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Comment by naniwaduni | Hacker News Reader

> It’s a huge rip off. Medicare should be paying a discount to the median price actually paid on the open market. But apparent nobody has an incentive to fix this.

Then they start issuing rebates instead of discounts?

Or yeah, sure, everyone's definitely paying $100 for this quantity of this drug, then we kick insurance back $80 for advertising for every unit that makes it to an end consumer through them.

There's no easy way out of price discovery when you are the largest buyer, because it becomes more than profitable enough to structure sales to exploit your policy to make up for the loss in doing the structuring.

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The Federal government and government in general is really good at commodity procurement. The processes and legal requirements give them the ability to price and fairly procure even single source commodities.

I’ve done scaled procurements at a very large, not federal level. We were almost always 10-20% lower unit cost than large corporate, and sometimes even better. At the Federal level, the law gives them “most favored” status, and they will sue vendors for fraud if they offer lower prices for the same commodity without lowering the federal cost.

“It’s hard” is a common refrain for policy discussions. “That’s bunk” is my reply. Policy without graft isn’t much harder than using high and mighty principles to enrich people at taxpayer expense.

Most drugs aren’t commodities.

The GP wasn't asserting that drugs are a commodity. They were arguing against the blanket implication that the federal government can't get efficient price discovery because it's the whale in the market. The GP is pointing out somewhat similar markets where the US is doing very efficient buying, even for single-source commodities (with parallels to single-supplier drugs), despite presumably also being the whale in the market.

> Then they start issuing rebates instead of discounts?

They already do, and it's a huge amount of money. It's how they keep prices opaque. There is a list price (retail price), the pharmacy dispenses the drug, and gets reimbursed a variable amount from the insurance company (called the reimbursement price), usually about 50% of the list price. Then, the insurance company gets a kick-back from the drug manufacturer (usually for non-generic drugs). Medicare also gets these kick-backs, and they stopped disclosing the actual amount around 2016.

That's assuming structing actually works here. It's not hard to define average price as cost after all incentives be they rebates or raffle tickets with “zero nominal value.”

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