I had a little argument with a friend of mine about the role of pharmaceuticals in the current health care crisis. She works for a prominent investment research firm investigating and making recommendations on pharmaceutical companies. My contention was that pharmaceutical companies are driving up total health care spending and profiting far too much for their efforts. That only energy companies have had higher profit margins over the past half decade goes to show just how much these companies are profiting off the system. Not only that, drug companies make more money in America where our unregulated system basically allows them to set their own rates and exploit intellectual property protections to keep bringing in huge dollars.
But there's evidence to support her contention as well. A recent study showed that increasing copays for the drugs the chronically ill need to stay healthy wound increasing total health care costs for that population. When you charge people for their drugs, they take fewer of them, become less healthy, and wind up going in for expensive Emergency and Inpatient treatments. Some (like Joe Paduda) took this study as an example of a potential pitfall of Consumer Directed Health Plans, which it clearly is. But in light of that discussion I'd had with my friend, it also reminded me of how essential drugs can be to reducing overall health spending. If raising copays a little bit on drugs increases overall health spending, taking those drugs away entirely will do even worse things for our health expenses. Who knows what the next "statin" discovery will be? Improved insulin delivery mechanisms are already showing promise of reducing spending on diabetics by making it easier for them to comply with their complicated treatment regiments.
In the end, while I maintain that it's important to sensibly regulate big pharma to limit price gouging and excessive profits, we do have to be careful not to over-regulate which could prevent the next blockbuster discovery from bringing cost savings through the entire care delivery system.
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