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Why drug prices in America are so high (2016)

economist.com

61–70 of 204 posts

Re: Why drug prices in America are so high (2016)

#61
post #39

Earlier quoted context omitted.

> It was part of the Medicare part D program - and likely put in via lobbying of Drug companies to politicians: The prices are still negotiated. They're negotiated by the plans that provide Medicare Part D, rather than determined unilaterally by Medicare itself (which is what happens for Medicare A and B reimbursement rates).

Any private drug negotiator is going to be in a terrible position because they don't have 100% of the market. They can't walk away, the drugs will just flow through another private drug body. The drug makers have no reason to give a discount if the drugs will be sold under plan distributor B vs distributor A. When you compare prices in the US vs nations with governmental bodies controlling drug prices, you can valida…

> Any private drug negotiator is going to be in a terrible position because they don't have 100% of the market. They can't walk away,

Having 100% of the market is the definition of a monopsony. That's bad for both patients (in the long run) and pharmaceutical companies (in the short run).

In any case, even an ostensible monopsony pharmaceutical purchaser can't really just "walk away", because so so many of the drugs that they're purchasing are deemed essential. Let's say the government just said, "sorry, you've been taking this critical blood-pressure medication since it was released seven years ago, but now we're not going to pay for it, because we're taking a hard-line stance in our negotiation with Pfizer".

At that point, there are two possibilities:

1) Patients stop taking the drug, and they die

2) Patients pay for the drug out-of-pocket (if they can afford it), and the remaining patients die.

#1 is possible, but a political disaster. #2 is a no longer a monopsony, which defeats the whole premise of "having 100% of the market".

Re: Why drug prices in America are so high (2016)

#62
post #20

> These high prices support innovation, they argue—not just for America, but for the world. I suspect this is in fact somewhat true, but how is it a coherent argument in favor of higher prices? The American people / American elderly (obviously) don't have some unspoken moral obligation to subsidize pharmaceutical R&D for the whole world. Governments around the world are able to negotiate affordable rates for their ci…

Milton Freidman's solution was to allow re-importation of drugs from countries where they were less expensive. Either the drug companies could raise prices abroad, accept lower prices domestically, not sell abroad, or some combination of all of the above.

This seems like something that shouldn't upset many Republicans. Remove artificial barriers and open the markets. This could apply to a lot more than just drugs. For example, it would be nice if region restrictions were removed from digital goods.

Re: Why drug prices in America are so high (2016)

#63
post #49

Earlier quoted context omitted.

The high price of medical care costs lives as well as jobs in other industries...

That didn't stop him from trying to repeal Obamacare. I personally think we should institute drug price controls for many reasons including that one but I'm not sure why we are thinking that Donald Trump is going to do it.

I don't know why Donald Trump does anything. But, I do think he's is of an unknown position in this particular area - so given that we have a problem in the US, and that Trump maybe doesn't have a defined position on the issue, it doesn't hurt to chase the possibility. (On the other hand if I'm just guessing with low-data: the chance does seems low).

Re: Why drug prices in America are so high (2016)

#64
post #58

This has a very simple fix, and is a fix that would appeal to Donald Trump: Require that pharmaceutical companies do not charge Americans any more for their drugs than what they charge any developed country. This lets other countries do the dirty work of negotiating prices while reaping the benefits for the US. In addition, it goes along with his whole America is getting screwed narrative - ie that other companies ar…

There are a lot of problems with reference pricing. First off, if country A (300M people) references country B (30M people), then the drug company can simply chose not to launch the drug in country B if that reference price is too low. Second, drug companies can modify their launch sequence (this already happens today) so that they launch in the referenced countries after the price is set in the country doing the ref…

What price control method would you advocate for?

Re: Why drug prices in America are so high (2016)

#65
post #50

Earlier quoted context omitted.

This is not a great fix. Almost all companies (not just drug companies) routinely find ways to segment the market into different groups with different abilities to pay and then charge different prices for very similar products. That is the profit (or future research budget) maximizing strategy. The US is richer. It should be paying more. How much more is debatable.

The US is richer and should be paying more than say Kenya. However, you would be hard-pressed to explain why the US should be paying more than say Denmark or Sweden or Germany?

The US is 8% richer than Denmark, 12% richer than Sweden and 40% richer than Germany on a per capita basis.

https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...

If you had said Luxembourg, Switzerland & Norway I would have agreed with you. That's only about 14 million people though.

Re: Why drug prices in America are so high (2016)

#66
post #36

Earlier quoted context omitted.

Has the US ever disallowed a patent because the company holding it refused to sell a product to the government at the price the government wanted? It's hard to imagine SCOTUS allowing that sort of thing. The US gov't is subject to its own laws.

Has the US ever fought hard to institute a travel ban in order to prevent people of a certain religion from entering the country, despite judicial intervention. That's the thing about governments: they can do whatever they want. And your recourse is to deal with it or spend years fighting against it (or die in the streets fighting it, lest we forget that option). Disclaimer: I'm for breaking patents when necessary, a…

Disclaimer: I'm for breaking patents when necessary, although 3D printing drugs is around the corner making it a moot point.

3D drug printing is a pipe dream. The syntheses are way to complex to do at home. You'd be better of just having a CRO make the drug for you.

Re: Why drug prices in America are so high (2016)

#67

Earlier quoted context omitted.

Milton Freidman's solution was to allow re-importation of drugs from countries where they were less expensive. Either the drug companies could raise prices abroad, accept lower prices domestically, not sell abroad, or some combination of all of the above.

This seems like something that shouldn't upset many Republicans. Remove artificial barriers and open the markets. This could apply to a lot more than just drugs. For example, it would be nice if region restrictions were removed from digital goods.

> This seems like something that shouldn't upset many Republicans.

You'd think so, but they voted against it on Jan 17th (along with nine Democrats).

Re: Why drug prices in America are so high (2016)

#68

This has a very simple fix, and is a fix that would appeal to Donald Trump: Require that pharmaceutical companies do not charge Americans any more for their drugs than what they charge any developed country. This lets other countries do the dirty work of negotiating prices while reaping the benefits for the US. In addition, it goes along with his whole America is getting screwed narrative - ie that other companies ar…

And the Clinton Foundation's big victory was in getting drug companies to sell anti-HIV drugs in the third world for far lower prices than they would go for in wealthier countries. So I imagine the idea of ending that would be appealing to Trump.

Re: Why drug prices in America are so high (2016)

#69
post #20

> These high prices support innovation, they argue—not just for America, but for the world. I suspect this is in fact somewhat true, but how is it a coherent argument in favor of higher prices? The American people / American elderly (obviously) don't have some unspoken moral obligation to subsidize pharmaceutical R&D for the whole world. Governments around the world are able to negotiate affordable rates for their ci…

The R&D argument would be much stronger if pharma companies didn't spend more in marketing than R&D in the US.

Re: Why drug prices in America are so high (2016)

#70
The key challenge is that the government has so grossly distorted the market, on multiple dimensions, that the actual levers within the pharma vertical are opaque to all but the most embedded incumbents. (economists refer to these as hidden externalities).

These market-distortions have all but eliminated the natural cost-competition that one would observe in other sectors, such as commodities or manufacturing. The best thing the government can do is back off completely and make those pharma companies REALLY sharpen their pencils.

For those of you who believe MORE regulation is the way out, that's called "trying to dig your way out of a hole" or "repeating the same nonsense and expecting a different outcome." Please challenge your beliefs.

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