Why Big Pharma is the Wrong Scapegoat

Mandel moderating a panel at the Mack Institute's Fall Conference 2015
Mandel moderating a panel at the Mack Institute’s Fall Conference 2015

Politicians love to blame greedy Big Pharma for our country’s rapidly ballooning health care costs, writes Mack Institute Senior Fellow Michael Mandel. While spending on prescription drugs did jump in 2014 compared to previous years, Mandel argues that blaming biotech and pharmaceutical companies misses the point.

“The way we pay for innovative drugs can certainly be improved. But the anger directed at the pharmaceutical and biotech industries overall is misdirected.”

In a Wall Street Journal op-ed, Mandel points out that rising costs of labor account for a far greater portion of increased healthcare spending. Payments to doctors, nurses, hospitals, long-term care facilites, etc. greatly outweigh payments for prescription drugs.

To reign in these costs, Mandel argues that instead of simply trying to regulate Big Pharma into submission, policy makers should focus on investing in drugs that will prevent medical labor spending in the long term. Examples include hepatitis C treatments that will reduce the number of future liver transplants, or cutting-edge cholesterol drugs that will cut down on the amount of future cardiac procedures. “It’s important for policy makers to understand that innovative medicines bring down long-term costs by reducing the amount of labor needed by the health-care system,” Mandel writes. Investments that promise few dividends in the near term are a tough pill for private insurers to swallow, so it’s time for policy makers to step in with a subsidization solution.

Read Mandel’s full editorial here.