Tuesday, November 25, 2014

Paying Till It Hurts

The author of the eponymous New York Times series, Dr. Elisabeth Rosenthal, recently spoke at a conference sponsored by the Mayo Clinic. During her talk she gave numerous examples of (outrageous, exorbitant, unbelievable) costs within the health care system. In her series, she says she didn't focus on the end-of-life costs which tend to be high but on the everyday, ordinary costs: like Augmentin, the oft-prescribed antibiotic, which went from $35 to over $100 when there's nothing different about it and inflation doesn't account for the increase.

A GAO study in 2011 found that 100 commonly prescribed drugs increased 6.6% from 2006 to 2010, prior to the passage of the Affordable Care Act (ACA, Obamacare)--in fact, the largest yearly increase occurred during George W. Bush's last year in the presidency. At that rate, prices would double in the ten years since 2005. Brand name drugs increased at a rate of 8.3%, indicating prices doubling in less than 9 years. This increase is happening at the wholesale and Medicare Part D levels equally.

Generics' prices decreased 10% over that same period where there's some competition. The overall medical inflation rate was a relatively paltry 3.8%.

What accounts for the price increases? It's not formulation or production costs. After the drug is released, it's not research and development costs. (Compare how new hardware technology prices drop after the product or service is in the market for a few years.) It's not our distribution channels--or Canadian pharmacy's wouldn't be able to sell Advair (for asthma) at one-tenth the US price, according to Dr. Rosenthal. Is it patent enforcement? Is it advertising? A lack of competition? A lack of a centralized negotiator like other countries have? (Our insurance companies don't negotiate. They just pay and pass along the costs in higher premiums.)

Now pharmaceuticals are not the only cost abuse we find. Listen to the rest of Dr. Rosenthal's comments or read her series.

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