U.S. to set up plan aimed at allowing prescription drugs from Canada
latimes.com
latimes.com
If we wanted a system that's more equitable, we could create a law that sets the maximum price for medicine in the US at some multiple of what's charged abroad.
For example: we could say that it's illegal to charge a US person more than 2x what you charge for the drug anywhere else in the world.
This would do two things: it would bring down the cost for US consumers, and it would increase the cost for consumers abroad -- effectively reducing the free-rider effect we currently see in Europe.
That's what you need to be true for your claim to hold water, not that the overall revenue pool is larger.
https://i.imgur.com/6QOta9X.png
Full source:
https://aspe.hhs.gov/system/files/pdf/259996/ComparisonUSInt...
Drugs aren't priced relative to what they cost to make or develop any more than airlines price flights based on how much it costs to fly someone between any given city. They're priced at the highest level the market will bear. Is it any surprise that the largest, most powerful economy in the world will bear higher prices? The drugs by definition have higher value because treating someone in a strong economy delivers more marginal value than in other markets. That's math.
Now we can talk about different systems but this is the one being held up today.
The issue is government allowing companies to be anti competitive. For example, the government is currently entertaining a lawsuit by one insulin company against another company trying to sell insulin for a lower price. While that lawsuit is ongoing Americans must pay the higher price. Thus really government willing to enforce continued monopoly is one of the problems
Of course, there are competitive markets for both food and insulin in the US. Quoting from a letter to the WSJ yesterday,
> Eli Lilly makes three types of insulin, which in most states you can buy over-the-counter at Wal-Mart for $24 per 1000 unit bottle. One hundred syringes cost $12. I have serious diabetes mellitus and have managed it with Lilly insulin for a decade for under $100 a month.
For some drugs there aren't competitive markets, and in some cases the government prevents competition, but both are typically temporary situations (patents, first-mover advantages) that help to get the drug on the market in the first place. An extortionate price for a drug is better than no access at all, and doubly so when it is going to give way to genuine price competition.
(2) The government doesn't grow food. Sometimes it pays for it, and sometimes it gives people money so they can pay for it, but there isn't a public option in case farmers decide not to sell us beef, because the market works. (But yeah, the government does -- and should -- help people pay for drugs they can't afford when the prices are reasonable.)
(3) Food production is subsidised, but it shouldn't be. And these subsidies have little bearing on the possibility of extortion in the market.
[1] https://en.wikipedia.org/wiki/Agricultural_subsidy#United_St...
I know I've set up kind of a straw-man. It might be that the consumer could choose to forgo an expensive drug or medical procedure without fatal consequences, but that's not the interesting case.
Right now insulin is expensive because the government is preventing companies that can produce it for cheaper from selling in the united states because of a lawsuit by the current market holder. That the government even has this power is a textbook example of the danger of governmental interference in the free market. People are literally dying because the government has made the market less free intentionally
Airlines are a great example of the race to zero profit. Airline margins are slim and thus the cost of travel often reflects exactly the cost of doing the flight itself. JFK to Heathrow requires participation in multiple markets, currency instability, multiple regulators etc which make the cost more excessive. Also london and new York airports are busier than sfo increasing airport fees. Thus in a market with low basically zero margins, the cost from ny to London is more as competitors that cant make the unit economics work leave the market entirely. New competitora cant enter the market at a lower price point because their profit would be zero.
CFO: ABC pharma just got FDA approval to sell a generic version of Viagra, our revenue is projected to take a $1.5 billion hit.
CEO: Fuck. Start raising the price of insulin, I gotta hit these wall street estimates.
(The study was done by HHS and was focused on Medicare, which sets prices based on a weighted average of market sales price, including negotiated discounts by insurers.)
Selling your product for 50% more in the US may not be more profitable than selling in EU where your marketing costs are a lot lower.
Of course you’d sell in all markets where you can, but the claim was that US profits > EU profits because US prices > EU prices.
Also, there’s R&D/education that’s really marketing. E.g. advisory panels, grants to the “right” organizations, agencies or researchers
In which case you could kill this stupid marketing budget without much effect on R&D by outlawing drug advertising.
In reality, the established players halve their marketing expense and make it difficult for any upstarts.
It boils down to this: drugs are a pretty anti-competitive market, and the US doesn’t have much in the way of opposing rules that would bring prices down. No surprise that companies make more money compared to European countries.
The real question is: if the US stopped allowing this and brought prices under control, would it wreck pharma R&D? People seem to assume the answer is “yes” when they bring up this disparity but I don’t see it being that obvious.
When every manufacturer has their own statin or their own ARB inhibitor, etc., the revenue is split between a true innovator and a bunch of copycats.
Fixing that could allow much more reward for true innovators, at lower prices but profits protected by volume.
The usual problem is that we don’t compare drugs in the same class against each other (for fear of negative results).
In the case of the blood pressure medicine, that process is not possible for the consumer, and as you say, not practiced by the labs. But that doesn’t mean there aren’t a hundred possible pros and cons for one type of molecule versus another to treat XYZ condition in ABC population, with potentially huge variation between patients both explained and unexplained.
There really aren't when comparing different molecules with the same mechanism of action. Individual hospitals and health systems will usually tender out their contracts to the cheapest molecule in each class, or sign up with a buying group that does.
It simplifies prescribing, inventory, distribution and administration too.
If they are "forced" to sell there, it's only because of two reasons:
1) the US companies started selling there of their own free will, and after their patents expired in those countries, other companies were free to use the formula
2) Other companies would have created the same drugs with or without their patents, and the American companies would've lost all of that market share/brand image in that country. And I bet the competitors would do it for a tiny fraction of the faux R&D costs Big Pharma likes to claim for inventing a new drug.
Besides, the idea that if a company patents something that means it's the only one that could have ever invented that thing needs to die already. The "first to file" patent system that has been adopted in most major countries because of big companies' lobbying is another dead-giveaway that this whole idea is bogus. Why would you have a "first to file" if you didn't have multiple people inventing the same thing at the same time.
Many people or groups of people can come up with the same invention around the world roughly at the same time. Often, those alternatives don't become popular because their papers are in their native tongue and they lack investment, but the "invention" was already made.
[0] https://www.sciencedirect.com/science/article/pii/S016762961...
No, most marketing is not direct-to-consumer marketing. Marketing absolutely is allowed in Europe, as evidenced by the massive amounts of money that drug companies spend on marketing within Europe.
Should people in third world countries being excluded from the chance of receiving lifesaving drugs just because they happen to live in a place that isn't as economically successful as the US? Maybe I could be convinced if you pegged the prices to some measure of local purchasing power, but almost any proposal that amounts to poor people not being able to afford medical care in the name of capitalism is verging on immoral in my opinion.
EDIT: It is disappointing that I get downvoted on HN for basically stating the controversial opinion that "people shouldn't die from being poor".
They have claimed that but I have my doubts it’s true. It seems more likely that they make good profits outside US and obscene profits in the US. And why should the US subsidize other counties? Maybe we should also pay 200k for a Honda Civic so other countries have cheaper cars?
(Note the first source is data collected together by someone at Pfizer; the second source is a study by an NYU Business School professor. These are public financials, you can run the numbers yourself on Yahoo Finance.)
If the government decided that Internet tech companies were "obscenely profitable" and started regulated prices so profits went down to 10% (instead of 30%+ for some companies like Facebook), do you think Silicon Valley would still produce the same output?
Nope but no-one dies in the US because they didn't get access to a 7th generation Intel CPU because they got replaced by a 9th generation that's 2% better and twice as expensive.
According to IDC, North America spends $750 billion a year on IT, twice as much as it does on pharmaceuticals. People would save a lot of money if those costs came down. Can we do that by having the government come in and regulate the price of computers and IT contracts? Profits may go down, but that would be okay, because we’d get the same IT products and services for cheaper, right? Why don’t we do that?
We don’t do it because when it comes to less emotionally charged issues, we think clearly. We know that if we did that, talent and capital would leave for greener pastures, and that would compromise innovation.
Why create more laws and complexity? Why not simply repeal the laws that prohibit importation of drugs and possibly also refuse to enforce private contracts prohibiting reimportation? The reason drugs are cheaper in Canada and Europe than in America is because of American laws that prevent importation.
Read about the raids on generics in India meant for the USA.
An analogy: you live in an apartment building in which every other apartment has rent control. Because of this you're going to pay every extra expense for the entire building.
You could decide to become a rent controlled unit as well -- but the building owners would have less money to improve the building, and it would fall into disrepair.
Or, instead, you could try and find a way to get everyone to equitably share the improvements to the building.
And you would know... how?
https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p...
So what? They clearly believe the marketing helps them make more revenue with the drug; that has nothing to do with covering the cost of R&D.
Your argument would make sense if marketing reduced their ROI, but they clearly believe it does the opposite.
I'm sure developers in San Francisco spend more on housing than on professional/personal development, but that doesn't mean one is precluding the other.
It's only "excess cash" if you assume the ROI on marketing is negative, which is a bold and unsubstantiated claim.
> Also in countries where there’s a public system pharma usually has 0 advertising because people have no choice anyway.
Direct-to-consumer advertising is only one tiny portion of marketing. European pharmaceutical companies spend massive amounts of money on marketing within Europe.
But here's one with unrestricted access [1]: big pharma spends in average 17% of their revenue on R&D, while Apple spends 3%.
[1] https://www.investopedia.com/ask/answers/060115/how-much-dru...
Edit Here's another link that states the average for Big Pharma for 2018 was 20%
[2] https://www.fiercebiotech.com/special-report/top-10-pharma-r...
Allowing reimportation would do exactly that by increasing (from zero) US demand for drugs from foreign markets.
EDIT: for explaining why.
I think explaining the economic dynamics directly leads to a self evident conclusion: internationally drug prices would increase as US consumers add to demand on foreign markets. Domestic prices would fall for the same reason
The reason drugs are cheaper in Canada and Europe is because of the massive negotiating power of a single buyer
Very few countries have single purchasers for pharmaceuticals.
We're not talking about pharmacies; they don't enter the picture here at all.
> If the single payer health plan
Again, almost no country uses a single-payer health plan for pharmaceuticals, so this is isn't relevant.
OHIP (the government-run insurer in Ontario, to which taxpayers pay the Ontario Health Premium directly) will sometimes pay some or all the cost of some pharmaceuticals in some cases (i.e, antibiotic-corticosteroid ear drops if you are under 25 or over 65, and have been experiencing an ear infection for longer than 30 days) for some classes of people (mostly youth and seniors); but by no means is there a single buyer in Canada, and there isn't one per province either.
I have bought more pharmaceuticals out of pocket in Canada than I have ever been provided during a covered clinic or emergency department visit, and I technically qualify for the youth drug coverage.
The listings for which drugs are covered under what circumstances can be found here: https://www.ontario.ca/page/check-medication-coverage/
Separately, the Trump administration is pursuing a regulation that would tie what Medicare pays for drugs administered in doctors’ offices to lower international prices.
In most European countries, a government regulator fixes the prices with industry. It's not freeloading in that case, they have the choice between negotiating a fair price or not having access to the market at all. And because they're not idiots, they choose to have access to the market.
Most of that money doesn't go to fund R&D and go back to their shareholders anyway :-)
"The Canadian medicine supply is not sufficient to support both Canadian and U.S. consumers," the letter states. "The supply simply does not, and will not, exist within Canada to meet such demands."
[1]https://www.cbc.ca/news/canada/toronto/american-demand-canad...
Theoretically drug companies can close off the entire market or increase supply. They’re prohibited from raising prices in the market. Since marginal cost is so low, I expect that they’ll keep selling st increased volumes.
It’s a bit odd that the US is taking this tack instead of just regulating drug prices domestically. But there’s a lot of odd things in the health system.
Perhaps the hope is that US prices will fall, shortages in Canada might cause prices to go up a bit there, but in the end the open market will equalize with lower prices overall.
The current administration is very anti-regulation, so this would be a bad move. Also, allowing Canadian drugs to enter the country will force current producers to lower pricers, which will organically (capitalism) reduce the price through competition.
https://www.healthaffairs.org/doi/full/10.1377/hlthaff.20.3....
What the administration is proposing is effectively to regulate drug prices, but outsource that work to Canada, since it's politically unpalatable to their base here in the US.
They should do the same for Europe.
Also, if I were Canada, I would ban the export of drugs to the United States if the US domestic price for the drug is higher than the Canadian price for the same drug. Because otherwise the effect would be that a single market would exist for the drug, and the average price in Canada would face upward pressure as a result. Although if they did this, an American administration bent on getting the same effect could cap all domestic drug prices to the prices paid by Canadians and skip the pointless importing step. I wonder how Canada would react to that? I guess if I were Canada at that point I would make drug price negotiations secret.
The net result of this drug policy is lower drug prices for US public, under the banner of "stop subsidizing the free-riders". The net result of the tariffs is higher wages for industrial workers, under the banner of "fighting the unfair China".
Both are left-wing outcomes, dressed up as not just acceptable but enticing for the conservative public.
Were there more efficient ways? Yes, we could reign in the pharma and force the 1% to raise wages for the 99%, but that would not be accepted by the conservative Americans, while this approach seems to be accepted.
The net result of tariffs is some combination of: higher costs on the goods purchased by Americans, lower wages paid to the workers making those good, and reduced demand on foreign goods (which may not have a substitute, which may depress the economy). The latter, reduced demand on foreign goods, may in turn hurt foreign economies, reducing their demand on our exports.
Somewhere in that is "higher wages for industrial workers", but it's unlikely tariffs lead to that outcome except in a handful of cases where the US has production capacity available for a substitute good. US steel might be one of said exceptions, because we have large amounts of unused capacity and a comparable or better product, but aren't able to manufacture it as cheaply. It's highly unlikely tariffs on ... checks notes from [1] Alaska pollack (interesting!), child safety seats, and hydrometers are comparable. I don't expect we have huge amounts of latent labor supply just waiting to make these things or manufacturing facilities configured to do so, but I could be wrong.
The net effect of a massive tax cut that disproportionately impacts the wealthy and tariffs that disproportionately affect (nay, target) consumption goods is a regressive tax hike on the majority of Americans.
These aren't left-wing outcomes, they're just bad policies.
[1] - https://ustr.gov/sites/default/files/enforcement/301Investig...
Another issue is that even _generic_ drugs are often wildly overpriced in the US. Canada (or some other country, such as e.g. India, which has a strong pharma industry) could pretty easily just make more of them and exert downward price pressure.
What's unfolding before us here is historic. Previous administrations were all too beholden to Big Pharma to even contemplate any of this.
That is, of course, how an actual free market works. Healthcare is far from a free market, so instead of embracing the opportunity for growth of the Canadian economy, we get responses like the one above.
In almost all of the systems, medication is not covered unless you're a child, extremely poor, or very old.
In practice about 30% of all healthcare expenditure in Canada comes from private sources, since things like medication, dental care, vision care, and a whole myriad of other critical segments of healthcare are not covered by any government health plan.
Ensuring access to those who need it is the primary concern. If Americans were suffering an unintended shortage, that'd be one thing... But causing an artificial shortage for Canadians in order to profit off Americans would result in near immediate regulation.
Sure, Canada could make a positive spin for this, but it's possible it puts their pricing negotiation with big Pharma at risk.
All in all, a cowardly "solution" that will likely result in all sorts of unintended consequences.
Its just another goofy legal loophole to avoid adressing the issue.
It's not a legal loophole. It ensures that the price of the drugs in the US will never be more than the price of the drugs in Canada (plus any additional costs of importing).
Almost nobody will actually import the drugs from Canada, but the legality of it provides sufficient market pressure on pharmaceutical companies that they wouldn't be able to charge 100x the amount in the US that they would in Canada.
Then why wouldnt you just make that the law without the silly roundabout shipping ruse?
Its using trade law to circumvent patent law.
If you read TFA, that's what they're talking about doing.
> Its using trade law to circumvent patent law.
Not at all; the restriction on drug reimports has nothing to do with patents.
https://en.wikipedia.org/wiki/Omega_S.A._v._Costco_Wholesale....
No, this is a common misconception. If FooCorp manufactures a drug in the US and exports it to the US, there is no inherent patent issue with a US entity purchasing it from the Canadian middleman.
I dont know why you italicized patent, in that example it's a trade issue precisely because the patent doesnt cross boarders.
Canada's ability to "negotiate" prices stems from the fact that the US is the single largest market for drugs, accounting for the bulk of revenues that pharmaceutical companies make worldwide.
If drug companies couldn't sell to the US at the high prices they currently do, they wouldn't be able to manage the relatively low prices that they offer to Canada and other countries.
Maybe the US should allow governments to negotiate drug prices.
I don't know what "pride" has anything to do with it. The US does subsidize the rest of the world, implicitly, which is why any effort to reduce drug prices in the US will result in other countries paying more, in the long run.
> Maybe the US should allow governments to negotiate drug prices.
I don't know what you mean by "allow governments to negotiate drug prices". The US doesn't have any say in whether other countries negotiate prices domestically.
State and the Federal governments. The USG isn't the only governmental body in the USA.
All are essentially blocked from negotiations by Federal law/policy.
https://www.pewtrusts.org/en/research-and-analysis/blogs/sta...
Why should the government "negotiate" prices that it's not paying? The prices are negotiated by the insurers who actually pay them, and they have far greater incentive than the government to keep them down.
This system appears to work in the vast majority of OECD countries, where drug prices are not actually set by a central authority (contrary to popular misconception).
No, Medicare doesn't negotiate drug prices because Medicare isn't a payer for pharmaceutical coverage. Those prices are negotiated by the private insurers who provide the benefits.
If you look at dollars-per-capita, the difference is $389. That doesn't only reflect the price of the drugs, it also reflects the fact that Americans might simply require more drugs than Canadians. For example, obesity rates drive the need for drugs for blood pressure, cholesterol, etc. 25% of Canadians are obese versus 34% of Americans: https://www150.statcan.gc.ca/n1/pub/82-625-x/2011001/article.... That means we would spend a lot more on obesity-related drugs even if they cost the same as in Canada.
Okay, let's import all our drugs from Canada and save a few hundred dollars per person on pharmaceuticals. Then let's get rid of all health-insurer profits and save another $180 per person. Now what about the other $5,432 more each American spends than each Canadian?
I like your data source and I looked at %health and Canada is 16% to the US’ 12%. That doesn’t mean that drugs from Canada will increase health care spending as there’s so many different factors at play.
The US might buy more drugs at lower costs keeping the ratios the same. Without a lot deeper analysis I don’t think it’s fair to say that the US requires more drugs than Canada.
The big issue is that, often even for those who are in fact insured, they have high deductibles, often times resulting in them paying the full price without rebates.
As we see it, there is no legal or operational way of transforming a drug packaged for a foreign market into a drug that meets the U.S. requirements of our in-progress track-and-trace system. What’s more, there is no way to alter the law to enable importation without undermining the law’s purpose and value.
[1]https://www.drugchannels.net/2019/07/our-stat-op-ed-state-dr...
I think it’s important for me to always mention how such a system would be implemented u set new laws. Or why I think the proposed law doesn’t address this need.
If I just say that it’s not currently done, it doesn’t help the conversation much because it’s not a useful fact. Also there’s no drugs exported to Mars and many other not relevant without additional info facts.
A new law will need to provide for this capability. All the laws I’ve seen addressed drug safety in one way or another. But curiously I hear the complaint about safety brought up without the compensating strategies also brought up.
Wouldn't mass-importation from Canada encourage drug companies to raise Canada's pricing to match US levels?
That seems like something Canada wouldn't be particularly fond of.
If the US began importing high quantities of drugs from Canada, what prevents Pharma companies from insisting that Canada pay current US prices?
If Canada declines, the companies could stop selling in Canada.
I would think in many cases the profit from selling in Canada at all is less than what they'd lose from allowing them to be imported to the US.
Anyone can manufacture any patented drug and just pay the patent holder an x% royalty.
It works ok for playing songs on the radio.
I think if the US were importing large quantities of drugs, they would be forced to move to that system.
But if you think that there is the political will to do so, I think that could work out rather well.
Thanks.
Oh, per your US tax return, we see that you earned 0.4% profit on your US sales last year. You’d be fine with a 1% royalty after we sell it for half price, right?
That drug pricing is America's problem, not Ontario's, is a phrase I never thought I'd type out haha.
Allowing import from Canada is just a bandaid to make it seem like they're doing something about the actual problem and will only work as long as we assume the supply of Canadian drugs can absorb both it's own demand and the US demand.
People understandably dislike Trump. His biggest legacy is actually not going to be his obnoxious personality however. It's going to be that he has unleashed the executive order as an acceptable method of action in combating eg the ridiculous US healthcare system. Just wait until the next Democrat is in the White House. If you're big pharma or big healthcare, you better put on your seat belt.
The next Democrat President will be belligerent with the use of EOs against the healthcare industry, thanks the Trump making their use far more acceptable (Trump is flinging them around on anything and everything as he sees fit to pursue his personal agenda). They will pursue policy - such as fixing healthcare industry problems - on things they can't get through Congress, using EOs. The healthcare industry is so disliked at this point, there will be very few defenders standing up against the use of EOs in that manner.
This will also likely be commonly seen in regards to environmental related issues. The next Democrat in the White House will use EOs extremely liberally toward policy in that area. Far more so than any prior Presidents have.
If you're the healthcare industry what are you going to do against a large volume of executive orders each year targeting you? Good luck fighting even a small fraction of them all, executive orders are difficult and costly to turn back. And the President can just keep burying you with them. Over the last few decades the President has increasingly been given ever wider discretion to use EOs, and Congress has largely been reluctant or plain unwilling to roll that power expansion back meaningfully. If you're big healthcare, you'll be battling the 'unlimited' resources of the largest, most powerful entity in world history, good luck.
It will soon become very obvious - if it's not already - that the best way to fix many of the malign parts of the US healthcare system, is through an abusive spamming of executive orders that chokes the whole thing to death and begins modifying how it all works. There is nothing that can be done to stop this approach, if a President decides to do it (Congress is very unlikely to agree to curtail the EO abuse). The healthcare industry would be on its knees begging for mercy in five minutes.
Democrats should properly already recognize there is no means to go through Congress to fix the US healthcare system. They had a supermajority and couldn't come close to fixing the disaster that is the system. There is one route to go and only one. They will use it, just watch. It's the obvious path.
Personally, I'm not a Democrat or Republican, more independent politically. I don't like the abusive use of EOs. At this point, given the entirely broken nature of US healthcare (and that Congress will never agree to anything that would fix it; not even remotely close), I'd support giving the next Democrat President carte blanche to obliterate the healthcare industry using executive orders. Bring it down by any means necessary.
Restraint in this regard, and (especially) Republican willingness to let agencies, laws, and policies they don't like even sort-of work when they're in power, has essentially been due to courtesy or deference to convention. That may be going away.
[1]https://en.wikipedia.org/wiki/List_of_United_States_federal_...
The raw counts are unlikely to tell the full story, and I suspect Congress's ongoing ceding of power to the executive has reduced the quantity of them in normal practice as well.
The top 5 recipients of healthcare lobbying money for '17 and '18 have been democrats [1]. Democrats received more healthcare lobbying money on both the '08 and '16 elections [1]. No reason to expect the party "for the people" to actually do anything for the people besides make emotional campaign commercials. Both parties are the same. Bernie is leading the way, however. Calling on all Dems to stop accepting their money. (personally, I wish they'd just accept the money and then betray the donors en masse).
Then Obama came in and did it even more!
So yes, we've already seen this problem escalate from one president to the next. My history isn't deep enough know for sure, but it might even go back to the Vietnam Police Action. It wasn't a war since congress didn't authorize it you know.
Edit: Looks like I was bamboozled: https://en.wikipedia.org/wiki/List_of_United_States_federal_... thanks ambicapter.
> Then Obama came in and did it even more!
What are you basing that on? How are you arriving at either 1) W expanding the use of executive orders, or 2) Obama doing it even more?
I'm dubious this is going anywhere, it seems like a ploy to get some talking points for the election in 2020.
In response, pharmaceutical companies inflate prices of new medications, then negotiate confidential deals that make it difficult to get a realistic comparison for the purpose of setting prices. Because we don't actually have a single payer for pharmaceuticals (there is no national pharmacare program), this program fails at price discovery, since the review board does not go about the actual purchasing of said drugs.
The net result is that Canada has the 3rd-highest per capita drug spend in the world (Switzerland is #2).
In reality, this occurs because the “new” product is junk and no better than the cheaper generic it’s replacing. With these government-sanctioned rebates, the manufacturers save themselves the embarrassment of trying to explain why nobody’s insurance will pay for it (it’s expensive junk).
This simple answer is satisfying to many who otherwise prefer single-payer plans, but doesn't really hold up to scrutiny
If country X (with single payer plans) does the same thing, the only choice the pharmaceutical company has is to not be covered by insurance, which mean they won't sell their drug. Also the state can just pass laws to make the pharmaceutical company life's miserable. UHC can't do that.
I mean, it fails the even more basic scrutiny that Canada simply does not have a single payer for pharmaceuticals, or even a handful of single payer provinces. It's much like the US in structure (out of pocket or private insurance), simply with price controls.
This is not correct for a variety of reasons, first and foremost that the Canadian healthcare system (systems, really, each province administers its own) do not cover drugs in most cases. There are public programs for low income earners, otherwise it's out of pocket or covered by private insurance.
The real answer is simply that there are legal caps on pricing for most patented medicines, as a condition of being patented.
A clarification: Canada does not have a single payer system. Rather it has multiple single payer systems.
Canada is a federation, in that while it has one national government, it also has ten provincial governments (and three territories).
Health care is the responsibility of the provinces, and so there is not "national" health care system (like in France or UK's NHS).
Some groups are a federal responsibility for health care: (aboriginals, military, federal police, federal prisoners and veterans)
From https://en.wikipedia.org/wiki/Rent-seeking
> The word "rent" does not refer specifically to payment on a lease but rather to Adam Smith's division of incomes into profit, wage, and rent.[4] The origin of the term refers to gaining control of land or other natural resources.
Our current regulatory environment sets up a situation where you can only buy medication from either one manufacturer, or a limited set of manufacturers, who then charge whatever they want.
But, going into more detail is very political, and much more political than I think is appropriate for a Hacker News discussion.
Expired patents didn't keep generics manufacturers from raising prices on US consumers. And even allegedly colluding on price fixing.
And removal of manufacturing QA is a recipe for flooding the market with counterfeit and ineffective drugs. Imagine if you didn't know if your cancer drug actually had sufficient active ingredients in it or any active ingredients for that matter. Individual testing at scale for something as complex as drugs is massively more expensive and fraught with distributing all sorts of failures.
That is not to say we shouldn't fight for efficient regulation, and against regulatory capture.
There is no simple answer to your question.
Here are a few issues:
1. It is fundamentally difficult to price a good with a high fixed cost and a low variable cost. International pricing is even more difficult.
2. Different countries have different regulations around the manufacture and sale of drugs, which can add to the cost to manufacture and distribute in those countries.
3. Many countries with socialized medicine use their monopsony position to negotiate good/better prices for drugs. Sometimes this involves credible threats to ignore patents.
4. Fake drugs are a thing and are a real, serious problem. My understanding is that drugs that pass through Canada (and possibly other places) do no go through the same verification processes that drugs for internal consumption do.
[0] https://www.businessinsider.com/heres-why-amazon-is-heavily-...
That may or may not be a good idea. But the reason it's easier to allow imports from Canada, instead of doing what the Canadians do, is politics. The U.S. has a long history of price regulation. After FDR, the government regulated everything from the price of milk to what airlines could charge for a ticket between Chicago and New York. That regime was almost uniformly disastrous, and starting with Jimmy Carter there was a bi-partisan move to eliminate price regulation all over the economy. So there is a huge political opposition in the U.S. to anything that smacks of price regulation.
Allowing imports from Canada effectively outsources the regulatory exercise of price setting to the Canadian government. So the U.S. can achieve the effect of price regulation, without having to actually admit that it's engaging in price regulation.
[1] https://en.wikipedia.org/wiki/Patented_Medicine_Prices_Revie...
> The Review Board establishes the maximum prices that can be charged in Canada for patented drugs.[1][2]
The real reason is that the gov't simply decides what drugs are worth and then tells the drug companies. If the drug companies don't like it, then the gov't tells them they can't sell them in Canada. Think of it more like "price by fiat" than anything else.
It was a lot like playing songs on the radio: nobody could stop you as long as you paid.
Then the system was switched to give the pharma companies total control of the distribution of their patented molecules.
Perhaps United Healthcare cannot negotiate as much because it's bound by regulation, there's a large number of drugs that it cannot realistically stop covering, and the drug companies know it?
Weird then that we became the richest most powerful country in the world precisely during that same time period.
Usually we use the market to set the prices of goods which works unreasonably well. But the pharmaceutical market is so far divorced from any normal market forces that what's the right price probably has very little relation to the prices charged.
And I think there are definitely two different discussions to have. "How much should be spent on pharmaceuticals" and "what should the unit price be?". The holy grail are solutions that reduce the cost of bringing a drug to market. But I'm also very interested in solutions that reduce the unit price without affecting total pharmaceutical spend.
Drugs aren’t a perfectly competitive market involving commodities, like say wheat or corn, but there is oligopolistic competition similar to say mobile phones, internet search, or social media. Would having the government set prices in those markets improve efficiency? Or are they competitive enough—even if not perfectly competitive—where the government probably wouldn’t do better?
I'm in 100% agreement that the government shouldn't get involved in markets that look anything like what you'd see in an ECON101 course. But the prices of drugs and healthcare in general are set in a way that is so far removed from ECON101 models that I don't think you can call the price of any pharmaceutical medicine a "market price". There are 100's of market prices, the price negotiated between any given oligopolistic supplier of drugs with a oligopsonic collection of governments and large insurance companies(which all set different price). The actual price an individual pays for a given medication and insurance, and the price the oligopolistic supplier sets for a lone individual.
I'm not sure why we call the price set by one relationship(uninsured individual with large oligopolistic supplier) with the largest negotiating imbalance the "market price".
It seems like this policy has two effects.
"Reduce the unit price of drugs to individuals". Good because more people can access medication, and consumers pay less.
"Reduce funding available for drug R&D". Probably bad because this reduces the number of future drug we have.
I'm don't know whether this will be good or bad on net for U.S. consumers in the long run but I think it requires analysis far more detailed than assuming the highest of a 100 possible prices for a medication is "the market price" and any deviation from it is creating an inefficient market.(Which is a good assumption for most near-perfect markets).
This is akin to asking Hong Kong to supply the entire China's demand for baby formula. This did not end well for HK.
Edit: Oh sure, down-vote me into oblivion.
Agree with you, this is likely all bad for Canada. (Sorry to be a bad neighbor mate)
But, the discussion is likely a net good all around. Just in this thread I see lots of new info. Many things I did not know about the US and Canada and how drugs work economically.
Better informed people is likely to be a good thing.
In any normal country private importation of whatever you want not explicitly prohibited is not a state's f*ing business.
I wish I could take the same risk when I get hydrocortisone, but instead I need to pay a physician for a prescription, a pharmacist to fill, and the clinic that stores everything.
Lots of middlemen for something that should be sold on Amazon.
https://www.statnews.com/2019/07/22/indian-pharmaceutical-in...
I mean there are places like Walmart, some pretty large pharmacy chains, etc. It seems like people would not tolerate a significant amount of counterfeit medication.
The pharmacies right by the border are fine, but if you want a nicer area, walk across the PedWest crossing and stand in the Uber waiting area for an Uber to go to Playas. Then you can go somewhere like Farmacias Roma or Farmacias del Ahorro or a bunch of other nice stores with people wearing lab coats. You could also just go to Walmart for medication if you want but recently they seem to be missing basic things I needed so they probably aren't the best.
Doing business in the US is very expensive. In the case of pharmaceuticals we have high regulatory costs and, perhaps worst than that, high legal costs.
If you want to develop and sell a medical device in the US you have to accept the fact that it will take a ton of time and money to deal with the FDA. Not trivial, at all, even for relatively simple products (say, basic hearing aids).
Worse than that, once you enter the market you have to expect the near certainty of having to face one or more nasty lawsuits. Medical product manufacturers, be it drugs or hardware, get pounded with lawsuits. From someone manufacturing a simple cane to prescription drugs. Lawsuits are so common most companies have complete legal departments on staff.
Given that reality, yes, definitely yes, there will be a difference in cost when selling drug A in the US vs. Canada, Peru or Italy. No question about it.
Yet, during debates between politicians all we hear about is how changing health insurance in one direction or another will reduce healthcare costs.
That's just nonsense. It has to start with tort reform and educational loan reforms that reduce the cost of education. A doctor graduating with $300K in debt has no choice but to charge very high fees for his or her services.
Now fill a hospital with people with multi-100K student debt and see if you can lower operating costs. Add to that an expensive regulatory framework and even more expensive legal landscape and the answer is simple: You can't. It doesn't matter how you twist and contort health insurance. If the underlying cost structure is high, no amount of magic hand waving is going to make things better.
That's our problem.
There's an asymptotic lower limit to what medical professionals have to earn in order to have a life. And there's another asymptotic limit to what the entire medical industry service and supply chain, from component suppliers to OEM's, doctors and hospitals have to charge in order to deal with regulatory and legal costs. Pretending none of this exists while talking about health insurance is kind of silly.
If you bring prescription drugs in from abroad, it will not take long until a MOAL (Mother of All Lawsuits) costs someone a ton of cash and imported drugs become just as expensive as anything else gotten locally.
Nobody seems interested in addressing the real issues, probably because he political value isn't as clear as beating on the low hanging fruit, even when this will fix nothing.
Ever wonder why we've been talking about healthcare reform for decades and nothing ever really changes? Well, now you know.
https://www.nytimes.com/2002/07/18/us/plan-import-drugs-cana...
The real reason that prescription drug prices in the US don't match the prices seen in other countries is that patients in the US have no leverage in demand like that seen in supply. When a market has a power imbalance where the producer has a near-infinite production capacity (drugs cost infinitely less to manufacture than discover) and monopoly protections (pharmaceutical patents), then the consumer is at the whim of the producer and will eventually/inevitably pay whatever price the producer demands.
This is econ 101 stuff.
What we need is an advocate to organize consumers so they have leverage over producers and can set a bulk price. This would also work in any industry that has a natural monopoly like water, electricity or (gasp) telecommunications:
https://en.wikipedia.org/wiki/Natural_monopoly
Note that we aren't talking about why electricity costs $10 per kilowatt hour, because decades ago we didn't have the "government is bad" mentality introduced by the Reagan administration, so Carter was able to form the US Department of Energy (and really various energy commissions had made the electrical grid part of the commons decades before that).
So this proposal of importing prescription drugs (whether it happens or not) is only looking at the supply side, and for the reasons I listed above, will certainly fail eventually.
The reason the rest of the world is eating our lunch is that they have no qualms about bolstering the demand side. That may mean: using a single-payer system instead of insurance companies, limiting the prices of key drugs, regulating pharmaceutical companies at a deeper level than what is done in the US, producing drugs at the state level (whether they're patented or not), or some combination of these and other measures that put consumers on an even playing field with producers.
Now, we could look at US insurance companies as being an advocate to keep drug prices down. But someone realized decades ago (indeed, as early as Nixon's Health Maintenance Organization Act of 1973), that a pool of money that large is ripe for exploitation and corruption. It was predicted very early on by (labor/leftists/Keynesians/socialists/radicals/insert boogeymen here) that we would find ourselves in the situation we're in now. It's just that wealth inequality wasn't at nearly the levels we see today, and older folks from the WWII generation felt a certain patriotic duty to rip off the rest of the world instead of their fellow Americans, and we still had a manufacturing base in the US so we didn't fall into these zero-sum games of squeezing profit from stone.
Ok that last paragraph was fairly opinionated on my part. But as the influencers of the tech world, you owe it to yourselves to be informed and know the history of this stuff so that you don't get distracted by the dilluted messaging that keeps people ignorant and divided. Stick to first principles, use critical thinking skills to discern where power imbalance leads to corruption, and find a way to convey what you have learned to people hungry for insight. For me that's the basic supply/demand dichotomy and how it breaks down in natural monopolies, but maybe there are better hacks out there.