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No Real Healthcare Cost Crisis

March 2011

William Faloon 
William Faloon

For 31 years Life Extension® has warned that corrupt disease-care legislation combined with suffocating FDA regulation will bankrupt the United States of America.

The day of reckoning is rapidly approaching when the federal government will be unable to subsidize the hyper-inflated healthcare prices that it created.

We have shown how inefficient and fraudulent government edicts are the cause of today’s medical cost crisis—and how this catastrophe can be averted with commonsense changes to the law.1-3

A Real-World Example

Life Extension® is on the front lines seven days a week helping people who confront medical issues, many of whom are unable to pay the artificially inflated prices brought on by failed government policies.

I recently received a call from a friend whose younger sister contracted genital herpes and suffered frequent painful outbreaks. Herpes is an incurable virus that 20% of American women (ages 14-49) are infected with.4 It is estimated that 80% of cases remain undiagnosed.5

I suggested that my friend’s sister consider taking 500 mg a day of valacyclovir (Valtrex®) as this has been shown to reduce the number of herpes outbreaks5 and reduce the chances of spreading the virus to one’s sexual partner by 47%.5 I recalled the retail price of Valtrex® was around $3 per tablet, but thought that it might be available as a lower-priced generic.

No Real Healthcare Cost Crisis

When I called the Life Extension Pharmacy®, I was shocked to learn that the brand name Valtrex® had jumped to $7.40 per tablet and that the generic cost almost this much! Since Valtrex® needs to be taken every day for prevention of outbreaks, the monthly cost for the generic comes to around $200, bringing the annual price tag to $2,400.

I was outraged that an off-patent drug could be priced this high and ordered our staff to find out what it really cost to produce high-quality generic Valtrex® tablets. What we discovered is beyond abhorrent. The raw material to make a one-month supply of generic Valtrex® is only 60 cents! The pharmaceutical-quality manufacturing process adds $1.50, which means the total cost to make a bottle of 30 500 mg generic Valtrex® tablets is only $2.10.

Yet this same bottle retailed in pharmacies for around $200—a government-protected markup of 9,523% (or 95 times over the cost of manufacture)!

No other business can get away with charging this much for a product whose patent expired. The only reason this happens is that federal laws provide a virtual monopoly to protect the drug industry’s outlandish profits.

When I called my friend back about the $200/month price, the first thing she said is “My sister cannot afford that.” That means this young girl will suffer frequent herpes outbreaks and is more likely to pass this incurable virus on to others.

Misguided FDA Decision Causes Price of Old Drug to Skyrocket 5,000%

For those concerned that this girl may forever be denied her medicine, drug companies have lobbied Congress to create laws whereby taxpayers will foot the bill for many of those who cannot pay the ever-escalating costs of medical insurance.

As we have so often reported, the federal government gives pharmaceutical companies a virtual monopoly over patented and generic drugs. The outlandish profits earned from these drugs are then used to buy lobbyists who persuade Congress to pass legislation that leaves the taxpayer on the hook for paying for these overpriced medicines.

What a racket! Overcharge so much for your product that most consumers cannot afford it, complain to Congress that consumers cannot afford your medicines—and then receive tax dollars to pay your monopolistic prices.

We long ago proposed that Congress change the law to permit companies to freely make generics, which would result in the price for generic Valtrex® plummeting from $200 a month to somewhere around $7 (or from $2,400/year to $84/year).

I titled this article “No Real Healthcare Cost Crisis” because it reveals how this country is being driven to economic insolvency by corrupt legislation, while pharmaceutical interests enjoy record profits.

Misguided FDA Decision Causes Price of Old Drug to Skyrocket 5,000%

In July 2009, the FDA officially announced what physicians have long known. An old drug called colchicine can effectively treat acute flares of gouty arthritis.

This drug has been sold as a low-cost generic since the 19th century in the US, and its origins go back 3,000 years to the ancient Greeks.

How Is This Affecting You?

Since colchicine was around so long, it pre-dated the FDA itself. The FDA wanted this drug tested for safety and efficacy and offered one company a three-year exclusive if it would conduct a study. In the one-week randomized trial this company conducted, it was discovered that a shortened dosage period produced good symptom management while leading to fewer side effects than longer term use. Astute physicians may have already figured this out, but it is good that a study was done to confirm the shortened dose advantage. The question is, can we afford it?

Before the study, colchicine was sold by several companies for around nine cents a pill. Once the FDA granted the three-year exclusive, the price shot up 50-fold to an average of $5 per pill.6

In 2007, there were 100,000 prescriptions written for colchicine for which Medicare-Medicaid paid about $1 million.7 Under the new monopoly granted by the FDA (with legislative authority from Congress), taxpayer funded agencies (Medicare-Medicaid) will pay around $50 million for the same drug.7

There are more cost-effective ways to have ascertained better dosage for this old drug, such as a one-week trial funded by the National Institutes of Health (NIH). An NIH-funded trial would have cost the government a fraction of the 5,000% increase it and private payers will now have to fork over for a non-patented medication that has been used for centuries in this country.

This is just a tiny example of how pharmaceutical company- sponsored legislation and misguided regulatory policies create an artificial healthcare cost crisis. Multiply this across the entire medical sector and you can see why radical reform is needed if an economic crisis it to be averted.

How Is This Affecting You?

If you obtain health insurance from your job, it now costs your employer nearly twice as much ($6,700 per employee) than it did in the year 2001.9 You might have noticed that you now pay a greater portion of the insurance premium through your employer and that your deductibles and co-pays are substantially higher than what they used to be.

Health insurance costs to employers are projected to double again over the next ten years. This means that fewer dollars will be available to pay you. It also means that employers are not hiring as many people because of skyrocketing health insurance costs.

Employees fortunate enough to have healthcare insurance in 2010 will pay on average $4,023 in premium subsidies and out-of-pocket expenses.10 This compares with almost nothing a decade ago. According to the Wall Street Journal, “Health Costs Are Crushing Small Businesses” as medical premiums have increased four times faster than the rate of inflation since 2001.11

If you pay for your own medical insurance, you’ve already been stung with skyrocketing premium rate increases, along with higher deductibles, higher co-pays and refusals to cover certain expenses.

Those without coverage face astronomical out-of-pocket costs for any serious medical issue.

Drug Makers Sharply Raised Prices in 2009

As if prescription drug costs were not already high enough, brand-name pharmaceuticals increased 9.1% in 2009, while biotech drugs rose 11.5%.8 This follows a pattern of prescription drug price increases that far outpace inflation, even as the cost of the active ingredient plummets (as can be seen in the 60-cent-a-month raw material cost of valacyclovir).

Americans continue to pay the highest prices in the world for their prescription medications as pharmaceutical company influence in Congress guarantees monopolistic-like protection.

Medicare’s Date with Insolvency

According to President Obama, “We will eventually be spending more on Medicare than every other government program combined.”12 That acknowledgment, however, did not stop passage of legislation (Healthcare Reform Act) that provides another Federal disease-care entitlement (and drug company subsidy) for people under age 65.

While the public is finally waking up to the colossal $14 trillion official Federal debt, only a few understand that the $37 trillion unfunded Medicare liability is our real deficit problem. Nothing else comes close to threatening our health and financial well-being.12

Medicare’s Date with Insolvency

The year 2008 marked the first time that Medicare posted a deficit, meaning it spent more on disease-care outlays than the taxes it collected. By the year 2017, the Federal government tells us that the Medicare hospital trust fund will be depleted.13,14 But this number is based on optimistic projections that are not happening, such as a 21% cut to doctors that was supposed to occur in 2010 but was canceled by Congress.13

An increasing number of doctors are refusing to accept Medicare today because it pays so little. If a cut in physician payments is ever implemented, the Medicare system could collapse because there will not be enough physicians to cover the aging population.

The chart on page two was created in 2007 and reveals the stunning magnitude of the Medicare and Social Security deficits. What’s really scary is that this does not factor in the Medicare Prescription Drug Act or Healthcare Reform Act passed by Congress over the past few years that will add trillions of additional deficit dollars to this chart.

The Federal government pretends it can raise taxes enough on wealthy individuals to offset the staggering liabilities it has incurred by promising more sick-care coverage than what Medicare is already on the hook for. The notion that taxes can be raised on a tiny percentage of the population to pay the gargantuan Medicare liability is a mathematical impossibility and represents the largest Ponzi scheme in the history of mankind.