Life Extension Magazine®

Issue: Aug 2014

Collapsing Within Itself

There is no real healthcare cost crisis as politicians claim. Instead, a marketplace dominated by pharmaceutical lobbyists use regulatory barriers to gouge the public with monopolistic prices. Deregulation would improve health care, lower costs, and eliminate the need for government-mandated insurance programs.

By William Faloon.

William Faloon
William Faloon

Do you remember when your employer paid 100% of health insurance premiums for you and your family?

This free health insurance was widely available in the 1980s and usually covered every medical expense. Back in those days, you did not read about healthcare costs bankrupting individuals, municipalities, corporations, and potentially the federal government.

In the 1980s, we at Life Extension® were a lone voice warning of economic turmoil unless medicine was radically deregulated.

The government’s response to our free-market approach was multiple seizures of products and relentless attempts to jail us. This was done at the behest of those in the mainstream who did not want their government-protected profit machine interfered with.

Move forward 30 years and exorbitant healthcare costs dominate the financial news. Politicians are desperately trying to figure a way out of a crisis their predecessors created.

You may wonder why no one has come up with a real-world solution. Omitted from the debate are the monopolistic pricing powers that regulations bestow to healthcare providers. These regulations (restrictions) preclude innovative competitors from entering the market, while creating mounds of burdensome bureaucracy.

Consumers pay for these regulations in the form of high prices, shortages, long waits, side effects, and inferior care.

Inherent inefficiencies within the former Soviet Union led to it collapsing within itself. These same ineptitudes exist with government-regulated medicine in the United States.

As we have exposed for 34 consecutive years, the cost of providing quality healthcare is a fraction of what is charged to individuals, insurance companies, and government programs by industries protected by authoritarian edict.

Collapsing Within Itself  

Our solution is quite simple. Tear down the regulatory barriers that cause medical costs to be so grossly inflated, and what appears to be a permanent healthcare cost crisis will disappear into the history books.

The media does some accurate reporting about outlandish medical prices, but the public quickly forgets the story. So we did some searching to see how many articles exposing medical-related price gouging we could find. The number was astronomical.

When one looks at the magnitude of medical price gouging, and how widespread it is, the reason that healthcare is today’s leading political issue becomes brutally apparent.

The underlying cause of this financial catastrophe are antiquated regulatory barriers that impede the introduction of more cost-effective ways of delivering better medical care to consumers. These senseless regulatory barriers enable hyperinflated prices since those offering superior medicine at lower prices are not allowed in.

What Life Extension predicted in the 1980s is happening before your eyes. Healthcare costs are spiraling beyond the affordability of the private and public sectors combined.

Markups Beyond Comprehension

Markups Beyond Comprehension  

A woman named Jeanne Pinder experienced medical price gouging first hand and uncovered numbers that even startled me.1

What caused her to be curious was an anesthesia bill for $6,000 from one hospital that was three-times higher than the anesthesia bill from another hospital in the same timeframe. She then questioned why an anti-nausea drug (ondansetron) was billed by the hospital at $1,419.

Jeanne found that the price of ondansetron from a local drug supplier was only $2.49. This indicated the hospital had marked up the price of this one drug by 569 times!

Jeanne then did some meticulous research to find out what various insurance plans would pay for ondansetron. For the same drug Jeanne was billed $1,419, the following insurance programs would pay:

Veterans Administration: $15.76

Michigan Blue Cross
Blue Shield: $17.60

Medicare: $24.36

 

The hospital charged $1,419 for a drug that cost less than $3 to buy. Jeanne’s investigation provides a real-world example of why healthcare costs have exploded beyond any real-world ability to afford.

Next time you’re told more money has to come out of your paycheck or pension to cover increased medical insurance premiums, or your private insurance rates go up, understand this is a facade designed to enrich the chosen few in the entrenched medical establishment. It has no basis in economic reality.

New York Times Exposes Egregious Markups

The New York Times published an article last year titled “ How to Charge $546 for Six Liters of Saltwater.”2

This investigative report looked at what the manufacture’s price was for saline IV solution and what hospitals billed to patients or their insurance carrier. It turned out that some of the patients’ bills included markups of 100 to 200 times over the manufacturer’s price, not counting separate charges for the administration of the IV solution.

How did the New York Times find out the saline cost? Manufacturers are required to report such prices annually to the federal government, which bases Medicare payments on the average national price plus 6%. The limit Medicare would pay for one liter bag of normal saline was $1.07 last year. Yet a bill from a New York hospital charged a private insurance company $91 for a bag of saline that cost the hospital just 86 cents.

What consumers forget is that private insurance companies hike insurance premiums based on these inflated drug charges.

Corrupt Lobbying Causes Asthma Drug Price To Soar

Corrupt Lobbying Causes Asthma Drug Price To Soar  

When an off-patent asthma drug went back on-patent, its price soared from $15 to $100.3 The name of this old-line drug is albuterol and it is one of the most common asthma medications used.

The way this off-patent asthma drug got back on-patent provides a startling look into the insidious lobbying schemes behind today’s inflated drug prices.3,4

In order for albuterol to be readily inhaled into the bronchi, it requires a propellant. The propellant in all albuterol drugs was CFC ( chlorofluorocarbon). CFC is the ozone-depleting agent that used to spew out of air conditioners, refrigerators, aerosol sprays, and many kinds of industrial equipment. CFC was banned from virtually all uses, but it was still permitted to be used in the small amounts contained in drugs like asthma inhalers until late last year.5

Pharmaceutical companies that lost patents on medications that used CFC wanted to regain a monopoly on this lucrative market. So they went to the extreme length of contributing $520,000 to a supposed environmental protection group to lobby the FDA to remove CFC from all drugs. This consortium also aggressively developed patented combinations of albuterol and other inhalants with new propellants that won FDA approval.6

This nefarious lobbying effort paid off. In 2005, the FDA approved an outright ban on many CFC-based inhalers starting in 2009.7 Subsequent bans took effect on other CFC drugs.7,8 Bear in mind that the consortium behind this lobbying scheme consisted of the same companies selling CFC-propelled drugs. They were effectively lobbying the FDA to ban their own drugs so they could monopolize the market with the new propellant versions they were patenting.6 CFC was the most effective medical propellant and according to some scientists, when compared to global CFC emissions, the tiny quantity used in inhalers posed no significant negative impact on the ozone layer.6

The payoff for this deceptive lobbying campaign was a 6-fold increase in the price that could be charged for the new patented albuterol that was inferior to the previous CFC version in delivering the drug to suffocating asthmatics.8

Schemes like this to rip off consumers are not exceptions. They are customary business practices of companies that routinely deceive the courts, Congress, and the FDA to deny generic competitors access to the market and stomp out the introduction of new medical products that could save lives and lower healthcare costs.

Do you see why there is no real healthcare cost crisis? There is instead a crooked marketplace dominated by lobbyists who use the government’s regulatory barriers to gouge the public with monopolistic prices.

Analogizing This To Gas Prices

Analogizing This To Gas Prices  

Just imagine if Exxon® wanted to monopolize the gasoline market and patented a less efficient way of refining crude oil into gasoline.

Then imagine Exxon® funds a fake environmental group to lobby the EPA (Environmental Protection Agency) to ban currently used refining methods. Exxon® would then monopolize the market with its patented refining method and be able to increase the retail price of gasoline from $3 a gallon to let’s say $18—the same 6-fold increase that occurred with albuterol. This would force consumers to spend over $300 to fill their tank.

Since most people cannot afford a $300 gas tank fill, Exxon® would need to emulate pharmaceutical companies and persuade the government to use tax dollars to subsidize their artificially inflated prices. This would force the government to set up a special website to determine which Americans were eligible for gasoline subsidies based on individual income levels.

Do you see what a mess this would create? There is no way that government could afford to subsidize these artificially inflated gas prices, nor could companies do so for their employees or unions for their members. Yet this is exactly what is happening with conventional medical costs. Prices are being corruptly inflated, and all Congress does is bicker as to who is going to pay it.

The harsh fact is that no one can afford to keep paying for something that is corruptly priced far beyond its free-market value. The fallout from this occurs before our eyes with the pending insolvencies of Medicare, Medicaid, municipal health plans, along with large swaths of the American economic landscape including the post office.

This Catastrophe Is Avoidable

Medical care is not a luxury. It becomes a necessity when one falls ill. Medical care is so essential that hundreds of different state and federal government programs have been created to regulate and pay for it.

Yet many of these government programs encourage fraud and force inefficiencies. The end result has become price gouging so severe that medical care has become unaffordable to society as a whole.

By way of example, the average annual cost per household for healthcare is around $20,000.9 The average household, however, does not earn enough to part with $20,000, so no tax and redistribution system is ever going to work in the long run.

Common sense deregulation, on the other hand, would force vast improvements in healthcare while dramatically lowering costs. Compare this to the electronic industry, which has seen exponential technological enhancements, but constantly plummeting prices.

If these kinds of advances had ever been translated to the medical arena, cures for virtually every degenerative disease would likely have already occurred.

Fallacy Of Affordable Care Act

Fallacy Of Affordable Care Act  

Proponents of government-subsidized healthcare fail to realize the inflationary impact it has on healthcare prices.10-12

When the Medicare Modern-ization and Prescription Drug Act of 2003 was passed, it gave pharmaceutical companies free reign to charge the federal government full retail price on prescription drugs covered by the Act.13 It should be no surprise that the Medicare Modernization and Prescription Drug Act of 2003 was written and pushed into law by pharmaceutical lobbyists.

The Affordable Care Act passed in 2010 is deceptively named. Premiums and co-pays for typical people are high, while annual deductibles are exorbitant.14-16 My private health insurance premium in 1982 was only $780 per year and paid full expenses for any hospital facility I chose in the United States. My deductible was virtually non-existent. The Affordable Care Act restricts where policy holders can get treatment, which can be a problem when a superior therapy is located outside one’s community hospital network.

Under the current so-called “Affordable” Care Act, young people today are paying around $3,000 a year in premiums for basic health insurance and are faced with annual deductibles of over $5,000!17,18 A significant percentage of the population does not have $5,000-$6,000 to cover their annual deductible, meaning the government-mandated insurance premiums they pay are often of little real-world value.

The more accurately defined “Unaffordable Care Act” has spawned fierce debate. When you see politicians attacking each other over how to best fund soaring sick care costs, remember that there is no real-world solution as long as the government grants monopolistic pricing power to conventional medicine. High medical prices would plummet in a deregulated environment, and the need for an “affordable” care act might become obsolete.

What You Can Do

The public is slowly recognizing the disconnection between medical costs and the inflated prices consumers are forced to bear. Media stories exposing over-priced healthcare are seen one day but often forgotten the next.

Politicians act oblivious to medical price gouging and can’t stop arguing about where the money should come from to fund bloated healthcare costs. If Congress just investigated why American medicine is so expensive, they might understand the need to remove archaic regulatory barriers that underlie the problem.

Three years ago, my book Pharmocracy was published for the purpose of exposing the flaws in the current regulatory system that cause healthcare to be so overpriced. I want to encourage members to not waver in this battle and to send a hard copy of Pharmocracy to their Representative and two Senators.

The cover price of Pharmocracy is $24. If members want to purchase three or more copies, we’re reducing it to just $5 per book, which include updates (like reprints of this article).

Rather than sit back and watch our nation financially flounder, I hope enough of our 200,000 members will order at least three copies of Pharmocracy and mail it, with the accompanying updated articles we’ll include, to their Representative and two Senators.

For longer life,

For Longer Life

William Faloon

P.S. Turn the page to order three hard copies of Pharmocracy for $5 each—79% off the cover price!

References

  1. Available at: http://clearhealthcosts.com/blog/2010/11/the-1481-drug-markup. Accessed March 10, 2014.
  2. Available at: http://www.nytimes.com/2013/08/27/health/exploring-salines-secret-costs.html?_r=0. Accessed March 10, 2014.
  3. Available at: http://www.nytimes.com/2013/10/13/us/the-soaring-cost-of-a-simple-breath.html. Accessed March 10, 2014.
  4. Available at: http://www.gpo.gov/fdsys/pkg/chrg-111hhrg50066/html/chrg-111hhrg50066.htm. Accessed March 10, 2014.
  5. Available at: http://www.fda.gov/newsevents/newsroom/pressannouncements/ucm371901.htm. Accessed March 11, 2014.
  6. Available at: http://www.motherjones.com/environment/2011/07/cost-increase-asthma-inhalers-expensive. Accessed March 11, 2014.
  7. Available at: http://www.motherjones.com/kevin-drum/2013/10/heres-why-your-asthma-inhaler-costs-so-damn-much. Accessed March 11, 2014.
  8. Available at: http://www.fda.gov/drugs/resourcesforyou/consumers/questionsanswers/ucm077808.htm. Accessed March 11, 2014.
  9. Available at http://www.money.cnn.com/2012/03/29/pf/healthcare-costs. Accessed March 11, 2014.
  10. Available at: http://bastiat.mises.org/2013/12/how-government-regulations-made-healthcare-so-expensive. Accessed June 2, 2014.
  11. Available at: http://www.safehaven.com/article/32015/the-effect-of-the-affordable-care-act-on-medical-care-inflation. Accessed June 2, 2014.
  12. Available at:http://www.galen.org/topics/ten-obamacare-predictions-for-2014 Accessed June 2, 2014.
  13. Available at: http://abcnews.go.com/nightline/story?id=128998. Accessed June 2, 2014.
  14. Available at: http://www.humanevents.com/2014/03/19/obamacare-sticker-shock-get-ready-for-your-jacked-up-premiums-to-double-or-even-triple.Accessed June 2, 2014.
  15. Available at: http://www.cbsnews.com/news/obamacare-deductibles-deliver-hefty-sticker-shock. Accessed June 2, 2014.
  16. Available at: http://www.healthpocket.com/healthcare-research/infostat/2014-obamacare-deductible-out-of-pocket-costs. Accessed June 2, 2014.
  17. Available at: http://www.forbes.com/sites/jeffreydorfman/2013/10/31/the-high-costs-of-obamacare-hit-home-for-the-middle-class. Accessed June 2, 2014.
  18. Available at: http://www.bloomberg.com/news/2013-11-15/obamacare-deductibles-26-higher-make-cheap-rates-a-risk.html. Accessed June 2, 2014.

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