Is it time to end “for profit” healthcare?

Concept of passing away, the clock breaks down into pieces. Hand holding analog clock with dispersion effect

The private healthcare industry is enormous, notoriously challenging to navigate, and making a lot of money at the expense of the public. The industry enjoys massive profits, often by undermining public programs and exploiting patents, whose ruthless pursuit of money usually has life-threatening consequences. It maybe time to end for-profit healthcare.

Politics has moved into healthcare in a big way. The Republican Party constantly bemoans the excessive spending of Medicare yet allows programs to function unimpeded. The Medicare Advantage program significantly contributes to the excessive spending (profits) in the Medicare program, and it needs to be ended.

Big Seven revenue increased 300 percent in the ten-year period studied, while profit increased 287 percent. Potter notes that, at three of these companies, over 90 percent of health plan revenues come from government programs.

The Big Seven, Centene, Cigna, CVS/Aetna, Elevance, Humana, Molina, and UnitedHealth Group are making obscene profits. This ruthless profiteering poses a threat to the stability of Medicare’s financing. It (along with Medicaid) is funded through a payroll tax split between an employer and an employee, the surplus of which goes into the Hospital Insurance Trust Fund. That fund is expected to run out in 2028, according to The New York Times.

Then there are PBMs. The prominence of pharmacy benefit managers (PBMs), an industry that amassed over a trillion dollars over the past ten years. Private insurers increasingly own these companies; as of 2022, 80 percent of the pharmacy benefit market is controlled by three companies (Cigna, CVS/Aetna, and UnitedHealth).

 David Dayen has written PBMs, with their opaque pricing practices, high fees, and enormous market power, are a significant factor behind skyrocketing drug prices. It’s gotten so bad that some drugs can be cheaper if one is uninsured. Some policyholders pay premiums if they need significant care but pay for their drugs out of pocket.

Then there are “fast track drugs”

A 2022 study published in JAMA found that “many drugs granted FDA accelerated approval lack evidence of clinical benefit, even after being converted to standard approval, yet they account for substantial CMS [Centers for Medicare and Medicaid Services] spending.

CMS spends billions on accelerated approval drugs. The JAMA study found that CMS spent almost $68 billion on 38 drugs granted accelerated approval between 2012 and 2017. Once the accelerated approval drugs hit the market, drugmakers also tend to raise prices more frequently than they do for other drugs.

Over a 10-year period, accelerated approval drugs received an average of 15.4 price increases, while non-accelerated approval drugs received an average of 12.7 price increases, according to data GoodRx compiled for NPR.

Accelerated approval drugs may have minimal clinical benefit and undoubtedly cost the US healthcare system a lot of money, but user fees incentivize the FDA to continue accepting drugs through this pathway.

Pharma doesn’t even want to answer investors about patents

Several of the world’s biggest pharmaceutical companies are fighting shareholder proposals to force them to disclose information on their use of a controversial patent strategy that can delay rivals from launching cheaper versions of blockbuster drugs.

A coalition of ethical investors has asked Johnson & Johnson, Merck, Pfizer, Eli Lilly, Gilead, Amgen, Regeneron, Bristol Myers Squibb, and AbbVie to publish a report on the process they follow when applying for multiple patents on a single drug.

Eight of the nine companies are fighting the proposals at the Securities and Exchange Commission. Companies routinely challenge shareholder proposals at the SEC and often win. BMS is still involved in discussions with the investors. 

The shareholder proposals come amid a public debate over drug companies’ use of so-called “patent thickets,” whereby they file multiple and sometimes hundreds of patents beyond the primary patent covering a particular compound. Critics allege the strategy delays the launch of generic medicines by rivals even after the 20-year exclusivity period on the primary patents of blockbuster drugs elapses.

Humira, the world’s best-selling drug, which has amassed $200bn in global sales for AbbVie, faced competition in Europe in 2018. But the first biosimilar competitors were only able to launch this year in the US due to an extensive “patent thicket” created around the drug, claim rivals.

“You can’t litigate through 100 patents: it’s just too expensive and too risky,” said Rachel Goode, head of legal and Intellectual Property at Fresenius Kabi, a healthcare company that makes generic drugs.

Big pharma defends its patent strategies, arguing that intellectual property protection is required to justify continuing investment in existing drugs. They say these investments drive innovations that benefit patients, such as new dosing regimens, delivery methods, and combinations with other drugs that provide real patient benefits, which we know to be a lie.

Healthcare should not be like this, and would not be if the patent system worked as intended. These cases demonstrate how drug companies have stretched out patents and monopoly profits for longer than the 20 years they are allowed to support risky research and development.

Healthcare is just too profitable, and everybody wants to make a lot of money at the expense of people. While many decry socialism, it’s time to admit that for-profit healthcare is not working. Big pharma is one of the most powerful lobbyists in Washington, influencing laws, public policy, and political elections. Every year, Big Pharma lobbies on more than 1,500 pieces of legislation, spending upwards of $100 billion to influence the outcome. It’s time for a change.