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How the U.S. Subsidizes Europe’s Health Care Costs

Fortune Global Forum 2015Fortune Global Forum 2015
United Therapeutics co-CEO Martine Rothblatt speaks at the Fortune Global Forum Tuesday morning. Photograph by Stuart Isett — Fortune Global Forum

If you want to get a sense of the scale of dysfunction in the U.S. healthcare system, just take a look at the percentage of GDP devoted to health expenditures in the country.

That was the message from Martine Rothblatt, the chairman and co-CEO of United Therapeutics, at the Fortune Global Forum on Tuesday.

Rothblatt explained that the U.S. spends about 15% of its GDP on healthcare, versus about 8% to 10% in European countries. “We have comparable longevity, so … if we spend twice as much for the same things that people in Europe are spending half as much for,” she said, “we’re going to spend twice as much of the GDP.”

Rothblatt, who was new to the healthcare industry when she started United Therapeutics, suggested to her staff that the company should charge the same amount for products in the U.S. as it does overseas.

“They said, ‘They won’t sell because the governments in those countries won’t buy them,’” she said. “That may well be the case, but it seems to me not right that the U.S. taxpayer through Medicare and Medicaid, which pay for roughly half of the drugs in the country, should be subsidizing the healthcare costs of the wealthier countries in the world.”

United developed a GDP-adjusted pricing plan, basing the prices of its products in any given country on the ratio of that country’s GDP compared to U.S. GDP. In China, for example, United’s drug prices are lower than they are in the U.S., but they rise every year as GDP per capita increases.