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Why drug prices in America are so high (2016)

economist.com

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

#71

Post by refurb »

dv_dt wrote: post #39
chimeracoder wrote: post #18

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.

That's absolutely not true. Look at the HCV treatments. The average discount for private insurers is 40%+. And that's just one example. They are tons of drug classes that are very heavily discounts to private payers.

Members of a health plan can't just move from one plan to another whenever they want. There is annual enrollment. Members are somewhat captive.

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

#72

Post by chimeracoder »

harryh wrote: post #29
chimeracoder wrote: post #8

Earlier quoted context omitted.

> "The simple answer is because they can. The easiest way to fix the fact that 'they can' would be to permit re-importating drugs that were manufactured within the US. Shortly before Obama left office, there was a bill that would have fixed that, but nine Democrats joined the Republicans in voting it down: https://www.senate.gov/legislative/LIS/roll_call_lists/roll_...

This is a silly hack. The US has plenty of market power to reduce prices for drugs sold in the US. There are reasons to be in favor of wielding that market power and there are reasons to be against it. But there is no rational reason to pretend to not wield it but then re-import a bunch of drugs from Canada. That's just a waste of shipping costs.

> But there is no rational reason to pretend to not wield it but then re-import a bunch of drugs from Canada.

Permitting trade across the US-Canadian border provides an equalizing force on the prices across the border, even though no drugs actually need to make the return trip (at equilibrium).

In other words, allowing the trade puts an upper bound on the difference between the prices charged in the US and the prices charged in Canada - that difference can be no greater than the costs of reimporting those drugs, or else it's cheaper for people to source their drugs from Canada.

By disallowing the trade, we allow the difference to grow unbounded.

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

#73

Post by andmarios »

RcouF1uZ4gsC wrote: post #25

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…

But isn't free market, unregulated prices, etc the mandate of US? I don't judge, just making a remark.

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

#74

Post by chimeracoder »

ferentchak wrote: post #32
doktrin wrote: 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…

This. Do we need to subsidize Sweden and Germany? I have wondered for a while why we don't make a law saying the highest price you can sell a drug for in the US is no higher than the lowest negotiated price that drug is sold to in other rich countries. So if Canada negotiates a drug for $10 then that is the highest price you can sell it for here etc. That way they can set the prices however they want but collective b…

> I have wondered for a while why we don't make a law saying the highest price you can sell a drug for in the US is no higher than the lowest negotiated price that drug is sold to in other rich countries.

You don't need a rule to enforce that. You just need to allow the US to reimport prescription drugs that were originally exported from the US. It would be far and away the simplest solution and would have the same end result[0].

Unfortunately, Congress has voted against that, so we're stuck with the status quo.

[0] The difference between the prices charged in the US and the prices charged in any other country could be no greater than the costs of reimporting the drugs from that country - or else people would just buy the reimported versions instead of the domestic ones[1]. This has the desired outcome of equalizing the prices

[1] Which, remember, are literally the same drugs manufactured at the same plants by the same company.

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

#75

Post by dv_dt »

chimeracoder wrote: post #61
dv_dt wrote: post #39

Earlier quoted context omitted.

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…

The balance of patients dieing vs not buying the drug at all is there regardless of what price negotiating scheme you implement. The cost is what varys in the end.

So when you look at data, a single government representative body can determine efficacy and balance the cost in a way that multiple private bodies have not demonstrated in US drug cost data vs drug costs in nations which implement governmental drug controls.

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

#76

Post by dv_dt »

refurb wrote: post #71
dv_dt wrote: post #39

Earlier quoted context omitted.

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. That's absolutely not true. Look at the HCV treatments. The average discount for private insurers is 40%+. And that's just one example. They are tons of drug classes that are very heavily discounts to private payers. Members of a health plan can't just move from one plan to another whenever they want. There i…

But when you look at data, this scheme does not result in better drug prices than national negotiation.

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

#77

Post by DanBC »

doktrin wrote: 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…

> 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.

The pharma companies also have enormous advertising budgets in the US, so you could stop that to save the old people some money.

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

#78

Post by throwawaydp535 »

frgtpsswrdlame wrote: post #55
dv_dt wrote: 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.

Given that Obamacare insurance premiums are spiraling out of control, it's unclear why you're holding that up as an example of affordable healthcare.

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

#79

Post by RightMillennial »

criddell wrote: post #62
Symmetry wrote: post #43

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.

The problem is many Republicans claim to be proponents of open markets and less regulation. But when it comes down to voting on bills, they generally do the opposite.

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

#80

Post by throwawaydp535 »

harryh wrote: post #50
RcouF1uZ4gsC wrote: post #25

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…

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. It should be paying more.

No, it shouldn't. There exists no objective moral obligation that would dictate that the US suffer the brunt of drug development costs for the benefit of the third world.

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