The Business of Healthcare

Introduction

In 2009, the Democrats had a once-in-a-generation Democratic Senate supermajority. Yet, as the Senate debated healthcare reform, Sen. Max Baucus (D-Mont.) refused to even consider a single-payer healthcare system in which the government provided universal healthcare. Single-payer had worked well in Canada, and in a number of countries in Europe, including the UK, and some polls in the USA showed that a majority of Americans wanted it in the USA. Yet Baucus, then head of the powerful Senate Finance Committee, refused. He said it was not realistic, and he wanted a healthcare bill that moderate Republicans could support. Eventually, Baucus and the Democrats passed the flawed Affordable Care Act (ACA) , the bill that the Republicans have tried to dismantle in 2017–2018. Baucus left the Senate in 2014, but belatedly, he made a reversal and in 2017 endorsed single-payer healthcare. Why the change? He suggested that its time had come. ¹ But by then Donald Trump was in the White House and the Republicans controlled Congress. Their time had come first.

How Healthcare Became a Business Instead of a Right

“The problem with American healthcare is not the care,” according to Christy Ford Chapin. “It’s the insurance.” ² And not just any insurance, but for-profit health insurance . Almost alone among developed nations, the USA has propped up a business model that relies on private for-profit insurers. The result is unequal healthcare in the USA, vastly unequal. American healthcare is unfair, inefficient, inaccessible for many millions, and much more costly than single-payer healthcare systems, such as in the UK, Canada, Denmark , Norway , and Sweden . These countries, largely because they use single payer , in which the government ensures the healthcare of entire populations, and they do not rely on for-profits, have had significantly better outcomes in life expectancy and infant mortality and vastly diminished pathologies such as obesity , teenage pregnancies, and anxiety syndromes. The reason? Healthcare is universal, affordable, and efficient. In the UK, which has experienced at least partial privatization , even under the Labor governments of Tony Blair and Gordon Brown , and the Coalition governments led by David Cameron and Theresa May since 2010, healthcare—though rated the best system in the world by the Commonwealth Fund—has begun to resemble the USA more as pieces of the National Health Service (NHS) have been whittled away and been privatized. The result is less access, lower life expectancy , and greater anxiety (and depression).

So if healthcare in single payer countries is better, more affordable, and universal, why don’t we have it in the USA? In the early decades of the twentieth century, the medical marketplace offered a variety of models, before settling on the system in place today. Unions, businesses, consumer cooperatives, and even ethnic mutual aid societies all offered their own versions of organizing and paying for medical care. Physicians also offered a model, something called a prepaid doctor group. Such groups often included a variety of specialists, including general practitioners, surgeons, and obstetricians. These groups worked well, and for several reasons. Their patients received integrated care in one location. And group physicians from across the spectrum of specialties could meet regularly to discuss and review treatment options for chronically ill and hard-to-treat and diagnose patients. ³

What made this system work was that individuals and families paid a monthly fee to the physician group, not to an insurance company. The system worked because it held down costs. Physicians typically were paid a base salary, plus a percentage of quarterly profits. As a result, they lacked incentive to ration care, which could cost them paying patients, or to provide unnecessary care since they did not reap an additional benefit. ⁴

Prepaid doctor groups were both efficient and affordable because virtually all the money that went into healthcare went directly to the physician groups: none of it went to insurers financing medical services. Moreover, doctors had no incentive to provide unneeded services, nor did they need to risk losing patients because physician groups could provide comprehensive care.

So why did doctor groups and healthcare coops fail to be adopted universally? Unfortunately, the American Medical Association (AMA) regarded early healthcare models as a threat. It was politics, not market logic or rational choice theory that positioned for-profit insurance companies as the way to organize medical services. AMA leaders decided in the late 1930s that the best way to protect the professional security of doctors was through insurance companies: these could offer policies that would reimburse doctors for their services. Translated, the AMA believed that it alone should shape the medical market. This belief was rooted not only in the cultural standing of the medical profession, but also in state licensing and medical practice laws that had endowed the AMA with regulatory power. Most observers would have caught the illusion, or the deceit. Once for-profit insurance became the model, it would eventually undermine doctor sovereignty. Missing in all this was assurance of efficient patient care. Here is how Christy Ford Chapin put it:

For AMA officials, safeguarding physician sovereignty trumped economic efficiency. They therefore created a particular insurance company model: their design required insurers to reimburse the services of individual physicians rather than medical groups; compensate practitioners for each service or procedure provided; and allow doctors to practice medicine as they saw fit, free from supervision or interference. Both physicians and insurers hoped to severely limit health insurance . Doctors feared losing autonomy to third-party financiers. Insurers were troubled by the cost implications of funding physicians who could arbitrarily increase the price and supply of medical services. Meanwhile, the AMA opposed and suppressed all other health care prepayment plans, whether sponsored by businesses, mutual aid societies, consumer organizations, unions, or even physician groups. Professional calculations soon merged with national politics to cement into place the centrality of insurance companies. ⁵

The AMA was very successful on multiple fronts. It retained regulatory power for itself, bypassing any state-imposed regulation. It managed to suppress other healthcare plans, whether sponsored by businesses, mutual aid societies, unions, or physician groups. And it institutionalized the model it thought that would best protect the autonomy of doctors: reimbursement of individual doctors for each service or procedure provided. What may not have been so obvious then, but which virtually all health-insured people know today, was that paying physicians for fee-based healthcare would inevitably inflate the number of services and procedures, and that would lead to higher premiums. ⁶ That is simply common sense, and that is what happened. What was noticeably missing in all this? A so-called free market, or a competitive model that would provide healthcare efficiently and inexpensively. As for universal healthcare, that was a European thing. And it is still being debated in the USA in 2018, long after virtually all developed nations have embraced it.

Although Democrats and Republicans offered numerous healthcare reforms in the 1940s and 1950s, the AMA model endured, to a large extent because of the efforts of the AMA itself. When President Harry Truman proposed a universal healthcare system, apparently hoping to build such a program around prepaid doctor groups, bypassing insurers and the AMA , the latter decided that the best way top keep government out of healthcare, and to keep the AMA in it, was to design a private sector model: the insurance model, that coincidentally was a for-profit model. Motives varied, but doctors preferred to maintain autonomy, a fee-based structure not limited by a fixed salary, and what many believed would be a more comprehensive and generous way to provide healthcare for all population groups. Insurers could see unlimited clients, as long as they could control the fee structure. Predictably, as healthcare was established as a business in which clients shopped around for insured healthcare, medical costs skyrocketed. And since that posed a problem for for-profit insurers, they just as predictably acted to contain costs. They expanded their function from financing medical services to supervising medical care and coordinating the healthcare system. They decided which services and procedures qualified for policy coverage and reimbursement fees for physicians and hospitals. They even shaped medical practices by insisting that healthcare providers follow their treatment blueprints. Once institutional relationships were established between health insurers, physicians, hospitals, and medical societies like the AMA , policymakers would simply act to accommodate that system. ⁷

It is this business for-profit model that has persisted in the USA ever since. The predictable result is that healthcare remains very much a casino game or lottery, some seven years after passage of the ACA . In the USA, healthcare is not a right or an entitlement; it is a market where goods or services are bought just like any other goods or services. The result is that healthcare has become an arena of predation. For-profit health insurers have not only contributed to the fragmentation of the medical marketplace, but also shaped that marketplace by extracting considerable wealth from healthcare. And unlike the NHS in the UK , and all other healthcare systems in developed countries, the USA has never committed to universal healthcare. Healthcare is rationed out according to who can afford it, inevitably reflecting the inequalities that persist throughout the economy. The greater the inequality overall, the more unequally that healthcare is distributed. And there is one other fatal flaw: in single-payer systems, as in Denmark , Sweden , and the UK, government insures everybody: that means a unified administrative system, providing healthcare as a right, and providing it universally.

The NHS has flaws, but that also has much to do with politics. Healthcare in the UK is becoming more unequal but, as we shall see, that has much to do with the partial privatizations beginning with Tony Blair and Gordon Brown and persisting with the Coalition government. It was never the intention to even partially privatize the NHS , or to allocate its services by means testing, when it was founded in 1948. The whole concept, in the wake of World War II, was to establish healthcare as a nonprofit system whose services would provide universal healthcare across the entire population. Partial privatization has been a radical departure from earlier intentions, and the results have only served to make Britain increasingly unequal, simultaneously creating many opportunities for predation.

How the Super-Rich Extort Wealth from Health and Create Inequality

In Europe, Denmark , Finland, France, Germany, Norway , Sweden , Switzerland, and the UK, all have less expensive, more efficient, fairer systems than in the USA. What is the difference? All these European countries have universal-coverage healthcare systems. Many Americans deny these claims, but here is why they are true. In single-payer systems, such as in Canada, Finland, Norway , Sweden , the UK, and Taiwan, the government provides insurance for all citizens and pays all healthcare expenses except for co-pays and coinsurance. This means significant elimination of bureaucratic waste. Instead of many payers and overlapping administrative costs, a unified and universal health insurance system is created. Private for-profit health insurers need an army of actuaries to figure break points in order to be profitable. Universal healthcare systems, where everybody is automatically insured from birth, do not need actuaries. Everybody is automatically covered from birth, and the government is not worried about a profit, only about providing good healthcare. In single-payer systems, where billing is put under one roof, healthcare is automatically centralized, universal, and national. In single-payer systems, the result is much less bureaucratic expense, hence a lower cost per capita as we have seen. ⁸

Some developed nations do not use single payer or national health insurance , but rely on what is called mandated insurance that is national and universal. In Germany, which has such a system, this means that health insurance is mandatory for the entire population. Both salaried workers and employees below what is considered a high-income threshold of almost €50,000 (US$66,337 in 2015 dollars) are automatically enrolled into one of the 130 public nonprofit “sickness” funds at the same rate for all members. Payment is made jointly by employer and employee contributions. Provider payment is not decided by the market in Germany, but by complex social bargaining, over which state governments preside. Sickness funds must provide a broad benefit package and cannot refuse membership based on an actuarial basis, which means that coverage is universal. It is also nonprofit, which is how Germany keeps its medical expenditures under control and limits medical inflation. Germans who make above the statutory threshold can still enroll voluntarily, unless they opt for private insurance. Germany’s public system includes about 89% of the population. Americans think that German and European medical systems are very expensive in general. But Germans not only have better outcomes, live longer, and have a lower infant mortality rate, they also pay a fixed percentage set at 15.5% of their gross salaried income, which is offset by employer contributions covering almost half of that at 7.3%.

How expensive and how efficient is the German healthcare system? Germany spent 8.7% of GDP on healthcare expenditure in 2011, a little over half of US spending on healthcare for the same year, although Germany has a system of universal healthcare coverage. ⁹ In 2012, Germany spent $4754 per capita, a little more than half of what the USA spent per capita that year. And despite having universal healthcare, Germany ranked second overall by a Commonwealth study in 2014 in access, which included costliness of healthcare and timeliness of care, out of the eleven developed nations studied. The USA ranked ninth in access, well behind Germany, despite the mistaken assumption that the USA has a superior healthcare system, one where you do not have to wait long for care. The Commonwealth study says you do, and you will. ¹⁰

The Commonwealth Fund also detailed a number of cost comparisons between Germany, nine other developed nations, and the USA, back in 2015. It published the following: US average cost for heart bypass surgery was $75,345; an appendectomy brought $13,910; an MRI costs $1145, and a CT scan costs an average of $896. Germans having any of these surgeries or tests paid nothing, bills were paid for by the nonprofit insurers who collected payroll tax deductions, of which employers covered almost half. And for those who didn’t have an employer, the state had mandated that municipalities had to provide full coverage, the same as for those who were employed.

The French system of healthcare—similar to the German—also provides universal healthcare coverage and uses nonprofit health insurance . Like Germany, it has not charged for surgical procedures such as bypass surgery and appendectomies, nor for medical tests such as the MRI. ¹¹

So if the healthcare system in the USA is so costly, despite being less effective and efficient, where does the money go and to whom? Much of it goes straight to the super-rich who control the for-profit health insurance companies. Drs. David Himmelstein and Steffie Woolhandler, both professors at the CUNY School of Public Health at Hunter College, have worked out much of the math, including healthcare costs in the USA before and after the ACA was passed into law, comparing these costs with single-payer systems elsewhere, such as Canada and Taiwan. While they note that the ACA is a good thing because it has enrolled twenty-five million into health insurance , they also project prohibitive costs: some $2.757 trillion for private insurance overhead and administration of government health programs between 2014 and 2022. This includes $273.6 billion in new administrative costs attributable to the ACA , but nearly two-thirds of this new overhead—$172.2 billion annually—will go for increased private insurance costs. ¹² This is a reference to added bureaucratic waste because many of the dollars put into healthcare through the ACA are filtered through private insurers. As they explain,

Traditional Medicare runs for 2 percent overhead, somewhat higher than insurance overhead in universal single payer systems like Taiwan’s or Canada’s. Yet traditional Medicare is a bargain compared to the ACA strategy of filtering most of the new dollars through private insurers and private HMOs that subcontract for much of the new Medicaid coverage. Indeed, dropping the overhead figure from 22.5 percent to traditional Medicare ’s 2 percent would save $249.3 billion by 2022. ¹³

This means that over an eight-year period the government, by filtering public money through private insurers, ACA , and the taxpayer, will be subsidizing private health insurance companies. The result is an overhead of 22.5%, roughly 20% more expensive than if the ACA were a stand-alone program: a program not filtered through private for-profit insurers. Hardly a bargain for the taxpayers, and for those needing healthcare, but a windfall of $172.2 billion per year for private insurers. ¹⁴ Granted this is not all profit—there is much bureaucratic waste—but it does represent what amounts to a subsidy given how much cheaper it would be to simply extend Medicare , which would lower overhead by some 20% according to the calculations of Himmelstein and Woolhandler.

As Himmelstein and Woolhandler explain further, Medicaid and other government programs account for $101.4 billion in projected overhead for the years 2014 through 2022. But even here the dollars that are added to administer Medicaid flow predominantly to private Medicaid HMOs, which, by 2022 will account for 59% of total Medicaid administrative costs. It is precisely this subcontracting of Medicaid coverage that has almost doubled its administrative overhead, rising from 5.1% total Medicaid administrative expenses in 1980 to 9.2% in 2015. Altogether, this means $273.6 billion in added insurance overhead or $1375 per newly insured person, about 22.5% of the total federal expenditures for the program. ¹⁵

The vast majority of these sums amount to a giant subsidy for the healthcare super-rich. That is because Medicare historically runs at 2% overhead, which is somewhat higher than single-payer systems such as Canada’s and Taiwan’s. Yet, traditional Medicare is a bargain compared to the ACA strategy of filtering most new dollars through private insurers and private HMOs, where much of the added Medicaid coverage is contracted. If the 22.5% overhead figure would be lowered to Medicare ’s historical 2% overhead cost, the savings would equal $249.3 billion by 2022, eliminating a substantial flow of money toward private industry, but a significant savings for healthcare consumers. ¹⁶

Significant as the sums noted above are, a universal single-payer system would reduce both insurers’ and providers’ overhead substantially, saving $375 billion annually. ¹⁷ That would represent savings for medical consumers of more than a trillion dollars every three years, a sum that currently goes to private insurers’ and providers’ overhead, adding to the wealth of the super-rich. Yet Republicans, led by Paul Ryan , continue to champion a healthcare system that is expensive, inefficient, and inaccessible for large parts of the population.

Keeping a private health insurance system around is bad health. As bloating continues in the for-profit sector, and as profits grow, the health of the nation is increasingly compromised. Bureaucratic waste of $375 billion per year cannot be sustained without helping to boost poverty rates, not to mention poor health. According to a survey taken by the Henry K. Kaiser Family Foundation and the New York Times, reported by the Times in January 2016, 63% of insured Americans reported using up most or all of their savings because of medical bills, while 42% had taken an extra job or worked additional hours so they could pay their bills, and all this well past adoption of the ACA . Half the population without health insurance reported problems with medical bills, which can only produce anxiety, frustration, and more medical expenses and illness. The Kaiser Foundation study also found that of those people with health insurance , 20% were having problems paying medical bills. Not surprisingly, the situation was worse among the uninsured: half (53%) faced problems with medical bills, which brought the overall percentage of the population having problems with medical expenses to 26%. ¹⁸

Private health insurance administrative bloat accounts for at least $375 billion per annum being siphoned from medical consumers, but this figure still omits profits accrued by the private health insurance sector—profits that not only add to the average medical bill, but represent large sums of wealth transferred from the many to the few, constituting yet another form of rent. United Health Group reported in 2014 that its profit was $10 billion. A year later, despite its claims that the ACA was actually hurting its profits—United Health Group was considering pulling out of its Medicaid contracts with the government—it posted a handsome profit of $11 billion. ¹⁹ Aetna recorded a profit of $2 billion in 2014 and improved that to $2.4 billion in 2015. ²⁰ CIGNA had a similar profit profile, netting a profit $2.1 billion in 2014 and improving a year later to $2.3 billion. ²¹ Anthem, a primary insurance carrier for and subcontractor with Medicaid, also reported substantial profits, some $815.2 million just in the first quarter of 2015. ²² Insurance companies are not hurting because of the ACA ; their profits have in many cases grown, to some extent because the ACA has added millions of new clients. If the results of the above figures are added, and these are only partial at best, profits for the leading insurance for-profit companies amounted to about $18 billion minimally for the year 2015. When added to the bureaucratic waste because of a for-profit health insurance regime, we are already in the neighborhood of $400 billion per annum, a hefty squandering of public wealth and health, but a huge rent or subsidy for the super-rich who run the for-profit health insurance companies. No wonder that health insurance companies spend vast sums lobbying against and publicly denigrating single-payer systems that would eliminate subsidies maintaining their profitable but ineffective, unfair, and expensive healthcare model.

The ACA has improved healthcare finances in the USA for many families, but it is not the long-term solution. The cost of medical care remains a financial hardship for significant numbers of families. The percentage of Americans who experienced financial distress because of medical bills has been reduced from a high of 41% in 2012, but it only fell to 35% in 2014, which meant that a third of all Americans were still struggling to pay the cost of medical care. The number of people avoiding medical care because of cost has also fallen, from 43% in 2012, but it still remained high in 2014 at 36%. And of those with health insurance , a third noted that employers and insurance plans were shifting the burden of medical expenses onto the insured, as deductibles, co-pays, and other fees were growing faster than the rate of inflation. ²³

The ACA has reduced the cost of insurance by insuring more than twenty-five million not previously covered, yet we have seen enormous sums of money still flowing away from Americans and toward for-profit insurance companies in the form of waste. The ACA has acted as a conduit for hundreds of billions being wasted by subcontracting with private insurance companies. A study by the federal Consumer Financial Protection Bureau in December 2014 found that medical debt had a significant impact on consumer credit: forty-three million Americans had overdue medical bills on their credit reports. The same report found that about half of all overdue debt on credit reports was because of medical debt. Fifteen million healthcare consumers had only medical debt on their credit reports, which meant that people with good credit under normal circumstances were struggling to pay off their medical bills. Moreover, the report concluded that medical bankruptcy was the leading cause of personal bankruptcy, an indication that the ACA was not efficiently, affordably, and fairly fixing America’s failing healthcare system. ²⁴ Finally, The Huffington Post reported in 2015—confirming what we have seen—that there were about 1.5 million bankruptcies annually, of which some 62% were medical bankruptcies. Just as startling, the same article reported that 72% of the medical bankruptcies were declared by people who had health insurance . ²⁵

If one simply compares the subsidies or the cost of maintaining a bloated and inefficient for-profit health insurance system, to the quarter (or higher) of the population struggling with medical bills, it does not require a mathematician to understand that by ending subsidies to for-profits and putting them directly into healthcare, by replacing for-profit health insurance with single payer , the number of Americans facing medical bankruptcy poverty because of private for-profit healthcare would decline dramatically. While the profit margins of private health insurers have been slimmed down to an extent under the ACA —3% is not uncommon—it is nevertheless true that in absolute dollars they have grown considerably. The ACA has added more than twenty million new clients, substantially improving earnings of the for-profits.

But the ACA does not mean that the insured do not worry about medical costs. Back in 2013 about 38% of personal bankruptcies were because of the continuing inflation of medical billings and out-of-pocket expenses, as well as inflating premiums. The result was that many patients were taken into collection: this was one reason that profit margins were slimmed down. But the other side of this was that collection agencies collected more than $20 billion from patients in arrears in 2013 alone. That’s another $20 billion wasted down the collection drain and yet another reason that the healthcare system in the USA continues to be broken. ²⁶

The American healthcare system is one of the chief conduits through which money gushes toward the super-rich. They are the ones with the collection agencies, they own the profits extracted by for-profit private health insurers, and they are the main beneficiaries of the ACA because it continues to subsidize them by not embracing single-payer national health insurance . And as we shall see, the super-rich have also driven policies that keep the price of drugs at historic highs, partially the result of a law that prevents Medicare from using its enormous leverage to negotiate lower drug prices, as is done in all civilized countries.

There is no other explanation for the poor performance of the American healthcare system. Private healthcare insurance remains unaffordable, unfair, and inefficient, but still profitable for insurers. Yet private health insurers also have their complaints to make. Hospitals in the USA, though mostly of the nonprofit sort, have become empires unto themselves. They are veritable profit machines, turning their gains into hefty salaries for their administrations, charging more for the uninsured because they can get away with it, and generally acting as an imperium claiming tax exemptions by retaining their nonprofit status. The result is that they also contribute some members to the elite 1%, while the inflating costs of their services populate the rising numbers of the medically impoverished. Given hospital pricing, it is not a surprise that Americans pay $2.7 trillion per year in medical bills, a figure that is expected to inflate dramatically in the next decade after a hiatus of several years. ²⁷

The IRS originally granted a tax exempt status to nonprofits if they would restrain executive compensation to market value, and if they agreed to spend 3% of operating revenues taking care of patients unable to pay. Both of these provisions have been largely ignored. Executive base pay or earned income may be limited by law, but hospitals have learned how to provide outsized bonuses and other kinds of income without violating their nonprofit charters. As for patients unable to pay, the 3% figure is miasmic. Inflated hospital costs have boosted need considerably beyond the 3%, raising the number of patients unable to pay, while hospitals routinely charge more for patients who are not insured. There were still well over twenty-five million of these in mid-2016. According to Forbes Magazine, “if you count all the sales, property, and income taxes that nonprofit hospitals avoid paying, it would total $20 billion [per annum].” ²⁸ For the healthcare super-rich, this is no less than a subsidy, a rent paid by patients and the communities served by nonprofit hospitals.

If hospitals were serious about reining in costs and servicing the medical needs of their communities, they would lower their prices, using the money they save from their tax exemptions. It is worth noting that 60% of the hospitals in the USA are nonprofits, meaning that the majority of operations and medical procedures in the USA are conducted in them. Yet we know that Americans do not live as long as their British counterparts, who are mostly treated in publicly owned hospitals.

Part of the problem is not the quality of a hospital, but access to it. The USA ranks poorly in access compared to all single-payer countries because of cost and timeliness of medical service. One result is that Americans do not live as long as residents of any single-payer country. Consider the following comparisons between the costs of hospital tests and surgeries in single-payer countries such as Canada, Spain, and New Zealand, and the USA for the year 2013. In Canada, an angiogram was priced at $35, in the USA, on average, it was $914. A hip replacement in Spain cost $7731, but in the USA, it was dramatically higher at $40,364, and an MRI, which was billed at $319 in the Netherlands, was an inflated $1121 in the USA. Finally, a drug comparison: Lipitor in New Zealand was $6 in 2013; in the USA, it was a rent-seeking $124 because it was under patent. ²⁹ There is no apparent reason for these discrepancies, other than greed, as in the USA, supported by a market-based for-profit healthcare system—including so-called nonprofit hospitals. And even if greed is absent, the cost discrepancies represent the difference between profit-fueled medical practice and healthcare treated as a universal public right, which is not only more equitable, but more economical as well.

If the USA adopted the British system today—even when the UK is under assault from the Coalition government—what would that mean? Single payer and mostly public hospitals to begin with. And what would that signify? A saving of about $5000 per capita per annum, universal coverage, longer life expectancy , greater access to medical care, and lower infant mortality . The USA could improve by making its healthcare universal, fair, and efficient. It needs only to extend Medicare to the entire population: automatic enrollment, universal access, cheaper costs, and better care. Here is how David Cay Johnston summed it up in Free Lunch, published in 2007 well before the ACA , but prescient in his understanding of healthcare in the USA:

If health care as a business worked, it would be a success story to embrace. If it resulted in lower costs, more and better care, and longer lives, it would be just what the doctor ordered. The American system provides acute care, trauma care, and access to the highest technology. But by every other objective measure—cost per capita, health status, longevity, costs of paperwork, and economic pollution—the uniquely American approach to health care is a complete failure. We pay more, enjoy shorter lives, and are drowning in infuriating makework, filing claims and making appeals, while distorting the whole economy because one giant component is a commercial activity. ³⁰

How the British Super-Rich Corrupt Healthcare

The British healthcare system, NHS , has been suffering from creeping privatization since Margaret Thatcher was in power but the decisive plundering of the healthcare commons started with the Blair government in 2007. That was the year that Blair induced NHS hospitals to contract out services.

The result was the scandal of private finance initiative (PFI) hospitals when more than 100 NHS hospital trusts signed deals for private financing in England. Originally conceived by John Major ’s government, all but one of the PFI contracts were made between 1997 and 2010 by New Labor, which argued that it wanted to shift the cost of projects away from government borrowing requirements. This arrangement worked well, but not for the people of England. By 2016, the trusts were paying £2 billion annually—a sum that was rising—for building and operating new hospitals and renovating old ones. Altogether, the new deals financed £11.8 billion of hospital building, but the hospital trusts will have to repay £79 billion over the twenty-five to thirty years that is the contract life of all deals. In a word, the PFI arrangements meant that the total cost would be more than six times the building cost, far more than if the government had borrowed money directly on behalf of the trusts. Barts Health NHS Trust, which borrowed £1.1 billion, will ultimately pay £4.1 billion, just for the privilege of borrowing from the private sector under PFI. ³¹

Meanwhile, many of the holders of PFI debt or equity, that also fund schools, care homes, central and local governments, are investment funds based in tax havens . The largest shareholder of Innisfree, the biggest investor in hospitals other than the NHS , is Jersey-based Coutts & Co. Altogether, indebtedness to financial institutions under PFI was £310 billion in 2016, more than five times the value of the assets created. ³² But don’t think that Innisfree is a good citizen paying taxes on earnings. That is the point of being in a tax haven.

Then, there is the misnamed Health and Social Care Act of 2012, which effectively abolished government responsibility for providing a national health service, ending a long-standing legal guarantee that government would provide comprehensive health services. NHS contracts were opened up for limitless privatization . More and more, the people of England would find out that, when it came to their health, they were on their own.

Several months after passage of the Health and Social Care Act , in July 2012, the British journal, New Scientist, anticipating the negative effects on health and increase in inequality of the new so-called health legislation, concluded that inequality was bad for the health of everybody, at all levels of society. The rich could not insulate themselves by their wealth. ³³ Several months later, David Cameron , who was indifferent to the blandishments of the New Scientist, and was anyways intent on cutting away benefits for the “bloated” NHS budget, announced that the UK government would no longer assess the effect of its policies on social equality, which he considered to be so much bureaucratic claptrap:

Let me be very clear. I care about making sure that government policy never marginalizes or discriminates… . I care about making sure we treat people equally. But let’s have the courage to say it—caring about these things does not have to mean churning out reams of bureaucratic nonsense… . We don’t need all the extra tick-box stuff. So I can tell you today, we are calling time on Equality Impact Assessments. You no longer have to do them if these issues have been properly considered. ³⁴

What followed was a little more serious than “tick-box stuff.” Prime Minister Cameron had just denied any possibility of social impacts on human beings “properly considered,” because the standard assessments were to be abandoned as “bureaucratic nonsense.” ³⁵

The Health and Social Care Act passed by Parliament was supported by some members of the House of Lords with declared financial interests in private for-profit healthcare companies. ³⁶ This was a bill effectively embracing the financial interests of the healthcare super-rich. Its intention, despite the remarks of the prime minister, was to divert the flow of NHS money toward the private sector. That was accomplished, but it also proved lethal. Among the many cuts were social care benefits for the elderly, soon followed by an increase in the mortality rates of those dependent on home care. The legislation had real-world knock-on effects; it was another indication of how deadly inequality had become, and how deadly it was for those who could not afford private care. Subsequently, the number of social care recipients in England went from 1,275,000 in 2007–2008, to 928,000 in 2012–2013. ³⁷

This was part of a concerted drive by the super-rich to divert as much money from the NHS as possible into private healthcare, something that has been historically lucrative for the very wealthy. It was a way of shunting income and wealth toward those who seemed to crave it above all else, while asking others to bear the costs. Private healthcare companies in the UK —which did not fund the education of NHS trained staff—were plucking off the profitable corners, while allowing less lucrative parts to remain within the public sphere.

The Health and Social Care Act of 2012 in Britain had other adverse effects as well. It allowed up to 50% of beds in an English hospital (Scotland and Wales follow different rules) to become private beds, though it was known that the use of hospital rooms is more efficient within the NHS , promising a future crisis in both affordability and access. The act also allowed the advertising of fatty foods to children. Again the super-rich in the private sector were behind this initiative. It was their London companies that bought the advertising. It was in London that there was the greatest concentration of poverty, and it was in London where children were at greatest risk of obesity , between the ages of five and ten. ³⁸

The Health and Care Act was promised as a measure that would save money. Allegedly, it would also introduce competition into healthcare that would improve the health of the nation. As we know, privatization meant more—much more—not less public debt. And invariably that meant that public health would suffer, especially the health of the poorest. The Child Poverty Action Group was able to show that Coalition government cuts, for the very youngest, meant that an infant born to a low-income family after April 2012 would be about £1500 worse off per year than a sibling born in 2010. That was because of the benefits their parents had lost: £190 Health in Pregnancy grant, a £500 maternity grant, £500 from the Child Trust Fund, and £545 from the baby element of child tax credit, offset by £255 in its child element. ³⁹

In Glasgow, where health in the UK is at its worst, general practitioners reported that benefit cuts meant greater numbers of patients could not afford to heat their homes, with direct impacts on health and life expectancy . Overall, in the UK, the 1% live at least ten years longer than average, a discrepancy that is repeated in the USA. ⁴⁰ Men who die in posh areas of London, Kensington, and Chelsea, for example, are on average fourteen years older than men who die in Glasgow. For women the gap is twelve years. ⁴¹

The damage done by the 2012 act was palpable. There was a serious rise in mortality by the summer of 2013. In England and Wales, an additional 23,400 people died in 2012 and early 2013, compared to earlier years—a 5% rise in mortality. Public Health England responded that this was possibly due to the flu. But this was denied by the president of the Faculty of Public Health, Professor John Ashton, who commented that there was little if any evidence that the flu was responsible for the uptick in morbidity. His conclusion? Spending cuts were to blame. Danny Dorling , Tom Hennell, and Martin McKee, all authorities in statistical analysis, have denied that flu caused increased morbidity rates. ⁴²

When the Tory government came to power in 2010, it announced it would be “supporting the public so they can protect and improve their own health.” ⁴³ Translated, however, this meant that the money saved on benefit cuts would go headfirst into private profits. In fact, the new market in commissioning services and outsourcing boomed after the 2012 act, led by Andrew Lansley , Health Secretary between 2010 and 2012.

As Health Secretary, Lansley privatized the NHS helpline, renamed NHA 111. Since it was put out to contract, it has been subjected to withering criticism for poor delivery of services, hardly an anomaly for the outsourcing of NHS England under the Tories . So why do the Tories continue their outsourcing? Not to benefit public health, certainly not to save money, as we have seen. The explanation has to do with the contracting of the renamed NHS 111. The firm winning most NHS 111 contracts was Harmoni, which was subsequently bought by Care UK, whose former chairman, John Nash, had made substantial donations to the Conservatives and even to Lansley’s personal office when he was shadow Health Secretary. And just to follow the trail a little further, Care UK is owned by Bridgepoint Capital, which coincidentally employs Alan Milburn, a former UK Labor Health Secretary between 1999 and 2003. It was Milburn who expanded the process of privatization and gave it legs. And finally there is Jim Easton, director of healthcare at Bridgepoint Capital, an erstwhile member of the National Commissioning Board, renamed as NHS England, which awarded the NHS 111 contracts. ⁴⁴

In 2015, NHS England announced a new list of approved private suppliers. At the very top of the list was outsourcing giant Capita, which that same year won a four-year contract with NHS England worth £1 billion, making Capita the sole provider of administrative services for GPs, opticians, and dentists. This was despite the fact that it had previously failed to provide adequate services to several local NHS trusts and as a result had its contract terminated less than three years into a seven-year agreement. ⁴⁵

The point of all this is that privatization does not work well for the health of England and the UK. It does not save money. It is inefficient and extracts wealth from health, without ostensible benefits for healthcare consumers. It is at best a rent, charged against sick people for the benefit of financial capital and the City. It may be tautological, or self-evident, but money that is drained away by rent-seeking capital is money not spent directly on healthcare for patients, which may also be the explanation for why the UK is already falling from the summit in the ranking of healthcare systems, falling to number thirty, according to The Global Burden of Disease Study 2015, behind all Scandinavian countries, Belgium, France, Germany, Italy, the Netherlands, and Spain. ⁴⁶

Privatized Healthcare Is Unhealthy, Expensive, Inefficient, and Unfair

In the USA, healthcare costs are higher than any developed nation, healthcare less efficient and accessible, and the healthcare system more privatized than virtually all developed nations. Danny Dorling has reminded us why medical systems that do not operate on the profit motive, but rather are motivated by well-being, are also the best medicine:

It is not hard to understand that a medical system that aims to give the best care at the lowest cost, and one in which profit is not allowed, is both likely to do the least harm, and most likely to treat you quickly and appropriately when you actually most need treatment. There are no private accident and emergency wards in the UK; it is not in the interest of private hospitals to provide such facilities, ones where the need is so clear, and the scope for profiteering so low. ⁴⁷

This conclusion is borne out by the numbers, and not only in the UK. In the USA, back in 2003, the Bush Medicare expansion—the Medicare Prescription Drug, Improvement, and Modernization Act—led too much higher drug prices in the USA, producing a windfall gain for the drug companies estimated at $50 billion per year or more. ⁴⁸ This happened because the government was not allowed to use its enormous leverage as the largest consumer of drugs to negotiate lower prices through Medicare , thanks to Congress. This was rent-seeking at best, giving pharmaceutical companies profits far above a normal market return.

Drug pricing is one of the principal reasons that healthcare is so expensive in the USA, where health outcomes are worse than in almost all advanced countries, despite being more costly. But the leading cause of healthcare inflation—and wealth extraction—is for-profit health insurance . Altogether, the USA spends more per capita on healthcare, and more as a percentage of GDP, 16.9%, than almost all rich nations. By comparison, France, with universal healthcare and nonprofit health insurance , spends less than an eighth of GDP at 11.6%, though it has far better outcomes. ⁴⁹ The USA also spends about two and a half times what the average industrial nation pays for healthcare per capita, an inefficiency that is remarkable since America could easily emulate healthcare systems that are universal, affordable, and more equitable, without the bureaucratic nonsense that continues to characterize the American system several years after the introduction of the ACA .

The US healthcare system is a profit-based, “free-market-based” healthcare system. It has many of the best doctors and hospitals in the world. It is in the vanguard developing the latest technology. Yet by almost all measures the American system is lagging behind most if not all developed nations in many of the metrics that really matter—despite the advances of the ACA , a conclusion that even President Obama has acknowledged. In 2014, the Commonwealth Fund ranked the US healthcare system last of the eleven developed nations that it studied, including Australia, Canada, France, Germany, Netherlands, New Zealand, Norway , Sweden , Switzerland, and the UK.

Comparing quality care, access, efficiency, equity, healthy lives, and cost, the Commonwealth study found that the USA topped the rankings only in cost. The US spent $8508 per capita on healthcare, significantly outspending Switzerland’s $5643, which ranked as the second most costly system after the USA. By comparison, the UK spent $3405 per capita for the same year.

As for quality care, the USA scored in the middle, ranked fifth, but the much maligned—in the USA—British system ranked first. As for access, the USA ranked ninth—because of inability to pay—while Switzerland and Germany tied for second. In terms of efficiency, the USA ranked last of the eleven ranked nations, a caveat that the pro-marketers should note: again the UK ranked first, followed by Switzerland, New Zealand, and Norway .

Equity? Dead last for the USA, with Sweden ranked first, followed by the UK and Switzerland tied for second. Finally, a category called healthy lives: the USA again ranked last, France ranked first, meaning that France had the healthiest nation, while the UK foundered in tenth position. The overall rankings reflected the metrics. The USA was ranked as the least effective healthcare system of the eleven nations measured, while the UK was ranked as the first and most effective healthcare system. Sweden and Switzerland were ranked second and third, while Germany and the Netherlands were tied for fifth. ⁵⁰ The USA also ranked last in preventing deaths from treatable conditions, such as strokes, diabetes, high blood pressure, and certain cancers. ⁵¹

What were the major differences in the healthcare systems compared and analyzed by the Commonwealth Fund? The USA was the most privatized healthcare system by far, practically unique in relying on for-profit health insurance —that is, a vast rent or subsidy—and a (mostly) hands-off policy of drug pricing, allowing a so-called competitive system to determine the cost of drugs. Likewise, the USA practically stands alone in letting the market determine costs of healthcare services. In most developed countries, charges for services provided, as well as drug prices, are negotiated with the government, something easy to do for single-payer countries where insurance is mostly provided by the state.

Damning as the Commonwealth figures are for the US healthcare system, other metrics reported by the Organization for Economic Cooperation and Development (OECD) are even more damning. In 2012, the USA had the highest obesity rates among adults out of sixteen ranked developed nations. Americans also paid more for pharmaceuticals than any of thirty-three measured nations, $1010 per capita per year. And when it came to public expenditure on health, what the state pays for healthcare of Americans, the USA again was last at 47.3% of total health expenditure, well below the OECD average of 72.3% public expenditure on healthcare. That meant more out of pocket expenses for the average American. ⁵²

To be sure the ACA has modified some of these figures, but healthcare inflation was again accelerating in 2017, not the least because there was little if any control over the cost of drugs which were minimally covered by Medicare . Meanwhile, for-profit insurers, disappointed that they were often losing money by participating in the exchanges set up under the ACA , were withdrawing from the exchanges. They are, after all, for-profits.

Two measures that give an overall view of healthcare systems are life expectancy and infant mortality . Again the US system lags. Americans born in 2016 could expect to live an average of 78.8 years, compared to the UK’s 81.2 years. Japanese born the same year could expect to live the longest at 83.7 years, while citizens of France and Sweden could expect 82.4 years. Germany was slightly less at 81 years: what all nations have in common is that their citizens could expect to live a minimum of about two years longer than their American counterparts. It is much the same with infant mortality rates for 2015, a profound embarrassment and shame for the USA. Infant mortality rates per thousand were lowest in Finland and Sweden at two per thousand. Germany and Norway were still low at three per thousand, while Denmark , France, and the UK all recorded two infant deaths per thousand. The USA, once again, lagged significantly; six infants per thousand were dying at birth, still high although a slight improvement over the previous decade. ⁵³

The UK is increasingly becoming unequal as social benefits are cut and taxes are reduced on the ultra wealthy. British inequality is increasing because of the partial privatization of the NHS , which transfers more medical costs onto patients, who, we know, are being increasingly told to be responsible for their own health. As the British become less equal, it is unlikely their healthcare system will be as equitable and efficient as it has been. And as Britain becomes poorer—especially likely after the exit from the European Union (EU)—as the rate of poverty increases, partially because of the rise in healthcare costs, Britain’s top healthcare ranking will be at risk.

At the other end of the spectrum is the USA. With 1% of Americans controlling about 45% of national financial wealth, the USA ranks well ahead of all other countries in concentrating wealth at the top. This means that wealth in the middle, what is owned by the proverbial middle class, is being diminished. The GINI coefficient, which measures the distribution of income throughout society on a scale of 0 to 1—where 0 stands for perfect equality and 1 indicates that all wealth belongs to one person, stood at 0.45 in the USA in 2012, the equivalent of massive reallocation of income upwards. By comparison, Denmark enjoyed a GINI of 0.25, Finland stood at 0.26, Sweden was at 0.275, Germany measured 0.29, France recorded 0.31, and the UK was at 0.35: all these measures were significantly lower than that of the USA. ⁵⁴

Moreover, as we might expect, low GINI scores correlated with low poverty rates. While the poverty rate of the USA in 2014 stood at 17.5%, the poverty rates of Denmark , Finland, France, Germany, and Sweden were in a narrow band between Denmark ’s 5.5% and France’s 9%. ⁵⁵ When one remembers that health expenditure per capita per annum in these same countries ranges between Finland’s $4612 and Sweden ’s $6808—much lower than the $9403 spent per capita in the USA—and compares these sums with the poor outcomes in the US healthcare system as opposed to other developed nations, several conclusions seem warranted: private, competitive, market-based, for-profit healthcare is expensive, inefficient, unfair, and far short of universal coverage. ⁵⁶ It is not surprising that as medical inflation continues in the USA, as the cost of healthcare insurance rises even under the ACA , and as wealth and income are concentrated increasingly at the top, the very top, healthcare in the USA could become an unaffordable luxury.

Big Pharma: Getting Drugged by the Super-Rich

A half-decade after the introduction of the ACA , Joseph Stiglitz was still proclaiming that market-based medicine does not work, except for the rich who own and manage the healthcare companies. ⁵⁷ Several years after Stiglitz warned Americans that healthcare should not be run as a business, and that healthcare in the USA would not improve as long as Americans tolerated a so-called competitive, or for-profit healthcare system, the ACA has made improvements, but not nearly enough to erase all the inefficiencies and shortcomings we have noted above. Some parts of the healthcare system are even worsening. Costs to be sure, access to be sure, but it is especially the inflation of drug prices that distinguishes American healthcare from its counterparts. What has driven the high cost of drugs? One leading cause is the refusal of Congress to allow Medicare to negotiate drug prices with drug producers, a boon for drug companies worth at least $50 billion. It is this fact also that distinguishes the USA from all other developed nations’ healthcare systems. ⁵⁸

But this is only the beginning. The predation of drug companies in the USA, the industry’s ability to extract rents from users of its drugs by minimizing or eliminating competition, by bypassing so-called markets, provides much of the pharmaceutical narrative. For example, government research has figured prominently in many if not most advances in biomedical research. Peter Gøtzsche, in Deadly Medicines and Organized Crime: How Big Pharma has Corrupted Healthcare, published in 2013, has shattered the myth that most breakthroughs are the result of industry-funded research. He shows that research for virtually all the basic science-enabling modern medicines has taken place in the nonprofit sector, at universities, research institutes, and government laboratories. ⁵⁹ A US Congress report published in 2000 provided further confirmation of the government’s prominent role in biomedical research: “Of the 21 most important drugs introduced between 1965 and 1992, fifteen were developed using knowledge and techniques from federally funded research.” ⁶⁰ Of these, National Institute of Health (NIH) research led to the development of seven drugs used to treat patients with cancer, AIDS, hypertension, depression, herpes, and anemia.

Other studies have concluded much the same. In 2011, it was reported in the New England Journal of Medicine that at least 80% of thirty-five major drugs were based on scientific discoveries made by public sector research institutions. ⁶¹ The National Cancer Institute played the lead role in the development of fifty of fifty-eight new cancer drugs approved by the Food and Drug Administration (FDA) between 1955 and 2001. ⁶² Three of the most important discoveries in the twentieth century—penicillin, insulin, and the polio vaccine—were developed in publicly funded laboratories. The NIH conducted an investigation on the five top-selling drugs in 1995, Zantac (ranitidine, for ulcers), Zovirax (acyclovir, for herpes), Capoten (captopril, for high blood pressure), Vasotec (enalapril, for high blood pressure), and Prozac (fluoxetine, for depression), and found that sixteen of the key seventeen scientific papers leading to the discovery and development of these drugs came from outside the industry. ⁶³

Between 1998 and 2002, 415 new drugs were approved. Of those, less than a third, 133, were innovative (molecular) entities. The others were modifications of old drugs, and of these only fifty-eight were given what is called priority review. This was a low yield, but over the short duration of five years, the yield actually dropped: in both 2001 and 2002, only seven innovative drugs were approved compared to a high of nineteen in 1999 and sixteen in 1998. ⁶⁴ The drug industry, despite its claims, has not been so innovative.

Of the seven innovative drugs approved in 2001, five came from Big Pharma. Of the seven innovative drugs approved in 2002, only three came from a drug company, none of which were American. But small as this number was, most of the so-called innovations were what Marcia Angell has called “last-ditch treatments,” rarely cures, to be used only when all older drugs had been ineffective. ⁶⁵ Given this paltry success, it is fair to ask if high prices and high profits are inducements to innovate, or if they are simply the result of greed?

Back in 1998, the journal Health Affairs reported that only about 15% of the scientific articles that were cited in patent applications for clinical medicine came from industry research. About 54% came from academic centers, 13% from government and the rest from public and nonprofit institutions. An internal document not published by the NIH revealed similar percentages. ⁶⁶

Even in a high-profile disease like AIDS, the initial breakthrough came from public research. The USA spent twice as much on research as all the drug companies combined looking for effective drug therapies to alleviate and cure AIDS, from the time of the discovery of the disease until almost the end of the twentieth century. ⁶⁷

Typically, drug companies invest little in biomedical research, including the major breakthroughs in new therapies, despite the clamor heard from pharmaceutical corporations, many leading politicians, and neoliberal economists, that government needs to get out of the way of private enterprise. When there is important publicly funded research, Big Pharma will often—yet another rent—take it over and then sell the drug at an exorbitant price, easy to do since they now have a monopoly, while claiming that they developed the new drug therapy. ⁶⁸

If we net out taxpayer subsidies, then drug companies only spend some 1% of their revenues on basic research that is intended to produce new drugs and vaccines. Moreover, if we include pubic spending to develop new drugs and vaccines, the taxpayer actually accounts for 80% of total spending. ⁶⁹ Investing so little of its own capital in biomedical therapies might seem to go against the best interests of Big Pharma. Yet this is consistent with everything we know about the so-called free market. Rent-seeking comes before public health, despite the claims of industry advertising. Executives are under pressure, some of it self-induced, to show quick returns, helping them to drive up stock prices and typically to push up executive salaries. And why invest those returns in research anyway, if the taxpayer is already there promising subsidies for biomedical therapies?

There are many myths about drug companies and their activities, motives and the effectiveness of their drugs. Some of the claims of Big Pharma have been repeated so often, that they have become widely believed by politicians, the public, and sadly by doctors themselves. Among the leading misconceptions is the belief that drugs are expensive because of the high discovery and development costs. Translated, this means that drug companies charge high premiums because of the expense involved in innovation and bringing new drugs to market. But Raymond Gilmartin, former CEO of Merck, which has ranked as one of the largest drug companies, admitted that high drug prices had little to do with the cost of innovation: “The price of medicines,” he confessed, “isn’t determined by their research costs.” ⁷⁰ It is rather, as Peter Gøtzsche has expressed it,

that prices of drugs not only reflect what society is willing to pay but also how good the companies are at keeping competition at bay. Anti-competitive activities are widespread, and price fixing is common. We often hear that it costs $800 million (in 2000 dollars) to bring a new drug to the market, but this is false. It is based on flawed methods, debatable accounting theory and premised on blind faith in confidential information supplied by the drug industry to its economic consultants … who [are] paid by the same industry. The true cost is likely to be below $100 million. ⁷¹

Aside from the accounting tricks that the industry has used to justify expensive drugs, there are numerous flaws with the argument defending high drug costs . As Marcia Angell has said, there is also an implied threat. If you want drug companies to keep developing lifesaving drugs, you should gratefully pay whatever the drug companies say they need to charge. ⁷² Alan F. Holmer , former president of the industry’s trade association, Pharmaceutical Research and Manufacturers of America (PhRMA), confirmed Angell’s point when he threatened, during a radio interview in 2002, that putting price controls on the pharmaceutical industry would reduce the R&D of the industry and would do irreparable harm to America’s children and millions who had life-threatening conditions. ⁷³

Holmer’s argument has been the industry mantra ever since. But the drug industry has never been transparent. Big Pharma does not make available what it actually spends developing each drug, arguing that such information is proprietary. So there is a permanently sealed black box. Nor is there a clear definition of what R&D includes. Much of it could be marketing costs and so-called education expenses, such as the expense of “educating” doctors. According to the calculations of Marcia Angell and Peter Gøtzsche and others, the actual development cost per drug has consistently been lower than $100 million, despite the industry’s claim for the much higher figure of $800 million. ⁷⁴

Peter Gøtzsche has documented how drug companies minimize their costs, while reaping enormous profits by patenting scientific advances developed first in university, government or health institute laboratories. And it is not just patenting drugs that has led to windfall profits. Drug companies have long lobbied the US government to restrict competition, which patents help accomplish, and they have not been averse to price fixing, attested to by numerous scandals and a long trail of litigation. ⁷⁵

The first AIDS drug, Zidovudine, for example, was synthesized at the Michigan Cancer Foundation in 1964. Burroughs Wellcome spent very little of its own capital to develop the drug, but the company still charged $10,000 per year for one patient in 1987—something it could do because there was no competition. Burroughs knew that desperately ill patients demanded the drug at any cost. In 2003, Abbott increased the price of its AIDS drug, ritonavir, by 400%, though its development had been supported by millions of dollars of taxpayers’ money. Abbott caused such outrage among doctors, that hundreds of them decided to boycott all of Abbott’s products. ⁷⁶

There are many similar examples. Imatinib (Gleevec) is very effective against chronic myeloid leukemia. Novartis synthesized this drug but ignored it until a haematologist’s research demonstrated its effectiveness as an anti-leukemia drug. Once again, development costs were minimal, yet Novartis, though it had literally stumbled into this drug, decided to charge $25,000 for a year’s treatment in 2002. Taxol, an effective cancer drug, was derived from the bark of the Pacific yew tree and later synthesized by NIH -funded scientists. ⁷⁷ The drug was then handed over to Bristol-Myers Squibb, which, despite minimal investment, charged between $10,000 and $20,000 for a single year’s treatment in 1993. When the patent ran out, the company sued the companies planning to market a cheaper generic. ⁷⁸ Twenty-nine US states sued Bristol-Myers Squibb for its obvious violation of antitrust laws, but the company knew that under recent legislation it could bring suit and delay the production of generics for thirty months. Bristol-Myers proved to be prescient. While litigation moved along at the pace of a tortoise, the company racked up revenues north of $5 billion. The case of course was settled against Bristol-Myers, but the fine of $135 million was much less than the billions of dollars in additional revenues earned while litigation was pending. ⁷⁹

Price fixing occurs in many countries besides the United States, even in Denmark . In 2010 several companies producing generic versions of citalopram—a commonly used antidepressant—withdrew their products from the Danish market, without providing any explanation. The price for the drug suddenly escalated by a factor of twelve, or 1200%: none of the companies still producing the drug offered comment. ⁸⁰

Simvastatin, a drug used to lower cholesterol and triglycerides, which was used by 6% of all Danes at one time, was the subject of another scandal in Denmark in 2007, when all companies marketing its generic equivalent raised the price of the 40 mg dose—the most commonly prescribed dosage—by 800%. The drug was also available at a lower dose at about a fifth of the price, but there was a legal problem. Pharmacies were not allowed to sell the lower dosage or to advise patients to take two tablets instead of one. Although the five producers of the drug raised its price to exactly the same level, even to the second decimal, the companies all denied collusion. ⁸¹

Lundbeck, a Danish pharmaceutical company that operates internationally, was taken to court in 2006 by the US Federal Trade Commission, which alleged that the company had taken advantage of a monopoly situation selling a drug for extremely ill infants. Lundbeck had bought a US company, giving it ownership of an older drug, indomethacin, whose price it increased by 1300% after buying it from Merck. In this case there were no development costs at all. ⁸²

There is no shortage of examples of price gouging in the drug industry, especially when a company is able to establish monopoly control over a drug, as KV Pharmaceutical did in 2011, when it won US government approval to market a drug known as makena. Prior to this approval, for some five decades, obstetricians had routinely used a natural hormone, progesterone, to help prevent premature births. Pharmacies prepared the hormone for doctors at a cost between $10–$20 per injection. This all changed when KV Pharmaceutical won US approval. It soon raised the price of makena to $1500 a dose, an increase of 75–150 times the previous cost. Doctors protested that the high cost would almost certainly lead to more premature births and likely permanently brain-damaged children because women could not afford the elevated cost. Some doctors persisted and announced they were happy to continue getting the cheaper version of the drug from compounding pharmacies. The predictable response from the company was to send cease-and-desist letters to the compounding pharmacies, warning them they could face FDA enforcement actions if they still produced the drug. ⁸³

In 2015, in the Harvard Political Review, Tess Saperstein reported—following a study by the AARP Public Policy Institute—that between 2006 and 2013, the prices of 140 brand-name drugs had increased an average of 113%. This might seem like a modest increase to some, but remember that many of these drugs were not on patent, and anyway the official mantra of drug companies is that they face tough competition, implying that increased prices also reflect increased research costs. But we have already seen a number of examples in which drug companies incur no research costs, and are doing everything they can to eliminate competition by establishing monopolies through patents. ⁸⁴ The only thing new about escalating prices are the prices themselves, not the drugs, not the costs incurred developing the drugs, not the increased expenses producing them. As Saperstein put it about the outsized profits:

If the pharmaceutical market were functioning properly, we would expect that prices would gradually drop, since new companies would enter the market and compete with the name-brand companies for business. In reality, the market encountered a roadblock somewhere along the line, and competition to manufacture old medications has dwindled. ⁸⁵

Saperstein provided further illustrations of pharmaceutical companies acquiring the rights to a drug from another company and then, with no research expenses incurred, increasing the retail price. In 2013, Horizon Pharmaceuticals purchased the rights to vimovo, a drug therapy that treats osteoarthritis. On the very day that Horizon began selling vimovo, some two months after purchase, it increased the price by almost 600% to just under $960 for sixty tablets. A year later Horizon raised the price again, this time to $1680. ⁸⁶

On February 10, 2015, Valeant Pharmaceuticals, a Canadian multinational, bought the rights to Isuprel and Nitropress, two drugs that lower blood pressure. The same day the company raised their list prices by 525 and 212% respectively. According to Valeant, neither of the drugs was improved due to costly investment in lab work and human testing, nor was the manufacture of the medicines made more expensive by shifting it to an expensive new building. The only change was ownership of the drug, the only expense was acquiring it. Other than that, no investment costs, no research costs. ⁸⁷

An analysis by Deutsche Bank in 2015 found that drug acquisition and price gouging had become fundamental to Valeant’s business strategy. In 2015 alone, Valeant raised the price of 81% of its drugs, according to the bank’s study, by an average of 66% (a figure that was disputed by Valeant). But the steepest rises in price were for Glumetza, a diabetes drug whose price shot up 800%, and Zegerid, a drug that treats gastrointestinal problems, whose price was ratcheted up 550% over its original price. Despite the appearance of collusion, or of greed, or of exploitation, or of monopoly and rent-seeking (again), that was not how Valeant saw the suddenly inflated prices of the newly acquired drugs. This was an apt illustration of healthcare rentier capitalism in action. Valeant was just a good player, it claimed, and anyway wasn’t this the system that everybody wanted: maximum market freedom: “Our duty is to our shareholders and to maximize the value.” ⁸⁸

In 2001, Questcor Pharmaceuticals, a small company located in California, bought the rights to Acthar Gel, a medication that was effective in treating infantile spasms, a rare form of childhood epilepsy. A half-century earlier, two researchers at the Mayo clinic were rewarded the Nobel Prize in medicine for their work discovering ACTH, the active ingredient in Acthar. Five decades later, the company that contributed nothing to the discovery and development of the medicine, having acquired the rights to Acthar, raised the cost of a vial from $40 to $23,000. ⁸⁹

Martin Shkreli provides a recent and egregious example of price gouging. In September 2015, Shkreli, who was then the CEO of Turing Pharmaceuticals, bought the rights to Daraprim (pyrimethamine), a medicine used to treat parasite infections. Shkreli, who was well known as a hedge fund manager, proceeded to hike the cost of the medicine from $13 to $750 per dose ($75,000 for a bottle of a hundred), an increase of 5500%. ⁹⁰ Here again was an illustration of why drugs need to be regulated. In the absence of any legal restraints, Shkreli raised prices with complete contempt for healthcare consumers simply because he could, though the drug was decades old. He contributed nothing to its development, and once again the only thing that changed about the drug was its ownership. ⁹¹

In 2013, BBC News reported that the pharmaceutical industry as a whole earned a profit of about 19%, putting it on a par with the banking industry. Five of the largest pharmaceutical companies earned profits above 20%, with US company Pfizer leading the way at 42%, followed by Hoffman-La Roche, AbbVie, GlaxoSmithKline (GSK), and Eli Lilly, earning profits between 20 and 24%. ⁹²

In 2012, a hundred leading oncologists from around the globe in an open letter published in the journal Blood, called for a reduction in the price of cancer drugs. They complained that of the twelve drugs approved by the FDA for a number of cancer indications in 2012, eleven were priced above $100,000 per year. They noted that drug prices for cancer indications had almost doubled in the previous decade, from an average of $5000 per month to more than $10,000 per month. ⁹³

Drug companies typically argue that R&D costs can be prohibitive, but their profit margins tell another story. And their narrative is deceptive. Pharmaceutical companies routinely spend more on marketing than they do on R&D, and in some cases the margin is twice as much. Johnson and Johnson, for example, for the year 2012, earned a profit of $13.8 billion, good enough for a 19% profit margin. But this was after accounting for sales and marketing expenses, which were excessively high at $17.5 billion, compared to $8.2 billion for R&D. Pfizer , with a profit of $22 billion, which clocked a 42% profit margin for the same year, spent $6.6 billion on R&D but almost double that amount on sales and marketing at $11.4 billion. Over in the UK, GSK registered similar numbers: it recorded a profit of $8.5 billion and 21%, after spending $5.3 billion on R&D and $9.9 billion on sales and marketing. ⁹⁴

There is a reason why drugs in the USA are so much more expensive. The USA is practically the only developed country that does not regulate the drug market. As we have seen in the many instances above, and in many more below, many drugs are expensive because of patents, or because the market is unregulated, or because US government research or funded research can be patented and sold at whatever price the market will bear, or because healthcare in the USA generally is a business. In countries where healthcare is a right, and where the government negotiates and regulates pricing, drugs cost much less. What accounts for the difference? Governments have huge negotiating power, for example, in single-payer countries, where they are the only medical consumer, and therefore any drug priced too high will be excluded from the healthcare market.

Extortion: Me-Too Drugs, or the Same Old Stuff in Different Bottles

There is considerable reason to believe that drug company cost-estimates per-drug development are deliberately falsified, and even extortionate. Big Pharma has argued that exorbitantly high prices are needed to cover high R& D costs, but most of the so-called innovative new drugs come from publicly funded laboratories. Big Pharma has in fact focused more on “me too” drugs—slight variations of existing drugs—and their development (including clinical trials) and marketing. ⁹⁵

We have already seen, following the research of Marcia Angell , that of new drugs approved by the FDA between 1998 and 2002, 77% of them were not innovative drugs. If they were not innovative, what were they then? In the words of Dr. Angell,

Incredibly, they were all me-too drugs—classified by the agency as being no better than drugs already on the market to treat the same condition. Some of these had different chemical compositions from the originals; most did not. But none were considered improvements… . Seventy-seven percent of the pharmaceutical industry’s output consisted of leftovers. ⁹⁶

There ought to be a law to prevent this kind of abuse, or aggressive rent-seeking, and there is: but it is hardly effective, and that is deliberate. The Bayh–Dole and Stevenson-Wydler Acts , both passed in 1980, and subsequent amendments were adopted to prevent abuses such as price gouging and rank profiteering. The acts specified that in vaguely defined “exceptional circumstances,” the NIH could require that research it had supported in medical schools, teaching hospitals, and small biotechnology companies, not be patented but should remain in the public domain. The same was true of intramural research. This meant that the right to patent or license NIH funded research was not a given. Bayh-Dole also required that publicly funded research licensed to drug companies should be made available to the public at reasonable prices. Until 1995, the NIH insisted that drugs resulting from public-private collaboration should bear reasonable costs. The third condition of Bayh-Dole noted that work patented and licensed under terms of that act had to be reported to the NIH , so the institute could track which drugs originated in that way: in other words, drugs developed using government-supported research. If profits were judged excessive, drug companies had to return a portion of the royalties to the government: this was also true of intramural research. Finally, Bayh-Dole stipulated that the government retained the right to use a licensed drug itself, or issue compulsory licenses to other drug companies if the original firm were judged to be profiteering. ⁹⁷

Since 1995, given the revolving door syndrome between government and industry, and regulatory capture, safeguard provisions guarding against exploitation have been largely ignored. Drug companies have been allowed to “regulate” themselves, with the result that prices can have no limits: they are whatever the market will bear. But pricing standards are not the only area of predation in the industry. Big Pharma has been allowed to define the meaning of an “effective” drug, and this practice goes back decades.

Pharmaceutical companies do not have to show the FDA that a new drug is better—or even as good—as existing drugs already in use for the same condition. They only have to demonstrate that the new drug is more effective than nothing: comparing new drugs to nothing has been the industry standard since the early 1960s. Even a cursory glance at the FDA website confirms that most new drugs are compared to placebos or sugar pills, not the best current treatment. ⁹⁸

As is evident, in comparing new drugs only to placebo-controlled trials, it is possible—and perhaps inevitable—for new drugs to be approved that are worse than drugs already on the market. The relevant law in this case is the Kefauver-Harris Drug Amendment of 1962 , which required drug manufacturers to show that new drugs were safe and effective, but failed to say what they should be compared with. This was translated to mean that they need not be compared to anything.

This critical defect in the law has allowed the drug industry to become a “me-too” (copycat) business. If companies had to show that their new drugs were better than older treatments already in use, then the number of copycat drugs would decline considerably. ⁹⁹ Drug companies would have to engage in real innovation, instead of piggybacking on proven therapies. Instead, many pharmaceutical firms figure out ways to extend the life of a profitable drug about to go off-patent by producing an almost identical drug and shifting users to the new patent. To do this drug companies need only manufacture a drug that is different enough to qualify for a new patent, posing little or no obstacle.

There are many illustrations of this, Nexium for example. Nexium is a heartburn drug made by the British company AstraZeneca that was brought to market in 2001 just as the patent of the company’s blockbuster drug, Prilosec, was about to expire. Without a replacement drug, AstraZeneca’s finances would have suffered serious losses. With $6 billion in annual sales, Prilosec had once been the top seller globally. When AstraZeneca’s patent expired, it would face competition from much lower priced generic brands, and the $6 billion in sales would vanish. So AstraZeneca developed an aggressive plan with multiple strategies, including lawsuits against manufacturers daring to contemplate making cheaper generic drugs. But it also hatched an even more aggressive strategy. The company knew that Prilosec contained an active form of the omeprazole molecule, and possibly an inactive form (isomer) of Prilosec as well. The plan was for AstraZeneca to apply for a new patent based on the active form of the Prilosec molecule, to call it Nexium, and to promote the new therapy as an improvement over Prilosec, and to do all this before the expiration of the patent on Prilosec. ¹⁰⁰

The strategy worked, as did its implementation. Before the patent on Prilosec expired, the FDA approved a patent for Nexium. The company then launched a massive promotion of Nexium, and successfully convinced Prilosec users and their doctors that Nexium was different and better than what it was replacing. In the wake of the campaign, Nexium became the most advertised drug in the USA. And just to make sure that the bait and switch worked, AstraZeneca priced Nexium just below Prilosec. To help make the transition, the company gave discounts to managed care plans and hospitals, provided doctors with free samples, and was brazen enough to offer coupons in newspapers. In 2001 alone, the company invested about a half billion dollars in its campaign, to assure that the new “innovation,” the purple pill in the ad campaign, would replace Prilosec. It was not long before AstraZeneca dropped all references to Prilosec, which was meant to vanish from the public memory, even though Prilosec was soon sold over-the-counter for a fraction of the cost of Nexium. ¹⁰¹

If there are some readers who still promote the magic of the market, they should already be disabused of that notion. But for those who believe that the consumer, or the patient, knows best, it is worth noting how and why AstraZeneca got approval for its “new” drug. Before the drug company could get FDA support, it had to conduct several clinical trials. Some of the trials compared Nexium to placebos. The results were clear, Nexium was better than nothing, satisfying the FDA. But AstraZeneca went further, comparing Nexium to Prilosec in tests for esophageal erosion. ¹⁰² The objective was to show that Nexium was not only better than nothing, but that it was better than “something”: in this case that “something” was Prilosec.

But to do this was tricky, how could anything not be better than nothing? In other words, how could AstraZeneca make something that was no different than nothing, and still call it something? Yet this is what they did. Instead of comparing equivalent doses of the two therapies, the company used higher doses of Nexium, comparing 20 milligrams and 40 milligrams of Nexium with 20 milligrams of Prilosec. Given these comparisons, Nexium seemed an improvement over the older drug. But this was only marginally true and only in two of the four trials that were conducted. The only surprise, Marcia Angell has observed, was that Nexium didn’t do better than it did. What did she think AstraZeneca should have done, if the firm had wanted to serve patients with heartburn? Double the standard dose of Prilosec, allow generic competition, and forget about Nexium. ¹⁰³ But that would have hurt the profits of AstraZeneca because of the obstinacy of people who refused to pay $4 a pill, and so AstraZeneca turned right when it should have turned left.

Big Pharma and Patent Falsehoods

The drug industry has insisted that it has high research costs—and therefore the rising costs of pills are necessary to protect the public’s health. Yet some 80% of the fundamental R&D is done directly by government, the NIH for example, or by publicly funded research at universities and research institutes. In fact, the Bayh–Dole Act of 1980 was passed to explicitly grant access to publicly funded research and then the right to patent products derived from it. But the vast majority of the pharmaceuticals patented by the industry are the same “me-two” products we have described above: they do not represent innovations, but ways for companies to imitate a therapy already developed and brought to market by another company. The result is families of drugs, statins like Lipitor or Crestor, for example, in which each therapy resembles and overlaps the characteristics of a predecessor. The real objective is to patent a slightly altered statin, which can then be marketed under its own brand, allowing a drug company to tap into a lucrative market without doing the preliminary R&D. Clearly, the motive is profit, since the new version adds little to improving drugs already on the market, or to improving the health of the public.

The drug industry is not only subsidized, R&D expenses are fully tax deductible, dollar for dollar. And that does not include all the tax breaks given to drug companies. They enjoy, collectively, tax credits worth billions of dollars, including a 50% credit for costs incurred testing “orphan drugs”—drugs with an expected market of less than 200,000 people. As of 2003, the FDA had listed 221 orphan drugs since the tax credit was adopted in 2000. Despite the tentative market cap, there have been important exceptions granted to industry: Retrovir, the first drug for HIV/AIDS, had a market that was well over 200,000, though it was listed as an orphan drug. ¹⁰⁴

The drug industry has become so super-lucrative that “drug wars” has been redefined. Despite the subsidies given for R&D, the granting of patents for research developed by the USA directly through NIH , or indirectly through university grants, and because drug prices are largely deregulated in the USA, drugs are more expensive than in all developed countries. In almost every case they are much higher. Gleevec, Novartis’s breakthrough drug for some types of leukemia and other cancers, was sold in the USA on an annualized basis (in 2013 prices) for as much as $11,007 (much higher for higher dosages), or for as low as $5482, if discounted. In New Zealand the price was $989 and in Canada it was $1141. Nexium, widely prescribed for acid reflux, had an average monthly cost of $215 in the USA—before the patent ended in 2014—but only $23 in the Netherlands. Cymbalta, commonly used as an antidepressant, costs $194 monthly in the USA, but only $46 in England. The list goes on, but several conclusions can be drawn already. The same drugs cost much less outside the USA, and in many cases the differences are a multiple of 10 to 1 or more. The same can be said for tests, for example echocardiograms. The USA charges much more, routinely up to $4000 in mid-2016; the cost in Mexico is about $300 and in Spain it is about $130. ¹⁰⁵ Who pockets the difference? The super-rich who own the healthcare companies, the hospitals, clinics, diagnostic centers, and especially drug manufacturers. Certainly not healthcare consumers.

As we have seen, Big Pharma justifies exorbitant prices by citing the high costs of R&D in particular. But the same should be true for other countries as well. The reason that drugs cost much less elsewhere, from Canada to Germany, the Netherlands, and Sweden , is because those countries regulate the price of drugs. In single-payer countries like Canada, Denmark , Sweden and the UK, the government functions as the sole buyer and payer of medical services and therefore has greater leverage. Europeans generally refuse to reimburse drug companies for drugs considered excessive and unjustified, especially when similar drugs are much less expensive and equally or more effective.

While many countries in Europe and Canada set wholesale drug prices, Medicare in the USA is barred from negotiating lower costs despite its considerable bargaining power as a kind of single payer for healthcare consumers above the age of sixty-five. Drug inflation is also explained by the US patent system, which awards patents for a period of twenty years, and then, as we know, routinely grants patents to me-too successors or copycat therapies.

But there has been a relatively new wrinkle in runaway drug prices in recent decades. As Robert Reich and Marcia Angell and many others have noted, the Patent Office and the courts initially ruled that products found in nature could not be patented: this is still the case in India and many other countries. Separating natural products from patents made good medical sense. That was why early vaccines, which used the body’s immunity, could not become the private property of drug companies. That is why drug companies hesitated before investing in research necessary to produce new vaccines: without a monopoly, and outsized profits, there was little incentive to invest in research.

Then in the 1990s, the rules changed. New laws granted pharmaceutical companies the right to patent and manufacture vaccines and matter (products) found in nature. The new rules blurred the line—or effectively abolished it—between what was found in nature and what could be transformed into a monopoly protected by a patent. As a result, nature was privatized, effectively allowing Big Pharma to claim what occurred naturally as its own “product.” As long as anything could be reproduced in a laboratory, it could be patented. Not only did the increase in patents on vaccines—which boost the body’s natural immunity—grow geometrically, some tenfold to more than ten thousand, but vaccine prices also escalated. Pfizer , one of the largest drug companies, led the parade, developing Prevnar 13, a serum based on bacterial strains found in a natural state, which protects against diseases caused by pneumococcal bacteria, from ear infections to pneumonia. Given the new rules, Pfizer obtained a patent and became the only manufacturer. In 2013, it brought in almost $4 billion in sales of Prevnar 13 vaccine. ¹⁰⁶

Put another way, the government, often decried by Conservatives as anti-business, had drafted new rules granting monopolies to drug companies, obviously shifting rising costs of healthcare onto the consumer while protecting the monopoly profits of Big Pharma. ¹⁰⁷ Such practices shift risk onto the consumer. They also illustrate how drug companies siphon billions of dollars from the real economy away from consumers to corporations and shareholders.

Big Pharma has demonstrated impressive ingenuity, not so much in developing new drugs but in figuring out ways to extend patents. Many drugs that are lifesaving remain under patent long after the patent has expired. This might seem like a contradiction, but again drug companies have been able to get the rules governing patents changed to suit them. This is because the Patent Office routinely renews patents on the basis of small and often insignificant changes in the original drug. Alterations in a single molecule are considered enough to make a “new drug” patentable. ¹⁰⁸

The financial burdens posed by extending patents, or recognizing a drug as new (and innovative), are not considered by the Patent Office. Alternatively, pharmacies are forbidden to substitute generic versions of a brand-name drug if it has changed in even a minor way. What is at stake is not just a matter of high prices, forcing consumers to go elsewhere. The problem is that often there is nowhere else to go—because of the patent system. The real problem, however, is not only that drug companies reap monopoly profits, but that these profits siphon wealth from the real economy and concentrate it at the top, which is why Americans pay much more for their drugs than do Europeans.

Subsidizing the Super-Rich: Drug Companies as Welfare Kings

The USA and the UK, and everywhere else, would be better off if we all abandoned the idea that we need drug companies. Just consider what we already know. Most of the innovative research and drug innovations have been based on government research or government-supported research at public institutions such as universities. What the industry reports as its research costs is, predominantly, direct advertising to consumers, legal only in New Zealand and the USA among developed countries, providing free drug samples to doctors—knowing they are more likely to prescribe these medications—and organizing conferences, where the industry presents its views as science. There are also clinical trials, with the infamous testing standards we have already discussed: the “new” medication need only be better than nothing.

A report published by the Health Research Group of Public Citizen, in July 2015, provided insights into how American taxpayers unwittingly subsidize the drug industry, often at the expense of their own health, contributing billions of dollars in welfare to an industry committed to profit, not the health and well-being of those who consume their pills and vaccines. Here is how the industry does it. Even after rebates, brand-name drugs cost Medicare 198% of the median costs for the same brand-name drugs for the thirty-one OECD countries. Within the USA, Medicare pays about 73% more than Medicaid and about 80% more than the Veterans Health Administration (VHA) for brand-name drugs. Under current Medicare pricing practices, non-innovative or me-too drugs are routinely priced as much or higher than older, equally effective drugs that are normally cheaper because they are off-patent. The result is that profits are artificially increased, reducing the incentive to develop innovative drugs. By simply allowing Medicare to negotiate drug prices—disallowed by the Medicare Modernization Act (MMA) of 2003—and by applying the same kind of standards as other governments—by refusing to buy brand drugs that are no more effective than older drug therapies that are generics and off-patent—taxpayer contributions to Medicare for drug insurance would be reduced by at least $11 billion per year. Finally, if Medicare could secure the same prices as Medicaid or the VHA , Medicare would save up to $50 billion per year, and more than $100 billion annually in the 2020s. In effect, this represents a substantial subsidy, and therefore an annual welfare payment to Big Pharma. ¹⁰⁹

But this is only the beginning. The Pew Charitable Trusts reported that for the year 2012, pharmaceutical companies spent more than $27 billion on marketing, $24 billion to physicians and $3 billion directly to consumers. ¹¹⁰ Since the industry does not promote generic drugs, but predominantly brand names because of their higher profitability, had there been much better regulation of prices, if Medicare had the right to negotiate the cost of drugs, if drug companies were not allowed to conduct promotion campaigns directly to consumers, and—to repeat—if they could not promote a brand name when there was another equally effective drug, and if pharmaceutical companies were not allowed to “educate” doctors as they now do, much of the $27 billion so-called research costs could be eliminated. If these expenses could not be used to reduce corporate taxes, drug companies would have greater tax liabilities as well.

However, the $27 billion price-tag pales in comparison when we consider what privatizing the drug industry costs us, though how we do the financing of the pharmaceutical industry hardly gathers any attention in public discourse or in the media. Currently, toward the end of 2016, the USA spends about $328 billion per year for prescription drugs. What drives this prohibitive cost? The fact that drugs are not sold in a competitive market, despite what we hear from the drug companies. On the contrary, pharmaceutical companies do everything to avoid competition. That is why they lobby for a patent system, knowing they can gain a monopoly and knowing also that they can patent government research. What drug companies know, but will never publicize, is that if drugs were sold in a truly competitive market, a market that did not include government granted patent monopolies, or rent-seeking gifts, or tax incentives, the drug industry would earn approximately $200 billion less per year. The pharmaceutical industry invests about $25 billion annually into research—much more goes for marketing as we saw—which means that Big Pharma earns about $8 dollars for every dollar it invests in research. ¹¹¹

In 2015, Medicare spent about $75 billion on prescription drugs for seniors. In 2016 it spent more than $97 billion. According to the Congressional Budget Office, by 2026 Medicare will spend $195 billion per year on prescription drugs, a rise of more than 100% in just one decade. ¹¹² Paul Ryan and his Republican supporters argue that Medicare will bankrupt the USA because of healthcare inflation. But he is wrong. It isn’t Medicare that is the problem. It is Paul Ryan : all he would need to do is to help raise taxes on the 1% to fund Medicare prescription purchases. But there is an even better remedy: regulate the drug companies, allow Medicare to negotiate the cost of prescriptions, and the cost to Medicare and to the taxpayer will be reduced by up to 80%. That could represent a savings of up to $80 billion for 2017, or $160 billion for the year 2026 if only Congress would repeal the law prohibiting Medicare negotiations of drug prices with the industry. ¹¹³

Conclusion

Diminishing competition by routinely granting undeserved patents on drugs, banning Medicare negotiation of drug prices, maintaining a healthcare system using private for-profit healthcare insurance, granting patents on me-too drugs, routinely allowing patent extensions for drugs only a molecule different from predecessors, is expensive. Taking all these devices together, they constitute massive fraud and a giant rent charged against healthcare consumers, those very same taxpayers who are paying the rent.

Americans pay a tidy sum for a healthcare system that is not universally inclusive, that is more expensive per capita than any healthcare system in the developed world, and ranked last by most metrics when compared to healthcare in Canada, France, Germany, Italy, and Scandinavia. Maintaining the elites who control the drug companies, the private for-profit health insurance companies, and the so-called nonprofit hospital systems, is expensive: a minimum of a half trillion dollars annually, with the promise of medical inflation looming in the immediate future, especially if the ACA should be amended or abolished by the administration of Donald Trump .

Like most other developed countries, the UK negotiates drug prices with the drug industry, mostly on the basis of what it calls “value-based pricing.” This phrase is more than a cliché. It indicates that pricing has a direct relationship to value for the patient and for the NHS . This means that profits must be modest, it also means that for a drug to have value it must be an improvement on what already exists in the market. ¹¹⁴ The NHS keeps drug prices modest because it operates as an exclusive buyer of drugs for all citizens. The result is that the UK pays about a third less for its drugs compared to the USA, providing further evidence that the USA would be far better off adopting a drug regime closer to Britain and Europe, where healthcare is too important to become just another business. ¹¹⁵

Notes

1.
David Weigel, “Max Baucus , Once a Foe of Single-Payer Healthcare, Belatedly Endorses It,” Washington Post, September 8, 2017.
2.
Christy Ford Chapin, “How Did Healthcare Get to Be Such a Mess?” New York Times, June 19, 2017.
3.
Ibid.
4.
Ibid.
5.
Christy Ford Chapin, Ensuring America’s Health: The Public Creation of the Corporate Healthcare System (Cambridge: Cambridge University Press, 2015), 2–3.
6.
Ibid.
7.
Ibid.
8.
David Himmelstein and Steffie Woolhandler, “The Bureaucratic Waste of ACA Quantified: The Post-Launch Problem: The Affordable Care Act ’s Persistently High Administrative Costs,” Health Affairs Blog (May 27, 2015), http://healthaffairs.org/blog/2015/05/27/the-post-launch-problem-the-affordable-care-acts-persistently-high-administrative-costs.
9.
Reinhard Bussel and Miriam Blumel, “Germany: Health System in Review,” Health Systems in Transition 16, no. 2 (2014), online at http://www.euro.who.int/__data/assets/pdf_file/0008/255932/HiT-Germany.pdf?ua=1.
10.
Karen Davis, Kristof Stremikis, David Squires, and Cathy Schoen, Mirror, Mirror on the Wall: How the Performance of the US Healthcare System Compares Internationally (New York: The Commonwealth Fund, June 2014), online at http://www.commonwealthfund.org/publications/fund-reports/2014/jun/mirror-mirror; see also data.worldbank.org/indicator/SH.XPD.PCAP.
11.
David Squires and C. Anderson, US Healthcare from a Global Perspective: Spending, Use of Services, Prices and Health in 13 Countries (New York: The Commonwealth Fund, October, 2015), https://www.ncbi.nlm.nih.gov/pubmed/?term=Squires%20D%BAuthor%5D&cauthor=true&cauthor_uid=26591905.
12.
Himmelstein, “Bureaucratic Waste of ACA.” For the $350 billion per annum figure, see Aliya Jiwani, David Himmelstein, Steffie Woolhandler, and James G. Kahn, “Billing and Insurance-Related Administrative Costs in United States’ Healthcare: Synthesis of Micro-Costing Evidence,” BMC Health Services Research, no. 14 (2014): 1–6, https://bmchealthservres.biomedcentral.com/track/pdf/10.1186/s12913-014-0556-7?site=bmchealthservres.biomedcentral.com.
13.
Himmelstein and Woolhandler, “Bureaucratic Waste of ACA.”
14.
Ibid.
15.
Ibid.
16.
Ibid.
17.
Ibid.
18.
Henry K. Kaiser Foundation, News Release, “New Kaiser/New York Times Survey Finds One in Five Working-Age Americans with Health Insurance Report Problems Paying Medical Bills,” January 5, 2016, online at http://www.kff.org/health-costs/press-release/new-kaisernew-york-times-survey-finds-one-in-five-working-age-americans-with-health-insurance-report-problems-paying-medical-bills/; see also Liz Hamel, Mira Norton, Karen Pollitz, Larry Levitt, Gary Claxton, and Mollyanne Brodie, The Burden of Medical Debt: Results from the Kaiser Family Foundation/New York Times Medical Bills Survey (Kaiser Family Foundation/New York Times, January 5, 2016), online at https://kaiserfamilyfoundation.files.wordpress.com/2016/01/8806-the-burden-of-medical-debt-results-from-the-kaiser-family-foundation-new-york-times-medical-bills-survey.pdf.
19.
Wendell Porter, “No, Obamacare Is Not Killing the Insurance Industry,” Wendell Porter Blog, online at https://www.healthinsurance.org/blog/2016/03/01/no-obamacare-isnt-killing-the-insurance-industry/; see also United Health Group, News Release, “United Health Group Reports 2015 Results Highlighted by Continued Strong and Diversified Growth,” January 19, 2016, at http://www.unitedhealthgroup.com/investors/~/media/205CB82AC734CBDA8361AA1C1FFA803.ashx.
20.
Aetna, News Release, online at https://news.aetna.com/news-releases/aetna-reports-fourth-quarter-and-full-year-2015-results/.
21.
CIGNA, News Release, online at http://www.cigna.com/newsroom/news-releases/2016/cigna-reports-strong-2015-results-expects-revenue-and-earnings-growth-in-2016.
22.
Anthem, News Release, April 29, 2015, online at http://ir.antheminc.com/phoenix.zhtml?c=130104&p=irol-newsArticle&ID=2041266.
23.
Margot Sanger-Katz, “Signs of a Decline in Financial Distress Connected to Medical Bills,” New York Times, January 15, 2015.
24.
Consumer Financial Protection Bureau, press release, “CFPB Spotlights Concerns with Medical Debt Collection and Reporting,” December 11, 2014, at http://www.consumerfinance.gov/about-us/newsroom/cfpb-spotlights-concerns-with-medical-debt-collection-and-reporting/; and Elizabeth Rosenthal, “How the High Cost of Medical Care Is Affecting Americans,” New York Times, December 18, 2014.
25.
Huffington Post, “Top 10 Reasons People Go Bankrupt,” May 24, 2015, online at http://www.huffingtonpost.com/simple-thrifty-living/top-10-reasons-people-go-_b_6887642.html.
26.
Olga Khazan, “Why Americans Are Drowning in Medical Debt,” Atlantic Magazine, October 8, 2014, online at http://www.theatlantic.com/health/archive/2014/10/why-americans-are-drowning-in-medical-debt/381163/.
27.
Elisabeth Rosenthal, “Paying Till It Hurts: A Case Study in High Costs, the $2.7 Trillion Medical Bill,” New York Times, June 1, 2013.
28.
David Whelan, “Obamacare Could Cause Nonprofit Hospitals to Lose Their Tax-Exempt Status,” Forbes Magazine, September 17, 2012, online at http://www.forbes.com/sites/davidwhelan/2012/09/17/obamacare-could-cause-nonprofit-hospitals-to-lose-their-tax-exempt-status-heres-how/#5b379e9217d3.
29.
Rosenthal, “The $2.7 Trillion Medical Bill.”
30.
David Cay Johnston, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill) (New York: Penguin Group—Portfolio, 2008), 209.
31.
Robert Mendick, Laura Donnelly, and Ashley Kirk, “The PFI Hospitals Are Costing NHS £2 Billion Every Year,” Daily Telegraph, July 18, 2015. See Guy Standing ’s take on this problem in The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay (London: Biteback Publishing, Ltd., 2016), 189–90.
32.
Ibid., 190. For background information, J. Owen, “Crippling PFI Deals Leave Britain £222 Billion in Debt,” Independent on Sunday, April 12, 2015; and The Private Finance Watchdog Initiative, “Meet the Investment Firms That Own Your PFI Funded Schools and Hospitals,” pfeyeblog, February 18, 2015, https://pfeyeblog.wordpress.com/2015/02/18/meet-the-investment-firms-that-own-your-pfi-funded-public-schools-and-hospitals/.
33.
Liz Else, “Inequality: Of Wealth and Health: The Rising Affluence of the 1 Percent May Not only Mean There Is Less for Everyone Else. What Does Inequality Mean for Your Health? Special Report on Inequality,” New Scientist, July 28, 2012, online at https://www.newscientist.com/article/mg21528752-400-inequality-of-wealth-and-health/.
34.
Hélène Mulholland, “David Cameron Axes Equality Assessments in War on ‘Red Tape’,” Guardian, November 19, 2012.
35.
Ibid.
36.
Danny Dorling , Inequality and the 1 Percent (London: Verso, 2014), 132; and Danny Dorling , In Place of Fear: Narrowing Health Inequalities (London: Center for Labor and Social Studies (CLASS), May 21, 2013), 11–18, online at http://classonline.org.uk/docs/2013_05_Think_piece_-_In_Place_of_Fear_(Danny_Dorling).pdf. See also Danny Dorling , Injustice: Why Social Inequality Still Persists, revised edition (Bristol: Policy, 2015), 319–23.
37.
Dorling, Inequality and the 1 Percent, 132.
38.
Allan Baker, Justine Fitzpatrick, and Bobbie Jacobson, Capital Concerns: Comparing London’s Health Challenges with England’s Largest Cities (London: London Health Observatory, 2012), 7–9, 16–23, online at www.apho.org.uk/resource/view.aspx?RID=118051.
39.
Child Poverty Action Group, Welfare Reform: What It Means for Families at Risk of Poverty (London: CPAG, 2012), online at http://www.cpag.org.uk/sites/default/files/CPAG_factsheet_the%20cuts_May13.pdf.
40.
David Blane and Graham Watt, GP Experience of the Impact of Austerity on Patients and General Practices in Very Deprived Areas (Glasgow: Institute of Health and Wellbeing, University of Glasgow, 2012), online at http://www.gla.ac.uk/media/media_232766_en.pdf.
41.
BBC News, “Life Expectancy Rises Again, ONS Says,” October 10, 2011, online at http://www.bbc.com/news/business-15372869.
42.
Dorling, Inequality and 1 Percent, 134–35, 214, note 17.
43.
On the website of Public Health England, January 2017, to define its limited responsibilities, online at www.gov.uk/government/organisations/public-health-england/about.
44.
Standing, Corruption of Capitalism, 273–74.
45.
Crispin Dowler, “Trusts Exit from Capita HR Contract,” Health Service Journal, June 18, 2014, https://www.hsj.co.uk/finance-and-efficiency/trusts-exodus-from-capita-hr-contract/5072024.article; and Ben Clover, “Three Trusts End Capita HR Contracts,” Health Service Journal, September 30, 2014, https://www.hsj.co.uk/home/three-trusts-end-capita-hr-contracts/5075278.article.
46.
Institute for Health Metrics and Evaluation, “Healthcare Access and Quality Index Based on Mortality from Causes Amenable to Personal Healthcare in 195 Countries and Territories, 1990–2015: A Novel Analysis from the Global Burden of Disease Study 2015,” Lancet 390, no. 10091 (July 17, 2015): 231–66, http://dx.doi.org/10.1016/S0140-6736(17)30818-8.
47.
Dorling, Why Social Inequality Still Persists, 442, footnote 40; Dorling’s comments are based on the work of Edward Tufte, Envisioning Information (Graphics Press, 1990).
48.
Dean Baker, The Savings from an Efficient Medicare Prescription Drug Plan (Washington, DC: Center for Policy Research, 2006), 3, online at http://cepr.net/documents/efficient_medicareMedicare_2006_01.pdf. According to Baker, Medicare could have saved almost $80 billion per year, $50 billion is closer to the low end! See also Stuart Silverstein, “This is Why Your Drug Prescriptions Cost So Damn Much,” Mother Jones, October 21, 2016. See the statement by Kirsten Axelson, Vice President of Pfizer , http://www.motherjones.com/politics/2016/10/drug-industry-pharmaceutical-lobbyists-medicareMedicare-part-d-prices. Pfizer was a major lobbyist for denying Medicare the right to negotiate drug prices.
49.
Joseph E. Stiglitz, The Price of Inequality: How Today’s Divided Society Endangers Our Future (New York: W.W. Norton, 2013), 122–23; and IMF World Economic Outlook Database, online at http://www.stiglitz-sen-fitoussi.fr/documents/overview-eng.pdf.
50.
Commonwealth Fund, press release, “US Health System Ranks Last Among Eleven Countries in Measures of Access, Equity, Quality, Efficiency, and Healthy Lives,” June 16, 2014, online at www.commonwealthfund.org/publications/press-releases/2014/jun/us-health-system-ranks-last.
51.
For the full Commonwealth Fund report, see Karen Davis, Kristof Stremikis, David Squires, and Cathy Schoen, Mirror, Mirror on the Wall: How the Performance of the U. S. Healthcare System Compares Internationally (New York: The Commonwealth Fund, June 2014), online at http://www.commonwealthfund.org/~/media/files/publications/fund-report/2014/jun/1755_davis_mirror_mirror_2014.pdf.
52.
Commonwealth Fund, “US Health System Ranks Last Among Eleven Countries.”
53.
These figures are based on OECD, Country Statistical Profiles: Key Tables from OECD (Paris: OECD, 2017), online at http://www.oecd-ilibrary.org/docserver/download/191100301e1t013.pdf?expires=1500225822&id=id&accname=guest&checksum=BCB10C83C4267695F3732C35249B3F25.
54.
See OECD, “Income Inequality,” online at data.oecd.org/inequality/income-inequality.htm.
55.
OECD, “Poverty Rates,” online at https://data.oecd.org/inequality/poverty-rate.htm#indicator-chart.
56.
World Bank , “Health Expenditure Per Capita, 1995–2014,” http://data.worldbankorg/indicator/SH.XPD.PCAP.
57.
Stiglitz, The Price of Inequality, 122.
58.
Ibid.
59.
Peter C. Gøtzsche, Deadly Medicines and Organized Crime: How Big Pharma Has Corrupted Healthcare (Boca Raton, LA: CRC Press and Taylor and Francis Group, 2013), 249–51; Henry Mintzberg, “Patent Nonsense: Evidence Tells of an Industry Out of Social Control,” CMAJ 175, no. 4 (August 15, 2006): 374, online at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1534100/.
60.
US Senate, Office of the Chairman, Connie Mack, The Benefits of Medical Research and the Role of the NIH, May 2000, online at http://www.faseb.org/portals/2/pdfs/opa/2008/nih_research_benefits.pdf.
61.
Ashley J. Stevens, Jonathan J. Jensen, and Katrin Wyller, et al., “The Role of Public-Sector Research in the Discovery of Drugs and Vaccines,” New England Journal of Medicine (February 10, 2011): 535–37, online at http://www.nejm.org/doi/pdf/10.1056/NEJMsa1008268.
62.
Merrill Goozner, The $800 Million Pill: The Truth Behind the Cost of New Drugs (Berkeley: University of California Press; 2005), 167.
63.
Arnold S. Relman and Marcia Angell, “America’s Other Drug Problem: How the Drug Industry Distorts Medicine and Politics,” The New Republic 227, no. 5 (December 2002), 30–33.
64.
Marcia Angell , The Truth About the Drug Companies: How They Deceive Us and What to Do About It (New York: Random House, 2005), 54–55.
65.
Ibid., 56.
66.
Ibid., 64–65.
67.
Goozner, The $800 Pill, 86–87.
68.
Ibid., 77–80; Robert Steinbrook, “The NIH Stimulus—The Recovery Act and Biomedical Research,” New England Journal of Medicine 360 (March 12, 2009), online at http://www.nejm.org/doi/10.1056/NEJMp0900665.
69.
Donald W. Light and Joel R. Lexchin, “Pharmaceutical Research and Development: What Do We Get for All That Money?” BMJ (British Medical Journal) 345 (August 11, 2012): 22–24, online at http://www.bmj.com/bmj/section-pdf/187604?path=/bmj/345/7869/Analysis.full.pdf.
70.
Cited by Gøtzsche, Deadly Medicines, 249.
71.
Ibid.
72.
Angell, Truth About Drug Companies, 37.
73.
Ibid., 38; and Alan F. Holmer on National Public Radio, “Talk of the Nation,” hosted by Juan Williams, January 2, 2001, cited by Public Citizen, Rx R&D Myths: The Case Against the Drug Industry’s R&D “Scare Card,” Congress Watch (Washington, DC: Public Citizen, July 2001), 1, online at https://www.scribd.com/document/62703342/This-new-Public-Citizen-report-reveals-how-major-U-S-drug-companies-and-their-Washington-D-C-lobby-group-the-Pharmaceutical-Research-and-Manufactu.
74.
Angell, Truth About Drug Companies, 41–44; Gøtzsche, Deadly Medicines, 249.
75.
Ibid., 251–52, 265, Gøtzsche, Deadly Medicines, 253–54; US Federal Trade Commission, Generic Drug Entry Prior to Patent Expiration: an FTC Study (Washington, DC: Federal Trade Commission, July 2002), online at www.ftc.gov.os/2002/07/genericdrugstudy.pdf; and Goozner, The $800 Million Dollar Pill, 231–48.
76.
Gøtzsche, Deadly Medicines, 249.
77.
Angell, Truth About Drug Companies, 38–39.
78.
Gøtzsche, Deadly Medicines, 249–50; and Howard Brody, Hooked: Ethics, the Medical Profession and the Pharmaceutical Industry (Lanham, MD: Rowman and Littlefield, 2008),76–78.
79.
Ibid.
80.
Gøtzsche, Deadly Medicines, 250.
81.
Ibid.
82.
Ibid.
83.
Ibid.
84.
Tess Saperstein, “Medicated Monopolies,” Harvard Political Review (December 10, 2015), online at http://harvardpolitics.com/covers/medicated-monopolies/.
85.
Ibid.
86.
Ibid., Jonathan D. Rockoff and Ed Silverman, “Pharmaceutical Companies Buy Rivals’ Drugs, Then Jack Up the Prices,” Wall Street Journal, April 26, 2015, online at http://www.wsj.com/articles/pharmaceutical-companies-buy-rivals-drugs-then-jack-up-the-prices-143009643.
87.
Ibid.
88.
Ibid.
89.
A. Gordon Smith, “Price Gouging and the Dangerous New Breed of Pharma Companies,” Harvard Business Review, July 6, 2016, online at https://hbr.org/2016/07/price-gouging-and-the-dangerous-new-breed-of-pharma-companies.
90.
Derek Lowe, “Martin Shkreli Has One Idea, and It’s a Bad One,” Science Translational Medicine, September 21, 2015, http://blogs.sciencemag.org/pipeline/archives/2015/09/21/martin-shkreli-has-one-idea-and-its-a-bad-one.
91.
Andrew Pollack and Matthew Goldstein, “Martin Shkreli All But Gloated Over Huge Drug Increases, Memos Show,” New York Times, February 2, 2016.
92.
Richard Anderson, “Pharmaceutical Industry Gets High on Fat Profits,” BBC News, November 6, 2014, online at http://www.bbc.com/news/business-28212223.
93.
Hagop Kantarjian, “The Price of Drugs for Chronic Myeloid Leukemia (CML): A Reflection of the Unsustainable Prices of Cancer Drugs: From the Perspective of a Large Group of CML Experts,” Blood, First Edition Paper, Prepublished online April 25, 2013, online at https://doi.org/10.1182/blood-2013-03-490003.
94.
Anderson, “Pharmaceutical Industry Gets High.”
95.
Angell, Truth About Drug Companies, 37–44; Mariana Mazzucato, The Entrepreneurial State: Debunking Public vs. Private Myths in Risk and Innovation, revised edition (New York: Public Affairs, 2015), 73, Fig. 7: Percentages of new drugs by type in the pharmaceutical industry.
96.
Angell, Truth About Drug Companies, 75; National Institute for Healthcare Management Foundation, “Changing Patterns of Pharmaceutical Innovation,” May 2002, at www.nihcm.org; and the FDA website, at www.fda.gov/cder/drmt/pstable.htm.
97.
Angell, Truth About Drug Companies, 68–69; Eyal Press and Jennifer Washburn, “The Kept University,” Atlantic Monthly, March 2000, 39, online at http://www.theatlantic.com/magazine/archive/2000/03/the-kept-university/306629/; and Peter S. and Michael H. Davis, “Why Don’t We Enforce Existing Drug Price Controls?” Tulane Law Review 75, no. 3 (January 2001), online at https://papers.ssrn.com/sol13/papers.cfm?abstract_id=243040.
98.
FDA Website, online at http://www.fda.gov/AboutFDA/WhatWeDo/History/Overviews/ucm304485.htm.
99.
Angell, Drug Companies, 75–76.
100.
Gøtzsche, Deadly Medicines, 172–73.
101.
Ibid.; Gardiner Harris, “As a Patent Expires, Drug Firm Lines Up Pricey Alternative,” Wall Street Journal, June 6, 2002; and “Two Fronts in Heartburn Battle,” New York Times, August 20, 2003.
102.
Gøtzsche, Deadly Medicines, 172–73.
103.
Angell, Drug Companies, 78–79.
104.
Goozner, $800 Million Pill, 46–48.
105.
The $4000 figure for an Echocardiogram is based on personal experience. For cost comparisons see Medigo at https://www.medigo.com/en-us/procedure-pages/cardiology/echocardiogram.
106.
Robert B. Reich, Saving Capitalism: For the Many, Not the Few (New York: Alfred A. Knopf, 2015). See the research at Robert W. Frenck, Jr., Alejandra Gurtman, et al., “Randomized, Controlled Trial of a 13-Valent Pneumococcal Conjugate Vaccine Administered Concomitantly with an Influenza Vaccine in Healthy Adults,” Clinical Vaccine Immunology 19, no. 8 (August 2012): 1296–303, online at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3416075/.
107.
See Robert Pear, “Bill to Let Medicare Negotiate Drug Prices Is Blocked,” New York Times, April 18, 2007; and Elisabeth Rosenthal, “The Price of Prevention: Vaccine Costs are Soaring,” New York Times, July 2, 2014.
108.
Reich, Saving Capitalism, 23; and Angell, Truth About Drug Companies, 74–83; and Ray Moynihan and Alan Cassels, Selling Sickness: How the World’s Biggest Pharmaceutical Companies Are Turning Us All into Patients (New York: Nation Books, 2005), 159–69.
109.
Marc-André Gagnon and Sidney Wolfe, MD, Public Citizen Policy Brief, Mirror, Mirror on the Wall: Medicare Part D Pays Needlessly High Brand-Name Drug Prices Compared with Other OECD Countries and with U.S. Government Programs (Ottawa Canada: School of Public Policy and Administration, Carleton University, July 23, 2015), 11, online at http://www.citizen.org/documents/2269a.pdf. See also Congressional Budget Office, March 2016 Medicare Baseline (Washington, DC: Congressional Budget Office, 2016), online at https://www.cbo.gov/sites/default/files/recurringdata/51302-2016-03-medicareMedicare.pdf.
110.
Pew Charitable Trusts and Fact Sheet, “Persuading the Prescribers: Pharmaceutical Industry Marketing and Its Influence on Physicians and Patients,” November 11, 2013, online at http://www.pewtrusts.org/en/research-and-analysis/fact-sheets/2013/11/11/persuading-the-prescribers-pharmaceutical-industry-marketing-and-its-influence-on-physicians-and-patients.
111.
Dean Baker, “Firefighters and Prescription Drugs,” Truthout Blog, Center for Economic Policy and Research, June 2, 2008, online at http://truthout.org/archive/component/k2/item/78463:firefighters-and-prescription-drugs; and Dean Baker, Truthout, “Liberals Working for the Right,” Truthout Blog, Center for Economic Policy and Research, June 18, 2012, online at http://cepr.net/publications/op-eds-columns/liberals-working-for-the-right.
112.
Congressional Budget Office, Medicare Baseline by Fiscal Year (Washington, DC: Congressional Budget Office, March 24, 2016), 1–2, online at https://www.cbo.gov/sites/default/files/51302-2016-03-MedicareMedicare.pdf.
113.
Ibid.
114.
UK Department of Health, “Pharmaceutical Price Regulation Scheme,” December 21, 2015, online at https://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Lords/2015-12-21/HLWS435/.
115.
Ben Hirschler, “Exclusive—Transatlantic Divide: How US Pays Three Times More for Drugs,” Reuters, October 12, 2015, online at http://www.reuters.com/article/us-pharmaceuticals-usa-comparison-idUSKCN0S61KU20151012.

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7. The Business of Healthcare