By Pete Dolack
October 30, 2024
Source: Systemic Disorder
As has long been the case, the U.S. health care system is by far the world’s most expensive while providing the worst results among the world’s advanced capitalist countries. And that expense continues to get larger and more unaffordable.
Just how large is the cost of private profit in health care? Almost two trillion dollars! Unbelievable? It certainly seems so. But that is indeed how much more money the people of the United States spent on health care in 2022 than they would otherwise have spent if the U.S. had a single-payer system. This is the direct result of a health care system that is designed to extract maximum profits rather than deliver health care. A system unique in the world in the extent that corporations such as insurance and pharmaceutical companies are allowed to play such a large role.
Health care spending in the U.S. is so extreme that the spending by the U.S. government alone is higher than total spending (as a percentage of gross domestic product) by any other country. Incredibly, the government was banned from negotiating drug prices until the Inflation Reduction Act of 2022 was signed into law, but only some drug prices in some programs can be negotiated, an incredible windfall for Big Pharma. Spending on health care in the U.S. in 2022 reached 16.6 percent of the country’s GDP with government spending alone accounting for 14 percent of GDP. The country with the next highest total, Germany, saw total health care spending account for 12.7 percent of its GDP.
Organizing for health care in Iowa (photo by IowaPolitics.com)
Where does the total of nearly two trillions dollars come from? To calculate that figure, I took the per capita health care spending of the three largest EU countries — France, Germany and the United Kingdom — and the neighbor of the U.S., Canada, and compared that average of those four countries to U.S. per capita spending, each for 2022, the most recent year for which statistics are available. The composite average for Canada, France, Germany and the United Kingdom is US$6,613 per capita, converted to U.S. dollars adjusted to create purchasing power parity as reported by the Organisation for Economic Cooperation and Development (OECD). Per capita health care spending in the U.S. for 2022 was US$12,555, or not far from double the composite average of the four peer countries to which it is being compared. The U.S. population in 2022 was 333 million, so multiplying that total against the per capita figure gives us a total of $1.979 trillion.
That is the cost of private profit in health care. And that total is steadily increasing. When I last did this exercise, in 2017, I calculated that the excess money paid to obtain health care for United Statesians was $1.4 trillion for the years 2011 to 2016. As a comparison, excess health care spending averaged $1.15 trillion for the period of 2001 to 2010 and $685 billion for the 1990s. Those ever higher insurance premium payments you are making as your employer forces you to shoulder more of the cost each year — if you are lucky enough to even have health insurance — are most definitely not your imagination.
And unlike other countries, where national health care systems cover everybody, there were 27 million people without health insurance in the United States. And for those with insurance, that does not mean the results are something to be proud about.
The most expensive and the worst results
In a survey of 10 countries — the five countries under discussion here along with Australia, Netherlands, New Zealand, Sweden and Switzerland — the U.S. ranked dead last in health care system performance. This survey was conducted by the Commonwealth Fund, an institution more than 100 years old that supports “independent research on health care” and seeks better health care outcomes. The Commonwealth Fund’s report, “Mirror, Mirror 2024: A Portrait of the Failing U.S. Health System,” pulled no punches in its conclusion: “The U.S. continues to be in a class by itself in the underperformance of its health care sector. While the other nine countries differ in the details of their systems and in their performance on domains, unlike the U.S., they all have found a way to meet their residents’ most basic health care needs, including universal coverage.”
The Fund assessed the 10 countries’ health care systems through 70 health system performance metrics covering five areas: access to care, care process, administrative efficiency, equity and health incomes. Among the five broad areas, the U.S. was ranked last in access to care and health outcomes, and next to last in administrative efficiency and equity. Australia came out first among the 10 countries in this survey; interestingly, by a narrow margin Australia spent the least.
Another sobering result of U.S. health care is that United Statesians “live the shortest lives and have the most avoidable deaths.” The Commonwealth Fund reports pulls no punches about this sad result:
“The U.S. ranks last on four of five health outcome measures. Life expectancy is more than four years below the 10-country average, and the U.S. has the highest rates of preventable and treatable deaths for all ages as well as excess deaths related to the pandemic for people under age 75. The ongoing substance use crisis and the prevalence of gun violence in the U.S. contribute significantly to its poor outcomes, with more than 100,000 overdose deaths and 43,000 gun-related deaths in 2023 — numbers that are much higher than in other high-income countries.”
The report notes that physicians in the “uniquely complex U.S. system” necessitates that all must “spend enormous amounts of time and effort billing insurers. Denials of services by insurance companies are also common, necessitating burdensome appeals by providers and patients.” In contrast, “High performers on equity, including Australia, Germany, and the United Kingdom, have limits on cost sharing (or in the case of the U.K., no cost sharing at all) to ensure that the ability to pay does not constitute a significant barrier to obtaining needed health services. In Germany, out-of-pocket expenses are capped, with the cost of coverage being income-based.” Australia offers free care in public hospitals, something unimaginable in the U.S., and Canberra regulates medicine costs.
The Commonwealth Fund report points to several factors that make the U.S. health care system perform so poorly, including lack of investment in primary care, administrative inefficiency, consolidation of hospitals, underfunding and decentralization.
There is nothing new here; a 2011 Commonwealth report ranked the U.S. last among 16 high-income, industrialized nations when measuring deaths that could potentially have been prevented by timely access to effective health care.
Delivering profits, not health care
What is not said directly in reports such as the above is the very fact that health care in the U.S. is designed to deliver corporate profits, not health care for individuals. Endlessly propagated capitalist ideology tries to convince us that the private sector is always better than anything provided by a government. So it is ironic indeed that the health care system with the most private-sector involvement performs the worst. But when we stop and think about it in a logical manner, freeing ourselves from ideology, this makes sense. Government doesn’t have to earn a profit; private enterprise expects to and will pack its bags if it doesn’t. Just as privatization invariably results in higher costs and often poorer quality than when the service was provided by a government agency as a public good, health care is provided far more efficiently when in public hands.
It’s the “magic of the market” at work. And if you are in need of health care in the U.S., that magic converts your money into fantastic profits. One big way this magic works is to steer as many seniors into Medicare Advantage. Medicare is the government-funded health care system that all who are 65 years of age and older are eligible for. The Medicare Advantage is a privatization of Medicare whereby insurance companies get their hands on health care money provided by the federal government. A June 2024 article published in Journal of the American Medical Association found that — surprise! — this corporate intervention provides less care at higher cost.
The three authors of the report, Adam Gaffney, Stephanie Woolhandler and David U. Himmelstein, flatly declare the health insurance industry’s trade group proclamation that Medicare Advantage is a good deal for taxpayers is false. The authors note that the non-partisan agency Medicare Payment Advisory Commission reported to the U.S. Congress that Advantage “overpayments added $82 billion to taxpayers’ costs for Medicare in 2023 and $612 billion between 2007 and 2024.”
Following up on this report, Corporate Crime Reporter interviewed Dr. Ana Malinow, who works with National Single Payer, a group working toward a single-payer system in the United States. In this interview, Dr. Malinow said, “The Medicare Advantage companies want to pick the healthiest patients out there, because you know that those patients traditionally are not going to cost you a lot of money.” How it works, she explained, is that Medicare Advantage pays a set amount per patient, with more for sicker patients, so that the incentive is to “make their patients appear as sick as possible, often without providing additional treatment.” As a result, “a program devised to help lower health care spending has instead become substantially more costly than the traditional government program it was meant to improve.”
Because of these systematic overpayments, Medicare Advantage is a cheaper option than traditional Medicare. Several of the biggest insurance companies have been charged with fraud by legal authorities, but Dr. Malinow notes that paying fines is merely a cost of business for them. A separate report, by the research group KFF, calculated that insurance companies’ gross margins per enrollee is roughly double the profits made on ordinary group and individual insurance plans.
And providing health insurance is highly profitable. For 2022, UnitedHealth Group reported profits of US$28.4 billion. Cigna had $6.7 billion, Elevance Health made $6 billion and CVS Health made $4.2 billion. “All told, America’s largest health insurers raked in more than $41 billion of profits in 2022,” the Pennsylvania Capital-Star reported. Denying care is one way for these insurance companies to boost their profits. The Capital-Star report said, “An American Medical Association survey found 94% of physicians surveyed said that prior authorizations lead to delays in receiving care and 80% said that prior authorizations can lead to treatment abandonment.”
Big Pharma grabs big profits
Let us not leave out the pharmaceutical companies. Another article in the peer-reviewed Journal of the American Medical Association found that the profit margins for pharmaceutical makers was “significantly greater” than for all others. To determine this, the article’s authors, led by Fred D Ledley, compared the annual profits of 35 large pharmaceutical companies with 357 companies in the S&P 500 Index from 2000 to 2018 using information from annual financial reports. The Big Pharma outfits had gross profit margins (the difference between the cost of goods sold and total revenue) double those of other corporations and net income close to double.
Want more? A report put out by the University of Southern California (not peer-reviewed) found that, adjusted for inflation, pharmaceutical company revenue more than doubled from 1979 to 2018:
“Based on 4,923 firm-year observations, we find that U.S. drugmakers’ sales revenue has increased from $139 billion in 1979 to $321 billion in 2018 (both numbers are in 2018 dollars). A large portion of the increases went to profit, increasing from 15.3% of sales in 1979 to 23.4% of sales in 2018. A much larger increase went to research and development (R&D), which increased from 4.6% of sales in 1979 to 19% of sales in 2018. Expenditures on acquiring drugs developed by other companies also increased from 0.1% of sales in 1979 to 5.2% of sales in 2018. These two categories represent the total costs of developing new drugs, both internally and externally.”
An investigation published by NYRequirements, a provider of health care education, found that the pharmaceutical industry, on a global basis, racked up an astonishing $1.4 trillion in profits for 2022. Pfizer topped the list with $31.4 billion in net income, with five more reporting more than $10 billion. And with that a lot of lobbying to keep themselves in the saddle can be done — Big Pharma spent $372 million on lobbying the U.S. government in 2022. Another €40 million is spent by the pharmaceutical industry to lobby in the EU.
How do these companies grab so much money? Corporate Watch offers five factors:Research and development is directed to “patients who are high-value and who will use the drugs long term.” On the other hand, “one-shot vaccines for epidemics that mainly affect poorer countries” are of no interest.
The patent system prevents cheaper generic medications from being produced so that original manufacturers can collect windfall profits.
“Price much, much higher than costs.” Although the industry spending 20 percent of revenue on R&D is higher than almost any other industry, “sales cover costs many times over.”
Big Pharma spends less than it suggests on developing new drugs; most of what they ultimately market was developed in university and government labs, or in those of smaller research companies, and then bought. The U.S. National Health Institutes provides $39 billion a year to universities, medical schools and other research organizations.
Massive lobbying, both in the U.S. and the European Union.
Corporate Watch provides examples of unconscionable profiteering. They write:
“Insulin usually costs less than $6 a vial to make, but sells for as much as $275 in the US (one example given by the campaign group Patients for Affordable Drugs). In Europe, pharma giant Gilead charged an average of €55,000 for a 12 week Hepatitis C treatment — when pills cost less than €1 per pill to manufacture. Such extreme examples illustrate a general pattern. One academic study found US pharma companies have an average 71% “gross profit” margin on drug sales — the money they make from a drug after the cost of producing it, but before company-wide costs such as marketing, taxes or executive bonuses.”
Medical corporations invent new ways to profit off you
There is one additional culprit in this sad story. Another unique aspect of U.S. health care: pharmacy benefit managers (PBMs), who are “driving up drug costs for millions of people, employers and the government,” according to a report in The New York Times. The Times report, published in June 2024 and written by Rebecca Robbins and Reed Abelson, said the job of these pharmacy benefit managers is to reduce costs but “frequently do the opposite.” These PBMs are “middlemen overseeing prescriptions” for more than 200 million people and owned by giant health care companies such as CVS Health, Cigna and UnitedHealth Group. The Times authors explain:
“They steer patients toward pricier drugs, charge steep markups on what would otherwise be inexpensive medicines and extract billions of dollars in hidden fees, a New York Times investigation found. Most Americans get their health insurance through a government program like Medicare or through an employer, which pay for two different types of insurance for each person. One type covers visits to doctors and hospitals, and it is handled by an insurance company. The other pays for prescriptions. That is overseen by a P.B.M. The P.B.M. negotiates with drug companies, pays pharmacies and helps decide which drugs patients can get at what price.”
Instead of saving money, more money is extracted. Overcharges for drugs, well beyond ordinary profiteering, are frequent, while small independent drug stores are underpaid, driving them out of business. (The PBMs are responsible for paying pharmacies on behalf of employers.) “[T]he P.B.M.s’ business practices touch virtually every American family,” the Times report says. “Even people who don’t take prescription drugs end up paying higher insurance premiums and taxes as a result of inflated drug costs.”
Perhaps none of the above should come as a shock considering that, last decade, when U.S. life spans were beginning to shorten, this was cheered as a “silver lining” because pension costs would be lower and in this decade, the Covid-19 pandemic was delayed being brought under control due to corporate greed. Huge profits were racked up as governments heavily subsidized newly developed vaccines but the pharmaceutical companies kept all the profits; in the case of Moderna minting several billionaires.
Vaccine makers refused to loosen their patent rights, clinging to intellectual property (IP) law, heavily skewed in their favor, to maintain a monopoly. Capitalist governments have rolled over for corporate interests for decades, making IP laws ever more rigid. It is unconscionable, or should be, when IP rules are used to keep life-saving vaccines away from most of the world’s people. A comprehensive waiver of World Trade Organization rules would have, even if temporary for the duration of the emergency, set aside Big Pharma’s IP rights and allowed all manufacturers of vaccines, wherever they are, to produce Covid-19 vaccines. The governments of India and South Africa proposed, in October 2020, just such a waiver to allow the production of one or more of the Covid-19 vaccines with most of the world’s governments behind them. The world waited in vain; the EU openly and the U.S. more subtly ensured IP rules were not touched. Corporate profits were more important than millions of lives.
What do these numbers and dispiriting results tell us? That health care should be a human right, not a good to be exploited for massive profiteering. The more private capital injects itself into health care, the more expensive it becomes with worse results. When denying care is what boosts profits, should we expect anything different? Some years ago I met a Canadian woman who complained about how much she disliked her country’s health care system. I told her of a friend of mine who had recently died. He had a bad heart and was in need of heart medication but the insurance company refused to allow it for him and he died because of that. “Does that happen in Canada?,” I asked. I was met with silence. It’s one thing to have to wait for medical attention sometimes in a non-emergency situation, upsetting as that can be, and not being able to access health care at all. Tens of millions can’t in the U.S., even those with insurance.
More than 26,000 die in the United States yearly because of a lack of health insurance and hundreds of thousands go bankrupt due to the costs. That is the price of private profit in health care. Or, more to the point, the price of capitalism.
As has long been the case, the U.S. health care system is by far the world’s most expensive while providing the worst results among the world’s advanced capitalist countries. And that expense continues to get larger and more unaffordable.
Just how large is the cost of private profit in health care? Almost two trillion dollars! Unbelievable? It certainly seems so. But that is indeed how much more money the people of the United States spent on health care in 2022 than they would otherwise have spent if the U.S. had a single-payer system. This is the direct result of a health care system that is designed to extract maximum profits rather than deliver health care. A system unique in the world in the extent that corporations such as insurance and pharmaceutical companies are allowed to play such a large role.
Health care spending in the U.S. is so extreme that the spending by the U.S. government alone is higher than total spending (as a percentage of gross domestic product) by any other country. Incredibly, the government was banned from negotiating drug prices until the Inflation Reduction Act of 2022 was signed into law, but only some drug prices in some programs can be negotiated, an incredible windfall for Big Pharma. Spending on health care in the U.S. in 2022 reached 16.6 percent of the country’s GDP with government spending alone accounting for 14 percent of GDP. The country with the next highest total, Germany, saw total health care spending account for 12.7 percent of its GDP.
Organizing for health care in Iowa (photo by IowaPolitics.com)Where does the total of nearly two trillions dollars come from? To calculate that figure, I took the per capita health care spending of the three largest EU countries — France, Germany and the United Kingdom — and the neighbor of the U.S., Canada, and compared that average of those four countries to U.S. per capita spending, each for 2022, the most recent year for which statistics are available. The composite average for Canada, France, Germany and the United Kingdom is US$6,613 per capita, converted to U.S. dollars adjusted to create purchasing power parity as reported by the Organisation for Economic Cooperation and Development (OECD). Per capita health care spending in the U.S. for 2022 was US$12,555, or not far from double the composite average of the four peer countries to which it is being compared. The U.S. population in 2022 was 333 million, so multiplying that total against the per capita figure gives us a total of $1.979 trillion.
That is the cost of private profit in health care. And that total is steadily increasing. When I last did this exercise, in 2017, I calculated that the excess money paid to obtain health care for United Statesians was $1.4 trillion for the years 2011 to 2016. As a comparison, excess health care spending averaged $1.15 trillion for the period of 2001 to 2010 and $685 billion for the 1990s. Those ever higher insurance premium payments you are making as your employer forces you to shoulder more of the cost each year — if you are lucky enough to even have health insurance — are most definitely not your imagination.
And unlike other countries, where national health care systems cover everybody, there were 27 million people without health insurance in the United States. And for those with insurance, that does not mean the results are something to be proud about.
The most expensive and the worst results
In a survey of 10 countries — the five countries under discussion here along with Australia, Netherlands, New Zealand, Sweden and Switzerland — the U.S. ranked dead last in health care system performance. This survey was conducted by the Commonwealth Fund, an institution more than 100 years old that supports “independent research on health care” and seeks better health care outcomes. The Commonwealth Fund’s report, “Mirror, Mirror 2024: A Portrait of the Failing U.S. Health System,” pulled no punches in its conclusion: “The U.S. continues to be in a class by itself in the underperformance of its health care sector. While the other nine countries differ in the details of their systems and in their performance on domains, unlike the U.S., they all have found a way to meet their residents’ most basic health care needs, including universal coverage.”
The Fund assessed the 10 countries’ health care systems through 70 health system performance metrics covering five areas: access to care, care process, administrative efficiency, equity and health incomes. Among the five broad areas, the U.S. was ranked last in access to care and health outcomes, and next to last in administrative efficiency and equity. Australia came out first among the 10 countries in this survey; interestingly, by a narrow margin Australia spent the least.
Another sobering result of U.S. health care is that United Statesians “live the shortest lives and have the most avoidable deaths.” The Commonwealth Fund reports pulls no punches about this sad result:
“The U.S. ranks last on four of five health outcome measures. Life expectancy is more than four years below the 10-country average, and the U.S. has the highest rates of preventable and treatable deaths for all ages as well as excess deaths related to the pandemic for people under age 75. The ongoing substance use crisis and the prevalence of gun violence in the U.S. contribute significantly to its poor outcomes, with more than 100,000 overdose deaths and 43,000 gun-related deaths in 2023 — numbers that are much higher than in other high-income countries.”
The report notes that physicians in the “uniquely complex U.S. system” necessitates that all must “spend enormous amounts of time and effort billing insurers. Denials of services by insurance companies are also common, necessitating burdensome appeals by providers and patients.” In contrast, “High performers on equity, including Australia, Germany, and the United Kingdom, have limits on cost sharing (or in the case of the U.K., no cost sharing at all) to ensure that the ability to pay does not constitute a significant barrier to obtaining needed health services. In Germany, out-of-pocket expenses are capped, with the cost of coverage being income-based.” Australia offers free care in public hospitals, something unimaginable in the U.S., and Canberra regulates medicine costs.
The Commonwealth Fund report points to several factors that make the U.S. health care system perform so poorly, including lack of investment in primary care, administrative inefficiency, consolidation of hospitals, underfunding and decentralization.
There is nothing new here; a 2011 Commonwealth report ranked the U.S. last among 16 high-income, industrialized nations when measuring deaths that could potentially have been prevented by timely access to effective health care.
Delivering profits, not health care
What is not said directly in reports such as the above is the very fact that health care in the U.S. is designed to deliver corporate profits, not health care for individuals. Endlessly propagated capitalist ideology tries to convince us that the private sector is always better than anything provided by a government. So it is ironic indeed that the health care system with the most private-sector involvement performs the worst. But when we stop and think about it in a logical manner, freeing ourselves from ideology, this makes sense. Government doesn’t have to earn a profit; private enterprise expects to and will pack its bags if it doesn’t. Just as privatization invariably results in higher costs and often poorer quality than when the service was provided by a government agency as a public good, health care is provided far more efficiently when in public hands.
It’s the “magic of the market” at work. And if you are in need of health care in the U.S., that magic converts your money into fantastic profits. One big way this magic works is to steer as many seniors into Medicare Advantage. Medicare is the government-funded health care system that all who are 65 years of age and older are eligible for. The Medicare Advantage is a privatization of Medicare whereby insurance companies get their hands on health care money provided by the federal government. A June 2024 article published in Journal of the American Medical Association found that — surprise! — this corporate intervention provides less care at higher cost.
The three authors of the report, Adam Gaffney, Stephanie Woolhandler and David U. Himmelstein, flatly declare the health insurance industry’s trade group proclamation that Medicare Advantage is a good deal for taxpayers is false. The authors note that the non-partisan agency Medicare Payment Advisory Commission reported to the U.S. Congress that Advantage “overpayments added $82 billion to taxpayers’ costs for Medicare in 2023 and $612 billion between 2007 and 2024.”
Following up on this report, Corporate Crime Reporter interviewed Dr. Ana Malinow, who works with National Single Payer, a group working toward a single-payer system in the United States. In this interview, Dr. Malinow said, “The Medicare Advantage companies want to pick the healthiest patients out there, because you know that those patients traditionally are not going to cost you a lot of money.” How it works, she explained, is that Medicare Advantage pays a set amount per patient, with more for sicker patients, so that the incentive is to “make their patients appear as sick as possible, often without providing additional treatment.” As a result, “a program devised to help lower health care spending has instead become substantially more costly than the traditional government program it was meant to improve.”
Because of these systematic overpayments, Medicare Advantage is a cheaper option than traditional Medicare. Several of the biggest insurance companies have been charged with fraud by legal authorities, but Dr. Malinow notes that paying fines is merely a cost of business for them. A separate report, by the research group KFF, calculated that insurance companies’ gross margins per enrollee is roughly double the profits made on ordinary group and individual insurance plans.
And providing health insurance is highly profitable. For 2022, UnitedHealth Group reported profits of US$28.4 billion. Cigna had $6.7 billion, Elevance Health made $6 billion and CVS Health made $4.2 billion. “All told, America’s largest health insurers raked in more than $41 billion of profits in 2022,” the Pennsylvania Capital-Star reported. Denying care is one way for these insurance companies to boost their profits. The Capital-Star report said, “An American Medical Association survey found 94% of physicians surveyed said that prior authorizations lead to delays in receiving care and 80% said that prior authorizations can lead to treatment abandonment.”
Big Pharma grabs big profits
Let us not leave out the pharmaceutical companies. Another article in the peer-reviewed Journal of the American Medical Association found that the profit margins for pharmaceutical makers was “significantly greater” than for all others. To determine this, the article’s authors, led by Fred D Ledley, compared the annual profits of 35 large pharmaceutical companies with 357 companies in the S&P 500 Index from 2000 to 2018 using information from annual financial reports. The Big Pharma outfits had gross profit margins (the difference between the cost of goods sold and total revenue) double those of other corporations and net income close to double.
Want more? A report put out by the University of Southern California (not peer-reviewed) found that, adjusted for inflation, pharmaceutical company revenue more than doubled from 1979 to 2018:
“Based on 4,923 firm-year observations, we find that U.S. drugmakers’ sales revenue has increased from $139 billion in 1979 to $321 billion in 2018 (both numbers are in 2018 dollars). A large portion of the increases went to profit, increasing from 15.3% of sales in 1979 to 23.4% of sales in 2018. A much larger increase went to research and development (R&D), which increased from 4.6% of sales in 1979 to 19% of sales in 2018. Expenditures on acquiring drugs developed by other companies also increased from 0.1% of sales in 1979 to 5.2% of sales in 2018. These two categories represent the total costs of developing new drugs, both internally and externally.”
An investigation published by NYRequirements, a provider of health care education, found that the pharmaceutical industry, on a global basis, racked up an astonishing $1.4 trillion in profits for 2022. Pfizer topped the list with $31.4 billion in net income, with five more reporting more than $10 billion. And with that a lot of lobbying to keep themselves in the saddle can be done — Big Pharma spent $372 million on lobbying the U.S. government in 2022. Another €40 million is spent by the pharmaceutical industry to lobby in the EU.
How do these companies grab so much money? Corporate Watch offers five factors:Research and development is directed to “patients who are high-value and who will use the drugs long term.” On the other hand, “one-shot vaccines for epidemics that mainly affect poorer countries” are of no interest.
The patent system prevents cheaper generic medications from being produced so that original manufacturers can collect windfall profits.
“Price much, much higher than costs.” Although the industry spending 20 percent of revenue on R&D is higher than almost any other industry, “sales cover costs many times over.”
Big Pharma spends less than it suggests on developing new drugs; most of what they ultimately market was developed in university and government labs, or in those of smaller research companies, and then bought. The U.S. National Health Institutes provides $39 billion a year to universities, medical schools and other research organizations.
Massive lobbying, both in the U.S. and the European Union.
Corporate Watch provides examples of unconscionable profiteering. They write:
“Insulin usually costs less than $6 a vial to make, but sells for as much as $275 in the US (one example given by the campaign group Patients for Affordable Drugs). In Europe, pharma giant Gilead charged an average of €55,000 for a 12 week Hepatitis C treatment — when pills cost less than €1 per pill to manufacture. Such extreme examples illustrate a general pattern. One academic study found US pharma companies have an average 71% “gross profit” margin on drug sales — the money they make from a drug after the cost of producing it, but before company-wide costs such as marketing, taxes or executive bonuses.”
Medical corporations invent new ways to profit off you
There is one additional culprit in this sad story. Another unique aspect of U.S. health care: pharmacy benefit managers (PBMs), who are “driving up drug costs for millions of people, employers and the government,” according to a report in The New York Times. The Times report, published in June 2024 and written by Rebecca Robbins and Reed Abelson, said the job of these pharmacy benefit managers is to reduce costs but “frequently do the opposite.” These PBMs are “middlemen overseeing prescriptions” for more than 200 million people and owned by giant health care companies such as CVS Health, Cigna and UnitedHealth Group. The Times authors explain:
“They steer patients toward pricier drugs, charge steep markups on what would otherwise be inexpensive medicines and extract billions of dollars in hidden fees, a New York Times investigation found. Most Americans get their health insurance through a government program like Medicare or through an employer, which pay for two different types of insurance for each person. One type covers visits to doctors and hospitals, and it is handled by an insurance company. The other pays for prescriptions. That is overseen by a P.B.M. The P.B.M. negotiates with drug companies, pays pharmacies and helps decide which drugs patients can get at what price.”
Instead of saving money, more money is extracted. Overcharges for drugs, well beyond ordinary profiteering, are frequent, while small independent drug stores are underpaid, driving them out of business. (The PBMs are responsible for paying pharmacies on behalf of employers.) “[T]he P.B.M.s’ business practices touch virtually every American family,” the Times report says. “Even people who don’t take prescription drugs end up paying higher insurance premiums and taxes as a result of inflated drug costs.”
Perhaps none of the above should come as a shock considering that, last decade, when U.S. life spans were beginning to shorten, this was cheered as a “silver lining” because pension costs would be lower and in this decade, the Covid-19 pandemic was delayed being brought under control due to corporate greed. Huge profits were racked up as governments heavily subsidized newly developed vaccines but the pharmaceutical companies kept all the profits; in the case of Moderna minting several billionaires.
Vaccine makers refused to loosen their patent rights, clinging to intellectual property (IP) law, heavily skewed in their favor, to maintain a monopoly. Capitalist governments have rolled over for corporate interests for decades, making IP laws ever more rigid. It is unconscionable, or should be, when IP rules are used to keep life-saving vaccines away from most of the world’s people. A comprehensive waiver of World Trade Organization rules would have, even if temporary for the duration of the emergency, set aside Big Pharma’s IP rights and allowed all manufacturers of vaccines, wherever they are, to produce Covid-19 vaccines. The governments of India and South Africa proposed, in October 2020, just such a waiver to allow the production of one or more of the Covid-19 vaccines with most of the world’s governments behind them. The world waited in vain; the EU openly and the U.S. more subtly ensured IP rules were not touched. Corporate profits were more important than millions of lives.
What do these numbers and dispiriting results tell us? That health care should be a human right, not a good to be exploited for massive profiteering. The more private capital injects itself into health care, the more expensive it becomes with worse results. When denying care is what boosts profits, should we expect anything different? Some years ago I met a Canadian woman who complained about how much she disliked her country’s health care system. I told her of a friend of mine who had recently died. He had a bad heart and was in need of heart medication but the insurance company refused to allow it for him and he died because of that. “Does that happen in Canada?,” I asked. I was met with silence. It’s one thing to have to wait for medical attention sometimes in a non-emergency situation, upsetting as that can be, and not being able to access health care at all. Tens of millions can’t in the U.S., even those with insurance.
More than 26,000 die in the United States yearly because of a lack of health insurance and hundreds of thousands go bankrupt due to the costs. That is the price of private profit in health care. Or, more to the point, the price of capitalism.
Pete Dolack is an activist, writer, poet, and photographer. He has been involved in various activist organizations, including Trade Justice New York Metro, National People’s Campaign, and New York Workers Against Fascism, among others. He has authored the books "It’s Not Over: Learning from the Socialist Experiment," which examines attempts to create societies outside of capitalism and explores their relevance to the present world while seeking a path to a better future and "What Do We Need Bosses For: Toward Economic Democracy," which analyzes past and present efforts to establish systems of economic democracy on a national or society-wide basis. He authored the book "It’s Not Over: Learning from the Socialist Experiment," which examines attempts to create societies outside of capitalism and explores their relevance to the present world while seeking a path to a better future.
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