Medical costs have been rising for years- actually decades. For patients that means the cost of insurance has risen, often while deductibles, copays, and out-of-pocket expenses have increased. The cost structure of other players involved, notably health providers and insurance companies/programs, has also steadily risen. The U.S. pays more for healthcare per capita than any other industrialized nation.
Source: The Commonwealth Fund, from The Conversation, Why the US has higher drug prices than other countries, 2/7/19
Adding to the strain will be the end of the government funded Covid response, meaning the cost of testing, treatments, and vaccines will shift to the private sector. This will be the first time since the start of the pandemic that the cost of Covid prevention and treatment will be borne by patients, either out-of-pocket or via health coverage and copays. This change in government policy will highlight the costs associated with testing, the medications to inoculate, and the response needed to otherwise treat the disease.
An area where the government can help immensely is in the regulatory process.
To note, research in the Chicago Booth report I’ve included below shows that nominally reducing the cost of the drug approval process (between $400,000-$800,000 per application on a process that costs an average of $3.2 million) would save $347 million for consumers (patients) or their insurers, which often includes taxpayer-funded Medicare or Medicaid. Shortening the regulatory timeframe by one or two years, would save an additional $600 million to $1.5 billion. This is not pocket change folks!
While many components factor into the overall cost of healthcare, let’s shift this discussion to the cost of drug prices.
Outside of the cost of gas for your car, the rising cost of health care is causing the most financial strain for people across the country. Many feel that government price controls will reign in the rising costs of drug prices. While this may be true, there may be another, more efficient way to address the issue- good old competition.
The pharmaceutical industry has been very successful at enacting roadblocks to competition. While the government may react with antitrust lawsuits, market dynamics tend to be more responsive. The Booth article looks into a case where generic drug prices dropped swiftly after a new manufacturer started producing the same drug, despite a long-running antitrust suit brought on by multiple states and the feds.
Give the Booth report a read and let me know what you think about the cost of healthcare and drug prices in America.
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~ Brian Kasal- The Leadership Matrix
P.S.- Did you see my last Leadership Matrix post? How Logistics, Not Just Supply Affect the Cost of a Gallon of Gas