MYTHS AND FACTS OF HIGH COSTS IN HEALTH CARE. #2

We continue examining the source of high health costs in the USA; the next contributor , and a important one is;

C-PHARMACEUTICALS ;

This segment consists of the producers and the retailers.

The retailers are the pharmacies and the "surgical supply outlets. The later I will return to when I discuss that industry as part of the inefficiency of cost control by Medicare.

Medical costs can be controlled at the retail outlet level. Most pharmacies are part of large retail chains in which filling prescriptions is a highly profitable but small element of the store mix. The pharmacy department by design is located in the rear of the store This encourages spontaneous purchases by the customer when they proceed to the pharmacy department to pick up prescriptions. The markup on various medications varies widely among different chains. Of course proprietary drugs are the costliest, but the profit margins on filling generic prescriptions are greater. This margin not price is why generics are actively promoted by the chains.

The manufacture and developer of new medications. Like any worker or business the pharmaceutical house is in business to earn money. The big companies who do research have a large investment in the producing of a new medication or therapeutic adjutant. Naturally they want to make enough money from every invention by research, as they can.

This is not the place to go into the costs in time, labor, false leads, testing for safety that go into the developing a unique medication for the market. Promoting and marketing the medication to the profession can also be costly. Also there is the unspoken risk of being the losing defendant in a class action law suit or suits if a drug after a period on the market is unexpectedly found to have detrimental effects.

It is true that in recent years the pharmaceutical manufactures have gone into great expense to publicly market their product. That is an element entering the final cost to the patient which should be prohibited.

We are bombarded to insist on generics. They only become available when the protective patents expire. Truly they cost much less to the consumer as well as the manufacture who has not had any expense in developing the drug.

Like the pirate counterfeiter who will copy a movie or music DVD and sell it through various outlets at prices well below the original, the generic drug manufacture is doing a similar but legal action. He is profiting on the work of someone else.

Perhaps this example would be clearer. Suppose you are an author and just had a best seller published. You would earn royalties from the publisher for each copy sold. You are now profiting from your labor, that is as things should be. But instead some off shore printer would without authorization reproduce your book, publish it and distribute it through cut rate outlets. You would not receive one penny from the sale of those copies. Would you consider that to be OK.

Translate the relationship of the generic manufacture and the company that developed the drug to the above and understand why the developer must make as much as possible from the early sales.

We have no knowledge of the markup the different retail chains put on the medications they sell. The price the consumer pays is determined by the cost to the seller plus his profit. Since generics cost the retail seller much less than the proprietary drug, the chain can increase the unit markup to a greater degree than the named medication and still undersell by a wide margin.

The savings from the various levels of the pharmaceutic industry could come from repricing medications after the developmental cost are recouped. A small amount in the price should be reserved for research and development of improved medications.

Indirectly related to the medicine costs in health care is the fact that although the generic may have the same chemical formula as the original there may be differences in therapeutic results that may be related to inert substances in the production of the consumer item. With have been recent become aware of quality control issues with some of the chemicals or drug production from China. If the results are compromised the ultimate treatment cost will be greater.

















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