Archive for July, 2017

Bad Pharma and a Health Care System That Does Not Work: How to Fix the American Health Care Crisis in One Easy Step

24 Jul


Martin Shkreli was once a kid who came from a poor working class family who had next to no wealth, but through sheer hard work and intelligence became a multi-millionaire by the time he was 30.  If this is the American Dream in a nut-shell, why has Shkreli been so thoroughly vilified and filleted by both the media and the public at large? Well apparently in America it is ok to do bad things as long as you keep your mouth shut. As such, Shkreli’s problem was not entirely because of what he did, but that he chose to be vocal about it.

For context, after a few dalliances with hedge funds that he commenced after leaving high school, dalliances that netted him millions of dollars but also attracted the attention of regulatory and law enforcement bodies, Shkreli founded a company called Turing Pharmaceuticals. Turing’s business plan centered around acquiring drug licenses from medications whose patents had expired, yet were so rare that there would not be sufficient incentive for competitors to duplicate the drug, run trials, and bring it to market, and then he and his company would dramatically raise prices. Although some could argue that Skereli’s plan was Machiavellian, the legal ground on which to challenge Shkreli’s action was precarious.

However, when news broke that Shkreli’s company had purchased the drug Daraprim, which is a medication used in the treatment of toxoplasmosis and cystoisoporiasis commonly associated with people suffering from AIDS, and then raised the price from $13.50 a pill to $700 a pill overnight the public outrage was understandably quite high. However, what ultimately doomed Shkreli and subjected him to protracted public scorn and multiple legal challenges was not that he committed an atrocity, because atrocities in corporate America and within the lives of public figures occur regularly, but rather that he talked about it and did not give the same boilerplate apology drafted by lawyers and/or PR firms that other corporations and people in the public eye give when they make mistakes that peak the public’s interest. Moreover, not only was Shkreli talking and offer no apology while talking, he actually defended his business model by stating that the duty his corporation owed was to its shareholders and as such he was just in maximizing profit. He further stated he would make the same decision(s) in this regard over again.

You will forgive me however if I do not believe that Shkreli is the only CEO in America to have this mentality.

In the end while what Shkreli did is an abomination, but by comparison to the rest of Wall Street and corporate America the only thing that really distinguishes him from everyone else is that he spoke his mind and did not offer the American public the blanket apology they typically hear. For example, the need for Maylan’s Epipen, an injector used to combat allergic reactions, just as a comparison dwarfs the demand for Daraprim, yet when it became news that Epipen had raised its American drug price almost six fold in a decade and that other nations pay substantially less for their Epipens there was nowhere near the same prolonged level of outrage heaped upon Maylan’s CEO as there was against Skerelli. As such, while Maylan is currently facing legal scrutiny for their actions, the probable result is that like many other fortune 500 companies they will probably have to pay a fine which they will write-off their taxes as a business expense and make up any shortfall by raising prices elsewhere and effectively passing off their misconduct to the general public.  

As such, by talking what Shkreli effectively done is not simply to doom himself, but become the de-facto fall-guy for the entire pharmaceutical industry, many of who will continue to commit atrocities on par or greater than Shkreli.

Of course drug companies poaching customers and getting away with it is not the only problem facing Americans and their health care. The Affordable Health Care Act, or Obamacare, has been under siege by Republicans and now President Trump for years ever since it was made law. Although Obamacare is a noble effort to extend health care to those who cannot afford it and/or do not have sufficient private health care from their employer, many Republicans for whatever reason, be it to erase the legacy of President Obama or to eliminate health care for millions of impoverished Americans and by extension the lives of millions of impoverished Americans by denying them access to affordable health care, are incensed at this social initiative and have loudly sought to “repeal and replace it.” Of course while repeal and replace makes for a great alliterative slogan before an election especially when there is no actual replacement plan proposed that can be challenged, after an election when what has being offered is effectively a tax break for the richest 1% of Americans, forces millions of insured persons off of their health care plan, is repudiated by every reputable health association in the country, and sets the stage to compromise the lives of millions of Americans as President Trump’s heartless, “mean”, and misguided proposed plan does, it is something else altogether. As such, if Donald Trump and the Republicans who are for this plan are prepared to sign it into law, they should also be prepared to sign the death certificates for the millions of Americans who will lose their lives as a direct result of this callous endeavor. For context the Congressional Budget Office (CBO) has recently stated that 22 million Americans are poised to lose their health care coverage by 2026 under Trump’s health care plan .

 Although the future looks bleak with respect to the pharmaceutical industry running unchecked and the Republican driven health care reform initiative that will set the stage for the death of millions of Americans, there is one simple solution to both problems that no one appears to be discussing. That solution? The American government, perhaps through a small tax increase if need be, covers the cost of health care for its entire populous, both medical treatment and pharmaceuticals.

In theory such a system would ensure that every American has access to the medical care they need in relation to each individual’s health regardless of pre-existing condition. As such, all of the red tape that Republicans and Democrats cite as a barrier for the effective administration of Obamacare would largely dissipate immediately. And if a government’s sole responsibility is to ensure the welfare of its people, how can health care not be the number one issue of concern?

As a pragmatist I am acutely aware of the fact that Republicans, Libertarians, and all those weary of big government would highlight the high costs associated with government being charged with delivering health care, in actuality the economic sense behind it is quite sound.

From a theoretical perspective if everyone were covered by a universal health and drug program the cost per person would be much lower than when governments must pay for those in need through Medicare or Medicaid, subsidized funding, and/or emergency funding due to the fact that the government would be able to draw the requisite revenue from the entire populous, both healthy and sick, in order to fund the program. Moreover, if government were given reins over providing health care for all, they would have a greater ability to work with drug companies to keep costs of drugs reasonable, or at least on par with the drugs of other nations, including those in the first world. In addition, in his Town Hall with Senator Bernie Sanders on February 8, 2017, Senator Ted Cruz made the point that one of the drawbacks of the current health care system was that it made it too difficult to transition between positions of employment due to fear of losing medical coverage. However, while Cruz made this point in an attempt to undermine Obamacare, he does raise an interesting issue; that the current system fosters the passing on better employment opportunities out of fear of losing health coverage. However, if universal health care and drug plans were covered by the government people would be able to seamlessly transition into better employment opportunities without the worrying about their family’s medical coverage. As such, the aforementioned points coupled with the elimination of the need to analyze complex private insurance plans, and having to deal with rising premiums not only related to Obamacare but all private insurance plans, are all valid reasons for the government to in theory take-on providing health care coverage to all Americans. And this is of course in addition to helping to ensure every American’s right to life.

While the theory is certainly strong, the practicality of all medical expenses being borne by the state is also surprisingly sound as well. For example, in his piece entitled America can save $1 trillion and get better health care  Jeffrey Sachs, professor and director of the Center for Sustainable Development at Columbia University, notes that Americans spend almost double on per person health care costs ($10,000) than other first world nations ($5,000) While this is certainly a great disparity, one of the main reasons for it according to Sachs is the incredibly high cost of prescription drugs in America compared to those found in other First World contemporaries. And why the higher drug prices in the United States? According to Sachs (and several others) the high cost of American prescription drugs is due to the monopoly on prescription drugs given to drug companies as a direct and indirect result of the extensive lobbying and political contributions they make in order to curry favor and attain leeway with respect its products and services. As such, if elected officials and the federal government as a whole were instead accountable to the public for prescription drug coverage and its related costs, logic dictates that the most important task would no longer be to solicit funds from drug companies to garner office, but rather to take a sterner stance against these companies in order to keep costs down for constituents. Data has already been presented to show that where there are strict regulations in place, the cost of prescription drugs per person has gone down significantly. .

The Solution

While many have highlighted several possible solutions for government to provide better health care to its populous, there is in fact a practical example currently in place that receives little attention. While Canada is well known for providing universal health care, the province of Ontario also has a prescription drug plan in place known as the Trillium Drug Program (TDP) that provides prescription drug coverage to all residents of Ontario who are not covered by any other drug plan. Under this program the government of Ontario provides coverage for almost all prescription drugs at a cost of only 3-4% of one’s net family income. As such, no one in Ontario has to live in fear of having a pre-existing condition, that their employer’s health care plan is not adequate, or that they will go without the medicine they need to survive. And while the Trillium has received positive reviews and been credited with helping people with certain conditions avoid bankruptcy domestically , it is model that can easily be adopted across several different locales and even by federal governments worldwide, including the United States. Furthermore, while some might balk at having to pay 3-4% of one’s net income this figure would certainly be much less if the drug plan expanded to target all citizens and not just those in need (whom Trillium was designed to protect).


Currently American tax revenue is annually approximately $6.6 trillion , with federal receipts accounting for approximately $3.6 trillion and state and local receipts accounting for the rest From this revenue pool according to the Congressional Budget Office (CBO) the federal government will spend approximately $980 billion on health care with various tax provisions for health care creating tax expenditures that total nearly $260 billion Given these amounts it should come as no surprise that health care currently edges out military spending as the largest area of government spending at 28.7%. However, as Sachs and others have pointed out, the cost of American Health Care is almost twice as expensive as that of other First World Nations ($10,000 per capita v. $5,000 per capita) due in large part to the high cost of prescription drugs and the broken prescription drug system . If Sachs is right and a trillion dollars can be saved via some fairly obvious reforms to the health care system would appear that these savings could actually cover the cost of a switch to universal health care and prescription drug coverage. For example, according to Fox News, who as a whole is certainly no fan of social (democratic) programs, universal health care would cost Americans $1.5 trillion dollars over the next decade or $150 billion a year Add to this figure the amount Americans spend on prescription drugs which according to Quintiles IMS (formerly IMS Institute for Healthcare Informatics) is approximately $374 billion a year  and is a figure that includes private and individual contributions, and you have a total cost of universal health care and universal prescription drug coverage which is (much less than) $524 billion a year.

While the optics of $524 billion a year to an already large health care budget are not ideal, again if one figures in the savings by implementing certain changes as advocated by Sachs (and others), coupled with the fact that private insurance currently pays the cost of most prescription drug coverage [and would continue to do so via (future) government stipulations], and the fact that the cost of medical care is high because people only get treatment when their conditions become complicated and expensive (and who otherwise would not wait if they had access to universal “free” health care), and you are left with a health care system that is actually quite affordable and should Sachs’ figures be correct one where America can have universal health care and prescription drug coverage and come out half a trillion dollars or maybe more ahead. And this is in addition to other benefits such as America finally becoming on par with other wealthy and progressive nations around the world with respect to health care, will help save the lives of almost 22 million Americans, reduce the drawbacks of Obamacare including the headache of reviewing plans and rising premiums, allow people to flow in and out of different jobs without having to have to factor in the opportunity cost of health care, and efficiently provide health care to all Americans while simultaneously guarding against the current predatory pricing of American drug companies who have been allowed to run unchecked for far too long. As such, universal health care and prescription is not simply a win-win, it is a must.


While it is naïve to think that Martin Shkreli is the only person in the pharmaceutical industry inflating drug prices and gouging the sick, it is even more naïve not to understand his situation is merely a microcosm of the entire American drug industry and the problems which plague it. As such, while he is currently being prosecuted and has been raked over the coals in the court of public opinion, it is important to note had he not been so public and spoken out, he would not have been singled out in the manner he has and allowed to be the fall-guy he is today. Instead he is the scapegoat for an entire pharmaceutical industry that has for decades has unfairly poached the American people and caused millions to suffer needlessly.

Fortunately, there is a solution to both ending the exploitation of American Pharma and providing quality and affordable health care to all Americans, and that solution is universal health and prescription drug coverage. The benefits of this dual program are apparent to anyone who is not a tool of the pharmaceutical industry, and on the surface the only semi-con associated with implementing universal health coverage is cost. However, as this piece demonstrates, the cost component is actually quite manageable in either the best or worst case scenario. If Sachs and others of his ilk are correct, after factoring the savings from certain changes to the industry, the American public will still come out over half a trillion dollars ahead even after they institute universal health care and prescription drug coverage. However, should Sachs and other scholars be wrong and as worst case scenario if no cost benefit can be found through any sort of reform, at worst the implementation of universal coverage should cost no more than $ 220 billion a year ($150 billion for universal health care and approximately $70 billion for prescription drugs to those that are currently not covered by employer private insurance). While $ 220 billion is certainly a lot of money, again this figure represents a worst-case scenario only and measured against current tax revenues (approximately $6.6 trillion), is only an increase of 3%. And while conservatives and/or libertarians might balk at having to pay an extra 3% in taxes, for the sake of perspective one only needs to compare this figure with certain current expenditures which have been largely fruitless like the War in Iraq which has not only claimed the lives of close to 150,000 people and opened the door to global terror groups like ISIS , but has already cost Americans $2.4 trillion dollars and is estimated to cost over $6 trillion dollars over the next four decades . As such, given these harsh realities perhaps it is time for the American government to wake up and instead consider funding life instead of death. While, roads, tanks, Wall Street bailouts, space exploration, the Olympic Games, and financing the construction of multi-million dollar sporting arenas are all nice things for governments to be involved in, the health and quality of life of one’s populous always has been and always should be the chief concern for any non-authoritarian regime, American or not. As long as the United States remains among the wealthiest nations in the world, rather than wasting its wealth it should actually invest it into cultivating its most powerful resource, the American people.

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