What’s the True Value of Medicine?

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February 15th, 2016

The media has been full of stories concerning the price of prescription drugs.  Presidential candidates and many in Washington, on both sides of the aisle, have been quick to voice their disdain for the “rich” Pharmaceutical companies and blame them for the increases in healthcare costs.  Even the generic drug companies have come under fire.  While there are certainly instances where unscrupulous drug companies have raised prices without regard to prudent long term industry goals and without the support of other manufacturers or the industry association, it is important to determine what is the true, long term value of prescription drugs.

The infographic below highlights some important areas of value offered by prescription drugs.

healthcare costs infographic 1

These medicines reduce hospitalizations and even offer cures which, in the case of hepatitis C, can save hundreds of thousands of dollars per patient by avoiding future liver transplants.  The hope of developing a medicine that can curb heart disease or control diabetes or even delay Alzheimer’s disease for five years can save hundreds of billions in healthcare costs.  The problem for shortsighted politicians is that these savings may not be recognized for decades or may be realized in a different segment of our healthcare system.  As the infographic shows $1 spent on medicine saves $3 to $10 in hospital costs.

Unfortunately, from Medicare’s perspective, all they see is an increase in Medicare’s Part D prescription drug benefit today with no recognition that a decade later there could be a 10-fold decrease in costs within Medicare’s Part A hospital benefit.  The two parts of Medicare exist in two different accounting silos with no provision for recognizing savings in one system that are produced by prudent expenditures in another.  This short term thinking and lack of coordination is magnified by political expediency, powerful lobbyists, politicians trying to get elected or re-elected and the Congressional Budget Office, who will only recognize benefits generated within these narrow accounting silos.  These are the short sighted and blinder wearing bureaucrats that hinder making the investments now that will pay off in the future.

RetireSafe had always hoped that healthcare reform would have included a process to recognize, account for and reward anything that prevents or postpones disease, whether it was exercise, better eating, smoking cessation or medicine.  Each of these would yield benefits, maybe not immediately, but certainly over the long term, that would reduce the cost of healthcare in America.  We all know how difficult it is to start exercising, lose weight or to stop smoking.  Our government has come up with various programs to encourage us to become healthier with limited success.  The Pharmaceutical industry, on the other hand, continues to discover new medicines that prove over the long run to reduce healthcare costs.  Jumping on the “bash big Pharma” bandwagon is a short sighted easy thing to do that doesn’t recognize the real value in medicines and its impact on lowering long term healthcare costs.