Why drug prices in America are so high (2016) | Hacker News Reader

Why drug prices in America are so high (2016)

economist.com

143 pointsThomPete192 comments

This has a very simple fix, and is a fix that would appeal to Donald Trump:

Require that pharmaceutical companies do not charge Americans any more for their drugs than what they charge any developed country.

This lets other countries do the dirty work of negotiating prices while reaping the benefits for the US. In addition, it goes along with his whole America is getting screwed narrative - ie that other companies are taking advantage of the fact that American markets pay for the drug developments, and other countries reap benefits of cheap drugs and that he would put America back on equal footing.

EDIT: Thanks for the great comments. To ease with the concern about hurting the very poor countries, we could substitute "developed country" with "OECD country" (http://www.oecd.org/about/membersandpartners/list-oecd-membe... which are relatively rich countries).

Of course there's no simple fix.

US health reform has been attempted based on series of simple fixes with all the best-seeming ones already exhausted over the twenty or thirty years it's been tried. And the entities profiting (enormously) from US health care have become champions, geniuses at dodging all the simple fixes.

Of course you can't force companies to sell for the same prices elsewhere unless you had no regulation on drug imports and that would discard the whole regulation process effectively, blah, blah. Companies could just label the drugs they sold in different countries differently or even mix them differently (there's already re-mixing for patent and other purposes, etc).

As noted in the article, the countries with lower drug prices do real, good regulation. To do that here, you'd need to take on regulatory capture and so-forth, a not at all simple matter.

You're totally right, this is a hugely complex matter.

However, it's not so simple to just relabel the drug, after all to a first approximation a drug is primarily an active ingredient and secondarily a delivery mechanism. You can patent one, the other or both together. There's definitely remixing, reformulation etc. for patent purposes, but it's not always that trivial to do.

Re. regulatory capture, I don't know if the FDA or regulatory capture thereof is that huge an issue. The chief advantage other countries have is the ability to say, "No." Medicare doesn't have that ability, and even if we were to allow CMS (the agency that administers Medicare/Medicaid) to negotiate for drug prices, it's not much of a negotiation if CMS can't say, "we're not buying it." Can you imagine the outrage in congress from people calling in and saying, "I need this drug and Medicare isn't paying for it."? I guess that's regulatory capture in some way, but damn is it more complicated than cozy agency-industry relations.

A really great and sober take on drug pricing from someone who's been in the industry forever can be found here:

http://blogs.sciencemag.org/pipeline/archives/2015/12/02/a-l...

EDIT: Typo s/companies/countries/

"Re. regulatory capture, I don't know if the FDA or regulatory capture thereof is that huge an issue. The chief advantage other countries have is the ability to say, "No." Medicare doesn't have that ability..."

Clearly, the influence of private interests is critical for the situation where those interests can set their terms and prices without fetters. Objecting that this isn't regulatory capture but something else seems like a quibble.

Broadly, piecemeal reform is something like black list security. The supposed free market is left to set health care prices and process for a public that is clearly unequipped to bargain like an "informed consumer" (no matter how blithe pamphlet announce this need). Once one particular method of exploitation get a lot of press, regulation or legislation goes after this method, leaving the industry to work out it's next "zero day" against the health care consumer.

I'm not saying there's no regulatory capture, I am saying that an angry citizen calling their congressman is a very different kind of problem then cozy relations between industries and the agencies that regulate them. Both exist, but they have quite different political and policy ramifications, and I would suggest that citizens calling congressman is more fraught than agency/lobbying reform (already difficult in its own right).

You can already see people calling the FDA saying, "let this drug through, it helped me, though it failed its clinical trial." Right now, the FDA has some insulation from political meddling, but that's not a guarantee, and I think that problem gets 10x worse if the government gets involved in direct negotiations and price setting.

For example what happens when if/when Medicare says, "we're not paying more for name brand than generic."? You'll get tons of people calling their congressman saying, "I need NameBrandSuperDrug because GenericSuperDrug doesn't work." Despite the science being quite clear that the generic is virtually always fine.

"I'm not saying there's no regulatory capture, I am saying that an angry citizen calling their congressman is a very different kind of problem then cozy relations between industries and the agencies that regulate them."

- What I would say has roughly similar results is a cozy relationship between regulated industry and regulator versus a cozy relationship between regulated industry and congressmen they finance - and even patient groups they finance, advertising strategies they follow, etc.,etc. I mean "Cui bono" comes up strongly here.

Your argument seems like an elaborate summary of the tree of the forest of health care corruption-in-a-broad-sense. I'm sure you can find a few more "trees" I didn't know about in this discussion but it seems like your approach still follows the path of ignoring this metaphorical forest for its trees.

Not sure how I'm ignoring the forest, I'm just saying you may need a different chainsaw depending on the trees ;)

Medicare drug plans do say no. There's even tools to find one that works best for a given patient.

https://q1medicare.com/PartD-SearchPDPMedicarePartDDrugFinde...

Those aren't quite the same. Medicare part D plans are actually private insurance plans whose costs are subsidized by the government. It's not the same as the government itself negotiating for drugs, which is essentially what the NHS in England and many other systems in the developed world do.

Right. Part D is what people are talking about when they talk about Medicare not being able to negotiate prices.

edit: That's one of the advantages of the privatized system, companies take the heat for having a formulary.

Yes and no, a detailed article covering the terms of the debate is here:

http://healthaffairs.org/blog/2016/09/19/the-politics-of-med...

Most relevant quote:

"One bargaining chip to attract market-oriented Republican votes was the so-called “noninterference clause”—a provision drug manufacturers had a major role in writing and getting through Congress—which banned negotiations between Medicare and pharmaceutical companies on drug prices and prevented the government from developing its own formulary or pricing structure. Instead of CMS negotiating on Part D plans’ behalf, prescription drug plans compete for enrollees and negotiate directly with manufacturers."

Part D (and presumably Part C plans that offer prescription coverage) negotiate with the drug companies individually. CMS cannot negotiate en-bloc for all the Part D plans. Therefore Part D plans have the same leverage as traditional insurers, which is to say some, but not nearly as much as All-Of-Medicare has.

The VA and Medicaid do regulate/negotiate drug prices, but those are much smaller populations. I think something like the VA system might work, but you'd have to have politicians willing to take some political risk or find a way of isolating drug price negotiations from political pressure. I think in this political climate, that's a really tall order. Remember when "If you want to talk to your doc about end of life plans we'll reimburse you for the visit" turned into Death Panels? I suspect we'd see something similar...

EDIT: and yes, private companies with a formulary are a great way to isolate yourself from the political heat, but you then lose the negotiating power government has ;)

There are a lot of problems with reference pricing. First off, if country A (300M people) references country B (30M people), then the drug company can simply chose not to launch the drug in country B if that reference price is too low.

Second, drug companies can modify their launch sequence (this already happens today) so that they launch in the referenced countries after the price is set in the country doing the referencing.

Third, this may actually push up the prices in other countries. This actually happened with Medicare Part B reimbursement back in the 1990s. Drug companies were offering big discounts to some private plans. Medicare said they wanted a piece of that, so they started calculating ASP (average selling price). Pretty quickly those other discounts disappeared and ASP got pushed way up and the gov't ended up with a fraction of the discounts they thought they'd get.

What price control method would you advocate for?

Fixing the patent system so generics can come to market faster. I'm not sure how.

On Evergreening: https://www.techdirt.com/articles/20130401/09233022536/india...

On forcing a license: http://www.nytimes.com/2012/03/13/business/global/india-over...

These may or may not work in a country like USA - due to its politics and "principles".

Shortening the period of exclusivity could result in higher prices and less drugs being developed. There is no magic bullet.

> Third, this may actually push up the prices in other countries.

That's the whole point. As mentioned in the article, the US disproportionately funds new pharamaceutical research. Other countries currently receive the benefits of this, but at a much lower cost.

So any system which reduces the prices in the US will either require other countries paying more for what they're already getting, or less research and development for the entire world.

Or that there is less profit.

I think we could have more accountable research if instead of being driven for profit it was driven as actual academic research with public domain benefit.

This. It's explicitly capitalistic to be against socializing risk and privatizing profits -- which the is game being played with the current setup of trying to fund drug creation via patent monopolies combined with per unit regulatory pricing games.

Academia should be the primary means of drug discovery. Drug manufacturing and distribution _should_ be a commodity business. Anything otherwise and all research on the the outcome, scale of use, and effectiveness of different drugs becomes hopelessly distorted by marketing incentives and the influence of complex dependencies from the entire rest of the healthcare service pricing model.

Measuring drug creation effectiveness by trying to maximize the number of drugs on the market is like measuring software design effectiveness by number of lines of code.

> Academia should be the primary means of drug discovery. Drug manufacturing and distribution _should_ be a commodity business

As mentioned below, the discovery is not the biggest driver of costs.

But you should also ask yourself: why is this not already the case? Currently, there's nothing stopping other countries from using taxpayer money to fund drug development locally. Except, by and large, they don't - as mentioned in the article, most of the drug development that happens worldwide is funded by the United States, even for companies that are headquartered in Europe.

The answer isn't that those countries aren't interested in consuming the benefits of that research, because they are more than willing to purchase those drugs that were developed in the US at lower prices. The answer is that they just choose not to fund the research, either because it's too expensive to conduct clinical trials with taxpayer money, or because it's more effective to have that funded by the market, especially when that market is US patients, rather than European taxpayers.

"Currently, there's nothing stopping other countries from using taxpayer money to fund drug development locally. Except, by and large, they don't - as mentioned in the article"

Come on!! Hasn't anybody actually read the article?? Unless the economist is showing different articles to different people the only phrase that mentions research implies that is an argument made by the industry and not clear at all. The "the US subsidizes drug research for the rest of the world" is a huge lie that cannot die soon enough.

> The "the US subsidizes drug research for the rest of the world" is a huge lie that cannot die soon enough.

It's a trivially verifiable fact. If you don't like the Economist, here's another source, showing that the US used to fund over 50% of the entire world's medical research. That number has dropped to 44% in the last decade, but only because China and India are growing so fast.

http://www.npr.org/sections/health-shots/2015/01/13/37680135...

Given the lack of transparency in the billing process for health care services -- there is no part of me that thinks these numbers could provide an accurate representation of expenditures toward actual research. How much research investment actually gets funneled into direct payments towards insurance companies or hospital providers (possibly co-owned by the research funds). The space for financial gamesmanship in the way medical facilities operate in the us is so big that I there's no possibility that this kind of thing is not occurring on a large scale ... if us public/private investment into medical research is so healthy -- why have the job prospects for anyone with a biomedical degree been declining for a decade straight?

I would be surprised if the cost of running clinical trials paid by sponsors is anywhere near the infrastructure cost needed to develop the institutions which perform them. I very much suspect that the price paid to "sponsor funding" for clinical trial research serves more as a barrier to entry to reduce competition in the drug market than it does as a means to cover the cost of running the research (with the enormous infrastructure costs paid via other means that makes running the research possible) ... and if I am right -- us taxpayers pay enormous amounts of money into infrastructure processes that then are used below cost by private companies to capture patent monopolies. Socialized risk, privatized profits.

The solution is the same regardless of the behavior of other countries -- reduce the role of government granted monopolies, redirect public subsidies that go toward funding commercial clinical trials into more public development outfits, and commodities the drug production/distribution (as cost is minimal once the drug is discovered and validated for use).

If we think private drug companies are actually any good at "picking winners" and dealing with risk of unknowns with respect to drug efficacy -- establish a derivatives market where they can gamble about which drugs in the development pipeline are likely to work -- and see if any of them are still around in a few years ...

Academia should be the primary means of drug discovery. Drug manufacturing and distribution _should_ be a commodity business

You're missing a big step! The key role drug companies play today: drug development.

Discovery is the cheapest step in the process. Running clinical trials is where most of the money goes. I just can't picture academia funding tens of billions of dollars of drug development. Where would that money come from? Are they up for the risk?

I don't write contracts but my current day job is "Information Technology 'stuff'" at a company that is related to this field.

While I couldn't talk about and have made no effort to remember the (obviously confidential) details of conversations I've overheard, I have heard enough to know the general trend in this area.

There are two main components to worry about here.

1) Cost of the procedure. Currently medical trials are activities by the 'drug company', except for things that a patient in that position 'should' need anyway. If academia were developing (at testing!) the new medicine/techniques then the 'medical research' system would need to cover it. Obviously this is more likely to work out with a 'single payer' system.

2) Risks. The unknown is risky. It can lead to worse outcomes and increased expenses. Similar to point 1, there would need to be coverage of this built in as well. As a special addition to point 1 it would also involve fixing 'malpractice' lawsuits and the like.

I think that if I were ever to be involved in a malpractice circumstance what I would actually want would be:

  * If the involved practitioners are //at fault// them to be barred from the profession and related fields.
  * If anyone lied or covered up information that would have lead to a better outcome them to go to jail.
  * The absolute best effort at fixing and/or treating the resulting issue to be provided (a single payer system just should).

> Academia should be the primary means of drug discovery.

But it isn't. Why?

I could put out a list of potential reasons, but I have no real knowledge of the complexity of drug discovery. I have some knowledge of the complexity of FDA approval, but nothing sufficient. My best guess - it's too expensive.

Why would that appeal to Donald Trump? It would hurt the profits of the drug industry in America which will cost jobs, pharma execs will tell him how bad this is for America and how harmful it is to drug R&D, etc etc. Donald Trump may have campaigned as a negotiator for the common man but he identifies with CEOs, anything that hurts them is not something that appeals to him.

This may not actually hurt the profits of the drug industry, because they would probably renegotiate their prices with the other countries. Right now, as long as the cost of what they charge to country is basically their marginal cost of production, they don't have much incentive to oppose the negotiation. Now, they can say that because they have to charge the same to the US, the other countries will have to pay more, or not get the drug. Thus, this has the potential to be revenue neutral for the drug companies while spreading out the cost more fairly

I think he means it would appeal to his political narrative of Americans being caught in a bunch of "bad deals" internationally.

The high price of medical care costs lives as well as jobs in other industries...

That didn't stop him from trying to repeal Obamacare. I personally think we should institute drug price controls for many reasons including that one but I'm not sure why we are thinking that Donald Trump is going to do it.

I don't know why Donald Trump does anything. But, I do think he's is of an unknown position in this particular area - so given that we have a problem in the US, and that Trump maybe doesn't have a defined position on the issue, it doesn't hurt to chase the possibility. (On the other hand if I'm just guessing with low-data: the chance does seems low).

There's another potential simple fix. Remove the regulatory capture which enables this.

Enforce anti-trust law against medical companies. Remove all re-importation laws, which are purely a result of their lobbying. Allow safe, competitive drugs from abroad into the US market without spending billions to get them past the FDA.

We didn't get here by accident, it's due to years of medical companies lobbying to twist the law. Medical costs are now 1/5 of the US economy, that's a lot of vested interest in things not getting more efficient.

This is not a great fix. Almost all companies (not just drug companies) routinely find ways to segment the market into different groups with different abilities to pay and then charge different prices for very similar products. That is the profit (or future research budget) maximizing strategy.

The US is richer. It should be paying more. How much more is debatable.

The US spends 17.1% of of its GDP on healthcare.

The 5 countries that are richer than the USA (GDP per capita) pay an average of 7.77%. Excluding Qatar, it's 9.03%.

The top 10 richest countries (excluding the USA) spend an average of 8.03% of their GDP on healthcare, and I'm pretty sure at least a few of these have universal public health insurance.

I really don't think it's a case of either the US being 'rich', or because the US is somehow subsidising the rest of the world. By any rational measure, you're simply getting hosed. These discussions are hilarious because I always hear the same domestic propaganda that's spread around by the pharmaceutical industry repeated verbatim, over and over again.

You're paying more than DOUBLE compared to the 9 other richest countries in the world. You're getting gouged. If you can't even admit that maybe, possibly there's a problem here, it's unlikely anything is going to get solved.

Data from here: http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS?end=2014&...

And here: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi... (using IMF GDP figures)

The US is richer and should be paying more than say Kenya. However, you would be hard-pressed to explain why the US should be paying more than say Denmark or Sweden or Germany?

The US is 8% richer than Denmark, 12% richer than Sweden and 40% richer than Germany on a per capita basis.

https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...

If you had said Luxembourg, Switzerland & Norway I would have agreed with you. That's only about 14 million people though.

> The US is 8% richer than Denmark, 12% richer than Sweden and 40% richer than Germany on a per capita basis.

This seems to ignore the obvious discrepancies between income inequality in the US vs. Sweden & Germany. Our Gini coefficient is higher than both, as is our poverty rate.

Our high GDP masks the fact that our world's-highest drug prices have a disproportionately negative effect on our poorest citizens.

That is true but it's mostly an argument for higher taxes are more subsidized medical care (including drug purchases) not an argument that the US should pay less overall for drugs than poorer countries.

> not an argument that the US should pay less overall for drugs than poorer countries.

I never said that.

My point is simply that pointing at nominal GDP paints an inaccurate picture. The US is a complex and extremely heterogenous market, and using a single economic measure to justify nationwide pricing is a bit like taking the temperature average of the man whose head is in the oven and feet in the freezer.

It's feasible to imagine a world in which drug companies apply the same adjusted pricing to poorer segments of the US market as they do foreign customers. They don't in practice, allegedly, because of Medicaid regulations enforcing a lowest-in-country price [1]. Regardless of whether that particular explanation holds water, the idea of price discrimination within the highly unequal US market is reasonable.

[1] https://object.cato.org/sites/cato.org/files/serials/files/r...

Ya, I generally agree that Mississippi run medicaid should probably be paying less for drugs than Connecticut run medicaid.

I can see how that might be tricky to get to politically though.

The federal share of Medicaid does vary by state:

https://www.medicaid.gov/medicaid/financing-and-reimbursemen...

https://aspe.hhs.gov/basic-report/fy2017-federal-medical-ass...

That's about funding though right? And now about how much the individual state programs pay for things (like prescription drugs). In the end does it work out to be the same thing? Maybe? I'm uncertain.

It's at least a similar sort of thing.

Critical access hospitals and rural health clinics probably overlap too, where Medicare pays out to smaller qualifying facilities using a different formula.

He still makes a point if for example country A is 8% poorer yet paying 40% less.

It's not obvious to me that expenditures on drugs should be a fixed % of one's income. It certainly seems like the % rises as people get richer.

As a non-US citizen who as been to all the countries in question the answer seems obvious: Their citizens are much unhealthier.

I like this idea but it is probably difficult to implement. Can't drug companies make slightly different versions of drugs and work around this kind of arrangement? In that case the US would get the "best" version of the drug since it's paying the most, but that's not the solution you want (e.g. lower prices) because it's fighting the fundamental fact that the US will pay more for the same drug. I'm not a drug expert so maybe there are some drugs where this is impossible or improbable. But this is pretty typical in other industries so I would expect the same thing to happen here if it became necessary.

I don't think they can get around it that easily because both the patent protections and the FDA approval are based on the "active ingredient" and delivery method and thus they cannot easily introduce a new variant without going to a lot of expense.

But they already have to get their drugs certified independently in other countries so yes it costs more to introduce multiple varients to the US market but it does not cost much more to introduce different varients to multiple countries that require independent verification of the drugs anyways.

Can't the manufacturers still inflate list prices by introducing heavy rebates?

But isn't free market, unregulated prices, etc the mandate of US? I don't judge, just making a remark.

A free market requires price discovery. That's sorely lacking for the majority of the US healthcare industry. Doesn't matter if it's a pill, a check up, or an x-ray, good luck figuring out what it's going to cost you in advance.

It's not a free market if you're not allowed to import from cheaper suppliers elsewhere, so that's already broken.

Permitting imports also undermines the market if it extends the scope of the market to include areas where government intervention (e.g. aggressive negotiation by national health systems) drives prices below efficient levels.

But then at least as a company you know that.

>Require that pharmaceutical companies do not charge Americans any more for their drugs than what they charge any developed country

If i recall correctly, that has been part of Trumps platform for several months before the election.

Or rather, allowing American customers to buy drugs overseas was part of his platform. And i remember that idea went before a congressional vote recently, with both republicans and democrats voting it down.

On mobile, so sorry i cant provide links.

And the Clinton Foundation's big victory was in getting drug companies to sell anti-HIV drugs in the third world for far lower prices than they would go for in wealthier countries. So I imagine the idea of ending that would be appealing to Trump.

Well we need competition for that to happen. So somehow you'd have to set something up where you would need to allow for the consumer to buy from other countries. Which sounds pretty difficult.

This is just price controls and fails for every other reason that price controls fails elsewhere. It puts the cost of drugs well above the market rate for such drugs in that country and opens the door for local producers to simply undercut. The long term effect of is this is that US sellers will essentially become galapagos companies that only sell to the US and you effectively create two markets. The end state is exactly where we're at now but only with the US bearing even more of the cost.

lol at "appealing" to DT based on logic, reason, human decency, critical or sustained long-term thinking.

That would be a damn hard thing to pass, and the drug companies would fight it tooth and nail.

Look at what they did in California.

What about the edge cases? If I understood you correctly, the poorest developed countries dictate the pricing.

Depends on if it is profitable to sell them drugs in that world.

If it isn't profitable, those countries either mostly do without or violate trade agreements (ignoring patents and the like).

this sounds like a good start.

> These high prices support innovation, they argue—not just for America, but for the world.

I suspect this is in fact somewhat true, but how is it a coherent argument in favor of higher prices? The American people / American elderly (obviously) don't have some unspoken moral obligation to subsidize pharmaceutical R&D for the whole world.

Governments around the world are able to negotiate affordable rates for their citizens, yet in the US we have to listen to these completely insane justifications?

IMO if the US government (who presumably agree with the drug companies on this) feels this strongly about subsidizing research they could always expand federal research grants and/or NIH funding. Yet I suspect that's a non starter for political reasons.

It seems even odder considering that many of the pharmaceutical companies are not US based, so it doesn't seem to make sense even from a protectionist standpoint.

Just as an exercise in cherry-picking, I grabbed the first drug from [1], "Relvar Ellipta", which apparently costs 6.3 times more in the US than the UK. This is despite the fact that the drug is manufactured by GSK [2], which is UK-based. It was developed by Innoviva, though, which is US-based [3]. What this means in terms of price-setting agreements and licensing, though, is not easy to see, and whether research grants would substitute for the expected profits from the pricing discrepencies.

[1] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5023951/

[2] https://en.wikipedia.org/wiki/Fluticasone_furoate/vilanterol

[3] http://www.inva.com/contact-us/

This. Do we need to subsidize Sweden and Germany?

I have wondered for a while why we don't make a law saying the highest price you can sell a drug for in the US is no higher than the lowest negotiated price that drug is sold to in other rich countries.

So if Canada negotiates a drug for $10 then that is the highest price you can sell it for here etc. That way they can set the prices however they want but collective buying agreements that are a part of socialized healthcare don't end up shifting the burden of cost to the US.

This really doesn't need to be that complicated. The US could quite easily negotiate lower drug prices with drug companies, without setting up a convoluted scheme that references other countries, by simply doing so.

There's just no political will, because strong negotiation would hurt drug companies in the US. And unless that political will somehow materializes, the situation won't change.

Something tells me this would be against some WTO rules. The US gov could simply negotiate a better deal just like Germany, Sweden or any other country does but...I guess the lobby plays a important role in the grand scheme of things so unless the US electorate puts pressure on the government you won't see a better deal.

> I have wondered for a while why we don't make a law saying the highest price you can sell a drug for in the US is no higher than the lowest negotiated price that drug is sold to in other rich countries.

You don't need a rule to enforce that. You just need to allow the US to reimport prescription drugs that were originally exported from the US. It would be far and away the simplest solution and would have the same end result[0].

Unfortunately, Congress has voted against that, so we're stuck with the status quo.

[0] The difference between the prices charged in the US and the prices charged in any other country could be no greater than the costs of reimporting the drugs from that country - or else people would just buy the reimported versions instead of the domestic ones[1]. This has the desired outcome of equalizing the prices

[1] Which, remember, are literally the same drugs manufactured at the same plants by the same company.

It's a nit pick but those prices would always be a bit higher after the effort to import them and source them etc. Of course this will never happen. No politician wants to have her name tied to the bill that allowed all those dangerous drugs into the country that killed kids. One mistaken import or a badly made counterfeit being imported would be a media frenzy.

> It's a nit pick but those prices would always be a bit higher after the effort to import them and source them etc.

That's what I said:

> The difference between the prices charged in the US and the prices charged in any other country could be no greater than the costs of reimporting the drugs from that country

As for:

> Of course this will never happen. No politician wants to have her name tied to the bill that allowed all those dangerous drugs into the country that killed kids.

That's not true at all. The Senate voted on this exact proposal on Jan 17th (not for the first time). The measure failed, but only by a few votes[0].

> One mistaken import or a badly made counterfeit being imported would be a media frenzy.

We're talking about importing drugs only from countries which recognize US patent laws, such as Canada. The risk of counterfeit drugs entering the supply from reimporting is no greater than the risk of counterfeit drugs entering the supply domestically in either US or Canada.

Besides, this is already done for other drugs, just not prescription drugs that are on patent.

[0] https://www.senate.gov/legislative/LIS/roll_call_lists/roll_...

Milton Freidman's solution was to allow re-importation of drugs from countries where they were less expensive. Either the drug companies could raise prices abroad, accept lower prices domestically, not sell abroad, or some combination of all of the above.

This seems like something that shouldn't upset many Republicans. Remove artificial barriers and open the markets. This could apply to a lot more than just drugs. For example, it would be nice if region restrictions were removed from digital goods.

The problem is many Republicans claim to be proponents of open markets and less regulation. But when it comes down to voting on bills, they generally do the opposite.

Exactly. I'm a big believer in capitalism. But capitalism requires competition, transparent markets, and allowing corporations to fail. What Republicans tend to prefer are monopolies, opaque markets, and corporate welfare. That's not capitalism.

> This seems like something that shouldn't upset many Republicans.

You'd think so, but they voted against it on Jan 17th (along with nine Democrats).

My first job out of college I worked for a company that looked for new ways to get sample vouchers into people's hands. There was so much money in finding gray areas to hand out samples.

The only job I've had that made me feel worse about what I did was insurance, but that didn't last long. I suppose we did innovate, but I didn't get paid enough to out-weigh the damage done to my soul.

The R&D argument would be much stronger if pharma companies didn't spend more in marketing than R&D in the US.

Marketing budgets pay for themselves. Why else would you market something?

Customers pay for marketing budgets in the end - that by itself is a big contributor to higher US drug costs.

Pricing in the US is not cost-based. That's not how it works.

If you price a drug at $100, you can't raise it to $110 to pay for marketing.

You set the price at $100, then decide what to do with the profit. If marketing costs $10, but increases your sales by 15%, then you have a positive ROI.

> Pricing in the US is not cost-based

I think this speaks for the whole issue ... there are some markets where this makes sense. I don't believe that it makes any sense in the healthcare market - and per-capita US healthcosts vs other nations would seem to bear that out.

Pricing isn't cost based in any developed country. It's value based.

The only market that is cost based are generics.

So whatever value can be extracted by holding lives of patients hostage?

No the value offered to the healthcare system. If a disease is costing a public/private payer $100K per year, if I price my drug at $30K per year and eliminates all other costs, I'm saving everyone $70K per year. That is offering real value and should be paid for.

So if I offer a drug that saves someones life, is the value the rest of their life, plus whatever society derives from that person too? Do I get to set a price that is 98% of that? I suppose they need something to live on so 80%? But then you see charities and and families holding out the tin cup so sick relatives can get their chemo treatment - so there's a path to extract some of the 'social' value of that person too...

Blithe statements of pricing at "value" are not the simple open and shut cases they are made out to be - and IMHO for healthcare are corrosive to our society and economy.

So if I offer a drug that saves someones life, is the value the rest of their life

Yes, yes it is. That's exactly what the UK does. 30K GBP/QALY (quality adjusted life year).

People might not like it, but there are finite resources in this world and prices have to be put on everything, even people's lives.

> I suspect this is in fact somewhat true, but how is it a coherent argument in favor of higher prices? The American people / American elderly (obviously) don't have some unspoken moral obligation to subsidize pharmaceutical R&D for the whole world.

The pharma companies also have enormous advertising budgets in the US, so you could stop that to save the old people some money.

I don't know if the R&D argument even works. Just how much are we overpaying for our drugs? It looks like American pharmaceutical R&D is about $60 billion/year, or roughly $200 per capita. Is that really all we're losing to these high prices?

Drugs are 10% of US healthcare spending so the gains are not that huge. However, ~200$ per capita is only part of the costs as profit and advertising also increases drug prices. Further cost is concentrated onto a small fraction of the population. So, while I might not care about 20$/month I would care about a 1% risk of 2,000$ per month.

Drug prices in US go up because of collusion between Insurance Companies and Drug manufacturers.

Would I buy expensive health insurance if drugs cost me $100 a month? Most probably never.

What if the sticker price for my monthly dose of drugs was $10,000 or $50,000? You bet I'd go get an insurance that'd cost $500 a month.

With such sticker shock, manufacturer reaps in profits. Insurance companies get to charge higher premiums.

Solution: Fix IP laws for drugs in US. If the drug costs beyond the 2x or 5X of what it costs in India, or than the average of drug prices in a few countries, then that drug loses all its IP protections in US. Manufacturer is still free to charge zillions for that product, but there'll be no restrictions on copycats or generic versions from outside US taking over the market.

It'll help in keeping a sensible profit margin for manufacturers without ripping off Americans.

Most problems in healthcare costs in US, are due to insurance companies dictating terms.

> Drug prices in US go up because of collusion between Insurance Companies and Drug manufacturers.

It's great that you're interested in healthcare policy, but you should be careful about making blanket statements without the evidence. Drugs are 9% of healthcare costs[1] and 14% of insurance costs[2]--hardly the decisive factor in your choice of health insurance. And expensive drugs are expensive primarily because it really does cost $1B+ to develop a new drug.[3] Even if you wipe out drug company profits (which we really don't want to do), you'll save at most 3% on your insurance.[4]

Like other types of insurance, cheap health insurance is cheap primarily because it limits your coverage. The biggest impact is that you pay more to see fewer specialists and undergo fewer procedures. It also results in situations in which you're denied a cure for liver disease until you have severe liver damage.[5]

Your solution doesn't solve collusion so much as make a major tradeoff: we can have a world in which drugs cost $1000/year, if we stop researching drugs that cure liver disease. We can have cheap health insurance, if we give up most of the coverage. You probably didn't know you were making that tradeoff, and that's probably not a tradeoff you want to make.

[1] http://www.huffingtonpost.com/2014/12/03/health-care-spendin...

[2] PwC report, page 12 http://www.amcp.org/WorkArea/DownloadAsset.aspx?id=12727

[3] https://www.washingtonpost.com/news/wonk/wp/2014/11/18/does-...

[4] Profit margins are less than 20% http://www.bbc.com/news/business-28212223

[5] http://america.aljazeera.com/articles/2015/10/16/insurance-p...

> And expensive drugs are expensive primarily because it really does cost $1B+ to develop a new drug.

Nope. More of the cost of a drug goes to marketing than development: https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p...

Nope. Development costs $1B+ by itself, as you can see from my source or your link. Marketing spend is on top of the R&D cost.

I agree that we should limit drug advertising, but that Global Data report is off by an order of magnitude. Total advertising for Rx drugs is $15B to physicians and $5.2B to consumers.[1,2] The discrepancy is due to several factors.

First, the Global Data report lists combined sales and marketing. Sales includes essential logistics needed for us to get our drugs, so you can't really say that marketing alone costs more than R&D.

Second, most marketing is for over-the-counter drugs, for obvious reasons. Tylenol, sold by Johnson & Johnson, has an enormous marketing budget, but it's not exactly the kind of drug that forces people to buy insurance.

Third, drugs only account for 40% of J&J sales--their scary marketing budget includes lots of advertising for non-pharmaceutical products.

[1] http://www.pewtrusts.org/en/research-and-analysis/fact-sheet...

[2] https://www.statnews.com/2016/03/09/drug-industry-advertisin...

> Nope. Development costs $1B+ by itself, as you can see from my source or your link. Marketing spend is on top of the R&D cost.

Irrelevant. You said: "And expensive drugs are expensive primarily because it really does cost $1B+ to develop a new drug" [emphasis mine] and I demonstrated this to be untrue. The data shows that the primary cost is not in R&D.

It doesn't matter what you say about the necessity of that sales and marketing. I didn't comment on that. The primary cost is still not in R&D.

> Third, drugs only account for 40% of J&J sales--their scary marketing budget includes lots of advertising for non-pharmaceutical products.

This may be true and perhaps more data is needed, but I haven't seen any evidence that demonstrates unequivocally that the primary cost of drugs in the US is due to R&D.

I agree its not a major %age of the costs for Insurance company. But here's what I think is happening:

Manufacturer MFG could sell a drug X at $1 and sell directly to 10,000 people at $1, make $10,000 revenue

But because of perverse insurance incentives, MFG decides to sell the same drug at $100, and there are 100 out of those 10,000 who can afford an insurance plan that covers the cost for that $100 drug X.

So, by jacking up the price the drug company's revenue at the very least, remains intact, or in most cases can get more revenue if the number of rich people with expensive insurance plans is greater than 100.

While Insurance companies wont mind paying the $100 since that fear of expensive drug gives them more customers affected by FUD, willing to pay obscene premiums, copays and deductibles.

And since many health insurance premiums are subsidized by the employer, the employee doesn't realize the true cost of health insurance, and thinks its a great deal to get a $100 drug for $20.

The solution I proposed, will solve this pricing obfuscation to a great extent. Insurance companies cannot justify paying for an expensive drug, if a cheaper one is available. MFG can still price drug X at $100, but if there's a generic variant made in India / Africa / China available for $5, there wont be a market for MFG to sustain. So, there's an incentive for MFG to sell X at < $5, while targeting more coverage instead of just the 100 people covered by expensive insurance plans.

I dont see people on either side of the political spectrum in US, asking to fix this problem. Nor has there been much discussion about the same. Hope this concept is evaluated and becomes popular in solving the Healthcare Mess of America.

I still disagree, I don't think costs are high because of collusion. I've seen no evidence of collusion between insurance companies or drug companies, which would be very illegal.

There is no reason for collusion. You say that people fear expensive drugs, but there is no need to manufacture fear. People already fear complicated hospital procedures, which can cost $1 million. Hospital procedures are more expensive than expensive drugs.

I think that you're ignoring the fact that it takes $1+ billion to develop a drug. You want to buy drugs for the price of a movie ticket, even though a drug costs 1000x more than a movie, involves much more risk to develop, and is used by fewer people.

Or even simpler, just allow people to buy the drugs elsewhere and import them into the US. With most products that is allowed, which through market pressure keeps prices from diverging too much between different countries. With drugs it is not allowed, so drug prices can diverge to a much greater extent.

This will either kill people in poor countries that can't afford to pay more or it will cripple new development of drugs since the successful drugs really do need huge profit margins to pay for all of the losers that never made a dime.

Friends in the pharma and medical device development industry have told me that the business case for any drug or medical device is built on top of US sales at currently inflated US prices.

According to them, the other developed countries that have negotiated lower rates for drugs serve a different purpose. Those countries have lower requirements around testing of drugs and medical devices, and they are able to move to human trials and market sooner there. The trade-off for those countries is slightly higher risk of sub-optimal outcomes, but this appears to be more accepted by the populations of those countries than it is by Americans.

I'm not writing this to vouch for this setup - it seems like it is pretty unbalanced and ultimately does a lot of harm to people in the US due to drug inaccessibility - but I thought I'd share it for another perspective.

Do you have support for the claim that US-developed drugs are generally available sooner in non-US markets? My understanding was that these drugs are generally available first in the US market, but that the developers may use FDA approval to help with EU approval, etc.

In the case of the medical device company in question, the trials took place in Europe due to an easier regulatory process around testing. As I said, it's their personal story, but here is an article that describes the differences between the systems: http://www.nejm.org/doi/full/10.1056/NEJMhle1113918#t=articl...

I didn't mean to imply that US drug prices necessarily have anything to do with its regulatory structure, or that the European regulatory structure had anything to do with their prices, only that the companies have probably optimized their development and pricing strategies for the economic and political situations in the local markets.

Same execs that probably sell you a line about R&D costs, right? Not sure why you'd ever trust them to speak truthfully about delivering good health to Americans.

"The simple answer is because they can. European governments control prices in various ways—Britain has the strictest system, refusing to pay for medicines that fail to meet a threshold of cost-effectiveness. But in America companies set whatever official price they like."

If anyone's interested, England's system of health technology assessment (HTA) for the NHS is extremely transparent and world-leading.

It's one of the things that we Brits should be extremely proud of (although pharma-sponsored sob story campaigns in tabloid newspapers may suggest otherwise).

All new technologies are investigated in terms of incremental quality of life gain (vs current treatment norms) and changes in costs.

Furthermore, they consider everything in a wider context of opportunity cost of adopting a new treatment and budget constraints.

For a lot more detail, have a look at the NICE reference case here: https://www.nice.org.uk/process/pmg9/chapter/the-reference-c...

The interesting thing about NIHCE and its short existence is that it's a startling reminder that the idea that health policy should be evidence-based is still a new one.

NIHCE's greatest contribution has been that, in insisting on being evidence-based as de-politicised any and all questions about what treatments should be available.

I think this week's US shenanigans have showed that de-politicising healthcare is a very laudable goal.

Just for the record, although the acronym does technically spell out NIHCE since they changed the name, they've stuck with the "NICE" branding.

It allows for all sorts of pun titles for academic papers like the following:

[i] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1734179/pdf/v03...

[ii] http://www.nature.com/bdj/journal/v215/n5/full/sj.bdj.2013.8...

I would argue HTA is not without it's problems. That's why the UK has a cancer drug fund. NICE has said "no" to those drugs, yet the public still clammers for them. So a separate funding mechanism was created to pay for them.[1]

[1]https://www.england.nhs.uk/cancer/cdf/

The cancer drugs fund is an absolute travesty, and a direct transfer of wealth from the UK taxpayer to the pharmaceutical industry.

The lobbyist who devised the value proposition to Cameron's government must be very proud of him/herself.

The only reason the public clamours for these drugs is because opportunity cost of treatment is very hard to distill into a newspaper headline.

The cancer drugs fund, at base principles, implies that cancer patients lives are more valuable than the rest of the public.

> I would argue HTA is not without it's problems. That's why the UK has a cancer drug fund. NICE has said "no" to those drugs, yet the public still clammers for them. So a separate funding mechanism was created to pay for them.

See also: PrEP. PrEP is available in the US (and covered by almost every private insurer[0] with drug co-pays covered by the manufacturer[1]). And while it's less convenient, there are public clinics where you can get prescriptions to avoid paying the co-pay to a GP. In other words, absent the cost of your time, you can get it in the US for free.

In the UK, PrEP is not covered by the NHS. The National AIDS Trust had to sue the NHS just to get them to announce their decision not to cover it - before that, they refused to make a statement one way or the other, and kept kicking the can down the road. Now, you can only get it by paying a private doctor (out-of-pocket) for a prescription, and then fill that prescription privately, which can cost up to $13/pill.

(This is technically not HTA, but for the purposes of this discussion that distinction isn't relevant.)

[0] And, as an aside, on the rare case that your insurer does not cover it, Gilead (the manufacuter) offers assistance programs that provide it essentially for free.

[1] This is a separate program to enroll in; Gilead basically reimburses the co-pays that the insurers charge

Sexual health is part of public health, and thus we'd expect PrEP to be funded by Public Health England, not the NHS.

The target of your anger here should be local authorities (who hold responsibility for Public Health), not the NHS.

https://www.england.nhs.uk/2016/11/update-on-prep/

> Sexual health is part of public health, and thus we'd expect PrEP to be funded by Public Health England, not the NHS.. The target of your anger here should be local authorities (who hold responsibility for Public Health), not the NHS.

First, PHE and NHS are both part of the DH, as is NICE.

Second, sexual health is one aspect of PrEP, but it's not the full picture (though of course, that's how the NHS press release you linked would be inclined to portray it. The lower court disagreed with that portrayal, even if the appeals court did not.)

Finally, the arbitrary delineation of responsibilities in which the NHS is free to wash its hands off of the matter and NICE has no incentive to hold the NHS accountable - leaving patients with no choice but to pay out-of-pocket - is exactly the problem. Meanwhile, PrEP has been generally available (and essentially free) in the US for four years, thanks (ironically) to the federation of power which forces insurers to remain somewhat competitive with each other, and which permits the pharmaceutical companies to pick up the slack when that fails.

If you want to point out that this approach has its shortcomings as well, then yes, I'm right there with you. But it's wrong to imply that what NICE and the NHS are doing is fundamentally different from the cost-benefit analyses done in the US, and it's also wrong to ignore the problems with the DH.

To anyone interested in getting PrEP in the UK, you can buy it from £39/month upwards without a prescription from a number of online pharmacies. Do your own research, as with taking any medication.

People for whom standard cancer treatments have failed will always beg for more options, no matter how ineffective or absurd. It's good that there's a fund for that; hope adds to quality of life, and with continued testing there maybe some of the treatments will graduate.

> It's one of the things that we Brits should be extremely proud of (although pharma-sponsored sob story campaigns in tabloid newspapers may suggest otherwise). They consider everything in a wider context of opportunity cost of adopting a new treatment and budget constraints.

For context, this is literally what risk-bearing entities in the US already do (both insurers and at-risk providers).

I could get behind the statement that risk-bearing entities should be performing methodical cost-benefit analysis of care coverage, but the fact remains that, at the end of the day, that means that someone is making the decision to deny certain people coverage because it's not cost-effective. Whether you have clinicians and analysts at an insurance insurance company performing that role or the government clinical panel of clinicians and analysts performing that role, it still results in some people having their care approved and some having their treatments denied[0].

It's weird to then dismiss the negative side of the tradeoffs as "pharma-sponsored sob story campaigns" in the UK, when those same stories are accepted as evidence of the systemic problems within the US.

[0] And to pre-empt the common misguided criticism that "it's better because it's not a for-profit company making the decision", that assumes that government agencies don't have a profit motive just because they that's not recorded on their balance sheet (they do), and it also forgets the counterintuitive fact that the explicit profit incentive in the US actually incentivizes the company to permit claims on more expensive treatments if the patient requests them.

You're confusing two different things.

When NICE decides not to fund something they have clear evidence that it is worse than current treatment, not just that it is more expensive than current treatment.

See, for example, Abraxane, a chemotherapy for pancreatic cancer.

To be accepted all it has to do is either:

i) Be better than current first line treatment or

ii) Have less side effects, and thus be usable as a second line treatment or

iii) Be much cheaper

It's fantastically expensive, has many side effects, and is less effective than current treatment. So it fails all three. But you wouldn't be able to tell that from the pharma-sponsored advocacy groups. Those groups talk about "2 years of life", when the manufacturer's own data talks of just 3 weeks.

It's incorrect to say that NICE has a profit motive. They very clearly - and this is the point of transparency - don't.

When NICE decides not to fund something they have clear evidence that it is worse than current treatment, not just that it is more expensive than current treatment.

That's not true at all. Kadcyla is superior to current therapies for HER+ breast cancer. NICE has decided not to fund it because it's too expensive.[1]

But the reality is that the price of Kadcyla is currently too high in relation to the benefits it gives for it to be recommended for routine commissioning in the NHS, even taking into account the end‑of‑life criteria and the patient access scheme.”

[1]https://www.nice.org.uk/news/article/kadcyla-too-expensive-f...

> You're confusing two different things. When NICE decides not to fund something they have clear evidence that it is worse than current treatment, not just that it is more expensive than current treatment.

No, I'm not confusing two different things, and I'm glad you picked cancer as an example.

Even if NICE has approved a treatment as "cost-effective", that doesn't mean that any specific patient will actually be eligible to receive it. For cancer treatments, there is a separate panel which reviews individual cases and provides the options available to that patient. It is not done on the aggregate; it's determined on the individual level. And, to make matters worse, if the patient decides to deviate sufficiently from the treatment plan (perhaps by delaying chemotherapy, or seeking treatment abroad first), those options can be rescinded, at which point the patient is required to pay out-of-pocket on the private market.

> It's incorrect to say that NICE has a profit motive. They very clearly - and this is the point of transparency - don't.

Every agency in every country, public or private, has a profit motive, and the DH is no exception. Transparency doesn't eliminate the profit motive; it just provides visibility into both the inputs and the outputs.

At the end of the day if you don't have the money to pay for a treatment yourself then someone else is making a cost to benefit analysis.

> At the end of the day if you don't have the money to pay for a treatment yourself then someone else is making a cost to benefit analysis.

Exactly, that's the point. You can label it however you want, and set up whatever system you want to allocate the resources, but that doesn't change the fact that this decision has to be made.

-> that assumes that government agencies don't have a profit motive just because they that's not recorded on their balance sheet (they do)

As long as you say so. Every must agree.

> "The simple answer is because they can.

The easiest way to fix the fact that 'they can' would be to permit re-importating drugs that were manufactured within the US.

Shortly before Obama left office, there was a bill that would have fixed that, but nine Democrats joined the Republicans in voting it down: https://www.senate.gov/legislative/LIS/roll_call_lists/roll_...

Please explain how that would work.

If I'm Pfizer, why on earth would I dramatically increase my sales of drugs to Canada knowing they're just going to be reimported into the US?

The answer is, I wouldn't. I would put a quota on Canadian sales. Sell them enough drugs for Canadians. This was actually done about a decade ago when reimportation was more popular.

That's how you get your patent broken.

Has the US ever disallowed a patent because the company holding it refused to sell a product to the government at the price the government wanted? It's hard to imagine SCOTUS allowing that sort of thing. The US gov't is subject to its own laws.

It's easy to imagine SCOTUS allowing such a thing, it's just hard to imagine the government doing it, or anything that restrains healthcare costs at the expense of healthcare companies.

Has the US ever fought hard to institute a travel ban in order to prevent people of a certain religion from entering the country, despite judicial intervention.

That's the thing about governments: they can do whatever they want. And your recourse is to deal with it or spend years fighting against it (or die in the streets fighting it, lest we forget that option).

Disclaimer: I'm for breaking patents when necessary, although 3D printing drugs is around the corner making it a moot point.

EDIT: @refurb:

I love coming to HN and having people say "its too hard, it'll never be done". ;)

I can run the laser sintering machine in my garage and build metal parts from a fine powder, parts that are aircraft grade, but I won't be able to 3D print drugs at home? No imagination.

Disclaimer: I'm for breaking patents when necessary, although 3D printing drugs is around the corner making it a moot point.

3D drug printing is a pipe dream. The syntheses are way to complex to do at home. You'd be better of just having a CRO make the drug for you.

You're comparing printing simple metal structures from metal powder to synthesizing complex molecules from scratch? I think you might want to brush up on your chemistry before pinning your hopes on 3D printed drugs.

Why it matters that the FDA just approved the first 3D-printed drug (2015)

https://www.washingtonpost.com/news/innovations/wp/2015/08/1...

3D printing of tablets containing multiple drugs with defined release profiles (2015)

http://www.sciencedirect.com/science/article/pii/S0378517315...

I can Google. You should Google before making a false blanket statement.

That's 3D printing a pill. Nothing to do with synthesizing the active compound, and it not going to allow you cheaply produce drugs.

The issue is creating the active compound, not putting it into pill form.

Laser sintering is a known technology. 3D printing drugs is a buzz word and a technology that doesn't even exist. As a chemist I can tell you it's a pipe dream. Chemistry just doesn't work that way.

This is a silly hack.

The US has plenty of market power to reduce prices for drugs sold in the US. There are reasons to be in favor of wielding that market power and there are reasons to be against it. But there is no rational reason to pretend to not wield it but then re-import a bunch of drugs from Canada. That's just a waste of shipping costs.

> But there is no rational reason to pretend to not wield it but then re-import a bunch of drugs from Canada.

Permitting trade across the US-Canadian border provides an equalizing force on the prices across the border, even though no drugs actually need to make the return trip (at equilibrium).

In other words, allowing the trade puts an upper bound on the difference between the prices charged in the US and the prices charged in Canada - that difference can be no greater than the costs of reimporting those drugs, or else it's cheaper for people to source their drugs from Canada.

By disallowing the trade, we allow the difference to grow unbounded.

OK, that's a pretty good point and you have me thinking about things a lil'.

It wasn't a bill, it was an amendment to a budget resolution. Several of the Senators who voted against it said they did so because they didn't like the way it was being introduced, not because they are against the idea in principle.

Here's the same idea, introduced as a bill instead of an amendment, and being co-sponsored by several of the amendment's "Nay" votes: https://www.congress.gov/bill/115th-congress/senate-bill/469

That quote seems to me to be missing a really important bit, which is that there doesn't seem to be a functioning free market which is a necessary condition to determine the price. (This comment is not aimed at you, it is aimed at the article for supplying such a broken explanation)

This is very, very important.

The drug market is one of the farthest things we have from a free market in the US outside of military weapons. It is just massively dysfunctional due to a combination of special interest lobbying combined with stepwise path-dependency.

A huge part of the health care discussion in the US starts from assuming our current system is somehow natural. It isn't. It is an engineered thing, with the engineering performed by in a non-coordinated fashion with incompatible goals by non-experts, piecewise, over a long period of time.

Even though I doubt it (healthcare truly is different than most services/goods), a truly free market might even be superior to what we have, in terms of outcomes by patient count. Of course, that would lead to unsightly public corpses, a much different drug industry and a lot of unemployed clerical workers, among other things.

And the big, unanswered question remains: why the US is such a special snowflake that what works in various ways in every other first-world country cannot work here. (Aside from the obvious answer.)

>why the US is such a special snowflake that what works in various ways in every other first-world country cannot work here.

I don't care for this argument simply because the US was the first country to throw off monarchical rule. Why the need for homogeneity? Shouldn't we have as many different implementations as possible? Personally, I don't care for centralized power (i.e. Facebook).

Didn't Google take a different approach to site ranking than every other search engine? If people want to see what state-level healthcare looks like, check out MA (so-called Romney-care). We had an amendment to the CO state constitution this past election that I voted for, but ultimately failed.

American healthcare isn't a city on a hill, it's a prison in a dump. Save your exceptionalist arguments for something which isn't unbelievably shitty.

> I don't care for this argument simply because the US was the first country to throw off monarchical rule.

I'm sorry you don't like it. We have an interesting history, but I do fail to see the relevance of a centuries-old political dispute to the question of modern healthcare policy[0].

> Why the need for homogeneity?

This is a strange question. This seems to presuppose that all other first-world countries have identical single-payer or something. The structure of healthcare in the developed world takes many different forms - see [1] for a sampler. All of them work better than what we have, for cheaper.

Personally, I'd be fine with any of those models. Or, if you have a new one, please, let's hear it - just about anything is going to be better than what we have[2].

> Shouldn't we have as many different implementations as possible?

Unless you want to throw a lot of money and lives away, no.

Generally, one experiments with different things in order to find out what works. We have a fairly decent, if not great, idea of things that work and things that don't. A huge swath of "things that don't" probably shouldn't be tried again, because that leads to suffering, death and wasted money. I'm all in favor of refining something that works into something that works better, and we should do that. But we need to get to the "something that works" part, first.

> Personally, I don't care for centralized power

Good. Me, too, and I think too few people feel that way. Unfortunately, if you're looking for decentralization in healthcare, you're still in the wrong country.[3]

Bottom line for me: If, in fact, the U.S. is supposed to be exceptional, supposed to be showing the way, supposed to be a better place, why do we tolerate a sixth of our economy being a shit-pit of waste, misery and dysfunction?

[0] For the pedantic, modulo constitutional issues, path-dependence through legal precedent, convincing people that somehow our government/land/people/animating spirit is so magically special that somehow economics, game theory and human nature don't apply to us, etc.

[1] https://en.wikipedia.org/wiki/Universal_health_care

[2] https://www.forbes.com/sites/danmunro/2014/06/16/u-s-healthc...

[3] http://www.allhealth.org/health-care-consolidation-trends-im...

Yes. either the capitalist or sovislist extremes would be our horrible horrible middle ground. Our healthcare inanity is one of our greatest threats.

if a company has a monopoly there isn't by definition a functioning free market.

The question therefore is, why does the monopoly exist? You will find that, as _jal has commented, it is not because of some natural phenomenon springing out of a free market.

sure it's natural. why would anyone compete if they could carve up a market and make monopoly profits.

Because in a free market, companies cannot keep out competitors. Only through regulatory capture / cooperating with government are monopolies sustained.

Even the greatest monopoly of all time -- Standard Oil -- which at its peak had 96% market share was whittled down to 64% by competition by the time the "white knight" regulators had it broken up.

And who knows the long-term consequences of empowering the government to determine what is and isn't a monopoly? Well in the case of friendly relationships with well-lobbied corporate interests, there will probably not be any anti-monopoly action forthcoming.

For a publication named "The Economist" that's quite the intellectually lazy answer. They say nothing of the existing conditions which make it possible for a company to arbitrarily set drug prices (after all, few other businesses in the economy enjoy such a privilege). Furthermore, the answer is not even satisfying to those who may have a rudimentary grasp on economics. After all, if the reason is "because they can" why not raise the price of their drugs to $1 million per dose? This argumentum ad absurdum demonstrates that even with the lack of medicinal alternatives, there are certain economic factors which prevent astronomically high prices.

The idea that you can point to even one or two "whys" is patently ridiculous. The goal is easy to state: how do you set drug prices at the level that optimally balances consumer welfare (benefit realized minus money spent)? Simply setting prices as low as possible is of course not the answer--a big part of maximizing the benefit realized involves creating adequate incentives for drug companies to create new medicines. But there are a dizzying array of factors that make it hard to even understand what that optimal price should be:

1) The potential free rider effect is huge. Drug companies would not invest billions into creating new drugs if after six months on the market they could be duplicated by a competitor and sold for a far lower price.

2) To avoid (1), we give drug companies a patent. But in the process, we make it much harder to use market mechanisms to regulate drug pricing, since patents inherently give drug companies monopoly power.

3) Moreover, in most of the developed world, we want to make a certain level of medical care accessible to everyone. That results in systems like Medicare, the U.K. NHS, etc. That too stymies market mechanisms, except in the other direction. Single-buyer markets are monopsonies, and unchecked result in driving prices below efficient level. (That is likely what has happened in Europe, and is the reason why Medicare is prohibited from negotiating drug prices.)

4) The pharmaceutical market is international, and thus rich in arbitrage opportunities for national governments. So long as the American market is willing to foot the R&D bill, other countries have enormous incentives to drive prices local below the efficient level for their own citizens.

5) Conceptions of morality also complicate things. We ordinarily accept the idea that companies are permitted to charge based on the value they create for their customers. We accept Apple charging $2,400 for a Macbook Pro and understand that people only buy it because they think they will get more than $2,400 of utility from it. What's the value to the customer of HIV anti-retrovirals? How much would you pay to extend your life by decades? Almost certainly more than what those drugs cost. There is an impulse to try and say "well, it's okay for Apple to charge based on value created, but not drug companies." That impulse is surely well-intentioned, but is counter-productive. It has the effect of driving talent and capital out of areas that have the greatest positive impact on humanity.

The US seems to need better regulation. How did it take so long for esomeprazole to be revealed as a marketing sham?

https://www.quora.com/Is-there-a-significant-difference-in-e...

Not necessarily more regulation or less regulation, but better. I guess that falls into easy to say hard to do.

I also wonder about things like the significance of the improvements made to the Epipen (the related patents allowed Milan to push generics off the market).

"Why can't we just control prices?" wonders a publication called The Economist in the second graf.

This article doesn't meet the Hacker News bar for me. Why read a shallow, dataless, meandering, "could the grass be greener" thinkpiece when you could be reading and discussing a deep statistical analysis like:

High US health care spending is quite well explained by its high material standard of living https://randomcriticalanalysis.wordpress.com/2016/09/25/high...

The two follow up posts on that blog (Random Critical Analysis) are also quite good. So many surprising discoveries await us in the actual data, but I guess opining and confirming bias is more fun? If real journalism is going to require active philanthropy to survive, I'm funding the kind of critical analysis on open data sets that makes me think & rethink, not the kind of stuff that makes me go "that's just, like, your opinion, man." This article was the latter.

> And it is illegal for Medicare to negotiate with drug companies

Why is this the case ?

Also, this is from September 2016.

It was politics from a couple decades ago. Medicare historically didn't cover prescription drugs, until Part D was enacted during the Clinton administration.

A tactic to get Republicans to support the measure was to pledge that Medicare wouldn't interfere in the drug market by developing its own formulary – Medicare Part D plan providers would compete for members and negotiate with pharmaceutical companies themselves.

There has been a bunch of talk over the last decade about repealing that particular restriction, but it's never made it over the finish line.

> until Part D was enacted during the Clinton administration.

???? Medicare Part D came into being in 2003, well into Bush's administration. The whole rest of your post is based around the notion that it was proposed by Clinton, when it was Bush....

Totally, and thanks. I was quick to write and submit my answer and was remembering some debate during the Clinton era.

But the noninterference provision was indeed targeted at market-oriented Republicans to get them on board. There were plenty who wanted to ensure that Medicare wasn't going to be eroding the businesses of established payers.

The support in the House of Representatives was also mostly Republican:

http://clerk.house.gov/evs/2003/roll332.xml

This history of Part D is so polically distorted it is almost exactly backwards.

https://mobile.nytimes.com/2003/03/05/us/bush-medicare-propo...

It was part of the Medicare part D program - and likely put in via lobbying of Drug companies to politicians:

https://en.wikipedia.org/wiki/Medicare_Part_D#Criticisms

https://en.wikipedia.org/wiki/Medicare_Prescription_Drug,_Im...

> It was part of the Medicare part D program - and likely put in via lobbying of Drug companies to politicians:

The prices are still negotiated. They're negotiated by the plans that provide Medicare Part D, rather than determined unilaterally by Medicare itself (which is what happens for Medicare A and B reimbursement rates).

Any private drug negotiator is going to be in a terrible position because they don't have 100% of the market. They can't walk away, the drugs will just flow through another private drug body. The drug makers have no reason to give a discount if the drugs will be sold under plan distributor B vs distributor A.

When you compare prices in the US vs nations with governmental bodies controlling drug prices, you can validate that the US way is ineffectual for controlling drug prices.

Any private drug negotiator is going to be in a terrible position because they don't have 100% of the market.

That's absolutely not true. Look at the HCV treatments. The average discount for private insurers is 40%+. And that's just one example. They are tons of drug classes that are very heavily discounts to private payers.

Members of a health plan can't just move from one plan to another whenever they want. There is annual enrollment. Members are somewhat captive.

But when you look at data, this scheme does not result in better drug prices than national negotiation.

Do you have data that shows that? HCV net prices are lower in the US than in the EU.

> Any private drug negotiator is going to be in a terrible position because they don't have 100% of the market. They can't walk away,

Having 100% of the market is the definition of a monopsony. That's bad for both patients (in the long run) and pharmaceutical companies (in the short run).

In any case, even an ostensible monopsony pharmaceutical purchaser can't really just "walk away", because so so many of the drugs that they're purchasing are deemed essential. Let's say the government just said, "sorry, you've been taking this critical blood-pressure medication since it was released seven years ago, but now we're not going to pay for it, because we're taking a hard-line stance in our negotiation with Pfizer".

At that point, there are two possibilities:

1) Patients stop taking the drug, and they die

2) Patients pay for the drug out-of-pocket (if they can afford it), and the remaining patients die.

#1 is possible, but a political disaster. #2 is a no longer a monopsony, which defeats the whole premise of "having 100% of the market".

The balance of patients dieing vs not buying the drug at all is there regardless of what price negotiating scheme you implement. The cost is what varys in the end.

So when you look at data, a single government representative body can determine efficacy and balance the cost in a way that multiple private bodies have not demonstrated in US drug cost data vs drug costs in nations which implement governmental drug controls.

>Having 100% of the market is the definition of a monopsony. That's bad for both patients

That's how the rest of the developed world does it.

> That's how the rest of the developed world does it.

No, very few countries - even those which regulate prescription prices - have monopsony pharmecutical purchasers. Germany does not. Canada does not. The Netherlands does not. Even France does not. Technically the UK doesn't either, because each England/Wales/Scotland/Northern Ireland are operated separately.

And as explained in the article, these systems only work because the US picks up the tab in funding research and development, even for pharmaceutical companies based in Europe. If the US weren't far and away larger than all the countries which do have monopsony purchasers, that setup wouldn't work, because nobody would be funding the development of those drugs in the first place.

This has background:

http://kff.org/medicare/issue-brief/searching-for-savings-in...

A summary is that when the coverage was established, the law was written so that Health and Human Services is prevented from participating in price discussions, it's left to the private companies that underwrite the policies.

You can bet that if Medicare did establish a formulary, we'd be talking about the problems with that instead.

This is the most accurate answer. Medicare doesn't negotiation on drug prices. The private insurers who manage the Part D plans do the negotiations and yes, they get significant price concessions (sometimes higher than for commercial patients).

When these private plans negotiation lower prices, they can in turn cover more patients for fewer dollars. That's why Part D has actually come in well under projected costs.

Because Medicare has, in a sense, too much market power and could unreasonably distort the market in favor of the short term incentive of getting the best possible price (the marginal cost of production) and against the long term goal of profitable drug companies that produce new drugs in the future.

Now, there are plenty of people that don't find this reason compelling and thing that the US gov't should do otherwise. But that's the reason.

I work at Blink Health (www.blinkhealth.com) and we're working to solve this problem and offer patients a fair price for their medication, often saving patients up to 90% of list price. We negotiate with pharmacies and pharmaceutical manufacturers to get the lowest rates and improve price transparency in an opaque market. We have a kick-ass engineering team -- if you're interested in these problems and want to help us fix healthcare shoot me an email at alexander [at] blinkhealth [dot] com

Why is an account with you better than no account at GoodRx?

I assume you are pretty much just a PBM?

The reason is that private health insurance companies suffer from the Classic Agency Problem.

They want their costs to increase at a sustainable rate so that they can keep growing their Net Income.

Historically, private health insurance companies earn ~ 6% of their total revenue as profit. To justify an increase in their premiums they have to "miss" their payout ratio slightly every year.

Drugs that patients will take for life are a great way off locking in that increased cost in a "controlled" way.

My father recently passed, and a month or so afterwards we got a bill from the nursing home pharmacy who, apparently, couldn't figure out how to bill his insurance.

The price for 30 atorvastatin, whose out-of-pocket cost is about $20, was $160. The same with other cheap generic heart medications.

Complaining about high drug costs is a red herring. Drug prices are a small fraction of healthcare costs, and even if new drugs were made cheap, healthcare providers would still overcharge for them.

In most European countries drug prices are negotiated at scale, because of public institution negotiating directly with pharmaceutical companies (most expensive drugs are the ones in international shortage, e.g. hepatitis C drugs, etc.). So what happens in the US is that pharmaceutical companies apply the "divide an conquer" rule, having a de facto monopoly.

Answered practically in the first two paragraph of the article:

Despite the furor, drug companies continue to charge exorbitant prices in America. Why?

THE SIMPLE ANSWER IS BECAUSE THEY CAN

There's no quick fix to the insatiable greed on all the parties involved. Profit over people's well-being.

I have never understood for profit medicine. There is a very fine moral line between, selling a blue pill that gives someone a "fun time" and selling cocaine for the same resin? Drug companies are making dugs and machines to "extend life" to drain the saving of the elderly. I've seen who could not pay for a "live saving" drug, give away everything they own so they can go on medicaid to be "saved".

Sam Peltzman in "Regulation of Pharmaceutical Innovation" shows with statistics how the 1962 FDA Amendments resulted in massive drug price increases and a halving of new drugs being developed, with no net increase in efficacy.

> Private insurers do so instead, but the government binds their hands, for example by requiring them to pay for six broad categories of drugs, without exception

I'd like to understand more of this -- it seems like there is hand-tying at multiple levels. In addition to insurance companies, why isn't it possible for pharmacies, for example, to compete on price directly -- CVS, or Walgreens, or potentially even Walmart, seem like they would have sufficient market share to negotiate prices as well.

The largest pharmacies do compete on price. It's common for CVS or Walgreens to get an additional discount on products.

Pharmacies do charge (fairly) low prices for generics.

Negotiation is only effective if you can walk away from the deal.

The drug companies can't afford to lose their biggest customer. But since the customer can't go anywhere else, it's not like they would. It's a detente where neither side can really make a move because the other just says "Nope."

I think transparency - as in publicly available pricing - would be the only thing to change the balance here. Even then, it's not a fix..

I searched all the comments and saw no mention of hospitals. I believe hospitals[0], pharma companies, and insurance companies have colluded to set prices for all healthcare which prevents the actual 'users' from price discovery.

[0]https://en.wikipedia.org/wiki/American_Hospital_Association

1. Drug companies donate to politicians.

2. Politicians promote drug-company-friendly policies.

3. Drug companies earn outsized profits.

4. Repeat

Previous discussion on Hacker News: https://news.ycombinator.com/item?id=12494927

To me this is why single-payer is unwise. The distortions of having a single massive customer with various mandates are bound to cause distortions like this. Government-subsidized HSAs for everybody is my pet alternative.

Please add (2016) to the title.

Done

The key challenge is that the government has so grossly distorted the market, on multiple dimensions, that the actual levers within the pharma vertical are opaque to all but the most embedded incumbents. (economists refer to these as hidden externalities).

These market-distortions have all but eliminated the natural cost-competition that one would observe in other sectors, such as commodities or manufacturing. The best thing the government can do is back off completely and make those pharma companies REALLY sharpen their pencils.

For those of you who believe MORE regulation is the way out, that's called "trying to dig your way out of a hole" or "repeating the same nonsense and expecting a different outcome." Please challenge your beliefs.

Make in China?

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