Should Governments Be Funding More Healthcare Projects?

Currently, the majority of healthcare projects are funded by private companies. This means that pharmaceutical companies assume the cost of researching and developing new treatments, and consequently factor this cost into the prices they set for medical treatments once they are brought to the market. This can result in extremely high drug prices that are often considered to be unaffordable by the public. This is not tantamount to improved health outcomes. Therefore, there is mounting pressure on the government to provide more funding to healthcare projects as people believe this will have a positive impact on public health in the long run. In this article, I will explore the current situation regarding healthcare funding in more depth and consider the different options the government could take to lower prices and consequently, achieve better public health. 

How does it work?

Developing new treatments is an expensive process that requires a considerable amount of research and development time. Therefore, pharmaceutical companies set drug prices as high as possible to maximise revenue, using the argument that they need sufficient capital to fund future research and development and to recover their upfront investment. These companies claim that if they do not have adequate profit margins on these products then developing and marketing new drugs would no longer be feasible. Therefore, forcing pharmaceutical companies to lower their prices without offering them any form of compensation could threaten innovation within the industry.

However, there are significant limitations in bringing new medicines to market at a price point that the public cannot afford. Most obviously, this results in a lack of access to new and innovative treatments, meaning that healthcare professionals are unable to take full advantage of medical advances while patients are deprived of treatments that have the potential to improve their quality or length of life. In addition, extremely high drug prices exacerbate inequalities in society since, in order to resolve medical issues, patients must have access to large sums of money. This makes good health attainable only to the wealthiest in society.

Furthermore, it means that patients who rely on life-saving medications are entirely at the mercy of private organisations whose aim is to make as much profit as possible. Since pharmaceutical companies secure patents on their drugs, they are able to protect themselves against the competition, thus allowing them to hold a monopoly over certain medications. This gives them free rein over the prices they charge, so if a company sees a significant profit opportunity they might drastically hike the prices up, which leaves patients with little choice – either they pay the higher price or they miss out on treatment. 

What can be done?

While innovation within the sector is certainly something to be encouraged if we want to continue seeing improvements in health outcomes, there is little benefit in pharmaceutical companies pricing their medicines beyond the limits of affordability. One way to combat this is the enforcement of state-regulated drug prices.

In the UK, the NHS has stringent criteria for accepting new medications and setting prices. The National Institute for Care Excellence (NICE) is a public body that evaluates every new treatment based on its cost-effectiveness and quality-adjusted life years before deciding whether it should be approved for sale to the NHS. If approved, NICE will also negotiate prices with the pharmaceutical companies to lower them to a level that is affordable to the public. This means that in contrast to the US market where the state does not impose regulations on drug prices, here in the UK we do not see such incredibly high prices or significant price increases.

However, pharmaceutical companies resist government pricing regulations as they argue that this squeezes their profit margins. This has the potential to reduce innovation in those countries with strict regulations, for example, if companies decide it is not profitable to launch new medicines in those markets, which can leave patients without access to life-changing medication. Similarly, the process of negotiating prices takes time and can leave patients waiting a long time for innovative treatments.

Does it work?

Therefore, it seems that a more viable option would be for governments to increase the amount of funding they provide to healthcare projects. This would help to relieve some of the pressure on pharmaceutical companies to recoup their costly research and development time, and would, therefore, allow them to bring drug prices down to a more affordable level.

Additionally, this would allow the government to have greater input on the healthcare projects that are prioritized. The government has a significant amount of data about health trends within the population which they could use to determine the projects that they fund. Rather than considering short-term profitability as the pharmaceutical companies are inclined to do, the government would be able to make decisions based on the long-term benefits for the population as a whole.

However, until public funding into healthcare projects is widespread, the onus is on society as a whole and in particular, on private investors to prove to the government that healthcare is a worthwhile investment. In the US, there are many initiatives to encourage individuals to invest in healthcare. For example, the American Medical Association‘s recent partnership with healthcare equity crowdfunding site, RedCrow, seeks to encourage physicians to invest in new and innovative projects. This not only allows startups to receive a capital injection, but it also allows entrepreneurs to collaborate more closely with medical professionals who have expertise and years of experience in the field.

In an ideal world, public and private investment would go hand in hand with one another. While government funding should certainly be encouraged in order to support innovation within the sector and lower the cost of healthcare, there are arguments that since public funds are scarce, efficiency and responsiveness might be sacrificed in government-funded projects. Therefore, the government not only needs to provide funding themselves, but they should also introduce initiatives that encourage private investment in healthcare too. For example, tax breaks could provide a good incentive to encourage individuals to invest in research and development projects within healthcare. This would give such projects several options for funding sources and allow them to progress quicker and more efficiently.

In summary, it is clear that the current situation is not viable in the long-term. At the moment, we are faced with two extremes. In the first instance, we have an environment where innovation can flourish but the resulting medications are priced too high to have a positive impact on the people who need it. On the other hand, prices are suppressed to a level where they are affordable to those who need them; however, innovation is also suppressed so we do not see the same advances in medicine. Therefore, it is essential that healthcare projects receive more public funding. Not only will this help to control prices, it also allows governments to steer the direction and goals of projects in order to reap the long-term benefits on public health. 

For private investors, this does not mean we should stop investing in healthcare projects. In fact, it is our responsibility to prove that healthcare is one of the most worthwhile efforts the government can spend its money on. 

If you have an exciting healthcare idea or are looking to invest in the future health of our population, we can advise on raising investment and penetrate the market with your product or service. Please feel free to contact us via email at hello@socialgamma.com.