Congressional investigation shows Celgene, Teva plotted to keep drug prices high | Hacker News Reader

Congressional investigation shows Celgene, Teva plotted to keep drug prices high

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84 pointsAndrewBissell19 comments

Of the parts of the world, other than the US, that I'm most familiar with, Japan and Western Europe, they control drug prices - and keep them low.

I've had a theory for a while that the way world drug companies make up for low profitability in those markets is in gouging in the US where it's a free-for-all and one should grab for as much as one can get.

The totality of US healthcare is a big, complicated $3+ trn/yr pie but there's flagrant abuse all over the system (and a variety of intl players, profitably for them, contribute) and pharmaceutical companies are eager to be in on the game.

I wonder what would happen to healthcare globally if the US were able to downsize its 20%-of-gdp system to something on the order of Western Europe or Japan which is to say 10% of gdp? That is, the revenue the system generates would drop by half.

Needless to say, there'd be resistance tantamount to, let's call it, institutional violence. US doctors' earnings cut in half? You've got to be kidding.

> the way world drug companies make up for low profitability in those markets is in gouging in the US where it's a free-for-all and one should grab for as much as one can get.

It's much simpler. They don't "make up" for anything, they just grab as much as they can get, everywhere. It just happens that in the US they can get more, and as the amoral, self-interested entities they are, they don't leave any money on the table.

No major company will say "Our profits are up in market A, so we should reduce profit in market B to compensate."

What leads you to believe that cutting drug prices would cause doctors' earnings to fall?

There is gross waste at every layer. The AMA artificially keeps doctors' earnings higher than they would be in a system that could respond to demand.

How are they keeping earnings high?

Restricting supplies of doctors.

How is that supply restricted? Medical schools are pretty much full, but many schools are going to great lengths to expand available spaces. Med school enrollments are up about 30% since the early 00's. It's true that at some point in the 90's the AMA was predicting an over-supply of doctors, but they quickly realized that wasn't the case and reversed course, as evidenced by their own (successful) efforts to help schools increase enrollment (https://www.aamc.org/system/files/reports/1/enrollmentreport...)

Additionally, restricting the functions of nurses, physicians assistants etc in the process.

A lot of things that doctors do (because people want doctors and doctors want doctors to be in demand) could be done by nurses with special training.

Physician income and drug prices are entirely unrelated, except for the oncologists whose salary derives from reselling onco drugs.

That you think they are somehow related strongly undermines the rest of your post, as it suggests you are very weakly acquainted with the details of our healthcare system.

This is an interesting theory to play around with. If you look at the regional revenues listed on Bayer's site[0] North America accounts for €15.1 billion of revenue, while Europe/Middle East/Africa accounts for only €13.2 billion and Asia/Pacific €8.6 billion. That is quite the gap which could be caused by high US prices, but it warrants a look into the industry's financials.

[0] https://www.bayer.com/en/worldwide/bayer-worldwide

In Brazil they control the prices and keep them... high.

So maybe people in Europe and Japan should say thank you to US citizens that pay more for medicines.

Alternatively, people in countries outside the US should be peeved at the US for protecting the US-based companies that gouge everyone, everywhere. ;)

Japan has the 2nd highest drug prices globally. It's actually a very significant market for that reason.

And in terms of drug prices in Western Europe, it really depends. One example, orphan drugs for rare diseases, the prices are actually pretty comparable to the US. These are the drugs that are several hundred thousand dollars per year.

A good example is Glybera, a gene therapy never approved in the US. The price in Germany was ~$1M USD.

Lots of conversation on the cost of US healthcare seems hyper-focused on prescription drug prices. A report released last week seems to contradict the notion that prescription drug prices are the culprit. Yes, prescription drugs cost more in the US than the rest of the world, but the real burden on healthcare seems related to administrative costs. [0]

Per an analysis of the report [1]:

“The U.S. spent $10,637 per capita on health care in 2018. Comparable countries spent $5,527.

The overwhelming majority of the difference — 76% of it — came from spending on inpatient and outpatient care — not drugs, which get more attention but represent just 10% of the difference.“

As someone who works in the pharmaceutical industry, I’ll be the first to admit that the financial toxicity associated with prescription drugs is a very real concern. To be absolutely clear, there is opportunity to reduce the cost for many prescription drugs without hobbling innovation. But perhaps the conversation would be better served by focusing on the larger system that allow healthcare costs to flourish unchecked? Should we not also be outraged when a single hospital-provided band-aid costs $7.00 (~20X markup)? [2] Price gouging is rampant across the board.

[0] https://www.healthsystemtracker.org/brief/what-drives-health...

[1] https://www.axios.com/drugs-arent-the-reason-the-us-spends-s...

[2] https://www.pri.org/stories/2017-10-16/curious-case-629-er-b...

I’ll believe something changes in the pharmaceutical industry when I see it. It’s been a problem my entire life, and they’ve bought too many senators and house reps.

This country doesn’t even pretend to have the right priorities.

Not to be an apologist for crappy pharma behavior, but some of the accusations don't seem that egregious.

"An internal slide presented to the company’s drug pricing advisory board showed that the increase would yield $24 million in new net sales."

What kind of company doesn't run revenue estimates for price increases? If you suggest a price increase, the first thing a CEO will ask is "how much extra revenue is that?"

"Teva only spent $689 million on Copaxone-related research since 1987 — just 2% of the roughly $34 billion it took in net revenue for the drug over the last two decades"

Usually drug sales today, pay for other R&D programs. What was Teva's total R&D spending across their entire portfolio over that time? My rough estimate is >$10B or >1/3 of what they made on Revlimid.[1]

"Teva launched a new, more potent version of copaxone as part of what they dubbed a coordinated “generic defense strategy.” The strategy, according to internal powerpoints, included contracting with middlemen to block generics’ market access and aggressive campaigns to lobby both doctors and patients to stay on the more expensive version of the drug."

Teva created a new version of Copaxone that could be injected 3 times a week versus 7 times. Sure, incremental improvement, but it's really up to physicians to decide if it's right for their patients. Apparently they do. And "contracting with middlemen to block generics" is just shorthand for "we'll give you a discount so our product is more attractive than the generic". Isn't price competition good?

I'm not defending Teva's behavior here (yes, they have done shitty things), or the price of their drugs (yes, MS drugs are way too expensive). I'm just saying if you want to impose price controls on drugs, then just do it. Be upfront. Pass a bill that says "your drugs must be priced under $xx,xxx dollars".

This looks like a campaign to shit on a company for pretty typical company things, like forecasting out revenue from a price increase and selectively pulling statistics to paint a situation in the worst possible light that has no bearing on how things actually work.

[1]https://www.statista.com/statistics/272544/expenditure-on-re...

  Isn't price competition good?

Having a lower price than a competitor is not always the same thing as price competition. Ie: https://en.m.wikipedia.org/wiki/Predatory_pricing

Sure, but in the generic drug market, you rarely see generic makers pull out of a market.

What Teva basically did was drop the price enough to make the generic not that attractive in a cost basis.

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