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The Hidden Monopolies That Raise Drug Prices

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Re: The Hidden Monopolies That Raise Drug Prices

#61

Post by kellanem »

bradleyjg wrote: post #45
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.

Two things going on with the rebates.

1. I think the article is a little one sided in their explanation of the rebate system, though it certainly more opaque than it should be. (some of which is just healthtech is stuck in the dark ages)

2. The rebates really only apply to the branded meds, which are approximately 20% of the market.

Re: The Hidden Monopolies That Raise Drug Prices

#62

Post by novalis78 »

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.

Absolutely agree. Something long the lines of what pricepain.com had in mind. This "market" is so ripe for disruption like no other. Sadly, its guarded by a lot of lobbying power and artificial regulations. I think they get away with it "because health".

Re: The Hidden Monopolies That Raise Drug Prices

#63

Post by xadhominemx »

DarkKomunalec wrote: post #53
refurb wrote: post #44

Earlier quoted context omitted.

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.

> 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. That's advertising. You mentioned 20% of their revenue is R&D - do you have a source, ideally listing what the other 80% goes to? That's a lot of unaccounted revenue, especially given how many drugs were shown to be dirt cheap to manufacture.

you're speaking very authoritatively for someone who apparently does not know the difference between sales, marketing, and advertising and also does not know how to pull basic financial information of publicly-traded companies

Re: The Hidden Monopolies That Raise Drug Prices

#64

Post by rayiner »

jcfrei wrote: post #30
chimeracoder wrote: post #25

Earlier quoted context omitted.

> Or: we could just emulate what those other countries are doing to control prices Because centrally setting prices is very difficult, and that difficulty scales super-linearly with size. Every other country that controls pharmaceutical prices is significantly smaller than the US is, and they also fund much less pharmaceutical R&D than the US does[0], even though they essentially import the benefits of that R&D at re…

In your comment you suggest that most of the profits of pharma companies go into R&D but that's not the case. There's a lot of rent seeking behavior by these companies due to poor legislation. This kind of behavior (incentives/"conferences" for physicians, lobbying, etc.) shows up under sales in their annual reports and it's clear they spend a lot more on it than on R&D: https://www.washingtonpost.com/news/wonk/wp/20…

So that's an article on how pharma companies spend more on sales and marketing than research. But many companies we'd consider "innovative" spend about twice as much on SG&A (sales, general, and administrative) as on R&D. For 2014-2015, the ratio between R&D spending and SG&A spending is 0.59 at Pfizer, 0.75 at Google, 0.56 at AstraZeneca, 0.43 at Apple, and 0.58 at Microsoft.

Re: The Hidden Monopolies That Raise Drug Prices

#65

Post by galdosdi »

tclAmockingbird wrote: post #60
DarkKomunalec wrote: post #53

Earlier quoted context omitted.

> 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. That's advertising. You mentioned 20% of their revenue is R&D - do you have a source, ideally listing what the other 80% goes to? That's a lot of unaccounted revenue, especially given how many drugs were shown to be dirt cheap to manufacture.

> > 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. > That's advertising. It's also keeping physicians up to date on the current science, applicability, and best practices of their products. I think it's a good thing for sales reps and MSLs to inform or remind physicians that there are alternatives…

FWIW the anecdotal experience of people I know in the health field in the US is that pharma sales reps know nothing about medicine, are hired for their sales / "relationship building" ability, and can't answer any question about the drug they are touting that can't be answered by looking at the brochure. Very disappointing.

You can't expect to get unbiased, quality advice from someone with such a strong incentive. The right way for doctors to stay up to date is for doctors to stay up to date! They need to read a damn book or journal article once in a while and takes responsibility for their own professional development. If doctors aren't doing that, regulators need to suspend their licenses.

Re: The Hidden Monopolies That Raise Drug Prices

#66

Post by gleb »

jonahrd wrote: post #18
chimeracoder wrote: post #3

> Americans pay the highest health-care prices in the world, including the highest for drugs, medical devices, and other health-care services and products. Our fragmented system produces many opportunities for excessive charges. But one lesser-known reason for those high prices is the stranglehold that a few giant intermediaries have secured over distribution. The antitrust laws are supposed to provide protection aga…

It's insane. I need a drug that costs about $8k every two months in the US. However, I'm living in Canada right now, where it costs $4k. My US insurance company just decided they will no longer cover the drug in Canada, so instead of paying the $4k CAD, they're now going to pay $8k USD and I'll go pick up the drug across the border. Seems like a lose-lose.

You are misunderstanding the incentives of the insurance company. They get to keep 20% of money that passes through them. The only way they can make more money is by increasing the money flow.

You lose though. Insurance is part of your total compensation, you are paying for all this. It's averaged out across a bunch of people, but you are still paying for it.

In summary, drug company wins, insurance company wins, your employer doesn't care and you lose. But you don't even know you lost, and can do nothing about it even if you wanted to.

Re: The Hidden Monopolies That Raise Drug Prices

#68

Post by galdosdi »

replicatorblog wrote: post #52
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…

You're over privileging people using the drug today and undervaluing the hundreds of millions who will use it for decades to come. For the most part, the expensive drugs like Sovaldi are under patent protection. That protection lasts for 20 years at max, and practically, a much smaller window since R&D cycles eat much of that time up leaving a small commercial window. Once the patent expires, companies like Teva and…

Sort of. Once the patent expires, the R&D machine will try hard to create new drugs that are just slightly different or potentially "better" in some vague small way for some small number of people, and then the sales/marketing machine will try hard to market to doctors and consumers the idea that this new, still patented version is the right thing and the best and the old stuff is crap.

The new stuff will actually benefit a tiny number of people, but mostly, you'll end up with a lot of those future generation which you think were going to save money, not saving any because they're wrongly prescribed a newer fancier drug that doesn't actually have any benefits for them over the old generic one. This is how pharma has their cake and eats it too.

Re: The Hidden Monopolies That Raise Drug Prices

#69

Post by DarkKomunalec »

tclAmockingbird wrote: post #60
DarkKomunalec wrote: post #53

Earlier quoted context omitted.

> 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. That's advertising. You mentioned 20% of their revenue is R&D - do you have a source, ideally listing what the other 80% goes to? That's a lot of unaccounted revenue, especially given how many drugs were shown to be dirt cheap to manufacture.

> > 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. > That's advertising. It's also keeping physicians up to date on the current science, applicability, and best practices of their products. I think it's a good thing for sales reps and MSLs to inform or remind physicians that there are alternatives…

> It's also keeping physicians up to date on the current science, applicability, and best practices of their products. I think it's a good thing for sales reps and MSLs to inform or remind physicians that there are alternatives to writing a script for Epipens, for example.

There are many very cheap ways of keeping physicians up-to date, such as a conference presentation of the drug, followed by a Q&A session, with a recording freely available online.

> Many drugs are cheap to make, but that neglects the astronomical development and regulatory costs.

Which are covered in the already mentioned 20% that goes to R&D (source pending). Are you purposefully ignoring information you dislike?

Re: The Hidden Monopolies That Raise Drug Prices

#70

Post by brandonmenc »

DarkKomunalec wrote: post #53
refurb wrote: post #44

Earlier quoted context omitted.

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.

> 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. That's advertising. You mentioned 20% of their revenue is R&D - do you have a source, ideally listing what the other 80% goes to? That's a lot of unaccounted revenue, especially given how many drugs were shown to be dirt cheap to manufacture.

> That's advertising.

Anecdotally, a friend of mine was doing post-doctoral work researching and developing cancer drugs. He now works on a pharmaceutical sales team as a scientific liaison.

"Advertising" a drug involves a lot more than running TV commercials - it also includes former scientists making the current research digestible for doctors who don't have the time or specialized knowledge to do that in between seeing patients.

The notion that every practicing doctor has enough free time - or is even smart enough - to keep up on the latest pharmaceuticals, is ridiculous.

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