Pharma facts 2012: Health Care is the Real Fiscal Cliff

Editor’s Note: All this week Check Up will be sharing one new Pharma fact a day that was an important breakthrough in the world of pharmaceuticals in 2012. Today, Check Up delves into the worries of the new health care.

Health care costs already devour 18% of America's GDP.  Between now and 2030 a cohort of 76 million baby boomers will become elderly, thereby driving health costs through the roof.  Budget actuaries see this escalation of health care costs as the principal reason why they expect the federal budget deficit to grow out of control.

The Affordable Care Act won't do much, if anything, to control rising costs.  Health insurers and pharma will derive the largest, most direct benefit from the ACA because it requires everyone to buy health insurance and, as a result, it makes 32 million more Americans buyers of prescription drugs (see here).  Pharma companies know the incremental sales volume from these new customers will return to them many times more than the $80 billion in fees they will pay to shrink the donut hole.

It is well known that America maintains an unmanaged, patchwork health system that stands as the most expensive and least effective in the developed world.  Right now, for example, the US spends 30% more on administration than on actual health care delivery.  But there is also an interesting corollary to this shameful situation that might shock reactionaries, rural physicians, pharma flacks and other proponents of the current system.  The fact that Americans pay higher drug prices, for example, coupled with increasingly aggressive price controls in Europe, means the US is subsidizing the rest of the world.  Your-on-your-own Republicans who don't want to pay for someone else's health care would grow enraged if they realized their $70 co-pay at the pharmacy supports day care, unemployment benefits and other nanny-state measures across western Europe.

-          Dan Hoffman