An average American spends $12,530 a year per person on healthcare.
And one of the main factors that lead to an increase in healthcare costs is soaring prescription drug and healthcare product prices.
This burdens the economy, healthcare sector, and citizens alike.
The common response to an increase in the prices of healthcare products is to doubt the healthcare product manufacturers and wholesalers — as they are the ones supplying products to the market.
However, things are not as simple as they might seem, and there is always depth to the truth.
This article will clear up your misconception about the prices of wholesale healthcare products being high.
But let’s first discuss some recent trends in the healthcare industry so that you can get a clearer picture of the subject matter.
Recent Trends in Prices of Healthcare Products
Healthcare spending is rising around the world consistently. In the U.S., it is almost twice as high as the OECD average.
Research by the Centers for Medicare & Medicaid Services shows that healthcare costs went up to $4.3 trillion in 2021 and are expected to reach $6.8 trillion by 2030.
It’s because the U.S. healthcare system is not as effective when it comes to controlling costs compared to systems in other countries like Norway, Germany, Brazil, and Denmark.
It’s a cure-driven system rather than a prevention-driven system in the U.S. However, Americans don’t realize that preventing diseases from getting worse is always going to cost less, says Dr. Tyeese Gaines.
Busting A Myth: Prices are only high in wholesale healthcare
It is widely accepted that wholesalers and manufacturers are the ones who are responsible for the price increase.
The fact is that pharmaceutical distributors and wholesalers purchase products from manufacturers at the wholesale list price and sell them to customers at the retail list price.
The lists are set and generated by the U.S. Department of Health & Human Services, and no one has the authority to mend or change the list (Terms and Conditions apply).
This implies that not only the wholesale industry causes a surge in prices; the truth is that the overall costs of healthcare products are high in the market.
As a matter of fact, the per unit price of wholesale healthcare products are less than that in retail as wholesale transactions take place in bulk — the more you buy, the lesser the cost per unit will be.
By now, you might be wondering what are the actual reasons behind these high prices of healthcare products.
Here you go!
Five Reasons Why Healthcare Products Are So Expensive in the U.S.
Reason 1. In 2020, healthcare spending hit almost 20% of the total GDP. It means that for every dollar people spend in the U.S., about 20 cents go toward health care.
This rise in prices can’t be attributed to inflation alone. Healthcare almost always outpaces inflation, so healthcare costs grow faster than the economy. That’s why it represents a larger share of the economy.
Reason 2. Another reason behind cost increase is that there is a phenomenon in healthcare called cost-shifting. It happens when healthcare organizations shift the cost from those who cannot pay the bill to those who can by increasing the prices.
Reason 3. According to Investopedia, the lack of political support prevents the government from taking measurable steps to control healthcare costs.
The Affordable Care Act was passed to ensure access to healthcare, but it also maintained the status quo to encourage competition among insurers and healthcare providers. President Joe Biden focuses on expanding the Affordable Care Act to give more people insurance.
Reason 4. Most importantly, healthcare is a research-oriented field and the entire process behind manufacturing healthcare products is complex and costly.
Reason 5. In addition, more than 131 million citizens in the U.S. take at least one prescription medication. This increases the demand for healthcare products, and the supply needs to be increased to reach market equilibrium. It requires high-cost that the consumer has to bear ultimately.
Now coming back to the question:
Will these prices ever stop going up?
Researchers and economists are still debating what exactly is driving these costs in the U.S. It’s tough for people to know how much healthcare will cost them before they get it.
Healthcare products can be made affordable if the:
- Government provides more funding for healthcare products and services to lift the burden off the public’s shoulders.
- Public works on prevention and works towards a healthier lifestyle. (Prevention is better than cure!)
- Life insurance companies introduce convenient and affordable plans.
Verdict!
Now you know that it’s not the wholesale industry that needs to be blamed for the high prices of healthcare products. The overall prices are high in the U.S., making these products less affordable for the audience.
The government and the health department can take adequate measures to reduce the prices.
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