Yes the insurance companies and the pharmaceutical companies do keep the costs up. I have no sympathy for the insurance companies, but I will defend the pharmaceutical companies in certain ways.
It takes years to bring new drugs to market. Out of something like 100 drugs that are evaluated, very few get to clinical trials. Out of those still more drop out as ineffective. And when a drug does come to market, it doesn’t always mean a patent will stand for the full 17 years, or 20, whatever it was changed to about ten years ago.
Let’s say a pharmaceutical company does a lot of chemical research for a new medication. When it finds a promising area, it will not only patent the exact chemical composition, but will patent all molecular variants in close proximity. The primary drug may make it through in a year or so, but further research may go on for a decade or so before a secondary medication is developed. At that point, only seven to ten years may remain on that medication. If it takes 15 years, only two to five years may remain for name brand profits to help recoup all the development costs.
There’s no denying there is a lot of money being made, but there are hundreds of millions of dollars in start up costs on these medications.
That’s one consideration. There is another.
While some people carp about the cost of new medications, some of them are very incredible today. In the past people would have to be hospitalized at great cost for certain ailments. Today there is no or very little hospitalization while new antibiotics, new heart regulation medications, insulins and other wonder drugs keep people up and running outside the hospital environment.
What people complain about, is the incredibly expensive new medications. What they don’t appreciate is they won’t have to pay for hospitalization when they are prescribed these meds as an alternative. Not only that, they will live a better quality of life as long as these meds do their work.
Avoiding hospitalization also avoids exposure to hospital contracted stafcillin resistant infections.
In the old days, folks would get sick, get worn down, become vulnerable to secondary ailments and pass away. Today the main problem is addressed with advanced medications, preventing it’s dilitarious effects and thereby the secondary effects that would lead to being confined to a bed, a possible nursing home environment and possible death.
I know that pharmaceutical houses are a prime target these days, but I’m not a big fan of trashing them. They make profits to be sure, but we want a healthy pharmaceutical industry. They’re saving lives as much as anyone else in healthcare is.
Is there some room for criticism? I believe there is. I don’t believe it reaches the level of the vast overcharging some people attribute to it.
I would defend my position from a single angle: If the cost of research through manufacture is the problem, why can one simply go to Mexico or Costa Rica (+ else) and receive the same exact medication in the same exact box for a pittance of the cost in the US?
One could say that the price in underdeveloped countries is being kept down because of the sainted work of these pharm giants reaching out to the poor (and that is what the pharms do say)... but I really doubt it. It is much more likely that the US cost is artificially jacked up exponentially.
Supply and demand would dictate that a sufficient supply at a higher volume should be cheaper. Hence the cost should be lower in the US, which undoubtedly is the pill-happy volume center. It should be more expensive in Mexico, where volume and availability are sure to be less.
On this single point I would rest, though I could go further.
The way the insurance business usually works is total claims about equals total premiums paid. Their profits only come from investing the premiums until they have to pay the claims. Many insurance companies are publicly traded so if they truly have unusually good profits you can own a piece of the action. In reality they are not especially great profit generators.
I worked for a pharmaceutical company and in my opinion it was very much like a government job being that they are highly regulated by the FDA. 90% of the work was hoop jumping and overhead. It's one thing to jump through hoops to enforce best practices but what I saw was much wasted effort not focused on doing real work. It's a highly bloated and inefficient government job that only works because of monopoly-sized profits if they make it through all the hoops.