More Uninsured Means More Healthcare Corporate Profits

By Adrianne Appel, IPS News. Posted April 10, 2007.

Drug prices, health insurance, doctor visits and hospital stays are too expensive for many people to afford, while insurance and drug company profits continue to climb.

The nation is entering a healthcare crisis, many leaders and experts say. An estimated 46 million people do not have health insurance because they cannot afford it, and the United States has one of the poorest health profiles of the developed world.

Meanwhile, in 2005, pharmaceutical giant Johnson and Johnson earned profits of $10 billion, and Pfizer had profits of $8 billion, according to Fortune magazine.

Healthcare is bankrupting even well-to-do U.S. citizens, especially people who have the misfortune of becoming seriously ill.

"The reason our health system is so crazy is we treat healthcare as a commodity. That really doesn't work. Most countries see it as part of their job to take care of their people," Meizhu Lui, executive director of United for a Fair Economy, told IPS.

The U.S. system is mostly privatized, which means that individuals alone or through their employers must buy their healthcare and health insurance on the open market. The government provides subsidized healthcare for the elderly and some of the poor and disabled.

Prices of many health services have soared in recent years, and today individuals and the government spend $2.3 trillion annually to purchase health insurance, doctor visits, medicines, hospital stays and special tests, according to Families USA, a health advocacy group.

"Our healthcare is in a car that is accelerating toward a cliff," Alan Sager, co-director of the Health Reform Project at Boston University, told IPS.

The United States has a high rate of untreated diabetes and high blood pressure, which fall disproportionately on African Americans, Lui said.

"Unless you're extremely wealthy, it's almost impossible to buy insurance. I'm in my 50s, and it would cost me $6,000 a year, and for a family it costs $12,000," Steffie Woolhandler, an associate professor of medicine at Harvard University, told IPS.

The U.S. system today has created strange incentives, so that high-tech care is abundant for those who can pay for it, while preventive care, like annual checkups, is not encouraged, Woolhandler said.

"It is remarkable we spend so much and yet fail to cover so many people," Sager said.

Healthcare companies wield tremendous political power, Lui noted.

For years, health activists, organizations of the elderly and labor unions have tried to convince Congress to allow citizens and the government to negotiate bulk prices for drugs or to purchase them from Canada, rather than paying full price on the open U.S. market.

Congress has not budged on this or other healthcare reform issues.

Behind the scenes, drug companies, hospitals, insurance companies and doctor organizations spent $400 million in 2005 and 2006 lobbying Congress and federal candidates to enact policies the companies favor, according to Opensecrets, an organization that tracks the records.

"Our government, instead of helping people, is being held hostage by these profit-making companies," Lui told IPS.

According to the Centre for Public Integrity, drug companies recently lobbied against strong safety regulations, and successfully lobbied to include patent protection in trade negotiations with other nations.

Drug companies also benefit because they receive favorable tax treatment from the U.S. government, Bob McIntyre, director of Citizens for Tax Justice, told IPS.

"They get to write off their purchases of equipment. They get a big break for anything considered research," McIntyre said.

All this adds up to big profits for the companies involved. In 2005, the drug companies Proctor and Gamble, Merck, Amgen and Abbot and insurer UnitedHealth Group were among the 50 most profitable Fortune 500 companies in the United States, according to Fortune.

Many large drug companies richly reward their chief executive officers with salaries and bonuses. Johnson and Johnson's CEO received salary and bonuses in 2006 of $28 million, according to Dow Jones. And Merck CEO Richard Clark received $10 million in compensation, according to AFL-CIO Corpwatch.

When former Pfizer CEO Henry McKinnell left the company in 2006, he was given pension, stock and other benefits worth $180 million, according to AFL-CIO Corpwatch.

But CEO William McGuire, of UnitedHealth Group, a health insurance company, stands alone. His annual salary in 2005 was $124 million, and he has been provided stock options worth more than $1.7 billion, according to Forbes.com. As part of his retirement package, he and his spouse will receive free healthcare for as long as they live, according to AFL-CIO Corpwatch.

This is not the case for the average U.S. family, Woolhandler said. If a parent becomes too ill to work, they may lose their salary and be unable to pay their health insurance.

"We found that three-quarters of people bankrupted by illness had insurance at the beginning," Woolhandler said.

People who have an existing illness, like asthma, are charged double the price for insurance or may be refused altogether, said Woolhandler, who founded Physicians for a National Health Program, which wants the United States to switch to a government-run healthcare system, as in Canada.

A number of companies made headlines recently by trying to boost their profits through illegal drug marketing schemes, cheating on their taxes or skimping on safety, according to Peter Rost, former vice president of marketing for Pfizer and author of the book "Whistleblower."

Pfizer was recently fined $430 million for attempting to defraud a government program. Schering Plough paid a $500 million fine for manufacturing violations and $345 million for improper marketing of Claritin, an allergy drug, Rost says.

The U.S. tax authority, the Internal Revenue Service, has demanded that drug company GlaxoSmithKline pay $7.8 billion in back taxes, while Merck may be facing $2 billion in back tax payments.

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