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Why drug prices in America are so high (2016)

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

#171

Post by allenz »

calvinbhai wrote: post #91

Drug prices in US go up because of collusion between Insurance Companies and Drug manufacturers. Would I buy expensive health insurance if drugs cost me $100 a month? Most probably never. What if the sticker price for my monthly dose of drugs was $10,000 or $50,000? You bet I'd go get an insurance that'd cost $500 a month. With such sticker shock, manufacturer reaps in profits. Insurance companies get to charge highe…

> Drug prices in US go up because of collusion between Insurance Companies and Drug manufacturers.

It's great that you're interested in healthcare policy, but you should be careful about making blanket statements without the evidence. Drugs are 9% of healthcare costs[1] and 14% of insurance costs[2]--hardly the decisive factor in your choice of health insurance. And expensive drugs are expensive primarily because it really does cost $1B+ to develop a new drug.[3] Even if you wipe out drug company profits (which we really don't want to do), you'll save at most 3% on your insurance.[4]

Like other types of insurance, cheap health insurance is cheap primarily because it limits your coverage. The biggest impact is that you pay more to see fewer specialists and undergo fewer procedures. It also results in situations in which you're denied a cure for liver disease until you have severe liver damage.[5]

Your solution doesn't solve collusion so much as make a major tradeoff: we can have a world in which drugs cost $1000/year, if we stop researching drugs that cure liver disease. We can have cheap health insurance, if we give up most of the coverage. You probably didn't know you were making that tradeoff, and that's probably not a tradeoff you want to make.

[1] http://www.huffingtonpost.com/2014/12/03/health-care-spendin...

[2] PwC report, page 12 http://www.amcp.org/WorkArea/DownloadAsset.aspx?id=12727

[3] https://www.washingtonpost.com/news/wonk/wp/2014/11/18/does-...

[4] Profit margins are less than 20% http://www.bbc.com/news/business-28212223

[5] http://america.aljazeera.com/articles/2015/10/16/insurance-p...

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

#172

Post by doktrin »

harryh wrote: post #130
doktrin wrote: post #128

Earlier quoted context omitted.

> The US is 8% richer than Denmark, 12% richer than Sweden and 40% richer than Germany on a per capita basis. This seems to ignore the obvious discrepancies between income inequality in the US vs. Sweden & Germany. Our Gini coefficient is higher than both, as is our poverty rate. Our high GDP masks the fact that our world's-highest drug prices have a disproportionately negative effect on our poorest citizens.

That is true but it's mostly an argument for higher taxes are more subsidized medical care (including drug purchases) not an argument that the US should pay less overall for drugs than poorer countries.

> not an argument that the US should pay less overall for drugs than poorer countries.

I never said that.

My point is simply that pointing at nominal GDP paints an inaccurate picture. The US is a complex and extremely heterogenous market, and using a single economic measure to justify nationwide pricing is a bit like taking the temperature average of the man whose head is in the oven and feet in the freezer.

It's feasible to imagine a world in which drug companies apply the same adjusted pricing to poorer segments of the US market as they do foreign customers. They don't in practice, allegedly, because of Medicaid regulations enforcing a lowest-in-country price [1]. Regardless of whether that particular explanation holds water, the idea of price discrimination within the highly unequal US market is reasonable.

[1] https://object.cato.org/sites/cato.org/files/serials/files/r...

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

#173

Post by dv_dt »

refurb wrote: post #132
dv_dt wrote: post #122

Earlier quoted context omitted.

Customers pay for marketing budgets in the end - that by itself is a big contributor to higher US drug costs.

Pricing in the US is not cost-based. That's not how it works. If you price a drug at $100, you can't raise it to $110 to pay for marketing. You set the price at $100, then decide what to do with the profit. If marketing costs $10, but increases your sales by 15%, then you have a positive ROI.

> Pricing in the US is not cost-based

I think this speaks for the whole issue ... there are some markets where this makes sense. I don't believe that it makes any sense in the healthcare market - and per-capita US healthcosts vs other nations would seem to bear that out.

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

#174

Post by aanm1988 »

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…

That would be a damn hard thing to pass, and the drug companies would fight it tooth and nail.

Look at what they did in California.

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

#175

Post by oppositelock »

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…

There's another potential simple fix. Remove the regulatory capture which enables this.

Enforce anti-trust law against medical companies. Remove all re-importation laws, which are purely a result of their lobbying. Allow safe, competitive drugs from abroad into the US market without spending billions to get them past the FDA.

We didn't get here by accident, it's due to years of medical companies lobbying to twist the law. Medical costs are now 1/5 of the US economy, that's a lot of vested interest in things not getting more efficient.

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

#176

Post by danans »

_acme wrote: post #152
danans wrote: post #131

Friends in the pharma and medical device development industry have told me that the business case for any drug or medical device is built on top of US sales at currently inflated US prices. According to them, the other developed countries that have negotiated lower rates for drugs serve a different purpose. Those countries have lower requirements around testing of drugs and medical devices, and they are able to move…

Do you have support for the claim that US-developed drugs are generally available sooner in non-US markets? My understanding was that these drugs are generally available first in the US market, but that the developers may use FDA approval to help with EU approval, etc.

In the case of the medical device company in question, the trials took place in Europe due to an easier regulatory process around testing. As I said, it's their personal story, but here is an article that describes the differences between the systems: http://www.nejm.org/doi/full/10.1056/NEJMhle1113918#t=articl...

I didn't mean to imply that US drug prices necessarily have anything to do with its regulatory structure, or that the European regulatory structure had anything to do with their prices, only that the companies have probably optimized their development and pricing strategies for the economic and political situations in the local markets.

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

#177

Post by Ericson2314 »

_jal wrote: post #56
dustingetz wrote: post #14

Earlier quoted context omitted.

That quote seems to me to be missing a really important bit, which is that there doesn't seem to be a functioning free market which is a necessary condition to determine the price. (This comment is not aimed at you, it is aimed at the article for supplying such a broken explanation)

This is very, very important. The drug market is one of the farthest things we have from a free market in the US outside of military weapons. It is just massively dysfunctional due to a combination of special interest lobbying combined with stepwise path-dependency. A huge part of the health care discussion in the US starts from assuming our current system is somehow natural. It isn't. It is an engineered thing, with…

Yes. either the capitalist or sovislist extremes would be our horrible horrible middle ground. Our healthcare inanity is one of our greatest threats.

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

#178

Post by harryh »

doktrin wrote: post #172
harryh wrote: post #130

Earlier quoted context omitted.

That is true but it's mostly an argument for higher taxes are more subsidized medical care (including drug purchases) not an argument that the US should pay less overall for drugs than poorer countries.

> not an argument that the US should pay less overall for drugs than poorer countries. I never said that. My point is simply that pointing at nominal GDP paints an inaccurate picture. The US is a complex and extremely heterogenous market, and using a single economic measure to justify nationwide pricing is a bit like taking the temperature average of the man whose head is in the oven and feet in the freezer. It's fea…

Ya, I generally agree that Mississippi run medicaid should probably be paying less for drugs than Connecticut run medicaid.

I can see how that might be tricky to get to politically though.

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

#179

Post by Ericson2314 »

narrowrail wrote: post #167
_jal wrote: post #56

Earlier quoted context omitted.

This is very, very important. The drug market is one of the farthest things we have from a free market in the US outside of military weapons. It is just massively dysfunctional due to a combination of special interest lobbying combined with stepwise path-dependency. A huge part of the health care discussion in the US starts from assuming our current system is somehow natural. It isn't. It is an engineered thing, with…

>why the US is such a special snowflake that what works in various ways in every other first-world country cannot work here. I don't care for this argument simply because the US was the first country to throw off monarchical rule. Why the need for homogeneity? Shouldn't we have as many different implementations as possible? Personally, I don't care for centralized power (i.e. Facebook). Didn't Google take a different…

American healthcare isn't a city on a hill, it's a prison in a dump. Save your exceptionalist arguments for something which isn't unbelievably shitty.

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

#180

Post by maxerickson »

harryh wrote: post #178
doktrin wrote: post #172

Earlier quoted context omitted.

> not an argument that the US should pay less overall for drugs than poorer countries. I never said that. My point is simply that pointing at nominal GDP paints an inaccurate picture. The US is a complex and extremely heterogenous market, and using a single economic measure to justify nationwide pricing is a bit like taking the temperature average of the man whose head is in the oven and feet in the freezer. It's fea…

Ya, I generally agree that Mississippi run medicaid should probably be paying less for drugs than Connecticut run medicaid. I can see how that might be tricky to get to politically though.

The federal share of Medicaid does vary by state:

https://www.medicaid.gov/medicaid/financing-and-reimbursemen...

https://aspe.hhs.gov/basic-report/fy2017-federal-medical-ass...

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