Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The Hidden Monopolies That Raise Drug Prices

prospect.org

Post reply on HN
Print view View original

41–50 of 199 posts

Re: The Hidden Monopolies That Raise Drug Prices

#41

Post by refurb »

clueless123 wrote: post #10
encoderer wrote: post #4

I think blaming drug companies and wholesalers just misses the point. Drugs are really good today. Not even the life saving types, but also things like migraine medication or acid reflux relief. If you suffer and have the means, you'll pay what the market demands for relief. And we live in a wealthy country.

If your drug is so good, you should let the market decide what the fair price. The problem is that drug companies and wholesalers don't let that happen by lobbying against open markets and government paid healthcare.

If your drug is so good, you should let the market decide what the fair price.

Contrary to what people think, drug companies can't just charge whatever they want. Take a look at the HCV drugs. They priced too high and their sales are eroding very quickly. If they had priced lower, they probably would have seen even greater profits.

Re: The Hidden Monopolies That Raise Drug Prices

#42

Post by refurb »

attaboyjon wrote: post #26
refurb wrote: post #2

It's interesting how the villains of drug pricing have gone from the drug companies to the PBMs. At any rate, I don't agree that PBMs cause drug costs to increase. PBMs are simply purchasing groups for insurance companies. They take advantage of bulk purchasing and offer that service to insurers. They also handle the all the complexities in setting a formulary which includes evaluating new drugs, negotiating with dru…

Actually the PBMs are a big villain here. They pocket the difference between the retail price of a drug and the discounts they negotiate with the drug makers. They choose the drugs on their formulary based on this spread. This one of the reasons why you will see prices for drugs like Insulin going up with each manufacturer raising price in lock-step. The drug makers are not competing to sell the consumer insulin, the…

But that's their job! They are supposed to negotiate lower prices. They, in turn, can market their formulary to insurance companies by saying "If you use us, we can offer a lower cost pharmacy benefit."

And if you're a smart insurance company, you do your due diligence and don't negotiate a contract where you have no transparency into the PBMs costs.

Re: The Hidden Monopolies That Raise Drug Prices

#43

Post by cmdrfred »

maxxxxx wrote: post #39

This is just another example of how messed up the US medical "market" is. Almost everywhere you look there are hidden prices, hidden middlemen and so on. I am not aware of any other market where things are so opaque and convoluted. If the current administration was serious about markets they should mandate that all pricing becomes transparent so a real functioning market can actually develop.

I like the 'allow drugs to be bought from Canada' idea. I've been buying mine from India for years at about 1/4th the cost.

Re: The Hidden Monopolies That Raise Drug Prices

#44

Post by refurb »

DarkKomunalec wrote: post #36
kellanem wrote: post #27

The article does a good job of starting to explain the forces, but it's actually even more complicated. A number of the PBMs are cross invested in pharmacies and insurance companies, and the incentives of 2-3 large pharmacies that control the majority of the market (and how they get paid) is very different than how small pharmacies get paid. Additionally the way the generic market works vs the branded (patented) meds…

Proportionately to their revenue, pharma doesn't spend that much on R&D: https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p... And that's just compared to advertising - throw in other overhead, and separate R&D into genuinely new drugs vs. generics and flavoured aspirin, and the numbers are even worse. Of course it's hard to get such comprehensive financial data, but that's just one of the advantages of pri…

Drug companies spend the most on R&D out of any industry. The average is almost 20% of revenue. That means if you buy a drug for $1000, $200 of that goes back into R&D.

And no, the sales and marketing in that article is not advertising alone. It's mostly sales people who go and visit medical professionals to talk about their products.

Re: The Hidden Monopolies That Raise Drug Prices

#45

Post by bradleyjg »

kellanem wrote: post #27

The article does a good job of starting to explain the forces, but it's actually even more complicated. A number of the PBMs are cross invested in pharmacies and insurance companies, and the incentives of 2-3 large pharmacies that control the majority of the market (and how they get paid) is very different than how small pharmacies get paid. Additionally the way the generic market works vs the branded (patented) meds…

> If you're interested in roughly what the wholesale price is plus a very small markup

What about the rebates mentioned in the article several times? I know in the car industry one trick is to go on and on about "dealer invoice" and how great a deal you are getting while ignoring that rebates make that number fairly meaningless.

Re: The Hidden Monopolies That Raise Drug Prices

#46

Post by chimeracoder »

kbenson wrote: post #32
chimeracoder wrote: post #19

Earlier quoted context omitted.

> we put high tariffs on Chinese steel to counter heavy Chinese government subsidization of that industry That's not a good comparison, because we're talking about reimportation - ie, drugs that are produced in the US and exported to another country before being reimported. In general, nobody's interested in reimporting steel produced in the US and exported to China. > Because the healthcare system is publicly funded…

> With free trade, another country is still free to subsidize the goods that it imports from the US, but with the knowledge that they'll be subsidizing whatever portion of Americans choose to reimport those drugs at the subsidized prices. But that's the whole problem. Canada presumably doesn't want to subsidize U.S. citizens. The whole point is to provide a benefit for their own citizens. If Canada subsidizes a popul…

> But that's the whole problem. Canada presumably doesn't want to subsidize U.S. citizens.

Well, right now the US is effectively subsidizing Canadians, because the US is funding the majority of the pharmaceutical research that produces the drugs they consume. Half of the entire world's funding for pharmaceutical research comes from the US. A large chunk of that is funded by earnings on pharmaceutical sales[0][1].

> If Canada subsidizes a popular but expensive drug so that it costs $1 for Canadians

This is kind of a moot point, because Canada doesn't do that.

> It will happen for as long as the manufacturer resists.

I don't understand what you mean by "resist". If reimportation were permitted, the manufacturer literally has no power to prevent cross-border trade. In your hypothetical scenario, yes, Canada would probably adjust the degree to which they subsidize their drugs, but that's a moot point because they're not actually doing that.

[0] and again, most of that come from the US, because earnings will be higher where the sale prices are highest

[1] http://www.slate.com/articles/news_and_politics/explainer/20...

Re: The Hidden Monopolies That Raise Drug Prices

#47

Post by torpfactory »

rayiner wrote: post #31
torpfactory wrote: post #20

I'm going to make the statement that perscription drugs aren't like other products and shouldn't be viewed as such. People literally need them to survive. This whole system of having something you need to survive being subject to market forces like some other widget is ridculous. Price fixing is absolutely a reasonable tactic to employ when the market for prescription drugs in the US is as completely useless at deliv…

The system is always subject to market forces. The government can budge the market around, but it's like pushing on one part of a balloon--it'll just have an effect somewhere else. When you set prices, you drive investment and talent out of the industry. Why spend years getting a PhD in biochemistry when you can go make $400k/year with just a BS at Google? It's precisely because people need drugs to survive that it's…

Almost all other developed economies use this approach and it works for them. Many Of these very companies are based on those very countries. We need a reasonable price for these medications. The market isn't delivering them. The scandal here isn't the pay these companies researchers receive. I'm happy to have them paid more for their work. To me the scandal is how much profit is being taken while many people go without due to the price. What do you say to those people who might die for lack of funds?

Re: The Hidden Monopolies That Raise Drug Prices

#48

Post by replicatorblog »

torpfactory wrote: post #29
joshuaheard wrote: post #24

Earlier quoted context omitted.

We need food to survive, and market forces work fine. In fact, I would say that the U.S. supermarket is a model of market efficiency.

When I can buy drugs from the Pharamacy for $1.69 a pound I'll be happy to see it driven by market forces. The market simply isn't doing a good enough job getting medications to consumers at a reasonable price.

https://www.walmart.com/cp/4-dollar-presscriptions/1078664

Re: The Hidden Monopolies That Raise Drug Prices

#49

Post by chimeracoder »

refurb wrote: post #35
chimeracoder wrote: post #28

Earlier quoted context omitted.

> doesn't prevent drug companies from allocating volume on a country-by-country level and maintaining price discrimination. It does; for price discrimination, there are three criteria that all need to be satisfied, and one of them is the ability to restrict resale between market segments. If market segments are free to trade with each other, the supplier cannot price-discriminate. > This happened back 6-7 years ago w…

The only reason that they can set these quotas in the first place is that US wholesalers can't (freely) export to Canada, and vice versa. If the ban on that had been lifted, AstraZeneca wouldn't be able to set quotas per-country in the first place. Manufacturer control over whole gets the buy drugs and what they can do with it after that is a cornerstone of drug distribution strategy. It also maintains drug pedigree…

> Manufacturer control over whole gets the buy drugs and what they can do with it after that is a cornerstone of drug distribution strategy. It also maintains drug pedigree and product integrity. I can't see it going away.

Not really. Manufacturers already have essentially zero control over wholesale resale within the US. (They can track it, to assist in things like recalls, but they can't prevent it). And there are other countries which already permit free trade of US-produced pharmaceuticals between their own international borders. The only difference is that it can't cross the US border again, which is why the easiest way for manufacturers to make money is to price-gouge US customers.

Post reply on HN