Fed Up with Drug Companies, Hospitals Decide to Start Their Own

A case study that everyone should be aware of is the story of Praziquantel in South Korea.

Here's a reference: https://cdn1.sph.harvard.edu/wp-content/uploads/sites/480/20...

Praziquantel is about the only thing that works against schistosoma, a very debilitating condition. The compound was discovered in the early 1970s in a joint venture between Bayer and Merck KGA. At that time South Korea had a major schistosoma problem, but Merck could not supply at a price Korea was willing to pay (at that time Park Chung-Hee was in power, it was a military dictatorship).

Korean leadership declared praziquantel a national security issue (true) and started manufacturing their own, and in a collaboration between KIST and Shinpoong Pharmaceuticals developed their own process, which was much cheaper than the original Merck isoquinoline route.

The effort was a major part of the development of a domestic pharmaceutical industry. Shinpoong still hold 50 % of the market in praziquantel.

Maximizing profits for shareholders is not the only motivation that we as humans have for creating life saving medicines. There are countless examples throughout history of new drugs being invented without IP laws. This is akin to how advertisers say the internet wouldn't exist without them.

I think people vastly overestimate their physicians' ability to stay on top of newly published research, and that includes new drugs' safety and efficacy profiles. If I want the stuff I work on to reach patients (and I do), then I want doctors to know about it. In the absence of pharma marketing dollars aimed at doctors and patients, I would like if there were some way to bring doctors the new information. Maybe that should be handled by a third party that doesn't have the interests of pharma companies in mind, funded by all of the drug companies at the time of a new drug approval.

Considering that in 2010, Forbes estimated that the cost of bringing a single drug to market, was between $4-11 billion dollars, you are buying between 2-6 extra drugs per year.

(https://www.forbes.com/sites/matthewherper/2012/02/10/the-tr...)

But that fails to account for the fact that the number of drugs doctors and patients have to choose from currently is staggering, and both groups have proven hesitant to switch to new therapies, and so by not advertising new drugs, the amount of money that can be made dramatically decreases, which further impacts the ability for pharma companies to invest in R&D.

No one thinks it is ludicrous for Google or Apple to throw as much money as they do at marketing. Its capitalism, and if you have a problem with it fine, but it isn't evil for pharma companies to work under the same model that every other industry on the planet has and which has been the driving force of the planet for the last several centuries.

Let's assume, for a moment, that the people running these Pharma companies aren't stupid. We can therefore assume that they will mostly make sensible decisions on how to spend money. It therefore follows that a company calculates that by spending $X on promotion, they'll recoup $X+$Y, where Y is the additional revenue thanks to their promotion, over and above what they'd have made without promotion - i.e, their promotional spend is a worthwhile investment for them.

For each company individually, therefore, promotional spend can be reasonably assumed to generate greater revenue and profit, some of which will be used to fund research into new medicines.

Now, like you, I'd much rather live in a world where there was no promotional spend, and correspondingly lower drug prices... but that's not the current world. And pointing a finger --'but, marketing, sales reps'-- at promotion is not the full story.

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There are different routes by which new drugs are discovered, but very simplistically, we can break them down to two:

1) a researcher somewhere (not in Pharma) comes up with some positive research that might eventually result in the new drug for some disease. To develop this finding, often they will create (spin off) a new private company, and somehow generate funding. The extent to which the original funding institution benefits from this research is likely variable, based on the legal framework and contracts under which the researcher was operating. (And frankly, if a university or other institution doesn't benefit from such a discovery it funded in its labs... they're not doing something right.)

2) a pharmaceutical company funds its own discovery operations, which work to discover new targets and/or drugs for those targets

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#1 is unpredictable, but can result in great new discoveries which are brought to market --and thus patients-- relatively cheaply (like in the hundreds of millions, rather than billions)

#2 is difficult, and very expensive, but mostly works - some pharmaceutical companies grind out drug after drug. However, ultimate success is less certain, and cumulatively, considering the cost of discovery operations as well as subsequent development, the cost is usually in the billions per successful new drug.

This is also why we're seeing a switch to a mixed model: big Pharma is increasingly spending big on smaller biotech operations with promising drug candidates, as a way of minimising risk.

Getting through the border and back on foot was a bit of a hassle, and it's probably not a good idea to "bring" too much stuff, but it was a fun experience anyway :-)

No, they're not.

> they're just using Hollywood accounting and referring to their profits as "excess earnings".

No, they aren't. Excess earnings are the correct technical term. Non-profit status, even in theory, has nothing to do with whether you earn more in revenue than you expend in costs, it has to do with whether there are stockholders or others who have a claim on accumulated returns.

More specifically, charitable nonprofits (which non-profit hospitals are) have a wide variety of additional requirements and restrictions (both in general, and specific additional requirements for hospitals, including several added by the ACA.)

> read that one, it's a good breakdown of the accounting that hospitals use to maintain their nonprofit status while behaving in every other way like any other for-profit business.

No, it's just a bunch of dishonest, or perhaps merely clueless, mischaracterizing; the most obvious example being considering money expended in providing Medicaid services but not covered by Medicaid reimbursement as money the hospital “paid to itself” rather than an external benefit. This isn't money the hospital paid to itself, it's money the hospital paid out to provide services under a public program providing healthcare to the medically indigent but which was not reimbursed by that public program (in general, Medicaid is a money-losing program for providers, as—while there are some exceptions—reimbursement is generally at the lowest of three things: a state set rate, the actual cost of providong the service, or the provider's usual and customary charge for the same or substantially similar service. This is at best break even, but over all, across all providers, it's always going to be, in practice, below actual cost.

And you may not be aware but “Each of the UK's health service systems operates independently, and is politically accountable to the relevant government: the Scottish Government; Welsh Government; Northern Ireland Executive; and the UK Government, responsible for England's NHS.”

If anything, a comparison with England is probably more appropriate :)

At the moment.

And yes, drug companies playing the game of "I'm not allowed to give you a sample" is super shady and ridiculous. Wouldn't surprise me if this gets fixed super fast.

https://www.fda.gov/Drugs/ResourcesForYou/Consumers/BuyingUs...

As for the exclusive pharmacy arrangements, that already happens. Some drugs are only available at one pharmacy. That may mean more business for the pharmacy, but manufacturers also extract more concessions because of it.

Look up the 340B program and mandatory Medicaid rebates. They add up to huge discounts.

In most cases Medicaid pays the lowest price of any customer and Medicare often pays the same as private insurers.

It's a fallacy to say the gov't is getting screwed over by not negotiating over drug prices.

The root of the problem with American drug companies is that they're insulated from open market competition by a government approvals process that costs billions--only a few companies have enough money to take a new drug to market. The government could reform this process but chooses not to, claiming it's necessary for consumer safety (certainly some kind of approvals process is).

Now if you wanted to setup a nationalized producer, put a "chinese wall" between it and the State and force it to compete without subsidies or special (favourable) regulations, sure, go for it. But then what's the advantage of it being nationalized to begin with? Anybody could start a non-profit corporation and do the same thing.

She came home one day feeling pretty good about overturning a $180k denial. She checked back a few weeks later, and found the paid in full amount to be in the neighborhood of $10k after "negotiated discounts."

The system is fucked. Had the denial gone through, that person would have been on the hook for the full 180k. (Or, to be more accurate, the hospital would have negotiated for $10k from the patient and written the remaining 170k off of their taxes)

Emergency care is a different matter, I imagine, insurance-coverage-wise, but pre-approval seems to be fairly widespread for planned stuff these days.

Your body is. A routine surgery can absolutely turn into a hundred-thousand-dollar nightmare.

Never mind that a mechanic has a much better understanding of a car, then a doctor does of a human body.

One of the reasons hospitals accept discounted rates for insured patients in general is ease of reimbursement vs trying to chase the patient for money.

"The real root problems with the system are that a tiny minority of very sick patients account for an overwhelming majority of treatment costs"

It's impossible to tell exactly what the parent comment meant any more precisely without clarification, whether they were talking about unnecessary over-consumption of resources (Americans have been over-healthcare'd for decades), or that eg cancer patients or elderly consume vast resources (as one would expect). However, it is of course the case that a tiny percentage of the population produces a very large share of the cost. The bottom 50% of healthcare consumers, are a mere 3% of the cost in the system. I don't know what the point of any of that is however, there are only ultimately two choices: go back to the old system that was far less expensive for the majority, but didn't properly cover about 1/3 of the population; or continue to shift toward universal healthcare with a fully distributed cost (which means significantly raising taxes on the middle class, as in every universal healthcare system).

"When it comes to America's spiraling health care costs, the country's problems begin with the 5%. In 2008 and 2009, 5% of Americans were responsible for nearly half of the country's medical spending. ... In 2009, the top 1% of patients accounted for 21.8% of expenditures."

https://www.theatlantic.com/business/archive/2012/01/5-of-am...

It's a big mess and I don't see billing practices improving significantly until the reimbursement system changes. Single payer could really simplify things for the end user.