Obamacare Creates Windfall for Drug Companies

One of the first things millions of Americans will see from the healthcare bill is an effective 40 percent tax hike on the over-the-counter (OTC) medicines.

If you pay for any of these items with money in your flexible spending account (FSA) or health savings account (HSA), you will face an effective tax increase of up to 40 percent on such items. The bill restricts individuals with these pre-tax accounts to buying a “medicine or drug only if such medicine or drug is a prescribed” one.

 

This tax will raise healthcare costs substantially by creating incentives for the use of more expensive prescription drugs.

At the same time money flows to the coffers of the drug companies, the bill could also potentially lead to a budget crisis in the government -- a wrenching political, social and economic upheaval. Large deficits and rising debt could spook investors, leading to higher interest rates on government loans. The higher rates expand the budget deficit and further unnerve investors. To reverse this calamitous cycle, the government has to cut spending deeply or raise taxes sharply. Lower spending and higher taxes in turn depress the economy and lead to higher unemployment.

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