Guest columnist Allen Woods: Profits from American health care

It’s always dangerous for me to watch TV as I’m particularly susceptible to infectious worms that repeat a musical refrain or catchphrase long after commercials have ended. (I thought “earworm” was a humorous term, but like everything else today, it’s been studied by psychologists and medical professionals as INMI-involuntary musical images.) Overall, I accept that as collateral damage from my basketball and Jeopardy! mania, but I was alarmed when I started humming the jingle for a prescription diabetes drug, something I thankfully have no experience with.

I started noticing the television commercials for prescription drugs and was soon overwhelmed with promotions designed to fight rheumatoid arthritis, diabetes, asthma, heart problems, strokes, osteoporosis, eczema, and a variety of variety of others. With minimal research, I found that pharmaceutical companies currently spend an estimated $4.5 billion a year on television commercials for prescription drugs that typically have extremely high price tags.

Pharmaceutical companies defend high prescription drug prices and advertising expenditures by pointing out the huge research and development (R&D) costs associated with creating, testing and approving new drugs. A Forbes business writer backed them up by comparing drug R&D investments to those of tech giants like Amazon, Google and Apple, finding the rate for drug companies much higher as a percentage of revenues.

But this approach assumes that pharmaceutical companies are just another cog in the corporate machine chewing through all consumers in search of higher profits. In the United States, Canada and Europe, drugmakers have always made large profits and continue to be the US sector with the highest profit margins: an average of 15-20% over a decade compared to 5-9% for top earners in other industries (

The European Union, Canada and the United Kingdom all ban the marketing of prescription drugs to consumers. In those areas, I would be spared the drugworms and exorbitant drug prices that reflect advertising costs. Prescription drug costs for consumers, including the government, in those industrialized areas are about half what they cost in the U.S.

The US government pays more (out of our tax dollars) for prescription drugs and protects the profits of big pharmaceutical companies (through patents, etc.) better than anywhere else in the world. It is no coincidence that the pharmaceutical industry spends $4.5 billion lobbying politicians, more than double the amount spent by the second largest industry (insurance).

Another spectacular mismatch between for-profit healthcare and the U.S. public is noted in a New Yorker article on the “hospice industry.” Hospice was born in England in the 1960s as a response to the physical pain and social isolation of terminally ill patients in hospital intensive care units. When it became clear that the use of pain relief instead of futile, expensive and painful life-prolonging treatments and assistance with social and family contact during a person’s last weeks or months was far superior to previous approaches , hospice programs have become commonplace in most hospitals.

But as seems inevitable under capitalism, the profit motive has overwhelmed the compassionate care that spawned the movement. The federal government saw large Medicare savings by avoiding costly end-of-life hospitalizations and authorized Medicare to pay for the lower costs of hospital care under Ronald Reagan.

Soon, for-profit companies began offering hospice care—they accounted for 30 percent of programs in 2000, but 70 percent today, many owned by private equity firms. Why such a large increase? Medicare pays for each day a patient is in a program. A large company with thousands of patients a year can generate millions of dollars. But even more tantalizing was the fact that government payments were essentially made on an “honor system” with virtually no oversight.

Once this became widely known, the abuses came hard and fast. Many people were enrolled in care whose medical condition was likely not terminal (6 months or less to live), and patients were often extended for multiple 6-month periods. After the government began penalizing programs with excessive deferral rates, large corporations responded by pushing “vendors” to enroll new patients, shutting down services for those who jeopardized their bottom line, many of whom had become dependent on the program for medical care and social assistance.

One lawyer described ongoing scams (7 of the 10 largest hospice companies have been sued for fraud at least once) as a predictable outcome when there is “a capitalist beneficiary [the for-profit hospice company] and a socialist paymaster [Medicare without oversight].” It is clear that some basic American rights, such as health care and education, should not be subject to capitalism’s insatiable hunger for profits.

Allen Woods is a freelance writer, author of the Revolutionary-era historical fiction novel ‘The Sword and its Scabbard’ and a Greenfield resident. His column appears regularly on Saturdays. Comments are welcome here or at [email protected]

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