Trade war and the cost of health care
July 1, 2019
Why has the cost of health care risen so dramatically in the United States during the last few decades? Could be mergers, buyout, and concentration of ownership in the industry world-wide – a new version of the old robber barons. Could be lax federal regulation of the cost of health care due to industry-influenced politics. Might include collusion and price-fixing among corporate players. Perhaps it involves the health care dynamics of an aging population. Maybe it is located in the very nature of capitalism itself – a consequence of the drive to maximize profits for investors.
Your list of reasons for the historic rise of health care costs may be different than those listed above, but perhaps we can all agree that there is a new one on the horizon: the emerging trade war. Last year the Trump administration increased tariffs from 10% to 25% on a wide range of Chinese products, and threatened to extend tariffs to an additional $325 billion in Chinese goods. In effect, this would tax virtually everything the U.S. imports from China.
It is difficult to determine exactly what is happening and what the consequences will be because a plethora of ideas and proposals have been floated which differ significantly in detail. Trade negotiations between the United States and China have been on-again off-again, interspersed with acrimony and accusation. It is a moving target. Nevertheless, key organizations have not been shy to sound off.
A New York Times article published April 6, 2018, touches on some of the key issues by noting that, “Dozens of drugs and medical devices are among the Chinese products and ingredients that the Trump administration targeted for a potential 25 percent tariff in a proposal this week. The list includes some products that are in dangerously short supply, like epinephrine, used to treat allergic reactions, and others, like insulin, whose rising prices have driven public outrage in the United States.”
The American Hospital Association (AHA) sent an unambiguous letter to the Secretary of the Department of Commerce late last year, “... to strongly oppose the tariffs that have been imposed on medical equipment and medical products imported from China that are used in hospitals, as well as potential tariffs under consideration that would impact the health care field.”
Just to be clear, the Association represents “...5,000 member hospitals, health systems and other health care organizations, and our clinician partners – including more than 270,000 affiliated physicians, 2 million nurses and other caregivers – and 43,000 health care leaders.” In the world of politics this is a heavyweight.
Premier is a group-purchasing (e.g. bulk purchasing) organization that works with 2,300 manufacturers of healthcare products, and conducts about $60 billion worth of purchases a year. “Premier is extremely disappointed with the administration’s plans to move ahead with a 25 percent added tariff on medical/surgical products imported from China ... It’s a step backward in our nation’s efforts to curb healthcare costs and spending,” according to a statement released early spring, 2018, by Premier’s Senior Vice President of Public Affairs, Blair Childs.
The Association for Accessible Medicines is an organization that represents prescription drug manufacturers of 9 out of every 10 prescriptions dispensed in the U.S. Their statement, also released spring, 2018, notes that, “We are concerned that the proposed tariffs may lead to increased costs of manufacturing for generics and biosimilars, and thus higher prescription drug prices for patients in the U.S.”
And now a word from the nonprofit patient advocates who are usually on the other side of the table from the trade associations. Patients for Affordable Drugs is a national, independent, nonprofit patient organization focused on achieving policy changes to lower the price of prescription drugs. According to a statement released spring, 2018, by Ben Wakana, executive director, “For an administration that wants to lower drug prices, this would do the exact opposite ... It’s a tax that would raise prices on prescription drugs.”
I only have the space here to show a small sample of the widespread concern, but there appears to be broad agreement across the American health care industry -- including major conservative and progressive health care think tanks and editorial boards -- that trade war tariffs are a bad idea. Trade wars are in large part political creations. They start and stop in response to political pressure.
Lawrence D. Weiss is a UAA Professor of Public Health, Emeritus, creator of the UAA Master of Public Health program, and author of several books and numerous articles.