Why are medical costs on the rise and why is it getting higher?
One of the readers posted this question to me, and I thought I’ll share my perspective as someone who is closely involved with the earliest phase of medical research and drug discovery
It is due to the very expensive process of drug/treatment discovery.
Over the last few thousands of years, humans have been doing science by observing our surroundings and our own bodies using our 5 senses — our eyes, noise, ears, mouth, skin to touch. Over this long period of time, we have discovered almost everything that can be discovered using this 5 senses.
In the last century, because of electricity and other fundamental inventions, we have been able to invent machines that have in turn allowed us to make greater quantum leaps in science. Machines like the telescope, the microscope, the x-ray machine etc.
Today, drug/treatment discovery in the field of medicine is made primarily with through the use of all these sophisticated equipment. These equipment costs a bomb — many of them the price of a HDB flat easily. So you can imagine to cost of research for one single drug.
Because these discoveries and inventions are not easy to make (there are no model answers at the back of life’s books) , the success rate (drugs making it from the start of the reseach process, to passing the safety tests etc and going on sale) of drug inventions is 1 in 10,000.
So when companies sell these drugs, they have to cover the cost of the 9,999 failures, by selling that 1 remaining drugs.
Also, there needs to be a sufficient profit margin so that investors would be willing to take on such huge risks (1 in 10,000 and no one knows when this 1 will pop out) in investing in the drug research process.
I’m sure many of you have heard about generic or low cost medicines. Such medicines are cheaper usually because the company’s patent has expired, or is willing to allow generic versions to be made. In this case, the cost of the drug is used to cover the cost of the manufacture —- it usually doesn’t cover the cost of the 9,999 failures, or the risk that the investors need to take.
So why don’t we go the way of producing low cost generic drugs from the start, for everything? Why do we use intellectual property and anti-piracy laws to protect rich pharmaceuticals? Because without this financial incentive, many investors would no want to take on such huge risks of failed drugs — they’ll channel their money into more profitable investments. Without this financial investment, research will slow and consequentially medical advancement will slow. While some argue that the State should take on these investments, others argue that it is irresponsible to use taxpayer money for such high risk ventures, and this should be left up to high-risk venture capitalists.
At the end of the day, all these makes new drugs/treatments very expensive, and the aged need more repairing than the young , and so we need to decide who and how to pay for them.
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Mathia Lee,
Probably about 10% of us need cures that are discovered in the 10 years. That is where the bulk of the cost is. There is an 80-20 rule in operation, 20% of the cases take up 80% of the cost…and among the 20% a small number account You can get a triple by-pass now much cheaper than 20 years ago when it was considered “new”. Lasik for example has been falling in price. So where is the high cost coming from?
Cancer drugs for example is highly expensive, new cures for diseases previously untreatable. So expensive drug treatment is concentrated on a number of diseases whose cures were discovered with the past 2 decades. After that the
patent protection disappears, and the generic drug manufacturers start producing it at a fraction of the cost. By the time I need viagra, it will probably cost 50cents a pop….because it will be made by Dr. Reddy and not Pfizer. As more of these drugs become generic, the “newly” curable list of diseases shrinks. Some of the cures for cancer cost $300 a pill today but when the patent ends, it will cost $2 a pill.
The MOH has a policy of not being a “first mover” when it comes to new equipment and drugs to keep cost down. Contrast that with the Defense where we are always trying to be the first mover. The MOH is not getting more and more cutting edge equipment every year so while cost is expect to increase …it shouldn’t be escalating.
I’ve been looking a specifically why healthcare cost is rising so fast in Singapore. One reason I believe is related to the privatisation of healthcare resources in Singapore. A few days ago there was an advertisement marketing private hospital suites – for a few millions or tens of million you can own your private hospital room. Something only a handful can afford to do. But an increasing number of affluent singaporeans are seeking treatment in private hospitals – a keyhole knee surgery in NUH costs $3K if you’re willing to wait but $15K at Eastshore if you want it done immediately. Because a rising number can afford Eastshore, specialists & surgeons are lured to the private hospitals by the higher ..escalating pay. The other components are cost of land,..just look at how our property prices are escalating…that is why nursing homes, dialysis just across the Causeway are so cheap. Nursing home costs and hospice cost have escalated and you don’t find super duper equipment and drugs here.
I don’t agree sophisticated equipment and advanced drugs are the main cause of “escalating” medical costs. I do agree that cost is escalating …and we better off containing this problem of escalating cost rather than find ways to cope with it.
Hey Lucky Tan
Thanks for pointing out all these contributing factors.
I totally agree with you that the points you raise are major contributing factors that definately ought to be addressed.
That said, I don’t think we need to argue about whether you’re right or I’m right — most issues have multiple contributing factors, so I think both drug development costs and healthcare management are contributing factors.
Similarly, I don’t think we need to argue about whether we should be containing this problem of escalating costs or finding ways to cope with it —- how about doing both?
Just one comment about the falling costs of drugs after the patents expire , (i’m commenting on this not because i think its the most important point to be tackled or because i disagree with your views, but because I’ve some exposure to this issue in the course of research work and HIV advocacy.)
When HIV drugs first came out, they were very expensive, primarily due to the patents ensuring the pharmas recover their drug development costs. Our govt refused to subsidise HIV treatment. Over the last 3 decades, lots of advancement has been made.
These days, we have the generic HIV drugs that are fairly low cost because they were developed in the early days and their patents have now expired (20 years on!! ). Our govt has now decided to subsidise HIV treatment, but is limiting the subsidy to generic drugs.
However, the newer drugs are much more effective and better at prolonging life and improving the quality of life. They remain very expensive because they are still under patent.
So the ethical issue still remains —- yes, the cost of a particular drug falls over time, but the BEST available treatment for a particular condition can actually rise over time. From an ethical point of view, should we have universal access to SOME form of treatment based on need (that’s the Singapore model), or should we have universal access to ALL forms, including the BEST forms of treatment, based on need ?
I’ll just give you a very personal example.
My dad, like many other men of his age, suffers from hypertension.
In Singapore, he can get subsidised, low cost generic drugs.
However, his cardiologist also informed him (as a very responsible doctor), that there were better, more effective, newer drugs available, but that these were not subsidised.
My dad has to pay hundreds of dollars for these better drugs, in Singapore.
If he goes to Malaysia to get it, he buys it for 60% of the price. Many international pharmas price their drugs according to the development status of the country —- lowest cost in underdeveloped 3rd world nations, and highest cost in 1st world countries.
Should this be the case? Should he have subsidised access to these BEST drugs, which might be 20% more effective, but cost 20 times more for taxpayers to subsidised compared to the generics?
If you want to talk about need, my dad needs it as much as a rich businessman or minister, and as much as the man in the 1-room flat.
If you want to talk about past contribution, my dad contributed a lot more in taxes that the man in the 1-room flat.
If you want to talk about future contribution, then my dad is past retirement age.
If you want to talk about affordability, we can afford the drugs, but if we keep him on these expensive drugs, I may never be able to contribute to the 3-kids policy or even have 1 single kid.
If you want to talk about responsibility, my dad is of healthy weight, does exercise, but has also had his fair share of char kway teows and fat pork in his life.
So, while universal health care is an ideal, practically, criteria to distribute it is required — resources are finite, whether it may be a large finite pool or small finite pool.
And of course, we shouldn’t just be looking at health resources, but the resources of the country as a whole. Should we spend more on health? Should we cut defense spending? ( If we further increase our dependance on defense technology and reduce our NS to make it a 3 month affair, that would free up alot more resources for eg. )
I know lots of people have been talking about ministerial pay —- while that’s an issue of fairness and justice, even if they go without pay, that extra, what, 20 million a year or so, will need to be distributed according to an agreed set of criteria.
If everyone in the country is financially independant, this is not a big issue because we all have the right to spend our money as we please
This is an issue because as the country ages, the elderly have to spend other people (the taxpayer)’s money. Then of course, the taxpayers and ex-taxpayers have to decide on an ethical system to distribute the country’s resources.
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I received a feedback from an email which i thought raised points we need to think about, so I’ll post it here, but anonymously, unless the author informs me he wishes to be acknowledged in name:
Hi Mathia
read yr posting – afraid I totally disagree with u on this matter. The bottom line is – total exploitation of the public.
Note – two years ago, thailand threatened to have hiv generic medication produced in thailand if the company do not decrease the price. the drug co. capitulated. today thailand is enjoying a lower cost.
After Thailand’s victory, India followed suit, though I cant remember if it is for hiv or some other drugs. the drug company concerned capitulated too and India is now enjoying a lower cost.
The problem here is that politically we are more pro corporations than people. Cost in singapore can easily go down by more than 30 % at least in most areas, but that is another issue..
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My reply :
thanks for your thoughts
Honestly, I haven’t really come to an opinion or stand at all on this matter, still deciding and so considering all angles…..
I was at last years Singapore AIDS conference, and according to the doctors who were advocates too, the Sg advocates tried to negotiate for cheaper drugs, but not that successful. The thing is thailand and india are third world countries , and in the home countries ie USA, UK, there is a lot of public pressure for these companies to be “kind” to the 3rd world nations.
Unfortunately Sg is a first world country, whose GDP matches these home countries.
Personally I’m totally for, and strongly, actively advocatin for FULL subsidised treatment for HIV patients. Honestly, with the kind of numbers we have here, we can totally afford it.
However, with the Ageing population, if projections are accurate, we’re going to hit a point where we cannot sustainably provide universal health subsidies. If, and when the econ. active : inactive ratio hits 2 : 1, we’re going to be at the point where not everyone can get everything, and we have to decide how we want to cut the pie.
Like I said, I’m for full univeersal health access, but if push comes to the shove and we can’t , i recognise the need to decide on a set of criteria. What’s this set of criteria? I honestly don’t know. And so , I wrote tha blog post, hoping to get ideas……………..
So thanks for contributing your ideas = )
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His reply :
Hi Mathia
Cant agree at all with the points you pen here and I do find that your reference to – third world countries – rather condesending. For a moment you sounded like “The Men in White”. haha..
I think Spore being a first world country is in reality furtherst from the truth. We hve the hard ware but we are years behind if not a decade in the software – in mentality and education and most other aspects. Many singaporeans are literate yes but I doubt if – educated.
You seem to have utter faith in our statistics, – which of course I dont – Look around you, look at the wide gap in inequality not only in income, but business, education, rewards base on merits ect..ect..and “cronyism”. Wages have been suppressed and this in reality is not because of globalism as the powers that be and the Straits Times would have us believe.
Thailand and India got cheaper prices because they fought for their people. USA Uk are slaves of the Neocons, they are pro corporations and exploit the middle class. Singapore is the slave of the slaves of the Neocons. Can you recall anything done here for the pure interests of singaporeans?…even in the socalled stimulus budget. The only pro-people matter “done” for singaporeans, is the straits times trumpeting “pro-people”
Again the big Pharma cannot use excuses like research cost ect to justify the exhorbitant prices, cause its not true. They charge research cost to their companies in US, cause it is tax deductable, and through transfer pricing, keep their profits in low tax and tax haven countries. Wh do you think Spore’s export is 250% of its GDP…this is one of the reason
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My reply
I think you raised alot of interesting points to consider, and would you be so kind to enlighten me on the following please? Cos i don’t really understand how that works, curious to learn lah….. = )
“Again the big Pharma cannot use excuses like research cost ect to justify the exhorbitant prices, cause its not true. They charge research cost to their companies in US, cause it is tax deductable, and through transfer pricing, keep their profits in low tax and tax haven countries. Wh do you think Spore’s export is 250% of its GDP…this is one of the reason”
How do these tax systems and tax deductions work? How do they justify exhorbitant prices, or not justify??
Also, how does this enable Sg’s export to be 250% of its GDP?
Sorry my Q quite elementary…….My econs is quite bad lah……………..
Another point i’ve been wondering:
drug research investments are currently mainly taken on my private, profit driven companies, because of the high investment risks involved, and so to the potential returns must be high for these investors to want to take on that risk.
How do you think this could be changed, so that these high returns are no longer necessary, so that there will still be a steady stream of research being done, without incurring such high costs for the people?
Thanks so much again for bringing up these points, I really appreciate the learning opportunity!!
Oh sorry, one more point, one that worries me a lot!!!
In what way do you find my refernce to 3rd world coutries condescending ???
I certainly didn’t mean to be, and if there’s anyway that i have come across this way, I certainly want to stop sounding that way, so will really appreciate if you can let me know my mistake!! thanks!!
Cheers
Mathia
Don’t forget to factor in the costs of sending the doctors to nice skiing trips in Switzerland, and more. In SG and MY, we get our drugs from doctors, not a separate pharmacy. I heard that this means that a lot of money is spent on customer relationship management to ensure these clinics stay loyal and help the sales people reach their targets… anyone knows if this is true?
Hi AlexTheGreat
Thanks for bringing that point up!
I don’t know enough to say if that’s true, but I thought I’ll just share with readers the rationale countries like the US have used to justify getting their drugs from a seperate pharmacy.
Basically, when the doctor is the one who prescribes and sells the drugs, there is the potential benefit for the doctor to prescribe the most profitable drug, rather than the drug that is best suited to the patient’s needs. Hence in the USA, the doctor gives the prescriptions, and then the patients go to an independant pharmacy to purchase the drugs prescribed.
Does anyone out there know the rationale for places like Singapore NOT adopting this system?? I’m really curious.
Mathia Lee,
Isn’t AIDS a preventable disease? People infected are generally those with careless irresponsible lifestyles. I would rather have my tax money go towards helping cancer patients, the old and seriously ill. I would be agreeable to helping those who get AIDS through no fault of their own eg.unknowingly through blood transfusion. I’m not going to have my money used to help promiscuous people who don’t bother to wear a condom.,..they will have to make do with less than the best drugs….I would prioritise those who have been responsible but are struck by misfortune ahead AIDS sufferers. As a society we don’t even have enough resources to help kidney patients who pay a hefty sum for dialysis, parents have to shoulder the full burden for children born disabled and there is no money to help the old who are forced to dig trash for cans and cardboard….we don’t have enough to help people who have been responsible…why should we help those who have not.
Hi Joe Lee,
thanks for your views! While I don’t want to impose any of my own views on yours by saying whether I agree taxpaper money ought to go towards preventable diseases like HIV/AIDS, I do wish to point out that in order for YOU to be CONSISTENT, then taxpayer money should also NOT be used for things like diabetes, heart disease, strokes, many forms of cancer etc, because these are also preventable diseases. In fact, because they are so recognised as preventable disease, it becomes the responsible of govts to educate the people to PREVENT these diseases by making healthy, responsible choices in their lives —- doing regular exercise, eating balanced diets, going for regular screening etc. This forms the basis for public health policy and health promotion programmes. It is only due to the stigma and misinformation in society that people associate only diseases like HIV as being preventable.
If we are CONSISTENT with your criteria of health resource distribution —- which is by the amount of responsiblity and control one has over one’s health condition —– our health costs would plunge. Because most of the top 10 killers and cost-incurring conditions will no longer need to be subsidised by taxpayer money.
Now there is another variation to your model. Let’s say we have a model where we should be allowed to CHOOSE where our money goes towards providing subsidies for, then we would have adopted the charity model. In another words, the govt provides minimal health subsidies, and taxes people minimally. But the govt then gives incentives(eg. through tax reliefs) for people who donate to charities of their choice. If you feel kidney patients or disabled children should be subsidised, then you donate to those charities. And if you feel that those who have HIV should be subsidised, then donate to HIV patients.
Another question I would like to ask you (and any reader): Do people who acquired HIV through sheer promiscuity have a right to life (from a human rights angle) ??? If your answer is YES , then taxpayers ought to subsidise. If your answer is NO, you are essentially dishing out the capital punishment for promiscuous behavior —- which currently is only practised in the most extremist islamic states………
Again, my intention is not to impose or recommend a particular view point, I’m just posing the questions often raised towards these views and hoping to get possible answers…………..
Mathia Lee,
I’m trying to be consistent. If resources are limited I rather it goes to those who have acted responsibly but are suffering through no fault of their own. AIDS is preventable and associated with promiscuous lifestyle.
The causes of cancer, heart disease are a complex combination of genes, diiet and environment – there is only so much a person can do to prevent it.
AIDS sufferers are already given some subsidy..they are not getting the best medicine to get a higher quality of llife …but so what ….that 70 yr old cleaner suffering from arthritis is also not getting a quality life. There is plenty of suffering going around and Singapore as a society has to make a choice who to help and who not to help given resources are limited.
It is a moral hazard to spend tax payer’s money on expensive medicine so that an AIDS sufferer who got it sleeping around without protection can have a ‘normal’ life. The PAP govt has been very consistent on this – single moms cannot apply for subsidised HDB flats.
I don’t agree to spending money on subsidies for expensive AIDS medication when parents of disabled children get little or no financial help, the average kidney patients have to spend someting like 50% of their income on treatment and cancer patients die because medishield does not cover the most advanced cancer medication.
The Singapore govt is not rich enough to help everyone – it is inevitable that some will suffer and I prefer those who have been irresponsible getting less help.
Joe,
We are all assuming that our govt has little resoruces and these painful choices have to be made. Cutting the defense budget by 2-3% probably release enough funds to treat every cancer patient with the best treatment.
I think the approach should be to try to help everyone first – when we find we can’t then we have to make all these painful choices.
Another way of thinking…
On the one hand, being pro-corporations translate to more R&D. While getting the drug companies to capitulate translate to cheaper drugs but less incentive for R&D, therefore less new and better drugs.
Without these drugs, many peoples’ life spans will be much shorter. If some drugs are so unaffordable, why not treat them as non-existent and just die, knowing that you are already past your non-drug-influenced-natural life expectancy?
Unless you are trying to buy time until the day somebody discovers how to be immortal, we know where everybody’s journey end, don’t we?
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