Playing the pandemic inflation blame-game: Healthcare edition | Ray Landis
Why do prescription drug prices increase so much? Because they can. And there are no rules to stop it
Prescription drugs sit on a pharmacist’s counter (Photo by John Moore/Getty Images/The Ohio Capital Journal).
It appears we are living through another winter of our discontent in 2022. A sober analysis would conclude COVID-19 is the root cause, but too many Americans seem to have decided the pandemic is old news. The new news, for those willing to overlook the strain on our overburdened health care system, is the rising prices of items ranging from gas and food to cars and housing.
For some this is indeed a major concern. Although overall wages are rising, certain categories of jobs, particularly those in the service sector already reeling from the impact of COVID, are not keeping up with price increases.
At the same time some wage earners are struggling, another group adversely affected by rising prices are older people on fixed incomes. A 5.6 percent increase in Social Security benefits beginning in January has helped, but those with meager savings or small pension plans with no cost-of-living adjustments find themselves hit hard by higher prices.
Of course, many older people are familiar with rising prices for critical items. Seniors are heavily reliant on prescription drugs in order to maintain their health. Prices for these medications have barreled upwards over the past decade. Out-of-pocket expenses for prescription drugs have constantly out-paced general inflation rates.
Why do prescription drug prices increase so much? Because they can – and there are no economic principles in place to stop them. The law of supply and demand does not work with prescription drugs. People who need these medications to preserve their health, and in some cases their life, cannot decide to choose a less expensive form of treatment.
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Compounding this is how the United States approaches paying for health care. One of the loudest complaints about prescription drug costs for Americans is we pay far more for medications than people in other countries. Neglected in this take is the reality that other countries subsidize health care – including prescription drug costs – for their citizens to a much greater extent than the U.S.
Through this system, governments negotiate prices with pharmaceutical companies.
In the United States, that negotiation does not happen. In Medicare, the closest thing we have to the health care systems that exist for all citizens in other countries, the law expressly prohibits Medicare from negotiating prices directly with pharmaceutical companies. The result? High prescription drugs costs – and huge profits for the pharmaceutical industry combined with huge compensation packages for drug company executives.
This prohibition on direct negotiation by Medicare was a part of the original Medicare prescription drug plan and was included as the price for the pharmaceutical industry’s support for the legislation. It also conveniently benefitted the health insurance industry, which also generates enormous profits and outlandish executive salaries, by forcing Medicare beneficiaries to choose a private insurer for their prescription drug coverage.
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Insurers also benefitted by their ability to combine drug coverage with overall health care coverage in Medicare Advantage plans which are damaging the Medicare system.
A provision to finally allow Medicare to directly negotiate the price of prescription drugs was included in the Build Back Better spending plan passed by the US House of Representatives. But the demise of this proposal in the US Senate, ironically because its opponents claim it would cause more inflation, means the chances of correcting this flaw have again been diminished.
Which brings us back to the issue of rising prices. Unfortunately, more attention seems to be focused on how the cost of a slice of pizza has risen 50 cents in Manhattan than how higher prices impact the lives of those struggling to make ends meet.
The increasing income disparity in society is magnified by inflation. Wealthy seniors may grouse about the few dollars more they are paying at the gas pump or at the grocery store, but older Americans who rely mainly on Social Security benefits to get by face stark choices as they encounter higher prices. Seniors deciding whether to take full doses of medications or pay their utility bills are not urban legends – they are the reality for far too many today.
Equally frustrating is the blame game for the causes of inflation. The on-going pandemic has resulted in lower production and increased demand for many goods. Global tensions have driven the price of oil to higher levels, corporate profits have increased, and the number of billionaires continues to skyrocket. Yet in some eyes the main causes of inflation are workers making $15 an hour and struggling families receiving child tax credits.
No one likes to pay higher prices. But our focus needs to be on solving our true crisis, the continuing impact of COVID-19, because only then will inflation begin to stabilize.
Meanwhile we should help those truly burdened by rising prices by passing the provisions of the President’s Build Back Better Plan – and perhaps recognize corporate profit margins and CEO salaries are much more responsible for high prices than the overdue raises those working behind the counter at fast food restaurants have received.
Ray E. Landis writes about the issues that are important to older Pennsylvanians. His work appears biweekly on the Capital-Star’s Commentary Page. Readers may follow him on Twitter @RELandis.
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