United and other insurers make a profit by restricting the claims they pay, so their profit motive goes directly against people’s need to get healthcare.”
Many claims are exceptionally high due to inflated prices for drugs, medical equipment, and services from specialists and hospital administrators. Private equity firms have further driven up costs, viewing the healthcare industry as a lucrative profit source. “
Our doctors on average get paid more than twice as much as their counterparts in other wealthy countries. Our pay structure for CEOs and other top corporate executives is out of whack and badly needs reforming.”
The Role of Patent Monopolies in Drug Pricing
When prescription drugs cost tens or hundreds of thousands of dollars, it is often not due to manufacturing expenses but rather the result of government-granted patent monopolies. “When a company has a monopoly on an item that can be essential to people’s health or life, it can charge an enormous price.”
This was evident with the introduction of Sovaldi, a breakthrough Hepatitis-C drug, which was priced at $84,000 for a three-month course of treatment—more than $100,000 in today’s dollars. If such drugs were priced at their marginal cost, insurers would have little reason to scrutinize claims so closely.
If we had Sovaldi selling for a few hundred dollars for a course of treatment, the price of generic Sovaldi, it’s unlikely the insurer would be asking many questions.”
The Impact on Patient Care
The high cost of patented drugs and medical equipment leads insurers to limit access. “An insurer may not want to pay for a scan using the latest device but would instead insist on a simple X-ray or other cheaper scan.
If there were no patents on the latest device, the cost of using it would be little different than the cost of a simple X-ray machine.”
Even in a single-payer system, prices would still be far above marginal costs, necessitating restrictions. “
A monopsonist buyer could force the drug companies and medical equipment manufacturers to accept lower prices, but we still would face the problem that they would be charging prices that are far above their marginal cost.”
Rethinking Innovation Financing
Patent monopolies serve as incentives for pharmaceutical and medical device companies to invest in research. However, alternatives exist, particularly direct public funding.
We already spend more than $50 billion a year supporting biomedical research through the National Institutes of Health and other government agencies. The industry spends around $120 billion a year which it expects to be reimbursed through its patent monopolies. This spending would need to be replaced.”
If drugs and medical equipment were sold at free market prices, the financial burden on patients and insurers would drop drastically. “We will spend over $650 billion this year on drugs and other pharmaceutical products, more than $5,000 per family. The cost would likely be in the neighborhood of $100 billion if they were sold without patent monopolies.”
Eliminating Perverse Incentives
By shifting to a system of publicly funded innovation, companies would no longer have the incentive to overstate the safety or effectiveness of their products.
We also would take away the incentive for drug companies and medical equipment manufacturers to misrepresent the safety and effectiveness of their products. This is especially the case if a requirement of getting public funding is that all research findings be fully open.”
Reducing the Burden of Tough Medical Decisions
With lower drug and equipment costs, many tough decisions insurers currently make would disappear. “Having drugs and medical equipment sell at free market prices would eliminate many of the tough calls insurers make today.”
While eliminating patent monopolies wouldn’t fix every inefficiency in the healthcare system, it would be a crucial step toward making care more accessible and affordable. “If we instead funded innovation upfront, and had cheap drugs and medical equipment, most of these tough calls would go away.”
Conclusion
Shifting away from a profit-driven model for healthcare claims and patent monopolies could reduce inflated costs, ease the burden on patients, and improve access to essential treatments. The current structure prioritizes profit over care, and without systemic reform, insurers will continue making difficult decisions that leave many without the treatment they need.
Wall Street Pulls Back as Trump’s Economic Policies Stoke Uncertainty