Why Nations with Universal Free Health Care Can Afford Expensive Medications
It often surprises people when nations with universal free healthcare, like the UK, are willing to purchase expensive medications that can cost hundreds of thousands or even millions of dollars. In contrast, U.S. health insurance companies are often hesitant to cover such costs. But how can these nations afford to buy these expensive drugs? The answer lies in the power of bulk buying and the non-profit nature of their healthcare systems.
Bulk Buying Powers
The key to understanding why these nations can afford such expensive medications lies in the principle of bulk buying. In countries like the UK, healthcare organizations, such as the National Health Service (NHS), have significantly more purchasing power compared to individual patients or private insurance companies. The NHS acts as the largest buyer of pharmaceutical and medical products in Europe and around the world, often purchasing medicines in bulk.
When a pharmaceutical company enters into a contract with the NHS, they are guaranteed a massive order that stretches over the term of the contract. Even a small profit margin on each batch of medicine can amount to significant profits over the long run due to the sheer volume of sales. This ensures that the NHS can negotiate lower prices than what individual patients or insurance companies might pay.
Comparison with U.S. Healthcare
In the United States, healthcare is not a universal system and is primarily run as a for-profit business by a myriad of insurance companies. These companies, although representing a large population, do not have the collective purchasing power of a single national healthcare system. Each insurance company operates independently, and they cannot match the buying power of a nation's healthcare system. This results in higher costs for patients and insurance companies.
Moreover, U.S. healthcare companies are specifically run to generate profits. Shareholders expect dividends, and executives seek bonuses. In contrast, healthcare systems in nations with universal healthcare are not operated for profit. All revenue generated goes towards operational costs, such as building maintenance, staff salaries, and medical treatments, rather than maximizing profits. The primary goal is to ensure patients receive the best possible, cost-effective medical care.
Forced High Drug Prices in the U.S.
The U.S. healthcare system has a unique problem in that Medicare (a major government insurance program) is not allowed to negotiate lower prices for drugs. Instead, Medicare is required to pay whatever the pharmaceutical companies set as the list price. As a result, drug prices in the U.S. can be exorbitant, with no real competition to drive prices down. This situation can be compared to ‘highway robbery’ where drug companies charge exorbitant prices knowing that they have no real competitors.
Furthermore, it is not just the drug companies that benefit from the current system. The U.S. political system is heavily funded by pharmaceutical company donations, creating a conflict of interest that obstructs any meaningful reform. This situation is exacerbated by the lack of regulation on drug prices in the U.S., leaving the cost to the patient or insurance company.
Conclusion
The ability of nations with universal healthcare to purchase expensive medications so easily is a result of their collective buying power and non-profit structure. The NHS, for example, buys in bulk, ensuring that even a modest profit margin per batch results in significant overall profit. In contrast, the U.S. healthcare system, driven by profit motives, results in higher costs and greater regulatory challenges.
For the U.S. to consider such a system, they would need to understand that reducing healthcare to a for-profit business results in higher costs for everyone. Capitalism, as an economic system, does not naturally lead to affordable healthcare. Universal healthcare systems, which prioritize patient care over profit, can actually afford to provide the highest quality care without breaking the bank.