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Violet A. Maw English 1010-102 Fall Semester Dr. Paul Anderson Exploratory Paper December 15, 2013

THE TRUE COST OF MEDICAL CARE

Introduction
Is not being able to afford lifesaving treatment here in the land of the free really freedom? The issue that has been on my mind recently has been the relatively high cost of health care and in particular that of medications here in the US. I say relatively because I have recently discovered that health care and pharmaceutical products cost more in the US than in other countries. For example, while author Rosenthal observes that $2.7 trillion annual health care bill may not be the use of extraordinary services, but the high price tag of ordinary ones. (1) Barlett and Steele go further and assert that the prices we as Americans pay for prescription drugs are far higher than those paid by citizens of any other developed country (...) and even more surprisingly, I learned from another source that The U.S. is not keeping up with the rest of the developed world when it comes to improving peoples health. (Fox 1). This situation led me to ask, What is causing the prices or cost of health care and pharmaceuticals to be so high? This particular issue is a natural extension of the career path that I have chosen pharmacy. I picked this career because I am very interested in helping people and one way of doing this is by providing them with the medications they need to help them feel better.

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However, I became increasingly aware of just how expensive medications were and that many people were not really able to afford them. I have discovered that this issue is very complex because there are numerous views that seek to explain these prices and each seems to offer a plausible argument. My research question became why is medical care so expensive? And so began my search of the research literature and therefore a quest to find some answers. The Cost of Medical Procedures and Medicines in the USA The first article that I selected was entitled The 2.7 Trillion Medical Bill written by Elisabeth Rosenthal, and published by The New York Times (Health Section) in June, 2013. This newspaper article discusses the cost of medical procedures and medicine in America compared to other developed countries and observes that they are, much higher here in the states. An example that Rosenthal gave was that of a colonoscopy and how it can cost four times more here in the U.S. as opposed to other countries. The author observes that citizens will often forgo medical treatment because they cannot afford it, even after insurance. So, not only is the high price of medicine affecting the pocket books of Americans, it is affecting their health and emotional wellbeing as well. My reaction to this article was very personal. I have experienced having high medical bills that I was unable to pay. I have often wondered why staying alive could be so incredibly costly. This article made me feel even more lost in the medical billing vortex, because it suggests that the American Medical billing system is strongly motivated by money. It was a valuable article in my research to find out why medical care is so high. This article was very long and I felt that it could have been a bit shorter, while still covering the same information. After reading this article, I wanted to do more research on the reasoning behind Americas high prices. My next search led me to the following article.

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U.S. Health Care, Is it Overpriced? The next article that I came across was one written by Maggie Fox, and published on NBC News just this last month. It was entitled, What makes U.S. health care so overpriced? Its not what you think. This article brings to light some very important issues as to why health care is so overpriced. Ms. Fox made some valid points in her article which include that even though we are being charged more here in the U.S., we are not keeping up with the rest of the world in improving our overall health. She observes, for instance, that chronic illness among individuals younger than 65 years accounts for 67% of spending, not the elderly like most would assume. Fox points out that Price of professional services, drugs and devices, and administrative costs, not the demand of services produced 91% of cost increases since 2000. (1) She asserts that the new Affordable Care Act actually encourages health care givers to move away from bills, to one of keeping patients healthy, and providing incentives. Ms. Fox states that the most important way to save costs would be by preventing chronically ill people from getting sicker. (1) I really liked this article because it really started giving me more facts, figures, and food for thought. It also left me feeling hungry to find more information as to exactly WHY prices are so complex. I wanted to get to the bottom of it. The next article I found really seemed to simplify and help satiate this hunger for me. Higher Health Care Costs Driven by Prices My next search brought me to the article High Health-care costs: Its all in the pricing written by Ezra Klein for the Washington Post on March 2, 2012. The authors claim was simple: health care in the U.S. costs more than it does anywhere else because the prices are higher. To which he asked, Why havent we done anything about it? Klein points out that the higher

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prices are not because we are sicker, but rather due to the higher prices. He observes that studies have been conducted to eliminate other culprits that may have led to higher prices. He asserts that U.S. citizens are spending more, without getting better services. Klein points out that a test study carried out by the International Federation of Health Plans showed that in 22/23 cases, Americans are paying higher prices than residents of other developed countries. (1) Americans are left with a huge sticker shock! I learned in this article that other developed countries actually negotiate aggressively with providers to set lower rates. In answer to the question posed by the author, why havent we done anything? I concluded that we cannot do anything if the government doesnt get involved in the pricing of medical care here in the US. I felt that I found an article that simply answered my question of why health-care prices are so high. Next, I needed to find out if the information that I had found so far, applied to pharmaceutical prices. Are the prices high for the same reasons? A Tale of Two Drugs The next article that I found and read was entitled, A Tale of Two Drugs. It was written by a critically acclaimed author, Berry Werth, in October of this year for MIT Technology Review. Berry wrote a tale about two different drugs, and the process the drugs went through to determine their cost. The first drug was Kalydeco, (which after only 3 months of review was approved by the FDA) and the second drug was Zaltrap. Kalydeco was the first drug of its type to treat the underlying cause of cystic fibrosis, while Zaltrap treated advanced colorectal cancer. There had already been other drugs that had similar results to that of Zaltrap. The manufacturer of Zaltrap wanted to charge $11,000 a month for this drug. Werth asserts that there was resistance from doctors because there were other drugs, that had the same effect, but with a smaller price tag. Werth quotes some doctors as saying Enough for the first time to such

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ridiculous prices. After meeting the doctors with much resistance, the drug company then dropped its price in half. On the other hand, the drug company that manufactured Kalydeco, the drug that treated cystic fibrosis, was able to get away with its huge price of $294,000 a year, simply because there were no other drugs with the same benefits. Doctors would agree to pay such a high price for Kalydeco because there was no other choice. Werth quotes veteran drug maker and former Genzyme CEO, Henri Termeer, as saying Its not a science, its a feel (2) with regard to the pricing of new drugs. Berry goes on to say, Ultimately, what matters in pricing a drug is its value. (9) Berrys paper opened the door to me with regard to the multiple, complex pricing arrangements of drug pricing. His paper also led me to think about why is there a price difference between brand name and generic drugs? My search for answers took me to the next article. Brand-name and Generic drugs: why the price difference? Whats the difference between brand-name and generic prescription drugs? The title of this article asks a simple question by authors Pharmacist Erick Mogalian and Professor Pual Myrdal written for Scientific America in 2004. Mogalian and Myrdal claim that its estimated that bringing a new drug to market costs the innovator on average $802 million over a period of 10-15 years. (1) Mogalian and Myrdal explain that the innovator will file a patent for their new drug that they have developed that allows them to sell their product exclusively in order to recoup money spent during development, and also to generate profit. It is only after the patent has expired, that other drug companies can start manufacturing and making a profit. The major difference between a brand-name pharmaceutical and its generic counterpart is neither chemistry nor quality, but whether the drug is still under patent protection by the company that initially developed it. While I appreciate the knowledge that this article gave me, I cant help but

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wonder if it really takes 10-15 years to research and develop a new drug. Does every drug take that long, or is that just an average? I guess the critic in me would really like some more concrete information with regards to exactly how long a drug takes to develop. What are the true costs at the actual pharmaceutical company? I would love to see the price breakdown of exactly where the money is spent while in development and how long it takes to develop a new drug. Conclusion In conclusion, after researching my subject of choice, I found passion about a subject that I knew relatively little about. Initially, I knew that medicine is very pricey, but never really put much thought into the prices, and why they are so high. But as I dug further into the black hole of billing and pricing, and the reasoning behind those prices, I became increasingly aware of just how morally troubling the pricing of medical care is. Though, I feel my knowledge has grown since I started my research journey, I also feel like I am just barely scratching the surface of the wealth of information that is out there to find. Also, it has provoked me to wonder how I might morally live with working in an industry so corrupt. Is there anything that I can do to change the system? Where do I fit in, and how can I change things? I feel that I have a stoked a fire, that I had no idea was there to be stoked.

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Works Cited Werth, Barry. A Tale of Two Drugs. MIT Technology Review, (10/22/2013) Health, http://www.technologyreview.com/featuredstory/520441/a-tale-of-two-drugs Klein, Ezra. High Health-care costs: Its all in the pricing. Washington Post, (3/2/2012), http://articles.washingtonpost.com/2012-03-02/business/35449534_1_higher-priceshealth-care-services-health-care-costs Morgan, Steven and Hurley, Jeremiah (2004-03-16). "Internet pharmacy: prices on the up-andup". CMAJ 170 (6): 945946. doi:10.1503/cmaj.104001. PMC 359422. PMID 15023915. Retrieved 2007-07-11. Rosenthal, Elisabeth. The 2.7 Trillion Medical Bill. New York Times, (6/2/2013) Health Section, http://www.nytimes.com/2013/06/02/health/colonoscopies-explain-why-usleads-the-world-in-health-expenditures.html?pagewanted=all&_r=1& Mogalian, Erik & Myrdal, Paul. Whats the difference between brand-name and generic prescription drugs? Scientific American, (12/13/2004), http://www.scientificamerican.com/article.cfm?id=whats-the-difference-betw-2004-1213 Fox, Maggie. What makes U.S. health care so overpriced? Its not what you think. NBC News, (11/12/2013), http://www. http://www.nbcnews.com/health/what-makes-u-s-health-careso-overpriced-its-not-2D11582695

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Violet A. Maw English 1010-102 Fall Semester Dr. Paul Anderson Exploratory Paper Journal December 15, 2013 Source 1 Werth, Barry. A Tale of Two Drugs. MIT Technology Review (10/22/2013) Health. Retrieved from http://www.technologyreview.com/featuredstory/520441/a-tale-of-two-drugs The author of this article identifies two new drugs. The first drug treats cystic fibrosis, and the other treats a form of cancer. Since there were already other drugs that had similar results to the cancer fighting drug, doctors were unwilling to pay the high cost. The pharmaceutical company then offered the drug at half the price through rebates and discounts. On the other hand, the drug that treated cystic fibrosis had no other competitors, so the pharmaceutical company was able to get the full asking price for the new drug. Barry Werth has written five critically acclaimed books. During a his 30-year career he has also written for The New Yorker, The New York Times Magazine, Outside, GQ, the Smithsonian, and numerous other publications. This article is relevant because it helps to show that the prices of medicine may not always reflect the alleged high cost of developing a new drug. Source 2 Klein, Ezra. High Health-Care Costs: Its all in the pricing. Washington Post, (3/2/2012), Retrieved from http://articles.washingtonpost.com/2012-0302/business/35449534_1_higher-prices-health-care-services-health-care-costs This newspaper article claims that high healthcare costs are due primarily to high pricing. The author begins by making a few comparisons between the costs of American health care with those of other countries which highlights the fact that the costs of American health care, including for pharmaceuticals, are the highest in the world. He then considers the factors that contribute to high prices. These include the lack of government involvement in the pricing of medical care costs and that this allows

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manufacturers to set the price as high as they choose. He also refers to some studies that seek to eliminate other alleged culprits of the high price of American health care. The author of this article is the Editor of the Washington Post's Wonkblog, a columnist for Bloomberg View, and contributor to MSNBC. While Mr. Klien has no formal medical training, he is a veteran journalist with many years of experience writing in the field of health. He also provides credible facts and figures to support his claims. This article is relevant because it helps bring to light other possible reasons why health care prices are so high. Source 3 Rosenthal, Elisabeth. The 2.7 Trillion Medical Bill. New York Times, (6/2/2013) Health Section, Retrieved from http://www.nytimes.com/2013/06/02/health/colonoscopiesexplain-why-us-leads-the-world-in-health-expenditures.html?pagewanted=all&_r=1& The author observes that the costs of [both] medical procedures and medicine [are] much higher in the United States compared to other developed countries, and as a result, citizens will often forgo medical treatment because they cannot afford them, even after insurance. Elizabeth Rosenthal is a medical doctor who writes for the health section of the New York Times and she uses credible sources. This topic is relevant because it applies to most citizens, because we all have to pay for medical attention at some time in our lives. Source 4 Fox, Maggie. What Makes U.S. Health Care So Overpriced? Its Not What You Think. NBC News, (11/12/2013), Retrieved from http://www. http://www.nbcnews.com/health/whatmakes-u-s-health-care-so-overpriced-its-not-2D11582695 In this news article the author identifies where the majority of health care spending is going. She points out/claims that high health care costs do not necessarily mean better health for Americans. She observes that we are not keeping up with the rest of the world in improving the health of Americans. She identifies that the main cost is in the treatment of chronic illness in those that are younger than 65. She suggests that we are treating the disease instead of keeping people healthier. Maggie Fox can be considered a credible author based on her experience as the Senior health writer at NBC News and the fact that she is a Retired science and tech editor. This article helps to eliminate items that one would consider causes in high health care costs.

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Source 5 Mogalian, Erik & Myrdal, Paul. Whats the difference between brand-name and generic prescription drugs? Scientific American, (12/13/2004), Retrieved from http://www.scientificamerican.com/article.cfm?id=whats-the-difference-betw-2004-1213 In this article the authors follow the steps that a new drug endures for development. The authors point out that a new drug has to go through many, many years of testing and developing. Finally, after years of testing, it has to meet FDA standards to be approved. After which, a patent is filed for the drug, typically lasting 20 years. The drug company will then charge consumers a cost to cover the many dollars spent in the development process. Only after the patent has expired, other companies are allowed to make the same type of drug as a cheaper rate. The cheaper drugs are labeled as generic. The authors of this article, Erik Mogalian - pharmacist, and Paul Myrdal - assistant professor of the University of Arizonas College of Pharmacy are credible authors because they are both experts in their career field and can give credible information. This topic is relevant because it helps to explain the cost difference in generic and name brand medicine.