It is wrong to subsidize rich, European nations

People have criticized the Affordable Care Act for amounting to a large transfer of wealth, from wealthy Americans to those not as well-off. But the real transfer of wealth has been from United States to other developed nations, whose health care costs we have subsidized for many years by paying so generously for many of our health care services. No better example of this comes to mind than the price we pay for pharmaceuticals in the US versus elsewhere. Below is a picture of what we pay  for brand-name drugs here compared to peer nations.

Pharmaceutical products are cheaper abroad in part because companies know they can make money in the U.S. market, and thus are willing to tolerate smaller profit margins in other countries.

It is wrong to subsidize rich, European nations

In effect, therefore, we are subsidizing the cost of health care in those other countries. And not just any old countries. Some of the richest countries in the world: like Switzerland and Germany. If we negotiated pharmaceutical prices more aggressively here in the U.S., the pharmaceutical industry might be more reluctant to accept lower prices elsewhere. More likely, lower prices in the U.S. would mean lower profits for the industry. This would undoubtedly have an effect on the willingness of pharmaceutical companies to invest in new products. Nothing promotes research spending better than the promise of future profits. It is worries about such research incentives that have caused some people to argue against negotiating lower prices with pharmaceutical companies. To lower profit margins, they contend, would be to slow down medical progress.

But is it the job of the United States to provide profits to the pharmaceutical industry, so they have an incentive to develop new cures? Is it people in United States who should pay for the majority of this research, simply because our friends in Europe are tougher negotiators?

In the United States, we have a health care cost problem. We spend significantly more money on health care than our peers. And a big portion of this cost problem is a price problem. Our doctors make more money than similarly trained doctors in Europe. Our hospital executives make more money than their peers in Canada. And we pay more money for prescriptions than we would if we lived elsewhere.

It is time to worry less about promoting industry profits, and focus more on controlling health care spending. That means becoming tough negotiators, with hospitals, pharmaceutical companies, device manufacturers and the like. It is wrong to ask the American public to be sugar daddy to Western Europe.

Peter Ubel is a physician and behavioral scientist who blogs at his self-titled site, Peter Ubel and can be reached on Twitter @PeterUbel.  He is the author of Critical Decisions: How You and Your Doctor Can Make the Right Medical Choices TogetherThis article originally appeared in Forbes.

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  • ninguem

    I’m wondering.

    Imagine legislation…..say…..Medicare will pay for a drug, or medical device, what…….pick a country, England pays for that drug or device, or what France pays.

    I’d imagine the response would be, as suggested, the price goes up in England or France or whatever country was used as a benchmark.

    Any country on that list that we’re mad at, right now?

    • amohtap

      Except that said company might be locked out of the country it wants to do business in. The whole point is that when you have 50 million customers, you have much more say in pricing arrangements. If Pfizer raised the price on it’s blood pressure medicine, then Germany can say “nope” and Pfizer will lose 50 million customers instead.

      • ninguem

        And maybe Medicare ought to say “nope” for the same reason.

  • guest

    The naivete of this piece is almost breathtaking. Someone who presents himself as a medical thought leader should be much more cognizant of the fact that the most powerful lobbyist group in our country is the pharmaceutical industry’s.

    Writing a piece in which our legislators are urged to “be tough negotiators” with drug companies is laughable. Why would they be “tough negotiators” with the very industry that is lining their pockets and providing them with the means for re-election?

    Until “thought leaders” such as Dr. Ubel see fit to use their time, energy and public platforms to cast light on the extent to which our democratic process has been perverted by corporate influences, we will all continue to live in a world in which the quality and cost of our healthcare is effectively controlled by private interests answering to their own profit-driven agenda.

  • NormRx

    What we pay to subsidize the European nations on drugs is nothing to what we pay to subsidize their defense.
    Why do we pay to have military bases in Europe and the Far East? They should be paying us.

  • guest

    Isn’t the problem that pharmaceutical companies rape US customers because they can whereas there is strict price regulation abroad?

  • BullDogLizzy

    This is absurd logic brought to you by pharma! Why would we force out ridiculous gouging prices on other countries. We need to pay what they are paying, not the other way around!

  • NormRx

    Just look at the history of Europe, they were constantly at each others throats. If it wasn’t for American involvement they would all be speaking either German or Russian. Not only do they not pay us we pay them rent for the bases and employ thousands of their citizens. The same goes for bases in Asia.

  • Dorothygreen

    So, who pays the R&D of drugs made in other countries, say Switzerland. Or is the US the primary manufacturer of pharmaceuticals. Also, it seems that the US pays way less for generics. Does this balance out the costs to taxpayers and individuals? It’s difficult not to go back to polio and the Salk vaccine, early drug development like antibiotics, Drugs that were life saving. Salk vaccine wasn’t even patented. Dr. Salk is a hero. Now – it can cost a family or insurance $100,000 for a child to stay alive with Leukemia. Oncologists make money on chemotherapy drugs. Many cardiologists are involved in statin research while being invested in statin companies. And, now the outrageous cost of Hepatitis C drug.

    Everywhere one looks in the US medicine the greed machine trumps patient and taxpayer considerations considerations.

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