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Setting the Record Straight on Drug Spending and Restoring Trust in Public Health

Paragon Newsletter
President at Paragon Health Institute
Brian Blase, Ph.D., is the President of Paragon Health Institute. Brian was Special Assistant to the President for Economic Policy at the White House’s National Economic Council (NEC) from 2017-2019, where he coordinated the development and execution of numerous health policies and advised the President, NEC director, and senior officials. After leaving the White House, Brian founded Blase Policy Strategies and serves as its CEO.

As January draws to a close, I am happy to share the latest updates from Paragon: A figure about US drug spending that will have relevance as Congress considers the cost of health care in the US, and an op-ed by one of Paragon’s directors covering the misuse of science during the pandemic.

Drug Spending in the United States is Low as a Percentage of Overall Health Spending

The U.S. spends a lower share of overall health care spending on prescription drugs than most developed nations even though in dollar terms the U.S. spends more on prescription drugs than any country as the figure below shows.

 

The U.S. Spends more on Prescription Drugs

If you had trouble viewing the figure, you can see it on our website here.

This is not to say U.S. spends too much or too little on prescription drugs, but it is a crucially important indicator that any excessive U.S. health spending is even more pronounced on other types of care. It also means solutions that are only targeted at lowering prescription drug prices are unlikely to make health care spending sustainable. Moreover, many of the recent advancements in health have come from pharmaceutical innovation and this innovation reduces other types of health care spending.

When the Organisation for Economic Co-Operation and Development (OECD) compared health care expenditures, it found that relative to its peers the U.S. devoted a larger share of health care dollars to hospitals and outpatient care. Furthermore, hospital and physician spending grew at 2 percent annually over the past decade while retail drugs grew at 0.6 percent. This should give pause to policymakers who think expanded price controls are the answer – Medicare has imposed price controls on hospitals since 1983 and physician payments since 1992.

Price controls are so nefarious because they substitute political and bureaucratic judgement over that of market participants and incentivize certain services over others, including where investments are made, with only rigid bureaucratic methods of reevaluation that are poor at discerning value and subject to regulatory capture.

If Congress is going to get serious about lowering health costs for patients and taxpayers, it will need to take a broader view of the problem and learn from past experiences with price controls.

The Cost of Pandemic-Era Public Health Blunders

Dr. Joel Zinberg, the director of Paragon’s Public Health and American Well-Being Initiative, wrote in his recent National Review op-ed “When Science is Not Science” that during the pandemic public health officials advocated a version of science “that was evidence-free, politically and personally motivated, dismissive of other points of view, and that ended up undermining public trust.” It was “far removed from the scientific method of unbiased observation and experimentation to ascertain truth about natural processes.” The American public encountered inconsistent and uninformed guidance on social distancing, vaccine mandates, and masking practices throughout the pandemic. Public health officials adopted a “public-health mindset” that prioritized saving lives no matter what the cost and consciously disregarded the resulting economic hardship and education losses that disproportionally harmed our most vulnerable children.

Joel’s new piece builds on Paragon’s study Freedom Wins: States with Less Restrictive COVID Policies Outperformed States with More Restrictive Covid Policies, which found that “states that stuck with severe lockdown measures had no better health outcomes but far worse economic and educational outcomes as compared with states that lifted lockdowns.” Zinberg argues public health officials’ misinformation and suppression of alternative viewpoints that would have better informed decision-making led to the hesitancy surrounding Covid-19 vaccines and may be contributing to additional preventable deaths. More work is needed to counter Americans’ widely prevalent mistrust of public health officials and rebuild confidence in public health endeavors going forward.

All the best,

Brian Blase
President
Paragon Health Institute

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