For more than a decade the World Health Organization has noted the corruption in the healthcare industry, and in particular, the pharmaceutical industry. They report that corruption in the industry is widespread because of the large number of intermediaries before healthcare or drugs reach the patients who need them. Each of these steps, whether in insurance, hospital administration, drug company research, or government regulators, provides an opportunity for corruption, and drives up overall healthcare costs. While it is sometimes argued that more government regulation and oversight is needed, in its current form, it is the government's extensive involvement in the industry, and very large lobby presence of the healthcare industry that increases the opportunities for corruption. The end result wasted taxpayer dollars going to increase revenues and profits for the medical industry.
According to MapLight, a non-profit, nonpartisan research organization, the Pharmaceutical Research & Manufacturers of America (PhRMA), a drug industry advocacy organization, spends roughly $20 million a year, influencing policymakers on Washington, including decision-makers from the Food and Drug Administration (FDA). Other multi-million-a-year dollar lobbyist organizations or corporations descending daily on Washington D.C. include the American Medical Association, Pfizer, CVS Health, Amgen, Eli Lilly, Biotech Industry Organization, Blue Cross Blue Shield, Merck, Johnson and Johnson, Bayer, GlaxoSmithKline and Anthem. These lobbying groups and companies are lobbying for a reason. They know that the amount of lobbying time and money will more than pay for itself in terms of more favorable laws (insurance, pharmaceutical and healthcare management companies were highly involved in the structure and form of Obamacare), and changes to or increased regulations (which actually benefit existing companies as they increase barriers to entry for competitors).
Patent-protected drugs in particular, allow drug companies to increase prices with abandon (see my last article for more on that). The lack of healthcare transparency via low co-pays, insurance, Medicaid and Medicare allows drug prices (and other medical treatment) to be easily inflated, fueling overall healthcare inflation. For example, hospital chains use the low level of healthcare transparency to pad their profit margins by marking up the prices of drug they give to their patients. An analysis by PhRMA estimates that of 20 leading brand-name medicines, the average hospital markup (after price-negotiations) to consumers and their insurance companies, above what the hospitals paid for the drugs, amounted to more than 250%. With the growing number of drugs prescribed in hospital, these price markups provide for them an increasing profit center. Given the already rapid price increases generally seen for name-brand drugs, hospital chain drug price markups add even more sticker shock to hospital bills, and thus increasing costs for individuals, health insurance rates and taxpayer costs via Medicare and Medicaid.
Pay to Play
In the case of pharmaceutical companies, they are heavily reliant upon government approval and patent protection for its drugs, as I talked about last time. They have learned that lobbying dollars are generally rewarded with larger profits. The more than 3,000 registered healthcare lobbyists on Capital Hill work hard to protect those margins profits, even when they don't necessarily result in better healthcare outcomes. The Food and Drug Administration (FDA), which is supposed to provide objective oversight and approval for dangerous drugs, is the key to the door for drug industry profits. The FDA used to be an obstacle for drug companies, but has become more of an ally in maximizing industry revenues and profits.
One conspicuous change allowing even more corruption to enter the FDA and the pharmaceutical industry than before came in 1992. Prior to that date, funding for the FDA came via taxpayers, independent of drug companies. In 1992, a law was passed whereby much of the drug review funding by the FDA would come from the drug companies themselves in the form of drug review application fees. While officials of course maintain that the source of their funding has no influence on their ability to objectively review drugs, the fact remains that many of the thousands of drugs that have come to market over the last few decades have offered few benefits, much higher prices than safer alternative treatments, and often with dangerous or even fatal side effects.
Drug companies have a high incentive to push drugs through testing, trials and regulatory approval as quickly as possible and regulators have incentives to move on to the next drug application and its associated revenues. In 2012, the Economist magazine wrote (in reviewing the book, Bad Pharma, by Ben Goldacre), “Pharmaceutical companies bury clinical trials which show bad results for a drug and publish only those that show a benefit. The trials are often run on small numbers of unrepresentative patients, and the statistical analyses are massaged to give as rosy a picture as possible.” Drugs that fail to meet safety or efficacy standards are often repackaged for another health ailment or pushed back onto the market with “improved” trials.
A horrendous and infamous example of what can happen with the often less than rigorous or ethical standards among the FDA and drug companies is with the anti-inflammatory drug, Vioxx. Despite clinical trials showing four times the risk of heart attack, falsified clinical trials, and manipulated data outcomes, the FDA approved the drug, which was later determined to have caused at least 88,000 additional heart attacks, according to the FDA. Incredibly, a year after the drug was withdrawn, the FDA voted to allow the drug back onto the market (which thankfully, has not happened thus far, at least in its original form).
Many large drug trials are not even representative of the drug user population. Children are normally excluded from drug trials yet children are a large market for most drug makers. That includes medical conditions that are more likely to affect children, such as asthma, migraine headaches, schizophrenia and bipolar disorder. Children are still being treated by medication for these problems, though often without children tested in safety and efficacy trials.
Older Americans or those with health problems are also often excluded from drug trials. A study by the Robert Wood Johnson Foundation found that one in five drug trials excluded participants based on age alone (usually older citizens), and another 45% excluded participants if they had physical disabilities or functional limitations, cognitive impairment, lived in a nursing home, or if they had other illnesses besides the condition the drug is trying to treat. In all, the study found that just one in four drug trials looked at outcomes that were relevant to older adults. And given that older citizens and those with worse health conditions are generally the heaviest users of prescription drugs, they are taking drugs that have likely not been tested on people like themselves. They have thus become unknowing participants in real-time drug trials. It's no surprise then, that many side effects and potentially adverse outcomes are added after drugs have gone to market and thousands or millions have used them.
(Spending) Money for Nothing
The more than $3,500,000,000,000 ($3.5 trillion) spent in the U.S. each year on healthcare, combined with medical industry influence influence on policy-makers has not translated into great health outcomes for most Americans. Studies show that perhaps a third of that amount is spent on ineffective, price-inflated or harmful drugs, unnecessary surgeries, extended hospital stays resulting from hospital infections, or other “adverse events”. A few years ago, an article titled, “Institutional Corruption of Pharmaceuticals and the Myth of Safe and Effective Drugs”, was published in the Journal of Law, Medicine and Ethics. The authors' analysis found that about 90% of the drugs approved by the FDA over the prior 30 years had little or no advantage compared to existing drugs.
Besides being costly and ineffective, many or most of those drugs are dangerous. A 2011 study published in the medical journal Archives of Internal Medicine found that the most commonly prescribed drugs listed an average of about 100 potential side effects. A report by Harvard University found that about 53,000 people each week in the U.S., more than two million a year, go to the hospital because of adverse effects from prescription drugs. About 2,400 Americans die from prescription drug use each week, more than 100,000 a year.
The U.S. Centers for Disease Control (CDC) states that antibiotics cause the most “adverse drug events” and that group of drugs alone leads to 140,000 hospital room visits a year in the U.S., and cause more than 23,000 deaths. A British Medical Journal study in 2016 found that, in all, more than 250,000 deaths a year in the U.S., about 700 deaths a day, are the result of medical errors, making it the third largest cause of death in the country, after heart disease and cancer. That's more than twice the number from suicides, firearm deaths and motor vehicle accidents, combined.
As to the argument that all of the trillions of dollars in U.S. yearly medical spending is necessary and has a correlating effect on the health outcomes of its citizens, comparing health metrics and spending across countries does not seem to support that view. The graph below compares healthcare and medical spending across 35 developed nations after adjusting for purchasing power parity (PPP), the cost of living for each respective country. Even after these adjustments, the U.S. is far and away the largest spender on medical and health services, spending nearly two and a half times that of the average OECD nation.
While average life expectancies have been steadily rising in the U.S., the rate of improvement has not been as great as most other countries. The chart below shows improvements in life expectancy over the twenty-five year period ending 2015. Over this period the U.S. had one of the lowest rates of lifespan improvement, compared to other countries, including those with already high lifespans. Worse, in recent years, average U.S. life expectancy has actually flattened and turned negative. In 2015 average life expectancy in the U.S. declined, with higher rates of death from heart disease, stroke, Alzheimer's, respiratory disease, kidney disease and diabetes, as well as unintentional injury and suicide. In 2016 average life expectancy for Americans fell again, with the two-year consecutive decline the first since the early 1960s. During these years nearly all other nations' lifespans have continued to improve.
According to World Health Organization (WHO) data, in 2015 the U.S. ranked 31st among all countries (though as noted, U.S. average lifespans have fallen slightly since then). The U.S. average life expectancy now ranks below most European countries, as well as Cuba, Canada (which averages more than 3 years longer lifespans), and even behind the Latin American countries of Chile and Costa Rica.
One of the notable health success stories in the U.S., has been the steadily declining rate of smoking, which has fallen by nearly ten percentage points in just the last twenty years (from about 25% of adults to about 15%). However, this decline in smoking rates has not seemed to have translated into much improvement of longevity, particularly when compared to the improvement of lifespans in other nations, which generally have higher smoking rates and have had slower rates of decline in smoking than the U.S. Of the 30 countries with a longer average life expectancy longer than the U.S., only three have a lower percentage of citizens (male and female combined) who smoke - Australia, Canada, and Costa Rica.
In contrast, Belgium, Chile, France, Germany, Greece, Israel, Italy, Japan, Malta, Portugal, Singapore, South Korea, Spain, and Switzerland have much higher rates of smoking (male smoking rates at least 10 percentage points higher) than in America, yet those same countries have longer average lifespans (both male and female), according to WHO data. And despite the health advantage this lower smoking rate would seem to give Americans, individuals in these countries with high rates of smoking both live longer and spend much less on healthcare than the U.S. does. Greece and Chile have very high male and female smoking rates yet Greece spends less than a quarter on healthcare than Americans do adjusted for purchasing power, yet live longer. Adjusting for cost of living, the U.S. spends about six times what Chile spends on healthcare, yet the average Chilean outlives the average American.
Average life expectancies are an important measure of overall health for a country, though other measures are important too. Older Americans especially, are not in great health overall. A University of Michigan study reported that in 2014 that less than half of Americans over the age of 65 report feeling “healthy”, with only about 30% of black and Hispanics reporting the same. The percentages for blacks and Hispanics is actually lower than when the study was begun in the year 2000, when U.S. per-capita health spending was barely half of what it is today.
Below is a graph of the Bloomberg Global Health Index, ranking the 50 “healthiest” countries. This broader interpretation of health includes life expectancy, cause of death, high blood pressure, tobacco use, physical activity, childhood malnutrition, mental health and other factors. Despite spending the most on healthcare by far, the U.S. ranked 34th by this index.