Instead of the Govt being the price negotiator, we got giant corporations instead.
yay
yay
The US could very well institute their own price controls on drugs, but it wouldn’t invalidate the value in services like Amazon’s, especially if the price controls in question do not create a lower bound on prices, but instead focus on setting upper bounds.
EDIT: I removed an unrelated paragraph about Planned Parenthood and drug supply chain I thought was out of scope.
That’s effectively what government-enforced drug patents are for. I think it’s debatable whether that’s the best implementation of what you’re describing. Government sponsored “Prizes” are another approach that sounds promising -> https://marginalrevolution.com/marginalrevolution/2020/03/pr...
I donate to Planned Parenthood as well, and decoupling drug purchasing from insurance is a reliable way to make sure that everyone can get access to birth control or contraceptive, even if their employer feels strongly opposed to it (eg Hobby Lobby).
This presupposes that the US pharma market (and healthcare writ large) constitute an actual market. It's really not, by just about any measure. The only thing remotely resembling a "market" is the fact that insurance is predominately provided by the private sector for profit. Outside of that, the industry is ridden with the worst combination of distortionary incentives and regulations. The fact that healthcare is tied to employment didn't happen by accident, it's the net result of WW2-era wage ceilings, followed by 1970's tax deductibility for employer group plans, followed by the ACA employer mandate. I'd describe the US as combining the worst of public healthcare systems with the worst of privatized systems. PBMs and every other horrible inefficiency of US healthcare aren't some accident of a functioning market.
It really strikes me as a no-true-scotsman's analysis of our health system. Why not just adopt one of the competing alternatives wholesale and admit defeat?
It’s important to have that discussion because it has implications on what approach we take. I think there’s generally broad agreement that the status quo is bad...there’s just violent disagreement as to why it’s bad. There are a number of ways to fix it (and not just the one proposal you keep hearing about).
Simply decoupling healthcare from employment while keeping it private is one approach. We know that this is efficient, because it’s what Medicare Advantage is, and that’s actually cheaper and better than Original Medicare.
Providing universal catastrophic care with savings accounts is another approach that has shown empirical success. It’s how Singapore’s health care system works, and it is widely regarded to be the most efficient healthcare system among the advanced economies.
> Why not just adopt one of the competing alternatives wholesale and admit defeat?
I agree! If it were up to me, we would adopt Singapore’s system wholesale. Either that, or, Switzerland’s. Or we would just have everyone in the US be on Medicare Advantage.
You can say it's cheating when governments win lower prices for their citizens like this but I'm not much inclined to care. I don't want to subsidize the continuation of our more-market-based-than-usual health care experiment when the results have been clear for decades. Compared to our peers, we're in a hole. Let's stop digging.
If this is the case, I wonder what would happen to drug development if that goes away.
Note, I'm not saying there's not too much profit from drugs. These statements don't have anything to do with that.
Republicans would be hesitant due to “regulations bad,” and Democrats don’t want to improve our current system because they’d rather throw it out. And of course both sides get donations from pharma.
Initial discovery research is pretty much entirely tax payer funded. There's then a second phase, moving from that discovery to POC, that is extremely underfunded, and which a lot of charity and such funding goes toward. It's only the last phase, taking POCs -> product, that companies really invest in. https://www.ncbi.nlm.nih.gov/books/NBK50972/
Now, that capital investment is not a trivial amount of money (about 80 billion in 2018 - https://www.statista.com/statistics/265085/research-and-deve... ), but it still is only 17% of drug company revenues - https://www.investopedia.com/ask/answers/060115/how-much-dru...
Note, too, that private companies tend to fund research toward common first world diseases, since they're profit driven, and far less to niche and/or common third world diseases. So not only do they not fund early discovery (government does that), nor generally moving those discoveries to POCs ('valley of death', and charitable foundations and the like do that), they also leave plenty of potential meds untouched, since the likely profitability is low.
To be fair, the other side frequently tries to prove them right.
[1]https://www.canada.ca/en/patented-medicine-prices-review.htm...
If anything, Australia is quite generous to pharmaceutical companies. New Zealand's Pharmaceutical Management Agency has much less negotiating power but still manages to obtain substantially lower prices.
For myself I can't help but wonder if lump-sum licensing might not be more effective. Pharmaceuticals are a bit like software: very high R&D cost, but the marginal cost to manufacture is very small. A one-time payment to sink a large chunk of R&D for a drug might be quicker and easier than guessing at a price. On the other hand, I have no experience in health economics, so it's possible this is a terrible idea.
You're describing "Prizes", and that's a legit point of view -> https://www.mercatus.org/publications/covid-19-crisis-respon...
On reflection I like prizes better, especially if there are multiple tiers (first to reach the target gets the most prize money, second gets less, etc). You want to ensure that multiple pharmaceuticals are developed independently, in case one of them needs to be pulled from the market.
I see the benefit for things like a covid vaccine where the economic benefit is so large we can afford to drop exorbinant sums. But what's the right prize for a newer better lipitor or xanax, or a treatment for malaria or Huntington's?
A healthcare system will typically have a good idea what it needs, whereas a pharmaceutical company will rightly enough focus on what will make the most profit.
Put another way: you don't need to set prizes for every drug. A better treatment for malaria is not going to make much money, because most of the patients will be in less-developed countries. But if you produce a side-effect free drug to reverse baldness, you will absolutely mint it by first selling into wealthier countries at very high prices to "skim the market", then lowering it over time.
Prizes would work better for low-profit/high-impact, for the rest you can mostly rely on pharmaceutical companies to rationally pursue their best interests.
The real value of medical patents (and this is something we've strayed far from) is in incentivizing expensive R&D for ultra-rare diseases. There are diseases that afflict < 1% of the population, there's hardly any revenue to be made in serving that customer base, especially relative to the R&D input necessary. It's stuff like that which can really benefit from prizes. It also presupposes that the prize-awarding authority knows which types of R&D fall under that bucket and which do not, and you get into a quasi-central-planning territory, but that holds true even in a world where pharma patents were only awarded to inventors of such rare-disease drugs.
Competive forces only work while there's competition, the second competition declines, rest assured consumer pricing is the first to take a hit.
Why would it be different in other branch?
Lack of choice; the government has captured the "market", and "consumers" can't choose to go anywhere else. Compare to the service (and especially customer service) offered by your cable/internet provider where you have not choice. The cable companies vie for literally worst customer service of all businesses year in and year out.
And we know that the government is doing an awful job in regulation of healthcare. I've got kind of a front-row seat to this and see things that most might not, since my wife's whole career has been in healthcare finance, and in particular around how Medicare reimburses hospitals for services.
She's currently working with one client hospital for whom their Medicare cost report still hasn't been resolved for some years back even before 2010. How can a business operate efficiently when they don't know what their expenses are going to be - not just in the future, but even historically, more than 10 years into the past?
Worse, the way the government forces hospitals to report this stuff is extremely specific, and optimized for how Medicare wants to run things - which is why Medicare can claim to spend less on administration: they just force hospitals to do all the administration for them. And hospitals can't say "no", with Medicare (together with Medicaid, which generally rides on Medicare's regulatory coattails) comprising a plurality of the market, if not an outright majority. The result of this is that hospitals have a choice of either running two separate accounting systems (one for what Medicare demands, and another to do rational cost accounting), or more likely, to just do the one for Medicare and muddle along as best they can. And that's a major reason why hospitals can't operate more efficiently.
And my wife's currently involved in a battle with them over some detailed rules they posted early in the summer. She's been working all summer for her client hospitals based on what the government posted on their website. Last week they changed the rules posted (you can even see the "last changed" date). But the change was in a way that contradicts their previous statements, and invalidates much of what she did all summer - and worse, they're lying about it, not admitting to what the previous version of the page said. Unfortunately the wayback machine didn't track that site, and while she's got her own records quoting the page, the gov't won't acknowledge it.
So there's a clear explanation for why it can get bad, and tons of evidence that it really is bad.
In addition to this, it's worth pointing out that the idea that Medicare is the solution to all of our problems because of the cost savings of administration is way over-stated.
There's a pretty great breakdown of where per capita costs go in the US vs comparable OECD countries -> https://www.healthsystemtracker.org/brief/what-drives-health...
Administrative costs make up a tiny percentage of the overall cost differential. You could basically zero it out, and it would still hardly make a dent on the overall cost difference.
The US Military runs the VA, and that's also been a noteworthy embarrassment -> https://www.cnbc.com/2018/05/28/va-veterans-affairs-history-...
Outside of raw warfare, the military runs almost entirely on cost-plus, which results in over-spending of contract money for boondoggles that just entrench the military industrial complex.
Outside of the US military, you have systematic inefficiencies like this across most major agencies.
NASA's planned SLS moon mission is a bit of a disaster — way over budget and way behind schedule. Because the boosters aren't reusable, each launch is expected to cost $1B (with a B) dollars — EACH launch! Meanwhile SpaceX's target cost-per-launch is $50M.
In healthcare, Medicare has actually been running a fairly interesting A/B test. When you turn 65, you have the option to enroll either in "Original Medicare", which is what we usually think of when we talk about "single payer healthcare in America", or you can enroll in Medicare Advantage (aka Medicare "Part C"), where the premiums that would go to the CMS instead go to private insurers like Humana, United, Oscar Health, Clover, etc. These plans replace Original Medicare, also cover Part D prescription drug benefits, and often include supplemental benefits that Original Medicare doesn't already cover. The outcomes are fairly interesting:
- 36% of Medicare beneficiaries are on private Medicare Advantage plans instead of the public "Original Medicare". Because everyone is entitled to "Original Medicare", this is purely voluntary. This number has been growing so rapidly, that we expect by 2025, more seniors to be on a private plan than the public one. There's also great variance by State. In Florida, Pennsylvania, Wisconsin, Michigan, Minnesota, Oregon, Alabama, Hawaii, and Connecticut — over 40% of beneficiaries are on Medicare Advantage. By 2022, we expect more seniors in those States to be on a private plan than a public one. https://www.kff.org/medicare/issue-brief/a-dozen-facts-about...
- For most beneficiaries, Medicare Advantage costs about 39% less than Original Medicare. https://healthpayerintelligence.com/news/medicare-advantage-...
- Medicare Advantage plans are, on average, of higher quality than the public "Original Medicare" https://healthpayerintelligence.com/news/medicare-advantage-...
- In Urban areas, Medicare Advantage costs less per capita to administer than Medicare — and that's not including the extra Medicare Part D insurance that you would have to buy if you're on the Original Medicare plan. https://www.commonwealthfund.org/publications/issue-briefs/2... From this same research, public "Original Medicare" is still cheaper in rural areas, but not by a whole lot.
So yeah, while the governments of a lot of countries are fairly robust and efficient, I think that suspicion is warranted, especially in the US.
Would you prefer the government to negotiate the price of your car for you? Markets are a powerful tool
Your website suggests you are American, so I recommend taking a look at the various healthcare systems on display in Europe, they're not all made equally (i.e. Some do more on behalf of their citizens than most). In my experience of watching American discussing healthcare in the EU, the subtleties are often lost, sadly.
There are merits to government price controls and there are certainly countries that have employed them successfully. That said, it isn’t the only solution to bending the cost curve, and there are also downsides to price controls. It’s complicated.
Yes? We already do this? For many years directly in the postwar period and now indirectly through agriculture subsidies and programs like SNAP. Making sure everyone has enough to eat is step one of having any kind of functioning society and why it’s always been a source of massive government intervention in the economy.
Making sure everyone has access to healthcare is, for the most part, a universally held goal. The disagreement is whether the only way to achieve that is through government price controls.
Food subsidies aren't targeted at the poor. The US government spends many billions of dollars subsidizing corn and soybeans and other crops that lower food prices for huge portions of America.
It's also not the same as price controls.
SNAP and ag subsidies are also just price controls with extra steps. We can argue about their efficacy, but they’re far closer to price controls than anything like free markets, especially given the increasing monopolistic control of industrial agriculture in the US.
I'm not sure who argued that "the right to not get surprise billed or screwed by your insurance company" is the optimum solution. The argument is that guaranteeing access to healthcare itself is attainable without price controls.
> SNAP and ag subsidies are also just price controls with extra steps
They're really not. The closest analog would be to institute a basic income that's earmarked for health insurance premiums. We don't have that today, at least in a uniform way (ACA subsidies come close).
No doublespeak vagaries here.
Healthcare is not just a demand-side issue. There is also constrained supply. I'd be happy to see the government subsidize supply production (building new medical schools etc) in a similar way that it subsidizes food production.
I'm by no means advocating government negotiation or single-payer or medicare-for-all as the thing the government must do on this issue. I'm fine with a form of intervention that allows the market forces to go the last mile in this.
Government does that in the US (and the EU and Canada and basically every first world nation that's not a city state). The department of agriculture and others spend somewhere between 10s and 100s of billions every year to make sure that food (and other crop) prices stay within carefully set, tightly defined limits.
Not being able to afford health care in no way condemns one to being killed. It's obviously not advisable, but plenty of people do just fine without regular doctor checkups because they keep healthy and live balanced lives. And, interestingly, given how many each year die in traffic accidents, it's not such a stretch that being _able_ to afford a car would kill you.
We all have really different reasons for wanting health insurance and owning a car. We have different components, considerations, and properties, which we value about these decisions. Given this, it seems ludicrously complex, inefficient, and cruel to subject all citizens of a nation to the same exact process of obtaining and using health care.
We all know how bad of an idea it is to centralize services, but because some linguistic jokesters have gotten the phrase "healthcare is a human right" to be passed around the globe enough times, people seem to drop context when it comes to this discussion.
As soon as youtube-dl got hit with its recent DMCA takedown request, GitHub obliged and the whole dang HN community lost their collective minds. "Decentralize your git repos" we all saw people writing - and they weren't wrong. But for reasons that continue to escape me during these awful lockdowns we're all facing, people don't seem to think that their government-provided healthcare workers and price negotiators will do anything of the sort.
I absolutely want the government to negotiate the cost of water, and electricity.
The concept of "markets" is not useful in a discussion about healthcare, because unlike other markets, a participant will often die unless they immediately purchase a good from the seller physically closest to them, regardless of price.
Saying the market can solve the problem of healthcare for everyone is a bit like saying it should be able to solve the problem of providing flagship-quality phones for everyone. But in fact, given the "law" of supply & demand, a product like healthcare which is in demand by literally every single person, yet constrained by supply, the solution the market converges on is going to extract the most amount of money it can from however many customers can be served by the available supply.
Supply constraints are also one of the problems I would, given complete faith in market forces, expect the market to solve but it has not done that either. Market forces did not prevent or resolve the dumping of cancer-causing chemicals, or known cancer-causing product like cigarettes to be removed, or any number of other undesirable things whose costs end up being paid by society as a whole rather than a given individual(s) responsible for the problem. When the market fails to solve a problem, some other force needs to intervene.
Maybe a free market purist would say we didn't give it long enough to solve these problems. I don't believe that, but let's say it's true: Saying the market will eventually solve a problem, when human lives or suffering are at risk, is a bit like saying evolution will eventually solve a problem. It may be true, but the timescales involved are sufficiently long to render their eventual solution irrelevant to the people who die or suffer before it materializes.
I don't claim to know the best way to do this, and perhaps my analysis above is incomplete or over-simplified, but the point stands that the market has not solved this problem, and does not show signs of doing so.