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The big impact of pharmaceutical industry profits

Proponents of a single-payer system in health care argue that it would save costs because of lower industry profits and lower administrative costs. Arnold Kling argues that the impact would be minimal. Is he right?

According to Public Citizen,
a source not particularly friendly to corporate interests, pharmaceutical industry profits in
2002 (the year I happened to stumble on) were 36 billion. If all pharmaceutical companies were forced to
serve the public at zero profit, that would lower US health care
expenditures from 1.3 trillion to 1.3 trillion.

That’s a pretty small change

I’ll carry it out to a few more decimal places. In 2002, total
health care expenditurea in the US were $1.342 trillion. So taking out
ALL pharmaceutical profits lowers that number to 1.306 trillion. I
don’t think there’s any way you can argue that the profitability of the
pharmaceutical industry is a large factor in the size of US health care costs or that moving to a system where government could exploit its power as a large buyer of drugs would lower total expenditures.

Does anyone have data on administrative costs in the current system?


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