U.S. Consumers Are Footing the Pharma Bill

The U.S. has a serious problem controlling medical costs...

That's why President Donald Trump wants other countries to pay more for prescription drugs.

More consistent prices across markets will help fund drug development... and curb prices for individual consumers. But that's just one piece of the puzzle.

Health care spending as a whole is spiraling out of control.

As the U.S. population gets older, the country is shelling out more than ever for medical services. Total health care spending in the U.S. is sitting at $4.8 trillion right now. It's projected to reach $7.7 trillion by 2032.

This spending bucket could eventually hit 20% of U.S. GDP. That's unsustainable for even the most developed countries... considering that average spending worldwide is about 10% of GDP.

And the U.S. already spends a higher percentage of GDP than all but three countries, none of which are considered developed (Afghanistan, Tuvalu, and Liberia).

It's clear that something has to change in the U.S. health care industry. So today, we'll take a closer look at what's going wrong, and how to move forward...

The aging population is a big contributor to health care costs...

About 18% of the U.S. population is currently 65 or older. That figure will rise to 22% by 2040.

Those folks spend an average of 2.9 times more on health care than working-age adults... and 6.7 times more than parents spend on their kids' health care.

With the population aging fast, more people will depend on Medicare and other health care services, inflating costs even more. Federal spending on these programs is expected to jump from $2.2 trillion in 2023 to $3.8 trillion by 2032.

This will add even more pressure on the overall system.

But there's more to the story than U.S. citizens growing older. Health care accounts for more than 16% of total U.S. corporate earnings.

More than half of that profit comes from pharmaceutical and biotechnology companies, not hospitals or direct-care providers.

But when we talk about reining in health care spending, it's usually focused on cutting costs in already low-profit areas like medical facilities.

The U.S. needs to take a closer look at pharma and biotech companies... As health care spending rises, these businesses will bag more and more profits.

And U.S. consumers will struggle with higher prices all the while.

Americans shouldn't have to fund the bulk of drug innovation...

That's the issue Trump is attempting to solve with his latest health care ideas, as we covered yesterday.

But whether you agree with the president's approach or not, one thing is certain... The U.S. consumer is suffering under the current system.

With other countries paying their fair share, we could start lowering drug prices. And we could do it without cutting into the research and development required for medical breakthroughs.

That would be a big step toward reducing health care costs... without disrupting this vital sector. 

Regards,

Joel Litman
February 6, 2025