Monday, June 25, 2012

Why is Health Insurance Expensive in America

The cost of drugs is a central reason American health insurance is so expensive. Consider that the cost of FDA approval of a single drug averaged $494 million dollars in 2009. Many of these approved drugs fail in the marketplace. The few drugs that succeed must be marked-up to cover the cost of all the other drugs being researched.

Clearly one might then argue that the marketplace is not working. That would be true except for the fact that the market for prescription drugs is international while the patent protections are not. Foreign governments, including China, wait for new drugs to be released and then reverse engineer them. U.S. patents are sometimes used as a guide to create illegal generic versions of approved drugs. American drug companies must then compete with illegal generics because of the patent infringement. This leaves America as the only market in which to recoup the cost of creating life-saving drugs.

All of these costs are passed on to the American consumer via insurance premiums. Our insurance premiums are paying for the entire planets health care research and development. American tax-dollar-funded basic research grants are also used to create the drugs which are then stolen through patent infringement. Health insurance in America is expensive because of the enormous and unfair share of financial burden placed on our 5% of the world's population.

To control costs, we need a new policy that is not focused on cost cutting grandma into hospice through "end of life counselling." We need a policy that returns patent protections to the creators and then enforces our patent laws internationally. How do we enforce U.S. law internationally? Make it clear that any violation of U.S. patent law with regard to prescription drugs will be pursued by the U.S. Justice Department. When a foreign government, corporation or individual violates us, make an example of them. Do this repeatedly and publicly instead of running guns to Mexican/Iranian drug cartels.

That is the actual role of government, to defend the country. If foreign nationals were violating American citizens in other ways, we would go to war.  Yet, stealing our knowledge, tax money and income is accepted because the truth is never explained. The market is supported by a fair set of rules. Those rules are being violated and it is forcing Americans to live in fear.

Politicians and the mainstream media fail to properly identify problem. For example, ObamaCare does not address the underlying problem of cost growth. ObamaCare simply tries to force people who do not need health insurance, people under 30 years of age, into insurance plans and cuts out those who need health care, working families. ObamaCare also discourages the innovative research that keeps humanity winning the race against disease. It goes without saying, but many of the people who read this post will have never been told that Americans are paying for the entire world's health care research and development. Until they hear it from three separate sources, they will not believe it. The best that can be done is present the truth and hope people allow themselves to start questioning what they have been told or not told.

Once everyone is engaged in the same free market, prices will fall. There will also be less rationale to prohibit the importation of prescription drugs as that policy is singularly designed to protect high domestic prices for our drug researchers and manufacturers. The free market is the answer, but it must have a fair playing field.


Shane Atwell said...

The reason medical care and drugs are expensive is because the gov't has driven out the individual consumer with tax incentives to corporate health plans, protected the drug makers from competition through the FDA, forced up their costs through the FAD, and forbidden the competition of foreign (approved)drugs. And now the FDA is on the warpath trying to get rid of older, cheaper drugs that have been widely used since before the most onerous regulations. To top it off, the gov't as the primary "consumer" of drugs has tried to combat prices by fixing them artificially low. So now we get shortages. Patent infringement is an issue, but even that would be ameliorated if drug companies didn't have the privileges of their cartel artificially inflating prices.

Jim said...

The big pharma industry's MD's and others move between jobs at FDA and their parent companies regularly.

The FDA only approves what big pharma approves of. If the pharmaceuticals don't approve of something, FDA and related agencies don't approve of it, and neither do insurance companies who uniformly have members of big pharma on their boards of directors.

Ask for alternative medicines or therapies that don't involve manufactured chemicals (big pharma), and you may likely be told "NO!"

Yeah, medical care is expensive, and another reason is the millions who don't have insurance who land in our hospitals where we pay for their care.

While American health care is in crisis, there are alternatives that people can go to and learn at:

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Doo Doo Econ said...

Thanks for the comments, even the "ad" which I will leave because it seems related.

I agree with Shane and it seems to fit into my argument as American pharma companies are locked into a non-market situation. They now depend upon the laws, connections and special interests as the domestic market would never support the R&D of the entire world.

I also mostly agree with Jim. The only area we may see differently is the scope of impact from uninsured hospitalizations. Information available can likely answer that question.

It seems that the high cost of health insurance is recognized by all of us as the reason that some people who need it do not have it. However, some people who do not have health insurance do not want it or need it.

As a young man, the financial resources which I could have applied to health insurance were better invested in education, food, transportation, and dating. Based upon recent conversations with 20-somethings and observations that ObamaCare tries to insure young people to drive down unit costs, this logic still holds. Young people only need catastrophic coverage.

Ashton Jones said...

Family health insurance can be pretty expensive. Nice find though.

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