 hours ago [-]
Seems like an interesting hypothesis to explore.
You didn't provide any context of why you think that could be the case or the mechanism through the alleged subsidies happen.
Der_Einzige 2 hours ago [-]
The sad reality is that if Americans stopped paying inflated prices the 40% of drugs discovered here would shrink to about 10% and world wide drug discovery would be massively reduced.
You literally have to get fucked or the world get fucked harder and drags you down with them. Same reason why NATO and the farm bill are good for America.
The greatest trick from the wealthy is to not just exploit you to get it, but to destroy any possibility of resistance to them. Even trying to resist does nothing but harms the under class even more than if you simply accept it.
“If you want a picture of the future, imagine a boot stamping on a human face—forever.“ - George Orwell, a communist/socialist
Edit: To the guy who claimed Orwell wasn't a communist, the POUM who he fought for in the Spanish Civil war was communist (https://en.wikipedia.org/wiki/POUM) and according to the soviet union was specifically trotskyist. If you fight for them you are a communist, even if and especially if you claim you weren't later in life.
tptacek 2 hours ago [-]
Orwell was not a communist.
gruez 2 hours ago [-]
For people who only read the title, note that the article is actually about a slightly different point:
>America is a lucrative market for the world’s drug giants. Many pharma bosses admit that is where they make most of their profits. But are these profits really responsible for America’s ballooning health-care bill? The short answer is no.
I don't think the article is disputing that Americans pay more for drugs than other countries, only that the pharma industry isn't the top gouger (or even above average) in the healthcare industry.
The headline is terrible given the thesis of the short article.
The Economist's analysis creates a model that shows Pharma companies making "excess profits" (greater than 10% return on capital) second only to technology companies. In that sense, by the Economist's terms, they are in fact gouging.
But that's not really the point the Economist wants to make; rather, regardless of whatever profits Pharma is raking in, they're in fact a small component of overall health care spending. You could zero out Pharma profits (this is my point and not theirs) and not materially change US health spending.
In all these discussions about American health care, my first take is that everybody should go download the CMS National Health Expenditures, and make a beeline for "Expenditures by Type of Expenditure and Program" (it's just an Excel spreadsheet). It's an extremely intuitive breakdown of where all US health care spending goes, and who's paying for it, all on one sheet.
There are a lot of narratives about health care spending that do not survive first contact with that spreadsheet.
kspacewalk2 2 hours ago [-]
Are you specifically referring to `Table 19 National Health Expenditures by Type of Expenditure and Program.xlsx` in the ZIP archive which can be downloaded at https://www.cms.gov/files/zip/nhe-tables.zip ?
tptacek 2 hours ago [-]
Yeah the one I have hotlinked in Google Sheets is a "Table 19" but I didn't want to presume it's Table 19 every year.
abeppu 2 hours ago [-]
I don't think the spending story alone is helpful because it doesn't acknowledge where there's room for actual improvement. Of the $1.5T spent on "Hospital Care", if almost all of it went to medical staff, facilities, equipment etc, and if good data suggested that people aren't in hospital unnecessarily, maybe that number isn't a problem. But if private hospitals have very fat margins, and some significant share of patients could be served just as well through less expensive clinical services, maybe that's too much.
In the context of the cost of medication, the $449B on "prescription drugs" doesn't break out what goes to drug makers vs PBMs or anyone else. We can easily imagine a world without PBMs that still delivers drugs to patients, but someone has to actually make the drugs. We can also ask, are people on medications they don't actually need? Are we sometimes _causing_ later health issues when medicating (e.g. fueling a giant opioid crisis)? None of this is apparent in the top-line spending figures.
tptacek 1 hours ago [-]
Whoah, that smuggles in an enormous assumption: that a dollar directed to a medical professional is automatically well spent. In reality, medical professionals in the US make drastically more money than they do in Europe and deliver way more procedures (they're often working on "RVU" scales that incentivize delivery of more procedures).
This is something that makes health care economics really difficult to discuss: everybody trusts their doctor and factors them out of the equation; the problem is every penny that doesn't go to their doctors and specialists. But that's not a valid analysis and your doctor and their support system is (after elder care) at the heart of US health spending.
lostlogin 29 minutes ago [-]
> medical professionals in the US make drastically more money than they do in Europe and deliver way more procedures
Do you have a source on that? I ant to understand how that works. The US is ludicrously inefficient per dollar spent, so how does that work?
tptacek 23 minutes ago [-]
By us compensating medical professionals more and allowing them to perform more procedures.
It's weird to see people startled by this claim because it's a pretty basic and accepted one!
abeppu 1 hours ago [-]
I did _not_ make that assumption. I specifically called out the possibility that some hospital care may not be necessary. Regarding hospital care, the two sentences describing hypotheticals where spending is or is not improvable specifically included clauses:
> and if good data suggested that people aren't in hospital unnecessarily
> if ... some significant share of patients could be served just as well through less expensive clinical services, maybe that's too much
knowaveragejoe 21 minutes ago [-]
I don't think they were insinuating that _you_ were making that assumption, but rather that your line of reasoning must necessarily make that assumption if brought to fruition
gruez 1 hours ago [-]
> But if private hospitals have very fat margins, and some significant share of patients could be served just as well through less expensive clinical services, maybe that's too much.
The second chart shows how many companies have return on capital greater than 10%, which basically covers the "very fat margins" you're looking for.
abeppu 1 hours ago [-]
I saw the economist chart, and am responding to tptacek advocating for a specific _spending_ based spreadsheet.
But _no_, the Economist category of "Healthcare Services" includes hospitals, insurers and PBMs and other "middlemen" (see the last paragraph of the article), and so based on their analysis we cannot separate out hospital margins.
tptacek 38 minutes ago [-]
The Economist charts are a rhetorical tool designed to highlight a point they're making (I think the points are valid and the charts are good and interesting).
The spreadsheet I'm "advocating" is less like that, and more like the tables in a 10K filing. It's simply an accounting of where US health dollars go, and where the money comes from.
I'm not saying that spreadsheet rebuts any claim this article makes (though it might). I'm saying it's a remarkably simple and comprehensive piece of data to fit onto a single screen, and when we discuss health care economics, it's extraordinarily helpful to have that data available.
dang 57 minutes ago [-]
Thanks - I've adapted your phrase for the title above. If anyone can suggest a better (i.e. more accurate and neutral), we can change it again.
dboreham 2 hours ago [-]
Drug costs are contentious because they're easily visible and often no covered by insurance. The other costs are obfuscated in complex billing and hidden under principle/agent veils.
E.g. my son has a peanut allergy and so we need to buy EpiPens. They were hundreds of dollars, and the vendor played MBA-nonsense games like requiring two to be purchased at a time. Meanwhile I was able to drive to Canada and buy the exact same thing (and as many or as few as I needed) for tens of dollars.
tptacek 2 hours ago [-]
We know where all the health spending in the system ends up, and while Pharma pricing is quite high and those companies are quite profitable, most of our health spending doesn't go to either Pharma or insurers.
megaman821 2 hours ago [-]
That is annoying, but not a huge cost driver. If you son ended up in the ER it would cost multiple lifetimes of epipens (even at an inflated price).
pixl97 5 minutes ago [-]
I mean, this is a bit of circular logic isn't it...
"Medicine being expensive doesn't impact care being expensive"
Which is almost exactly the opposite. If people could get cheap general doctor visits and be able to afford their medicines then this would reduce the number of emergency visits allowing less beds/doctors/hospitals.
3 minutes ago [-]
blindriver 2 hours ago [-]
My friend’s daughter needs an eczema crème and was told the price was $1000 per tube and wasn’t covered under insurance.
The price in Canada is around $100. Yes, Big Pharma gouges Americans.
newyankee 2 hours ago [-]
Issue is more like 'the cure for high prices is high prices' does not seem to work in healthcare
alephnerd 2 hours ago [-]
That's your insurance provider that told you no - not "Big Pharma".
Which is what TFA points out as well:
"The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity. They have higher costs of capital than drugmakers, but they also clear our 10% hurdle much more comfortably (chart 3)"
tptacek 2 hours ago [-]
Both are counterparties to negotiations that set price and availability, so it probably doesn't make sense to separate their role.
Analemma_ 2 hours ago [-]
Everyone is guilty here, because once one sector forms a monopoly, they have monopoly pricing power, and so their counterparty sectors have to form a monopoly as well to keep leverage in negotiations.
50 years ago, there were many more pharma companies, many more insurance companies, and many more hospitals under individual ownership. First the pharma companies consolidated, which give them monopoly pricing power over insurers. So then the insurance companies consolidated to they could negotiate on equal footing, but then they had monopoly pricing power over the hospitals. So then hospitals consolidated so they could negotiate. And now after decades of this, we're right back we're started, except for consumers, who can't consolidate and hence get fucked.
The two solutions here are either breaking up all the monopolies at the same time-- pharma, insurance, and hospitals-- so that everyone has market competition again, or letting health care consumers consolidate so they have pricing leverage-- i.e., forming a single-payer health-care system where the government negotiates deals on behalf of a 330+-million payer pool.
It does not make sense to either blame or spare one single sector: the pharmas, insurers and hospitals are all guilty, though in a sense all of their hands were forced by their counterparties. It's a coordination problem of exactly the kind government is supposed to solve, hence why government-run health care eventually seems like the only option.
potato3732842 39 minutes ago [-]
17% of the US GDP is healthcare so that's probably about 20% of the country that will scream bloody murder if you try and touch it in any way that makes it cost the other 80% less.
thmsths 2 hours ago [-]
I feel like you explained how we got there and our options to fix it perfectly. As you point out we have monopolies (or close to) at every single step. Whatever bandaid people and politician can come up with will quickly be neutralized by these conglomerates, at this point, any half measure is basically useless or has severe tradeoffs.
pixl97 4 minutes ago [-]
>As you point out we have monopolies (or close to) at every single step.
This is happening to a huge number of industries in the US, not just healthcare.
SJC_Hacker 2 hours ago [-]
> So then hospitals consolidated so they could negotiate. And now after decades of this, we're right back we're started, except for consumers, who can't consolidate and hence get fucked.
Consumer consolidation is called voting. Its too bad most consumers have voted in politicians who don't represent their best interests
deadbabe 2 hours ago [-]
So it should cost $550 in America and $550 in Canada.
tptacek 2 hours ago [-]
It depends on your moral system. Equalizing costs across markets almost certainly reduces the number of people who can be served by a medication.
cpfohl 2 hours ago [-]
I'd be really interested to see these costs averaged (like parent post) but then re-distributed by average income...
bradfa 2 hours ago [-]
Population of the USA is about 340 million, population of Canada is about 42 million. Assuming similar statistics of people needing a given medicine, proper cost sharing to result in the same profits would put it much closer to the USA cost than the Canada cost.
testing22321 2 hours ago [-]
How do you know what their profit margins are in each country?
How much profit is enough?
megaman821 2 hours ago [-]
Since most non-biological medicines don't cost very much to manufacture at all; enough profit is enough to cover that drug's R&D and the R&D of the 9 other drugs that didn't pan out. If the US market can cover all those costs, then whatever you get out of other countries is gravy. If that ceases to be true, then other countries will have to pony up more money or go without.
sfn42 1 hours ago [-]
Yeah man that's what they do. They sell it at a loss in Canada and then profit in the US to make up the loss. That's definitely how it works.
Let's hope they never discover that they could just not sell it in Canada at all and make even more money.
PhotonHunter 36 minutes ago [-]
For drugmakers, we treat research and development as an asset that is depreciated over 15 years, which is more or less the lifetime of their patents.
This is not a good assumption. It's a super complicated subject, but what really matters is market exclusivity and I think most industry people would use 8–12 years as a realistic range for small molecule market exclusivity.†
I'm unsure how this revised assumption would alter the conclusions.
Everything in healthcare is a "small component" if you squint or ask those benefitting but this death by a thousand cuts adds up to a hair under 1/5th of the US GDP. Go single payer or deregulate the living crap out of it, I don't care. I just want this leech of my back.
TheCoelacanth 53 minutes ago [-]
Every individual component of health care is a small portion of spending.
xnx 2 hours ago [-]
Seems like net income margin for an average US company is about ~10% and for big pharm it's ~14%. Regulations are probably what keeps pharma unusually profitable.
lotsofpulp 50 minutes ago [-]
10% consistent profit margin is above average for publicly listed US companies.
Americans created "big-pharma", "big-medical" and "big-insurance" for themselves and now they are living the consequences...
tboyd47 2 hours ago [-]
The answer: Well, that depends on how you define "Big Pharma."
abeppu 2 hours ago [-]
> The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity.
This category of "providers of health-care services" is rather over-broad, and I wish they had split it up more. Shouldn't hospitals (which actually _provide health care_ and are necessary parts of the healthcare system) be in a separate bucket from the "middlemen"?
And within the hospital category, don't we need to draw some distinctions? Currently in the US there's been press about how recent funding changes are causing a bunch of rural hospitals to shut down. It seems that some hospitals are major money losers, though we as a society may want them to continue to exist (or else a rural person in a medical emergency has no chance of getting care in time). But what's happening at the hospitals that _are_ collecting "rents", esp since in more urban contexts there are often multiple hospitals and one might expect more competition?
bearjaws 2 hours ago [-]
I work for a large mail order pharmacy and I will tell you we make no money on over 90% of our prescriptions. Our margin is less than 4%. The space is hyper competitive and obviously consumers are price sensitive. We are incredibly lean - less than 50 staff to run the pharmacy and a fully robotic dispensing line doing the vast majority of the dispensing.
The drug manufacturers are making massive profits, and nobody is stopping them.
Hilariously the whole TrumpRx card is kind of a step in the right direction, I've screamed for years that manufacturers blatantly rip everyone off and if just use a made up discount card system all of a sudden the drug is 30-90% off.
Ideally the government just says the global price is the US price, and eliminates discount cards entirely.
pfisherman 36 minutes ago [-]
The list price is mostly a starting point for negotiations with PBMs and payers. Drugs are also often aggregated and bundled. So in a lot of cases is unclear what a drug actually costs.
tptacek 2 hours ago [-]
You only get access to the government-negotiated discount, which is from the pharma company list price, if you buy without insurance. But your insurance company already negotiated a discount from that list price (they're not dumb, and any excess dollar they give to Pfizer is a dollar they don't get to deploy elsewhere). From what little we know of the government discount, it is likely in most cases to be a worse price than what you already have access to.
nineplay 2 hours ago [-]
I'm intrigued by the premise - I have my own large burden of health care costs and my own suspicions about where it is going - but does anyone else find their charts unreadable? I'm trying to parse the first one and I keep trying to put the pieces together. "Health care services" is 60 out of 101bn ... excess profits?
The second one I can hardly start on, "health care services" is a medium circle ( circle size = combined market capitalization ) with the second highest "Aggregate return on invested capital" and in the middle of "median weighted-average cost of capital".
I know its called "the economist" but they usually make their articles readable by people without a econ degree. If I had a suspicious mind ( I do ) I'd think this was deliberate obfuscation.
Also "health care services ... such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity"
That is a lot of different interests bundled together. How can they say insurers are the true money makers when they are not even broken out?
I'm surprised on the comments here that go: "I had to pay $$$$ for a medication when I could buy that same medication somewhere else for a fraction of it. Therefore Big Pharma gouges America".
That is not evidence that "Big Pharma gouges America". It is evidence that Americans pay a lot more than other countries. Only that. The conclusion doesn't necessarily follow from the premises.
Want to understand why? Read the article's last paragraph:
> The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity.
As always, no one reads anything.
gertlex 2 hours ago [-]
>> The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity.
> As always, no one reads anything.
The implication of the article was the "bulk of the rents" applies to healthcare costs in total, not just to drug costs. I.e. drug costs are not a huge part of the healthcare costs.
That by itself doesn't guarantee an understanding of why specific medication costs are sometimes 10x or whatever of other 1st world countries.
(but I didn't read the article; just the rest of the comments)
tptacek 2 hours ago [-]
Insurers make even less money than Pharma companies do. To a first approximation essentially all health care spending goes to companies that deliver health services directly.
delfinom 2 hours ago [-]
Yea in fact the ACA law caps insurers to a maximum of 15% profit. Anything extra must be rebated back to the customers.
The debatable part is the rebate is back to the employer who is allowed to simply pocket the money, though one could argue its returning the amount the employer is covering, often more than the employee. :shrug:
Believe or not, I get yearly notices from UHC about rebates for the prior year.
tptacek 2 hours ago [-]
Whatever the reasons are, I don't need first principles to make this claim, because Medicare presents this particular data quite clearly.
diego_moita 2 hours ago [-]
> Insurers make even less money than Pharma companies do.
In the whole or in relative terms? Source, even if personal or anecdotal?
I am willing to consider your point because, to be fair, the article doesn't show any data that indicts the insurers. They just blame them at the end without any evidence.
> all health care spending goes to companies that deliver health services directly.
Well, that wouldn't explain why medication alone is more expensive in America, right?
But accepting your argument: is it because of greed and oligopolies, incompetence or excess of regulation?
mothballed 2 hours ago [-]
No, he's right. Insurance profits are legally capped, and this keeps them from representing an outsized fraction of spending even in cases when they might partially be the driver behind it. They have to spend N% of their income on actual health care benefits. They're not absurdly high, you could look them up, but I don't think it's possible to exceed something like 10% profit.
This means the only way for insurance companies to increase profits is to increase the price of healthcare, and they have zero incentive to try and lower the amount of money they pay out for healthcare which might otherwise have been split between profits and lower premiums.
tptacek 2 hours ago [-]
My guess is that if you found NHE data from before the ACA cap insurance would remain a small component of overall health spending (the ACA was very important and I am in no way downplaying it).
Mostly I'm saying: you don't have to axiomatically derive why this is. Medicare collects and synthesizes this data.
mothballed 2 hours ago [-]
How would you derive it from medicare? Isn't medicare supposed to be non-profit? They should occupy 0% of health care spending once you remove the pass-through transfer payments that go back into medical care, minus some administration overhead.
tptacek 2 hours ago [-]
The CMS collects these statistics in the same way that the BLS collects labor statistics. It has nothing specifically to do with the part of CMS that directly administers Medicare. The point is that we have very high quality data on this stuff.
mikeyouse 1 minutes ago [-]
I’d like to see a deeper analysis here though. Insurers don’t make that much money on a percentage profit basis, but profit’s derived after expenses. Hypothetically, their sheer existence could be a huge burden to everyone involved, their costs to employ legions of make-work employees processing/rejecting/questioning claims could result in low profits even if the work isn’t necessary, they could take advantage of transfer pricing to hide profits in their wholly owned PBMs…
tptacek 2 hours ago [-]
Hah, I wouldn't need "personal" or "anecdotal" evidence for this; it's right there in black and white in the NHE data; literally in the first row of the sheet. I posted about this across the thread.
The Economist's analysis concludes that the bulk of exorbitant rents in the US is captured by providers of health-care services who take advantage of the healthcare system's opacity:
* hospitals,
* insurers,
* pharmacy-benefit managers, and
* other middlemen.
black_13 49 minutes ago [-]
[dead]
BeepInABox 2 hours ago [-]
Yes. /thread
Rendered at 18:12:19 GMT+0000 (Coordinated Universal Time) with Vercel.
Why do they care? Referral bonus?
Did you report them?
The GP post didn't specify one way or the other, but its reasonable to believe that the fact that it was seen as suspicious that the doctor told the poster that they needed to order the medicine from an American pharmacy suggests pretty strongly it wasn't an American doctor.
If America prohibited such gouging, would the rest of the world accept price increases on their drugs? If the current administration is so interested in inflicting harm on the rest of the world, maybe they should be convinced to lower drug prices.
You’re confusing capital and operating costs. Once you’ve developed the drug, selling everywhere you can makes sense. When considering whether to develop a drug or invest in something else, America’s biotech market absolutely turns keys. (But not as uniquely as we think. Europe has a thriving R&D market, it’s just directly subsidised.)
I doubt governments elsewhere are itching to increase their healthcare spending even more. Realistically speaking the actual result will be cost cutting from pharma companies, mostly in the form of lower R&D spending for new drugs.
You didn't provide any context of why you think that could be the case or the mechanism through the alleged subsidies happen.
You literally have to get fucked or the world get fucked harder and drags you down with them. Same reason why NATO and the farm bill are good for America.
The greatest trick from the wealthy is to not just exploit you to get it, but to destroy any possibility of resistance to them. Even trying to resist does nothing but harms the under class even more than if you simply accept it.
“If you want a picture of the future, imagine a boot stamping on a human face—forever.“ - George Orwell, a communist/socialist
Edit: To the guy who claimed Orwell wasn't a communist, the POUM who he fought for in the Spanish Civil war was communist (https://en.wikipedia.org/wiki/POUM) and according to the soviet union was specifically trotskyist. If you fight for them you are a communist, even if and especially if you claim you weren't later in life.
>America is a lucrative market for the world’s drug giants. Many pharma bosses admit that is where they make most of their profits. But are these profits really responsible for America’s ballooning health-care bill? The short answer is no.
I don't think the article is disputing that Americans pay more for drugs than other countries, only that the pharma industry isn't the top gouger (or even above average) in the healthcare industry.
The Economist's analysis creates a model that shows Pharma companies making "excess profits" (greater than 10% return on capital) second only to technology companies. In that sense, by the Economist's terms, they are in fact gouging.
But that's not really the point the Economist wants to make; rather, regardless of whatever profits Pharma is raking in, they're in fact a small component of overall health care spending. You could zero out Pharma profits (this is my point and not theirs) and not materially change US health spending.
In all these discussions about American health care, my first take is that everybody should go download the CMS National Health Expenditures, and make a beeline for "Expenditures by Type of Expenditure and Program" (it's just an Excel spreadsheet). It's an extremely intuitive breakdown of where all US health care spending goes, and who's paying for it, all on one sheet.
There are a lot of narratives about health care spending that do not survive first contact with that spreadsheet.
In the context of the cost of medication, the $449B on "prescription drugs" doesn't break out what goes to drug makers vs PBMs or anyone else. We can easily imagine a world without PBMs that still delivers drugs to patients, but someone has to actually make the drugs. We can also ask, are people on medications they don't actually need? Are we sometimes _causing_ later health issues when medicating (e.g. fueling a giant opioid crisis)? None of this is apparent in the top-line spending figures.
This is something that makes health care economics really difficult to discuss: everybody trusts their doctor and factors them out of the equation; the problem is every penny that doesn't go to their doctors and specialists. But that's not a valid analysis and your doctor and their support system is (after elder care) at the heart of US health spending.
Do you have a source on that? I ant to understand how that works. The US is ludicrously inefficient per dollar spent, so how does that work?
It's weird to see people startled by this claim because it's a pretty basic and accepted one!
> and if good data suggested that people aren't in hospital unnecessarily
> if ... some significant share of patients could be served just as well through less expensive clinical services, maybe that's too much
The second chart shows how many companies have return on capital greater than 10%, which basically covers the "very fat margins" you're looking for.
But _no_, the Economist category of "Healthcare Services" includes hospitals, insurers and PBMs and other "middlemen" (see the last paragraph of the article), and so based on their analysis we cannot separate out hospital margins.
The spreadsheet I'm "advocating" is less like that, and more like the tables in a 10K filing. It's simply an accounting of where US health dollars go, and where the money comes from.
I'm not saying that spreadsheet rebuts any claim this article makes (though it might). I'm saying it's a remarkably simple and comprehensive piece of data to fit onto a single screen, and when we discuss health care economics, it's extraordinarily helpful to have that data available.
E.g. my son has a peanut allergy and so we need to buy EpiPens. They were hundreds of dollars, and the vendor played MBA-nonsense games like requiring two to be purchased at a time. Meanwhile I was able to drive to Canada and buy the exact same thing (and as many or as few as I needed) for tens of dollars.
"Medicine being expensive doesn't impact care being expensive"
Which is almost exactly the opposite. If people could get cheap general doctor visits and be able to afford their medicines then this would reduce the number of emergency visits allowing less beds/doctors/hospitals.
The price in Canada is around $100. Yes, Big Pharma gouges Americans.
Which is what TFA points out as well:
"The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity. They have higher costs of capital than drugmakers, but they also clear our 10% hurdle much more comfortably (chart 3)"
50 years ago, there were many more pharma companies, many more insurance companies, and many more hospitals under individual ownership. First the pharma companies consolidated, which give them monopoly pricing power over insurers. So then the insurance companies consolidated to they could negotiate on equal footing, but then they had monopoly pricing power over the hospitals. So then hospitals consolidated so they could negotiate. And now after decades of this, we're right back we're started, except for consumers, who can't consolidate and hence get fucked.
The two solutions here are either breaking up all the monopolies at the same time-- pharma, insurance, and hospitals-- so that everyone has market competition again, or letting health care consumers consolidate so they have pricing leverage-- i.e., forming a single-payer health-care system where the government negotiates deals on behalf of a 330+-million payer pool.
It does not make sense to either blame or spare one single sector: the pharmas, insurers and hospitals are all guilty, though in a sense all of their hands were forced by their counterparties. It's a coordination problem of exactly the kind government is supposed to solve, hence why government-run health care eventually seems like the only option.
This is happening to a huge number of industries in the US, not just healthcare.
Consumer consolidation is called voting. Its too bad most consumers have voted in politicians who don't represent their best interests
How much profit is enough?
Let's hope they never discover that they could just not sell it in Canada at all and make even more money.
I'm unsure how this revised assumption would alter the conclusions.
†one reference of many in support: https://pmc.ncbi.nlm.nih.gov/articles/PMC10242760/
https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile...
>Total Market 8.67%
This category of "providers of health-care services" is rather over-broad, and I wish they had split it up more. Shouldn't hospitals (which actually _provide health care_ and are necessary parts of the healthcare system) be in a separate bucket from the "middlemen"?
And within the hospital category, don't we need to draw some distinctions? Currently in the US there's been press about how recent funding changes are causing a bunch of rural hospitals to shut down. It seems that some hospitals are major money losers, though we as a society may want them to continue to exist (or else a rural person in a medical emergency has no chance of getting care in time). But what's happening at the hospitals that _are_ collecting "rents", esp since in more urban contexts there are often multiple hospitals and one might expect more competition?
The drug manufacturers are making massive profits, and nobody is stopping them.
Hilariously the whole TrumpRx card is kind of a step in the right direction, I've screamed for years that manufacturers blatantly rip everyone off and if just use a made up discount card system all of a sudden the drug is 30-90% off.
Ideally the government just says the global price is the US price, and eliminates discount cards entirely.
The second one I can hardly start on, "health care services" is a medium circle ( circle size = combined market capitalization ) with the second highest "Aggregate return on invested capital" and in the middle of "median weighted-average cost of capital".
I know its called "the economist" but they usually make their articles readable by people without a econ degree. If I had a suspicious mind ( I do ) I'd think this was deliberate obfuscation.
Also "health care services ... such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity"
That is a lot of different interests bundled together. How can they say insurers are the true money makers when they are not even broken out?
https://www.ama-assn.org/sites/ama-assn.org/files/2025-04/20...
That is not evidence that "Big Pharma gouges America". It is evidence that Americans pay a lot more than other countries. Only that. The conclusion doesn't necessarily follow from the premises.
Want to understand why? Read the article's last paragraph:
> The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity.
As always, no one reads anything.
> As always, no one reads anything.
The implication of the article was the "bulk of the rents" applies to healthcare costs in total, not just to drug costs. I.e. drug costs are not a huge part of the healthcare costs.
That by itself doesn't guarantee an understanding of why specific medication costs are sometimes 10x or whatever of other 1st world countries.
(but I didn't read the article; just the rest of the comments)
The debatable part is the rebate is back to the employer who is allowed to simply pocket the money, though one could argue its returning the amount the employer is covering, often more than the employee. :shrug:
Believe or not, I get yearly notices from UHC about rebates for the prior year.
In the whole or in relative terms? Source, even if personal or anecdotal?
I am willing to consider your point because, to be fair, the article doesn't show any data that indicts the insurers. They just blame them at the end without any evidence.
> all health care spending goes to companies that deliver health services directly.
Well, that wouldn't explain why medication alone is more expensive in America, right?
But accepting your argument: is it because of greed and oligopolies, incompetence or excess of regulation?
This means the only way for insurance companies to increase profits is to increase the price of healthcare, and they have zero incentive to try and lower the amount of money they pay out for healthcare which might otherwise have been split between profits and lower premiums.
Mostly I'm saying: you don't have to axiomatically derive why this is. Medicare collects and synthesizes this data.
https://en.m.wikipedia.org/wiki/Betteridge's_law_of_headline...
* hospitals,
* insurers,
* pharmacy-benefit managers, and
* other middlemen.