The Issue with Free Healthcare

Rashail Wasim

The past few years have led to increasing calls for a universal healthcare system in the United States. From low life expectancy, to the inefficient insurance industry, to the absurd costs of routine treatments, the American model’s failures are apparent. For these reasons, the European and Canadian systems, where the government is often the sole customer for drug companies, and negotiates the cost of each drug, are seen by the Left as examples to follow. Such policies would radically reduce the cost of drugs such as insulin, but at a price. New drugs will not be created nearly as quickly as they are today, and America will lose her dominance in the pharmaceutical market

It is true that European systems result in lower costs, with drug prices on average 35-55% cheaper than here in America, but those low prices can only exist on the backs of American consumers. Sales in the US account for 64-78% of the profits in the global pharma industry. If US drug prices fell to the median of other developed countries, $134 billion in industry profits would be lost annually. That number accounts for up to 96% of global net profits last year. If that high profit margin seems criminal or wrong, remember the average drug takes 12-14 years to bring to market, with a cost of around $2.6 billion, and there is always the risk of failure. No one can expect the industry to invest as much as it does into innovation if it loses such a large portion of its profit margin. The industry would collapse and have to undergo massive restructuring to recover from such losses. 

While there is an argument to be made that creating life saving drugs should not be for profit in the first place, the US system has yielded miraculous results. America spent $61 billion dollars in 2016 on research and development (R&D) for new drugs, 46% of the world total. This money has been revolutionary, allowing US companies to invent 57% of new drugs from 2001-2010. The US share has steadily increased since the 1970’s, growing from 31% of new drugs during that period. These decades are when the Europeans finished recovering from the Second World War, and gained market share against the US in most industries. However, it is also the time when they rebuilt their healthcare systems with the state as the head of the system as opposed to the markets, causing European companies to shrink or move to the US. France, for example, made up 19% of new drug production in the 70’s, compared to only 6% in the 2000’s.

The pharmaceutical industry also yields many economic benefits for the US. Seven of the top twelve pharma companies are based in America, allowing the US to control nearly 50% of the global pharma market, valued at more than $450 billion. These pharma companies employ hundreds of thousands of workers and pump billions into the economy. In contrast, the European Union has a population that is about 50% larger than the US, yet they employ 14% fewer workers in their drug companies. US pharma companies are also patrons of American universities, accounting for 61% of their R&D funding from businesses. The lack of price controls benefit the consumer in certain ways as well. As companies do not have to negotiate the price of the drug before bringing it to market, new drugs become available to Americans on average three months before Europeans and nearly 12 months before Canadians.

There are many aspects of the healthcare system that are unjust, but government-run healthcare will have disastrous consequences. The United States is the last developed country in the world where companies can justify investing so much money into new drugs. Without the profitable US drug market to subsidize the restrictive markets in other developed nations, pharma companies will be forced to downsize, which will hurt both the American economy and the victims of countless illnesses. The cures for cancer, Alzheimer’s and diabetes are out there, and chances are that American pharma companies are going to discover them. Should the US jeopardize this system for short-term gain? Universal health-care is portrayed as a perfect solution to the industry’s woes, but all choices come with trade-offs, and this one is no exception.

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