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Comment by forrestthewoods | Hacker News Reader

The rest of the world is so damn proud of their cheap universal health care. Little do they realize how much of it is subsidized by Americans. You're welcome world. You're welcome.

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It has absolutely nothing to do with subsidization by Americans. It's simply that universal health care allows patients to be fairly represented as consumers via insurance agencies.

The American health care system is a perfect example of what happens, if you confuse lack of government regulation with free markets. The resulting oligopoly and in some areas monopolys cause prices to increase massively, especially given the unique traits demand acquires when demand is literally wanting to survive. That's just basic economics and trivially easy to explain.

FWIW, you have the exact same system with college textbooks: the International Edition we get in Europe is often 30-50% cheaper than the US Edition, and has big letters saying "Not for sale in the US or Canada". Then you also have a further Low Price Edition, saying "Not for sale outside India, Pakistan, ..." which I've seen at 1/10th of the US price, though usually printed on lower quality paper and lagging an edition behind.

This suggests that pharma is not a special case. And you can't point to any huge R&D costs for textbooks that are subsidized by the US.

That's easily explained though. Students don't have a lot of money and textbooks are next to rent and in some cases tuition the most expensive thing you're going to buy as a student.

Students in the US are already comfortable paying enormous amount of money for the education, students in Europe much less so and students in India and Pakistan simply can't afford to pay what US students can.

Still even if your profit margin is much smaller, that's still a large market, so you sell these books in India with a smaller profit margin and increase them in Europe and the US.

Additionally universities in the US forcing students to buy certain textbook creating monopolies also certainly doesn't help prices to stay down.

> Students in the US are already comfortable paying enormous amount of money for the education, students in Europe much less so and students in India and Pakistan simply can't afford to pay what US students can.

Yes, exactly. Substitute "people" for "students" and "health care" for "education" and you have also explained the price differences in the cost of drugs.

This is certainly one reason for higher drug prices but I don't think it's the only one.

No, certainly not.

It is a common misconception that the US subsidizes others. Expenditures by US companies account for no more than 50% of pharmaceutical research among the top ten drug companies [0], so the rest of the world contributes as much as does the US. I don't think any other US spending could be considered a subsidy to others.

[0] http://www.fool.com/investing/general/2013/09/23/the-pharmac...

How does that refute his point?

Take Roche -- based in Switzerland. Their largest market by revenue is... the US. Their US revenues are 63% higher than all of their European sales combined.

http://webcache.googleusercontent.com/search?q=cache:uNS_cQR...

Ding ding ding, winner!!

You might want to explain the USA's addiction to prescription drugs, and how your conclusion is hence, well, misguided https://www.gov.uk/government/uploads/system/uploads/attachm...

Yes. The USA is addicted to prescription drugs. That addiction puts significant money in the pocket of pharmaceutical companies. Those companies may or may not be American. Either way their pockets are lined with American dollars.

This only shows that Roche can either sell much more on the US market or that their margins can be much higher there.

That's certainly interesting but doesn't explain anything at all.

First, it is rather ludicrous to suggest the main difference in health care expenditures is linked to the US subsidising medicines. For example, while the US spend 17.1% of GDP in health, the UK spend 9.4 % (http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS). The 8 points of GDP difference represents close to 300 billions $, which would be a significant proportion of the revenue of all the pharmaceutical combined (I did not look much for reliable statistics of combined revenue, but saw that: http://www.statista.com/topics/1764/global-pharmaceutical-in..., which suggests ~1 trillions USD).

It is also well documented that sales are significantly more expensive in the US than in Europe (marketing expenses are higher than R&D for most big pharmaceutical, and that proportion is significantly more so in the US). So without more analysis, you can't say from higher sales whether the US are subsidising European healthcare or marketing departments.

Now consider that in most of Europe (all?) Roche is expressly legally prevented from advertising their prescription drugs, and it's clear that pure revenue numbers does not give sufficient information as the cost of sale are likely to be vastly different.

Refute? Easy. The US has an unhealthy addiction to prescription drugs: https://www.gov.uk/government/uploads/system/uploads/attachm...

That's sort of irrelevant, though, if drug companies in other countries are supporting their research through high prices in the American market.

Clearly a major proportion of the profits for any pharmaceutical currently comes from the US, regardless of where those drugs were developed. If the global profits for pharmaceuticals are curtailed because the US stops paying a premium it seems foolish to say that the profit motive wouldn't be impacted in regards to spending on pharmaceutical R&D.

I've seen this argument before, from someone arguing against universal health care in the US in general, and Obamacare in particular. I said that one advantage of socialized medicine is cost, and they came back with this: it's only cheap because we pay for all their R&D.

Except then I ran the numbers, and it turns out that medical R&D in the US amounts to only about $500 per person per year, while the gap in costs is many thousands of dollars.

Perhaps it is you who does not realize how much of it (i.e. not that much) is subsidized by Americans.

Don't confuse the pharmaceutical industry with any healthcare system. The quality and cost of hospitals, doctors, nurses, etc, in the RoW has nothing to do with how much Americans pay for drugs.

Yeah, because the price people are paying is related to the actual costs of researching and producing it.

Hint: No, it's not.

Biotech is a goldmine.

Hint: It's not. R&D isn't guaranteed to pay off. Why even do it or invest in it if the chance of success is so low?

This would be easier to swallow if pharma companies weren't some of the most highly and consistently profitable companies on the planet. Or if they spent magnitudes more on research than they do on marketing, PR, and lobbying.

>Why even do it or invest in it if the chance of success is so low?

Because the payoff is high?

Medical research is heavily government funded. I would be surprised, if the majority of the investment actually comes from pharma companies. Any R&D pharma companies invest in is also going to be heavily focused on areas that have a high likelyhood of paying off reasonably soon, much like R&D in any other company.

They own more of your government than any other industry, which is incidentally how they managed to create their hyper-inflated prices in the first place.

Their chance of success doesn't depend on R&D.

God, some Americans are really cringe-worthy. Is it really necessary to get defensive just because other governments are more interested in representing the interests of their people?

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