Preexisting Condition and the Cost of Prescription Drugs

Harold Black, PhDBlog

In this very strange political season pollsters tell us that the most important concerns of the electorate are immigration and healthcare. When I saw that healthcare was a concern, I thought that it meant poor outcomes, or poor access, or lack of services, inadequate care or improper diagnoses and medications. But no. The concerns were not with healthcare but rather with health insurance. Obamacare (the “Affordable” Care Act) mandated that everyone purchase health insurance. The result was a decrease in the number of uninsured from 44 million to around 28 million. Obamacare lead to predictable results: a lessening of choice of doctors, an increase in insurance premiums and a rise in the cost of deductibles. However, these are not what is debated. Rather it is pre-existing conditions and prescription drug costs. I guess I am confused and must be missing something. If one has insurance, then preexisting condition is irrelevant. Moreover, the insured do not pay the full cost of prescription drugs. Preexisting condition only applies to people who do not have insurance and then seek to get it. Additionally, Medicare, Medicaid and the Children Health Insurance Program (CHIP) all insure those with a preexisting condition. Medicare supplemental programs cover preexisting conditions after a six-month waiting period. So preexisting condition worries should be confined to the uninsured. Generously assuming that 50 percent have a preexisting condition, we are talking about 14 million people. That would be a fairly low cost problem to solve. To quote Stevie Wonder, “What the Fuss?”

As to prescription costs, drugs in the U.S. cost significantly more than in other countries. The president favors having drug companies put the list price of their drugs in advertisements. However, the list price of drugs is irrelevant to the insured who are only concerned about their co-pay. Indeed, the major reason that U.S. drug prices are so high is that consumers do not bear the full cost of their medicines. Rather the drug companies set prices in order to get the highest price possible from the insurers. Some want the government to step in and force the drug companies to lower their prices. Of course, this will make things worse. For example, the VA’s effort to hold down drug costs has resulted in fewer drugs being available to veterans. Also forcing lower prices reduces profits and leads to a decrease in drug innovation, research and development. As our president would say “That would be bad.” He has recommended the price that Medicare pays for drugs be based on the costs in other countries. This is supposed to decrease the co-pay for those with Medicare Part D. This is a rather curious proposal. It is akin to the government trying to reduce the price we pay for automobiles by lowering the costs of vehicles in the government car pool. This president should know that the surest way to reduce drug prices domestically is to increase competition, but not through the use of generics since they already comprise 84% of U.S. drug consumption. Rather, I propose changing the laws to allow importation and purchase of drugs online directly from the foreign countries where the drugs are cheaper. This occurs now in the pet pharmaceutical market where the identical drugs can be purchased online from foreign sellers much cheaper than in the United States. For prescription drugs, such a proposal would instantly result in cost savings for those who bear the full cost of the drugs and force pharmaceuticals to lower their prices.

Dr. Harold Black is professor emeritus at the University of Tennessee, Knoxville. This piece appeared in the USA TODAY NETWORK – TENNESSEE.