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The Best Fix for American Drug Prices Is Already on the Books

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Re: The Best Fix for American Drug Prices Is Already on the Books

#41

Post by RcouF1uZ4gsC »

khazhoux wrote: post #19

Crazy idea: all pharmaceutical research should be publicly funded and publicly-owned. No private ownership of drug patents, period. "But this will disincentive research!" Maybe. Or, tax people more in order to fund the research. The tax revenue would go directly to researcher salary, equipment, expenses. Even a large tax increase can't be worse than today, where people have to pay huge $$$ anyway, of which a large cu…

You do that and in in a few decades, after a few rounds of negotiations, most of your research money will go to funding ex-researchers pensions. For an example, take a look at where California's tax revenues go.

In addition, public funding tends to more risk averse. Private industry generously rewards innovation. Public funding tends to reward not rocking the boat.

Re: The Best Fix for American Drug Prices Is Already on the Books

#42

Post by peterashford »

AnthonyMouse wrote: post #17
jerrysievert wrote: post #9

Earlier quoted context omitted.

are you sure that the cost of development is the real issue? the last numbers I saw, 2015, showed marketing budgets for medicine to be often times twice what was being spent on R&D in the US. currently, only four countries allow this time of marketing: New Zealand, Brazil, Hong Kong, and United States. it sounds like the US isn't necessarily subsidizing drug R&D, and instead is subsidizing marketing.

> the last numbers I saw, 2015, showed marketing budgets for medicine to be often times twice what was being spent on R&D in the US. The marketing expense isn't necessarily avoidable. Suppose it costs $50M to research a drug and patients will pay $1000 for a course of treatment. If you do no marketing then you get forty thousand customers and can't recover your R&D. If you spend $100M on marketing then you get two hu…

...except, at least in NZ where they do some of that marketing, the drugs are purchased via the state body Pharmac, which will not pay the inflated prices that the drug companies charge in the US.

Re: The Best Fix for American Drug Prices Is Already on the Books

#43

Post by gred »

ianai wrote: post #29
khazhoux wrote: post #19

Crazy idea: all pharmaceutical research should be publicly funded and publicly-owned. No private ownership of drug patents, period. "But this will disincentive research!" Maybe. Or, tax people more in order to fund the research. The tax revenue would go directly to researcher salary, equipment, expenses. Even a large tax increase can't be worse than today, where people have to pay huge $$$ anyway, of which a large cu…

It’s clearly a market where large expenses are required to make progress. I’m thinking the discoveries should be made public goods through rewarding breakthroughs somehow. Or, devote some fraction of the National gdp to research. We’re talking at least the amount the market currently allocates, but preferably more.

> I’m thinking the discoveries should be made public goods through rewarding breakthroughs somehow.

Maybe the people who create new medicines could be given a temporary monopoly to recoup costs and make some money, and in exchange their research becomes part of the public domain? I'm just spitballing here, but something like that might work...

Re: The Best Fix for American Drug Prices Is Already on the Books

#44

Post by peterashford »

tomohawk wrote: post #4

One of the biggest reasons is that the US essentially subsidizes drugs for many other countries, such as Canada, that impose price controls, and threaten to allow other manufacturers to provide the drugs in their countries if the companies don't accept the imposed price. This enables these countries to get access to new medicine without paying the cost of developing the new medicine. Its time to end the trade war on…

How do you propose to force other countries to pay more for medicines than they do currently? What I find odd is that no-one is forcing these companies to sell their products at a lower price - if they weren't profiting, they wouldn't sell their product.

Re: The Best Fix for American Drug Prices Is Already on the Books

#45

Post by lend000 »

khazhoux wrote: post #19

Crazy idea: all pharmaceutical research should be publicly funded and publicly-owned. No private ownership of drug patents, period. "But this will disincentive research!" Maybe. Or, tax people more in order to fund the research. The tax revenue would go directly to researcher salary, equipment, expenses. Even a large tax increase can't be worse than today, where people have to pay huge $$$ anyway, of which a large cu…

Did Rome suffer from more fires than similar cities in that era? Something tells me it's the other way around...

On average, group behavior can best be studied when assuming average humans have selfish, rational motivations. It's possible to create incentives in the public sector but you can imagine it would be much like academia -- a focus on pushing out high volumes of papers, getting grants, and theoretical/laboratory breakthroughs without any consideration of bringing them to market.

Most of the breakthroughs in medicine used by countries around the world were invented in the US and originally held by US companies -- the US has effectively subsidized and enabled foreign socialized healthcare systems by being a global exporter of medical technology. So the US adopting a state run medical system would likely have an interesting effect on the global medicine market, in a way much different than any other country (i.e. a massive reduction in global progress).

Most people advocating that seem to think the US system is a failed example of a 'free marketplace,' which is an embarrassingly incorrect belief but a product of significant misinformation littering both sides of the argument these days. The US healthcare system is in most ways further from a free market than that of any other country I know of. First of all, we have universal healthcare but only for the elderly (medicare) and the poor (medicaid), which creates an artificial demand imbalance that pumps the prices up for non-participants in those programs, which is even worse than a singular universal system. Then look at the ridiculously overpowered IP law in the US (especially in pharmaceuticals), the oppressive occupational licensing (harder to become a doctor here than anywhere else so naturally we have an artificial shortage of people qualified to do mostly very basic things), FDA-imposed pharmaceutical monopolies, inability to opt-in to experimental treatment (which also means malpractice insurance is always a significant expense), amongst others. This is not a free market, and even if we adopted universal healthcare tomorrow, it does not fix all the other problems listed.

Re: The Best Fix for American Drug Prices Is Already on the Books

#46

Post by danShumway »

rayiner wrote: post #32
danShumway wrote: post #15

Earlier quoted context omitted.

> Nobody wants to spend money on marketing. If drug companies could recoup their investment faster by spending less on marketing, they would. This doesn't pass my sniff test. The original article's point isn't that companies are marketing just so they can flush money down the toilet. Of course it's profitable. The article's point is that we as a society want them to spend more money on R&D; and our current strategy s…

Shortening exclusivity would increase the need for marketing, because companies would have to get the word out to consumers and doctors much more quickly.

Again, that might be true, but it rings multiple alarm bells when I actually think about it.

First, it assumes that the profit margins of a company remain constant. Again, companies want to make money. Period. So say that you're a pharmaceutical company and you're currently getting back 250% of your costs for a drug over the exclusivity period.

If we double that exclusivity period, you are not going to decrease the price you charge or the amount you invest into marketing so that your return on investment remains 250%. At least, not if you're a good business owner. You're going to double down on the exact same strategy and make 500% return. If I later halve your exclusivity period, you won't stay at 500%. You'll go back to 250%.

The fact that a company has less time to do marketing does actually suggest to me that marketing becomes a less bulletproof, desirable strategy for making money - which is exactly what the author wants. It might still be a bad idea; maybe pricing becomes the most efficient way to generate profit, or maybe the drug industry has such tight margins that there is no efficient way to generate profit and everyone closes up shop.

But it seems at least somewhat reasonable to say that if you expect the cost of marketing to remain constant, and the return per dollar to go down severely, you invest less into the now inefficient strategy.

The other reason that I have difficulty accepting this claim at face value is because I can think of markets where it just isn't true: for example, mobile apps. Nobody smart is investing huge amounts of money into marketing a mobile app. What they're doing is churning out five apps a week on the hope that one of them goes viral.

The lack of exclusivity in that market means that constant development is basically a requirement to keep your head above water.

Now, do we want our drug industry to look like the mobile app market? The mobile market is so opposed to long-term investment that the majority of games and apps developed there are rushed-to-market crap. So we probably don't want our drug research to operate the same way.

But I don't think it's immediately unreasonable that there might be a middle ground we could hit between 20+ years of exclusivity and 4 days of exclusivity.

Re: The Best Fix for American Drug Prices Is Already on the Books

#47

Post by disordinary »

tomohawk wrote: post #4

One of the biggest reasons is that the US essentially subsidizes drugs for many other countries, such as Canada, that impose price controls, and threaten to allow other manufacturers to provide the drugs in their countries if the companies don't accept the imposed price. This enables these countries to get access to new medicine without paying the cost of developing the new medicine. Its time to end the trade war on…

That's not true. If the US had a centralised health system like other developed countries they would have the same bargaining power. In NZ we have Pharmac who bulk purchases drugs for the country, they can get good deals because they operate in a free market and can play the pharma companies off each other.

Don't blame other countries for your own governments inability to bargain.

Pharma companies still have patents and exclusivity deals. They will price the drug at a point where it's profitable, and countries will buy those drugs if they work.

Re: The Best Fix for American Drug Prices Is Already on the Books

#48

Post by snowwrestler »

jerrysievert wrote: post #9
tomohawk wrote: post #4

One of the biggest reasons is that the US essentially subsidizes drugs for many other countries, such as Canada, that impose price controls, and threaten to allow other manufacturers to provide the drugs in their countries if the companies don't accept the imposed price. This enables these countries to get access to new medicine without paying the cost of developing the new medicine. Its time to end the trade war on…

are you sure that the cost of development is the real issue? the last numbers I saw, 2015, showed marketing budgets for medicine to be often times twice what was being spent on R&D in the US. currently, only four countries allow this time of marketing: New Zealand, Brazil, Hong Kong, and United States. it sounds like the US isn't necessarily subsidizing drug R&D, and instead is subsidizing marketing.

Are you sure that the "R&D" numbers you saw represent all the costs of developing a new drug and bringing it to market?

Re: The Best Fix for American Drug Prices Is Already on the Books

#49

Post by disordinary »

peterashford wrote: post #42
AnthonyMouse wrote: post #17

Earlier quoted context omitted.

> the last numbers I saw, 2015, showed marketing budgets for medicine to be often times twice what was being spent on R&D in the US. The marketing expense isn't necessarily avoidable. Suppose it costs $50M to research a drug and patients will pay $1000 for a course of treatment. If you do no marketing then you get forty thousand customers and can't recover your R&D. If you spend $100M on marketing then you get two hu…

...except, at least in NZ where they do some of that marketing, the drugs are purchased via the state body Pharmac, which will not pay the inflated prices that the drug companies charge in the US.

The reason for the advertising in NZ is that Pharmac will often fully fund generics, if you want to buy the brand name drug you have to pay extra on top. For instance, I just got a new prescription for inhalers, the pharmacy told me if I wanted ventolin it would be $5 but the generic was fully subsidised.

Re: The Best Fix for American Drug Prices Is Already on the Books

#50

Post by mikeash »

pg_bot wrote: post #39
mikeash wrote: post #28

Earlier quoted context omitted.

Pharmaceutical R&D spending isn’t all that high. It’s around $300 per capita in the US. The money is not coming from high insurance premiums.

That is around 90 Billion dollars. I'm not sure where you got that number exactly, but phrma member companies list their combined 2016 R&D expenditures at 65.3 billion[0] so it seems plausible. For context that is around the GDP of Slovakia or Sri Lanka. (65th and 66th biggest world economies)[1] [0] https://www.phrma.org/press-release/randd-investment-by-u-s-... [1] https://en.wikipedia.org/wiki/List_of_countries_by…

I don’t understand how comparing it to the GDP of small foreign countries adds context. The important context is what I stated: it’s about $300 per person. That means that it’s a very small portion of our ~$10,000/year per capita health care expenditures. Anyone who knows how much their health insurance costs per year can immediately see how much of that funds their share of pharma R&D. The answer will almost always be “not very much.”
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