Valeant’s Drug Price Strategy Enriches It, but Infuriates Patients and Lawmakers
nytimes.com
nytimes.com
This is the classic coupon strategy to maximize revenue - if you set the price very high but offer discounts to those who can't afford it, you can get more revenue than if you pick a single price that would be less than what some buyers were willing to pay and more than others were willing to pay.
In the first example of the article, an older woman (Susan Mannes) had to take on a second job to afford a drug that Valeant increased the price on in order to keep her husband from dying. I don't know what the upper limit is on how much Susan and Bruce Mannes will pay for this drug, but I suspect it is limited only by their current assets. In other words, Valeant could feasibly take everything they own.
I don't see a way out of this without regulation, and I don't see that happening when the pharmaceutical industry has been so effective at influencing federal laws.
There's a morality question here, and maybe I'm an asshole in this scenario, but being an asshole in of itself isn't a crime.
That being said, bad faith can simply be determined by a vote, similar to how Uber drivers are expelled if they act in bad faith (bad ratings).
As a society we should decide where to draw the line. If an executive increases price of life saving drug purely to maximize companies profit, knowing that it will lead to death of other people, he should be treated as criminal.
What, exactly, do you propose to criminalize? Excessive profits? What is profit? How is it calculated—is it tied to the number of deaths, or just any death? On specific drugs or the company as a whole? Is this healthcare only, or any industry where lives could be at stake?
Don't get me wrong, I think this is egregious profiteering, but you can't just point to profit as a bad thing.
There was an interesting look at the ethics of search and rescue businesses in Wired earlier in the year, where I see some parallels (as well as a company acting in good faith).
[1] http://www.wired.com/2015/08/search-and-rescue-for-sale/
Seems equivalent to me.
https://en.wikipedia.org/wiki/Price_gouging
Really, this is a coercive monopoly. Legal countermeasures fall under anti-trust law.
For many of these generic drugs, this is a case where markets have literally already solved the problem. They're available from European and Indian manufacturers at extremely low cost.
All we need to do is lower the trade barriers.
Remember, these are drugs that are already FDA approved. But the manufacturers can't sell in the US because the ANDA approval process is too onerous.
This fixes part of the problem, perhaps. But the article explains that it can take other manufacturers years to ramp up production if they aren't already making the drug. This also doesn't fix the problem for non-generics.
Windfall profit taxes. Anyone who posts a profit over 20% forfeits all of their profits.
Charge what ever you want. Profit however you wish (monopoly, insider trading, war profiteering, patronage, dumb luck). Government (the people) won't bat an eye.
But if you hit the jack pot, you'll wish you hadn't.
The only value held more dearly than the cult of Freedom Markets [tm] is notion of fair play. Ridiculous profits offends everyone (not already bought off). As populism goes, windfall profit taxes should be an easy sell.
Exactly.
What's "economy"? The measure of the movement of money.
What's "inequity"? The hoarding of money.
We want to grow the economy, by reducing hoarding, by keeping the money moving.
We salute companies fudging their profits by padding their expenses.
The Freedom Market [tm] zealots have made wealth redistribution via progressive taxation politically infeasible. And, truth be told, it's a lot of paperwork.
Taxing windfall profits accomplishes the same thing, by playing to everyone's innate sense of fairness (and compulsion to punish cheaters). We'll cheerfully "help" any company (or person) not smart enough to bury their own profits by administering cashectomies and audits.
While I appreciate your effort, a more appropriate quote would be:
"If your idea is any good, you'll have to ram it down people's throats."
Don't overcomplicate stuff unnecessarily. That's how you disempower yourself. Paralysis thru analysis.
The money that the pharmas have allows them to corrupt the political process, enabling them to abuse patients/insurers with insane prices... this isn't new. The incentives are completely fucked at every level of organization: drug development, clinical trials, patient care.
As far as the claim that patients are largely shielded from price increases, I think that claim was made in bad faith, and is laughably disconnected from reality. Medical-debt induced bankruptcy is very alive and well in the US, and is not in other places.
The USA pays more than twice what the rest of the rich world does for health care for no better outcomes. This isn't only due to drug pricing but drug pricing obviously cost USA consumers tens of billions a year in increased health care costs just because it means they pay much more in insurance costs (or even less noticeable have part of their paycheck diverted to pay inflated drug prices impact on health care costs) doesn't mean they avoid the high costs of this corruption based pricing.
It is very unlikely this system is going to be changed. It has been going on for decades at huge costs to the USA. Maybe (I just maybe) it will be slowed some if the public forces politicians to reduce the amount of the paybacks given by the Democrats and Republicans to drug companies at the expense of everyone else. Meaningful change is very unlikely. The parties are far too corrupt at this point to make any significant change in policy likely.
An example there : http://www.fiercepharma.com/story/france-strikes-big-hep-c-t...
The thing is that is the state refuse to reimburse the drug it won't likely be prescribed/used, so the company has an incentive to sell at an acceptable price.
You can also read some of : https://en.wikipedia.org/wiki/Bevacizumab#Society_and_cultur... to see how new drugs are approved or not, taking into account their cost and effectiveness.
The costs of fighting the existing copyright/patent cartel led by the USA is very high. Countries want to avoid this and if the cost is diverting a few percent of their GDP to the USA's drug companies they likely will do so. If however that diversion because too great they will have huge incentive to decide the cost is too high and we have to fight the USA's governments policies put in place at the behest of their drug companies.
The costs will be enormous to the countries that fight, especially at first. The USA is enormously rich and can accept losses internally and use economic power to punish those defying it's dictates.
If several rich countries decide to align with India (which seems to be by far the leading advocate for fighting the copyright/patent cartel) costs to the USA will also get step. At some point step enough that others force the government to stop using the rest of the USA's economic clout to benefit the drug companies.
But I think it is very unlikely the other countries could sustain the losses long enough for the USA to cave. It is a big if, but if China grows well economically for the next 20 years it is much more likely India and China together could work together on this to bring together a large coalition.
I don't think China and India would work together as strong allies but they could come together in this area if the USA continues to demand large percentage of countries GDP be diverted to the USA drug companies.
All these types of things get complicated. It isn't as if the Drug companies don't understand this same path. They will obviously seek to use corruption in other countries as successfully as they have in the USA to get those governments to act in their interest for cash payments that are peanuts compared to the costs those governments will place on their citizens to benefit the drug companies.
The payments to corrupt political parties doesn't only work in the USA, it works most everywhere. So don't count out the insane movement of wealth into drug companies coffers changing anytime soon.
If you want to be practical buying stock in these companies will likely reward you well. That is what I have done. I can understand if you think it is repugnant to profit from corruption in the political system on such a massive scale (very little corruption ever impacts multiple percentage points of GDP but, as this does). That is likely a higher ethical decision, weighing my options I accept that "hit" to my karma. If I were given the authority to decide the policy I would make a decision that would harm my stocks but I am not given that option. And based on my estimates of likely future outcomes betting on the USA political parties staying very corrupt in relation to providing benefits to drug companies seems a very likely bet.
I, for one, really appreciate that things that belong to me continue to belong to me unless I sell them or don't pay my debts. I would accept fairly onerous regulation long before I would give up what I consider to be a fundamental benefit of not living in a failed state.
Eminent domain is constitutional. That is the whole idea - try to profiteer too much from your government granted monopoly, and we may seize it while paying you some price that the courts deem fair. Couple of cases like that and the industry will tone itself down. And no regulations.
Imagine other markets were similar: one company purchases the rights to manufacturing all laptops and now you must pay $10K for the same thing you used to buy for normal prices last week.
Its interesting to consider how many people's lives would be greatly improved (or even saved) if vendor exclusivity rights were reduced in this market.
People could sell generics and alternatives that are not yet approved by the FDA or whatever local authority at a much lower price, everyone wins (except the government and Big Pharma).
Though there would be a lot of fraud I presume, sellers with fake pills and the like...
However, dealing drugs that literally save one's life is kind of a big deal - one month's supply of a fake or impure medication could be deadly, unlike with shitty MDMA and meth...
It seems like you could get some pretty good prices on drugs at comparable quality. Hopefully the TPP agreement doesn't interfere.
They buy over half the prescription drugs in this country. They can be a bully and negotiate great prices for themselves. And once the prices are public, see if any insurance companies are willing to accept a 5000% premium over the Medicaid price.
Medicare (for physician administered drugs) pays the average of all the private payers, which isn't a bad way to do it. For prescription drugs, it pays list price, except for the Part-D private plans which already negotiate.
To be honest, allowing Medicare to negotiate is a little bit like any company "negotiating" with the gov't. It's a take it or leave it proposition and is a more like "price by fiat" than a negotiation.
Having the federal gov't negotiate drug prices is not necessarily a panacea. The largest US insurance companies cover 30-40M lives, that larger than the population of Canada. Yet, they pay more for drugs than Canada does. You know why? Because the Canadian gov't makes them (back to the "price by fiat").
And yeah, it's price by fiat, through the market. Welcome to government contracts - plenty of people have become very rich in this space, and I have no sympathy to those that complain about their slim profit margins on incredibly high volume transactions. It's a big job. Get rich doing it, or get out of the way for someone who will, because it's got to get done.
http://marginalrevolution.com/marginalrevolution/2015/09/gen...
I guarantee there are manufacturers in the world who would be happy to have the business and could rapidly drive the price down to competitive generic levels again. But they are locked out by the bureaucracy.
I think ultimately this is what will keep caps on the price that can be charged -- if your treatment plan costs you $1,800/month, and a return airfare from the U.S. East Cost to Delhi is $600 return on a budget, I'm surprised people are not booking trips right now.
We have 2 main competing interests. 1. Creation of new treatments 2. Affordability of treatments
At the same time, we should have a minimum burden on the free market in terms of regulation.
I believe we can do this with the following.
1. For all non-patent drugs, Medicare signs a 5 year contract to supply the drug at a given cost. This will allow off-patent drugs to be available for low expense.
2. For drugs covered by patent, Medicare should negotiate a price based on differential Quality adjusted life year, with the price per quality adjusted life year set by law. For example, if we set the price for quality adjusted life year to $100,000, then Medicare should pay up to $100,000 for a treatment that gives a person 1 quality adjusted life year.
Drug companies are allowed to sell to others and negotiate a private sales without other regulation on what price they charge.
I want the pharmaceutical industry to be one with outlandish rewards because I want very smart people to be thinking outside the box and taking risks with they try in pursuit of cures for disease. Even the rewards to life-saving medication should have outlandish rewards. If we continue to see outrage at pharma about the price of life-saving treatments (see Solvida), we will see companies shift resources away from such treatments to more elective drugs such as sexual enhancements, requiring less sleep, etc where they can still have great rewards without the moralizing by critics.
Isn't it weird that we can custom order synthetic cathinones from China for $100, but apparently no one has tried this with theruputic drugs?