In its fight to keep drug prices high, big pharma leans on charities
latimes.com
latimes.com
In the US on the other hand, the FDA requirements are more stringent, but are disconnected from pricing completely. Achieve FDA clearance, and you can negotiate whatever price you want. US consumers subsidize the rest of the world.
What are we subsidizing exactly? Development of new drugs? Does this mean if US started tightly regulating drug prices, then drug prices would go up everywhere else in the world? Or just that the rate of new drug development would slow down?
A bit of both, most likely. The US tends to see drugs that are not available elsewhere in the world, but the cost of drugs is much, much higher.
Quick example - Generic Walgreens ibuprofen costs $3.29 for 20 in the US. The same thing in the UK at Boots (same parent company) costs $0.50.
It is still possible that the US market subsidises drug development if it happens in the UK.
This is what under-regulated capitalism does, the wealthy corporations engage in propaganda to protect their profit lines at the expense of the public.
Has anyone made an exhaustive table that contains prescription drugs on one side, and their supplement equivalent(s) on the other side, where applicable?
For example, I am using Berberine (supplement) [1] instead of Metformin (prescription). In this case, the supplement may be superior to the prescription. I would love to find the equivalent to my blood pressure drug losartan potassium (an orally active, nonpeptide angiotensin II (AII) receptor antagonist.)
[1] - https://examine.com/supplements/berberine/?PageSpeed=noscrip...
Berberine is well tested (about 3000 years of medical use). It wasn't until the last decade or so they found it had the same use as Metformin. Apparently metabolic syndrome is less of an issue in China? They mostly used it for gut infections and as a clothing dye.
The most common interaction id diarrhea and cramping from diarrhea. (same as Metformin) It can also cause sweating and low blood sugar.
The berberine I'm finding at assorted online sellers seems to be around $20 for 120 capsules of 500 mg.
Metformin is $4 for a 30 day supply or $10 for a 90 day supply at Walmart [1]. Same price regardless of whether the prescription calls for 1 pill a day or 2 pills a day, and regardless of the pill size (500 mg, 850 mg, or 1000 mg), so that means if your doctor will give you the right prescription you could get 180 1000 mg metformin tablets for $10. That's something like 6 times as cost effective as berberine!
[1] This is the cash price. No insurance or GoodRX coupon required.
For my other BP meds, I am trying to find a way to buy them in bulk. Doctors and delays induce life threatening risks.
edit--- Apparently people don't like the idea of affordable pharmaceuticals?
How does one doctor claim to serve 38 million patients? Another example of Medicare fraud?
I guess we get the journalism that we pay for.
> The negotiation issue has a tortuous history. When Medicare was expanded to cover prescription drugs in 2003, it became the single-biggest buyer of medicines in the U.S. But while other federal agencies, such as the Department of Veterans Affairs, can use their market clout to seek better deals on drug prices, Congress prohibited Medicare from doing so. Instead, the scores of private insurance providers that offer Medicare plans are left to negotiate individually with drugmakers, with significantly less power.
The idea that giant insurers like Cigna don't have sufficient "market clout" to negotiate on even footing with drug companies is laughable. Medicare would not just have "market clout"--it would control so much of drug purchasing that it would have monopsony power to drive drug prices below the efficient level.
It's a very simple proposal. "Use Medicare's monopsony power to drive drug prices artificially low." Maybe it's even a desirable policy outcome. Trade future development for cheaper drugs now. But it's intellectually dishonest to talk about it without really talking about what it means, without using the relevant concepts and terminology. It obscures what is fundamentally a simple economic tradeoff (indeed, it obliterates the notion that there even is a trade off).
[1] https://en.wikipedia.org/wiki/Monopsony
> Monopsony power exists when one buyer faces little competition from other buyers for that labor or good, so they are able to set wages and prices for the labor or goods they are buying at a level lower than would be the case in a competitive market.
Yes, drug companies don't want drugs to become a commodity. Nobody wants their products to become commodities. And we have to acknowledge that, at least maybe, the public shouldn't want drugs to become commodities (at least, not during the period of patent protection). Companies in commodity markets don't innovate. Look at where innovation is happening in the PC market. It's happening in companies that can make a big profit (Google, Apple), not companies that deal in commodities (Acer, HP).
But put that aside. Maybe the best thing is for drug companies to be like Acer rather than Apple. At the very least, honest reporting should acknowledge that we're talking about trade-offs. In the last few decades, new drugs and medical devices have revolutionized treatment for things like HIV, breast cancer, leukemia, Hepatitis C, prostate cancer, etc. The 5-year survival rate for prostate cancer has gone up from 68% in the 1970s, to 99% today. HIV went from being a death sentence to a chronic condition. Many leukemias went from being death sentences to being extremely treatable. That progress wouldn't be possible without the tens of billions of dollars a year that drug companies invest in R&D. We can choose to slow down that pace, in exchange for making the existing treatments more widely accessible. That's a totally acceptable choice. But it's deception to make it seem like it's not a choice.
Everything aside at a minimum the US needs more transparency about pricing. The whole system with its coupons, rebates and middlemen seems to be set up to hide the real cost of drugs. Without transparency no real discussion can be had.
Because I have an iPhone. It's made executives and shareholders at Apple quite rich. It's also, I'm confident, advanced the state-of-the-art far faster than if Apple had been a government-regulated utility of sorts, limited to a "fair" 10% profit margin.
If people were talking about the government exercising monopsony power to drive down the price of iPhones, I'd (a) except Apple to protest vigorously; and (b) worry about the impact on smartphone innovation. Drugs are no different. The fact that drugs are important to society doesn't change the basic mechanics of a capital- and talent-intensive industry.
Let’s also stop negotiating any other government procurement. We will get some real cool fighter jets.
In this context the "luxury treatments" are drugs under patent and the "cheap options for all" are generics.
And then we can identify a specific problem -- we don't have enough generics because unless a drug is under patent, nobody has the incentive to pay to put it through FDA trials.
But you can't solve that by removing the profit from the "luxury drugs" -- that only makes it worse. Then nobody has the incentive to pay for FDA trials for anything.
The actual problem is that FDA trials are an unfunded mandate. Either they need to be made significantly less expensive somehow or the government needs to fund them itself so that more unpatented generics can actually get approved.
https://www.jhsph.edu/news/news-releases/2018/cost-of-clinic... https://www.outsourcing-pharma.com/Article/2018/09/26/Clinic...
The trial costs are small compared to R&D costs, but that's only because R&D costs are very large. So it's millions of dollars compared to billions of dollars.
But generics don't have R&D costs, they already exist and are out of patent. Which correspondingly makes them much less profitable -- that's the whole point -- and then "millions of dollars" becomes a significant cost.
Moreover, it's a free rider problem, because once you pay for it for a generic drug, anyone can make it, but they didn't have to pay the millions of dollars for the trials so now they can undercut your price.
As a result everybody sits around waiting for somebody else to spend several million dollars for a trial instead of doing it themselves, which means that nobody does it.
https://docs.house.gov/meetings/GO/GO00/20190129/108817/HHRG...
But now, we're deep into talking about trade-offs--exactly the thing journalists don't want you to talk about.
> "Evergreening" is a pejorative term used to refer to the practice of extending the length of patent protection beyond the statutory term of 20 years, most often used in the context of pharmaceutical patents. Although drug companies do engage in creative strategies to maintain sales levels for as long as possible, criticisms of evergreening are largely overstated. In fact (with relatively reasonable exceptions), patents generally cannot be renewed or extended. In the vast majority of cases, so-called "evergreening" will only be a successful strategy to the extent that consumers can be persuaded to purchase the newer, pricier, patented version of a product rather than the older, cheaper, unpatented one.
(The author is on the faculty at Harvard medical school.)
they have machinery in place to "persuade" consumers and medical staff that prescribe
Subtlety here: the consumers aren't making the choice, it's the insurers or medicare. We can't simultaneously accept the arguments "medicare will ruin drug development because it's the only consumer" and "consumers are choosing to purchase newer drugs making evergreening effective".
"there are endless examples of this type of “evergreening"
"With a surprisingly large number of expensive “evergreened” drugs, one need look no further than the person in the mirror (and his or her doctor) if one wishes to avoid paying a much higher price for essentially the same medicine."
"Pharmaceutical companies, it seems, have been very successful in convincing consumers and doctors that the newer version is worth the extra cost."
The author is suggesting that there's no problem because consumers can in theory avoid the problem, but as he points out, they don't. Evergreening is a very prevalent and effective strategy to separate patients from their money.
Let's say you're right. Then shouldn't we solve that instead of jumping straight to price controls?
If market prices are too low than we have an inefficiency where we're not properly incentivizing drug research but if prices are too high then for twenty years we have a situation where some people are not getting a beneficial medication that could be provided at a very low marginal cost which is also a market inefficiency.
It seems like one solution is a bounty system where the government in addition to paying low unit prices writes giant checks based on the value of the medication. With larger checks for medications that work through new pathways and generate higher quality adjusted life year gains.
We need to also address the cost of FDA approval which is a very large portion of research costs.
Virtually every such exposition of the argument says exactly that.
> Although this question is difficult to answer, several studies suggest that the benefit of lower prices today is offset by the forgone value created by drugs that never reach the market. According to one estimate, if the U.S. were to adopt European-level price controls, the reductions in U.S. prices today would result in 0.7 years lower longevity for future cohorts of Americans and Europeans due to fewer new drugs. This would cost Americans more than $50,000 per person when the value of foregone health is valued.
(Author is a professor at Harvard Medical School.)
(Commentor works MedTech adjacent)
Their research is no paid for by the US gov't. Basic research is heavily subsidized, but basic research doesn't get you a drug and basic research is the cheapest part of the entire process. They are still shoving billions of dollars into bringing drugs to market, again, often not successfully.
And no, drug innovation is not highly subsidized by the gov't. Just look at budgets. NIH budget is $38B, of which a fraction is actually spent on research leading to new drugs. PhRMA (just the largest drug companies) spent $71B in 2017.[1] And that ignores the billions spent by VCs to fund start-ups, another $13B in the first 10 months of 2017.[2]
Adding it up, private spending on drug R&D is probably 5-10x that of what the gov't spends.
[1]https://www.biopharmadive.com/news/phrma-research-developmen... [2]http://www.pharmatimes.com/magazine/2018/december_2018/a_rec...
(And if you look at countries that don't enforce drug patents, they have cheap drugs, but produce almost zero medical innovation.)
There is no call to denigrate the author for not finding a discussion on broad economic categories as central as you do.
Would you feel this way about an article discussing military arms procurement that failed to characterize the situation as a monopsony ?
Moreover, the way people talk about "negotiating drug prices" is very silly. It's the patient who has to decide whether to take the drug. We're pretending there is a monopoly seller and a monopsony buyer and they have to agree on a price, but that's not actually necessary -- if Pfizer says they want $50 and Medicare says they want to pay $40, you don't actually have an impasse there, all you have to do is to say that the patient has to pay the remaining $10.
The negotiation shouldn't be between Medicare and Pfizer, it should be between Medicare and the patient, and then the patient and Pfizer.
The alternative is that Medicare says $40 and Pfizer says $50 and since they can't agree, the patient has to pay $50 instead of $10. Or $500 instead of $10, because the lack of any Medicare coverage at all reduces volume which increases unit costs. Or the volume to support development without insurance coverage doesn't exist and so neither does the drug. How is any of those better than the patient paying the remaining $10?
Absolute monopsony might be a very threatening thing to absolutely profit orientated business, but in practice here nationalised public services like Health need have no interest in forcing their commercial suppliers slowly out of business with unsustainable deals. The position could be abused if it was arranged as such but if a Nation were to choose that outcome, it would make more sense to nationalize the suppliers promptly rather than slowly degrade their value.
They actually do, for two reasons.
The first is that it's an international market, so any given country is better off to underpay and free ride on the R&D paid for by other countries. (And the consequences of this are subtle; it isn't that all R&D stops or companies lose money, it's that they shrink their R&D expenditure by not investing in high risk high reward treatments because they're no longer high reward, and you get correspondingly fewer high patient value treatments.)
The second reason is that there is a conflict of interest. The person receiving treatment is not the person paying, so the people receiving treatment want to maximize effectiveness while the people paying want to minimize costs. The government is then put in the position of choosing who to make unhappy. Then each person gets one vote but there are more taxpayers than patients with severe illnesses, so the result is for governments to generally under-invest in treatment compared to the value the patient themselves would place on their own life.
This is why it's much better for the government to set the price they're willing to pay rather than the price the supplier is required to charge, and let the patient make up the difference if it's more and it's worth it to them. Otherwise the government underbids on the value of your life but you can't use your own money because most of what you would have used already went to paying the premiums/taxes that were supposed to pay for your healthcare until they decided you weren't worth the cost.
By "free ride on the R&D paid for by other countries" the US market bought R&D is a especial fit for this outlook, but without any hard figures to hand, it is perhaps easier to flatteringly assume its stability. Others can do R&D in their own ways, including very significantly University research besides Nationally funded research. Pure commercial health research is problematically burdened by interest in profitability of potential treatments. Its unfortunate that in this age we are to assume international competitiveness in health and all important technologies as given and unavoidable, over cooperation. Cooperation is what we do with people we care enough for.
> The government is then put in the position of choosing who to make unhappy.
In UKs free health service practice most of the treatment decision is made by the treating doctors, who select the best treatment available to them for the patient. The doctors quite rarely don't have most expensive treatment option available and can advise that one is available for private purchase occasionally. This is unfortunate but such is the nature of illness. Overall, the selection of treatment to patients is overwhelmingly worked out by doctors, not the government. There is a certain delay and compromise involved in the government selecting and making treatments available to the doctors, thats a matter contested between doctors and government, not patients and government.
They can, but do they? In other words, is the amount of research done per capita in Europe more than the amount done in the US, counting both government and private sector in both cases?
> Pure commercial health research is problematically burdened by interest in profitability of potential treatments.
In principle this is just a measure of how important something is to people. A cure for cancer when you have cancer is worth a lot more than a cure for restless leg syndrome or whatever. Then that gets multiplied by the number of people who have that condition and it actually is a pretty good measure of how much we should be spending to cure something.
Sometimes you get seemingly silly results like a lot of money going into things like baldness cures, but it's because there are a very large number of people with that condition, and small importance times large volume actually justifies a significant amount of research investment.
It doesn't work that well for things that generally only poor people get, but that doesn't mean it can't work for the major killers like heart disease and cancer that get everybody. And charities are actually doing a pretty good job with the exceptions like malaria. You don't have to solve every problem the same way.
> Its unfortunate that in this age we are to assume international competitiveness in health and all important technologies as given and unavoidable, over cooperation. Cooperation is what we do with people we care enough for.
It's not really a matter of cooperation. It's not as if the US develops a cure for a given condition and then keeps it to themselves and doesn't let Europe have it.
The issue is that if there are 100,000 patients world-wide and it takes a billion dollars in revenue to justify the development, the average patient has to pay ten thousand dollars. If a country declares they'll only pay $8000, taking that much is still better than having to amortize the same costs over fewer patients, but then they have to charge more than $10,000 to patients somewhere else.
Naturally every country has the incentive to do that, but the more of them that do the more drugs never get developed to begin with because the remaining countries couldn't make up the difference.
> The doctors quite rarely don't have most expensive treatment option available and can advise that one is available for private purchase occasionally.
It's not just a matter of not having the treatment option available.
Consider that math again from the perspective of the drug company. They need a billion dollars in revenue which is $10,000/patient on average.
Now they go to the NHS in the UK which offers to pay no more than $8000. The actual manufacturing cost is only $100 and the rest of it is going toward fixed costs like R&D and interest on the money borrowed to do R&D. Getting $7900 to put toward those costs isn't sufficient on average, but it's more than zero.
Meanwhile if the company refuses that price, they get nothing from the UK, because NHS does cover the existing alternative. Which means that if the company refuses the government's terms, a patient's price in that country is $10,000 more than the alternative, because the NHS is paying $6500 for the existing drug but nothing for yours. Then even though yours is $5000 better and only costs $3500 more, from the patient's perspective it costs $10,000 more because the alternative is "free" but yours is full price. So if you don't accept the governments terms you get approximately zero customers in that country.
So the company takes the government's $8000 because it's better than the nothing they get in the alternative, and then the drug is "available" there. But that's not enough to sustain the research when everybody does it. The more countries do that the less research we get.
Actually I asked you for that info to support your idea that others freeload on US bought R&D. Now you are asking for the data that would show your supposition is incorrect, instead of having some to indicate that it may be valid.
But a true assessment of the situation wouldnt just look at cash spent anyway. Humans are complex, cash doesn't fully account for their motivation and achievements. Many people do great work for lesser remuneration.
> In principle this is just a measure of how important something is to people.
In principal sure; like the profits from crack cocaine, cutting down ancient forests, making nuclear arsenals... Great principle that.
It was an attempt to employ the Socratic Method. A rhetorical question. The US spends more on medical R&D than most other countries.
> But a true assessment of the situation wouldnt just look at cash spent anyway. Humans are complex, cash doesn't fully account for their motivation and achievements. Many people do great work for lesser remuneration.
This is true, but then what you're really getting at is whether markets or governments generally spend money more efficiently. I would not have expected that to be a comparison you'd want to invite.
> In principal sure; like the profits from crack cocaine
"Sometimes people want dumb stuff" is not much of an indictment of a system that causes people to get what they want. Play stupid games, win stupid prizes.
> cutting down ancient forests
This happens when the value of the forest as a forest can't be captured by the market. This is basically always caused by poor regulation, e.g. if the forest is a carbon sink then cutting it should be priced appropriately to account for the carbon you're releasing. Markets require externalities to be priced appropriately.
And half the time the stupid consequence is directly caused by bad regulation, e.g. the government owns land and sells only the logging rights, so there is no option for the market to use the forest as a forest, the only choice is use it for logging or nothing.
> making nuclear arsenals
Compare the costs of maintaining a nuclear arsenal with the costs of the world wars that ended and haven't happened again since they were developed. Which one is more efficient?