$1,000 Hepatitis Pill Shows Why Fixing Health Costs Is So Hard
nytimes.com
nytimes.com
Hepatitis C is a slow death sentence, and these drugs, based on studies to date, appear to be life saving.
I don't understand that statement. I had Hep C and it was cured with interferon/ribavirin. It was a nasty treatment and I guess there are people who don't complete it, hence (probably) its reputation for uncertain effectiveness.
I absolutely would have preferred this new treatment, but if you had been able to tell me five years ago that I could take interferon & ribavirin now, or wait five years for a better treatment, I still would have completed the interferon/ribavirin treatment.
Sorry if this is a little like a stranger at a party asking about how to get rid of their warts :p
Many people forget how difficult it is to produce a good, generalizable cure to any disease. It requires billions of dollars with a lot of dead ends. Occasionally it pans out. No one wants to spend the money for research that may never produce anything of value but they want the product of persistent and very expensive R&D for next to nothing.
One of the biggest government investors in unpopular diseases is the US military, largely because they have a lot of veterans with them due to blood transfusions, environmental exposure, etc in the backwaters of the world. Organizations like the US Army are willing to put money toward relatively common diseases like multiple sclerosis, because it impacts their people, that the government at large is uninterested in because it is not politically sexy.
(Big Pharma Spends More On Advertising Than Research And Development, Study Finds --- http://www.sciencedaily.com/releases/2008/01/080105140107.ht...)
I can sort of understand why marketing exists. Many people (most?) do not see their doctor on a regular basis, and even if they do, they might not bring up some chronic issue that they've learned to "live with".
For people who do not see their doctor (or who do not have a good relationship with their doctor, or who have a poorly informed doctor) marketing from pharmaceutical companies may very well be the only way that they learn a cure or treatment exists for a problem that they have!
It has been so long since a disease has been cured that the current american system isn't designed to handle it.
I have to say the European state sponsored medicare looks way superior from this point of view.
They are not worried about the high upfront cost since every citizen is paying taxes for that.
Plus they can drive prices down since if the government buys from you you make a lot of money if it doesn't you have to sell it a lot cheaper for regular people to buy it with their own money.
It's not perfect it's open to manipulation however it's better that anything a dynamic corporate sector could offer.
Not only that, but that they can look very clearly at cost vs benefit. With a citizen, who is unlikely to move anywhere else, you can look at lifetime care costs and reduced earning ability (at least in the average case), and say outright that it is sensible to pay $100,000 to save many times that on a lifetime of ineffective care and reduced potential. You can also look at the public health impacts - treating one patient might reduce the risk of wider infection in society, which can also be placed in the cost-benefit analysis.
This is more difficult with American states (because people move between them much more- the payment comes from one state, but the benefit is spread out), and more difficult for insurers (because they are subject to much greater short term pressures, and can't look at wider benefits).
From the article:
“If it is cost-effective from a societal standpoint, it is not necessarily going to be cost-effective from a health plan standpoint,” said Dan Mendelson, chief executive of Avalere Health, a health care consulting company.
But we would need to reward provider networks for keeping people healthy, not just treating them when sick.
Simple: make it federal. Scale it up until you get controlled borders.
As a healthy Veteran, I can say I'm glad I haven't had to dip into my benefits...
Instead of rolling your eyes, work on a solution ;-)
..and that pharamceutical companies aren't run by complete monsters.
Pharmaceutical companies have a long history of despicable behavior.
"Pfizer Bribed Nigerian Officials in Fatal Drug Trial, Ex-Employee Claims" (http://www.cbsnews.com/news/pfizer-bribed-nigerian-officials...)
I know we have a broad range of vaccines against once common ailments, and anti-bacterial agents but I don't think we've ever had good viral 'cures' so its not as if cures are being held back. I think the fundamental research just isn't there.
This sword cuts both ways. Implicit in your response is that it's the potential income from American medical spending that's driving the investment in research: even if (or maybe because?) the income from other nations that structure health care expenses is used more wisely, it's not sufficient incentive to induce such research.
Well, the UK has DEATH PANELS (as some people call them) which is probably the National Institute for Health and Care Excellence (they had a name change which makes the acronym a bit weird, but their still called NICE).
So if a medication can't show efficacy and is very expensive it's not going to get NHS funding.
We used to allow people to spend their own money if they wanted to on medication. We still do - IVF has limited provision as one example - but there was a spate of drug companies releasing very expensive and not very efficacious meds. When they got turned down for NHS funding those companies paid money to patient groups to campaign for changes in the decision. (Pretty fucking sleazy - using the desperation of dying people to promote your ineffective medication) The government at the time decided to change the rules around a small number of medications. You would be able to buy those yourself, but you would then have to pay for the rest of your care too. I'm not convinced that was the right decision.
Even though there is a big upfront cost (in the US), isn't the treatment with this drug a lot less expensive than not treating someone with Hep C? So shouldn't the overall costs go down?
Every few years people seem to think we've found all of the significant small molecules for human disease - they keep getting proven wrong.
Different companies do it differently, but the customers I had went through a series of steps. I'll try to summarize them briefly here.
1. Target choice: Typically research focuses on a single "target". In small molecules, this is typically a protein that you want to activate somehow to change a biological pathway. For other sub-fields, such as biologics, "target" can mean other things.
2. Iteration / core choice: You start with a small organic molecule "core" that can be the backbone of your drug. Molecules with similar cores can "fit" into similar places, whereas active groups that branch off of the core affect their efficacy.
3. Screening / lead optimization: Pharma companies have libraries of chemical structures, their properties, and how they fit into certain proteins. The idea is to find a molecule with a core that will fit, and active groups that will make the drug 'plug' the active site of the protein. When doing drug discovery, there are all sorts properties you care about, ranging from pka to toxicity. - For many drugs, there is experimental data that is available. For other drugs, experiments must be performed to obtain data. At this stage it basically becomes a data problem for the chemist. Lots of time looking at pivot tables of raw experiment data, 2d molecule structures, 3d structures, computational predictive results, etc. The idea is to to find holes in the data where potential molecules with the right core and active groups could have matching properties, etc. - A lot of it is data based, but a lot of it is also intuitive. - There are other sources of data other than assays (experiments). One of the most useful is X-Ray crystallography images, which are 3D images of molecules in active sites.
4. Discovery Candidate: At some point (hopefully) you reach the stage where you're pretty sure a drug has good properties. This is when you lock down the IP, not just by patenting that molecule, but all other molecules that are similar. Basically "putting it in a box" to start the more expensive animal / human testing.
5. POST-IND FDA approval process. You can read about this here [1], but basically this is where the expensive / time consuming fun begins. Animal tests, efficacy tests on humans, etc. This is pretty expensive but also well defined by the FDA
Note that I am far from an expert, some of the people I worked with had done this for decades and would probably correct me and / or point out steps I'm missing.
[1] http://www.fda.gov/drugs/resourcesforyou/consumers/ucm143534...
Not when you learn that the company that actually created it planned to put the price 2 times lower before being bought out.
Early on in a drug's development, companies will do market research to estimate the value of the drug. That research is pretty quick and dirty and the price you arrive at has a margin of error of +/- 50% easily.
I have acquaintances who worked on the pricing of Gilead's drug. If anything, Gilead priced at the lower end of what they could have. No company, launching that drug today, would have priced it at the price Pharmasset estimated 2-3 years ago.
The incremental cost of actually producing a pill now is probably far, far, lower than $1000, but the pharma companies will want to sell the drug for as much as they think people will pay for it so that they'll have money to produce new drugs.
That argument would be a whole lot more convincing if they didn't spend vastly more money on marketing than on R&D...
"Ask your doctor if somthingodin is right for you."
Just bizarre to me.
Then there's the pure branding ads, where you can say the name of the drug, show pictures of people dancing in forests and playing with puppies, and say "ask your doctor if somethingodin is right for you", without having to spell out the side effects.
So first you learn what the drug does, and all the horrific things it will do to you. Then, when you vaguely remember that the drug helps treat a thing you have, you see the branding ads, and then you talk to your doctor, who, while ethically bound to go over the side effects, is not being monitored by the FDA, and thus will hopefully present a rosier picture than the first ad.
Over the last 10 years, Gilead has spent somewhat more on research than marketing. They still spent a big chunk of change on marketing, though: $9.4 billion.
That being said, presumably they set their marketing budget at a point that maximizes their revenue (i.e. the point at which one more marketing dollar fails to bring in more than one more revenue dollar). Given the fact that the research budget is a fixed cost, obviously it makes sense to spend money on marketing to ensure that there are enough sales to recoup that expenditure and make a profit.
So I guess I don't understand what your point is?
Oh, and a considerable percentage of "research" is really marketing, since its goal is to find minor variations of existing, perfectly effective drugs whose patent protection is about to run out.
If people could instantly know about which drugs are relevant to them, or doctors meticulously searched the literature for all available treatments for all patients, then alerting the world about the existence of your new drug would be a complete waste. But we don't live in that world.
If pharmas really are offering identical products, that's a problem of creating unnecessary drugs, not marketing per se, and would be exposed when the relevant people make the cost benefit calculation.
Not true at all: Could you sit in an empty, white-walled room and tell us exactly which new drugs will be needed over the next decade and how they will appeal to doctors and different patient groups? Whether they'll be worth developing at all? How existing patients on inferior (or no) treatments will find out about them without you spending a nickel?
Marketing is not just ads.
As a society, marketing more than useless. It manipulates and confuses actual knowledge.
Even if you think DTC is worthless or actively harmful, surely there's some value in marketing to (nominally) informed, expert doctors and insurers, unless you think marketing anything is an essentially fraudulent or worthless activity. Would Ford or their potential customers be better off without marketing? What makes drugs any different?
[1] http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/105x...
I don't think marketing is either fraudulent nor worthless, but it is a tragedy of the commons these days. People have more than enough tools at their disposal to discover the products they want and need to buy on their own. Marketing by an individual entity is useful and necessary, but the whole field is just pointlessly rearranging the chairs. We'd all be better off if we could somehow all agree to quit it, at least the fluffy parts that convey only emotion and not information.
That's a lot easier to do when they can get the government and other insurers to pay $1000 a pill for their wares that they have marketed to the public.
the marketing of many drugs is done to convince consumers to pick a named brand over a generic. frankly the small print warnings they have to carry are more frightening than what is on a pack of smokes.
TOBY The pills cost 'em four cents a unit to make.
JOSH You know that's not true. The second pill cost 'em four cents; the first pill cost 'em four hundred million dollars.
If you want to step up and by the first pill I'm sure they won't have a problem bringing down the costs. It cost them 11 billion to buy the company which did the R&D for this drug.
Take for example PPIs, they where crazy expensive at first, but are now very cheap. I can only imagine the same will be the result with this treatment.
It's pretty tough to evaluate the investments large pharmaceutical companies make in R&D because a lot of the expenditure is through acquisitions and a lot of failed efforts at private companies go uncounted. But do the math on this product: ($84K course of treatment times 3.2 million customers in the US alone) -- or just noting the $55bn total revenue estimate or the $3.5bn they sold last quarter. Compare that to the $2.1bn they spent on R&D last year (less in previous years) or the $11bn they paid for the company that developed the product. It's pretty clear that this is an absolutely monstrous windfall that they can get away with because of the way we've designed our healthcare system.
It's not a bargain.
Also: I don't have data to evaluate your statement that "they often aren't good at sticking to complex drug regimens", but it seems like a gross and extremely callous generalization. Also: it's 2014, we have smart pill bottles, automated alerts, and all sorts of other ways to solve that problem for nearly nothing. I'd refer to some of the other commenters who have noted that companies get richer through treatments than cures.
Much of the article above is essentially about state Medicaid programs freaking out for exactly this reason.
There is very little true price discovery going on when the largest payer for healthcare services has absolutely no choice to purchase the product at a given price. All they have to do is get a new treatment approved (i.e. show that it works and is safe), and then the government has no choice but to buy it.
I don't see anything wrong with Gilead charging $84,000 for curing a disease. I just see something wrong with the stats not being able to take it or leave it.
Personally, I do. Helping other people is never going to be friendly with a free market. I accept that it may have a cost, but I reject the idea that people's health is something that should be traded on the free market. While it's great that this cure was developed, it was developed because there was a profit to it. That's the worst reason to develop a cure—how about working on diseases that aren't likely to return a profit? Curing the cold may not make you rich, but it would yield substantial productivity benefits for our society. Same with basic dietary habits. In fact, I'd be willing to bet that the US (not familiar with other countries) is worse off, mental-health wise, since the invention of Prozac, compared to basic research into public awareness of exercise, diet, and basic emotional well-being.
This is, of course, for reasons nobody can adequately respond to with reason instead of feelings, unpopular.
But it's certainly 1. fair and 2. a large cost savings, given the sheer number of Hep C patients who brought it on themselves.
This will not be an issue when the masses that have Hep-C now are cured. This is mostly a short term financing problem. Would you rather solve the issue for $1X now or pay $3-5X over time to deal with it. I would rather cure the masses now and lower the long term medical costs.
The basis is that these people choose, of their own agency, to shoot up with used needles. This isn't some poor guy getting the cancerous genetic bit flipped by a cosmic ray or an uninsured single mom getting disabled by a drunk driver. These are consequences brought on by the patients themselves. By what moral basis should society be paying for the consequences of willful degeneracy?
They certainly chose to shoot up right until the point they achieved chemical addiction, but after that there is much less free will than people presume.
>By what moral basis should society be paying for the consequences of willful degeneracy?
I don't know about you but I hate seeing people self destruct. I certainly feel an obligation to assist them when possible. You might not, but please don't act like your moral compass is the only one that matter.
Alas not necessarily. PPACA (aka Obamacare) was supposed to ensure exactly that, but the Supreme Court struck down those provisions. So in 24 states Medicaid does not necessarily cover poor, non-senior, non-disabled adults without dependent minor children.
That's leaving aside the entire category of aliens which even in the other 26 states have only spotty coverage.
That sounds similar to Medicare (Australia), although I haven't had to use Medicare to pay for medications.
That certainly does make it seem like they're attempting to price gouge the government, because "they can afford to pay".
Most European welfare states refuse certain treatments based on costs. This can, obviously, really suck because there are (sometimes) no private options, or they're unrealistic. And of course, every few years an expensive option is made available for a year or so because some politician's daughter happens to have it.
This has been a criticism of Europe. Drugs get developed because Americans will pay for them, then when the cost is mostly recouped (ie. a decade later), it finally becomes available in Europe. This is freeloading, but you can't really blame them.
Countries that ensure universal access to approved drugs generally keep costs down by the negotiation power of a government-backed monopsony combined with the threat of compulsory licensing should demands be excessive (rarely exercised, but the fate of BRCA1/BRCA2 tests in France is an example).
[1] https://www.youtube.com/watch?v=_yF69KVbUaQ&t=4m11s
[2] http://blogs.reuters.com/anya-schiffrin/2014/02/12/the-frenc...
> New drug regulations in France: what are the impacts on market access?
"Cost-effectiveness studies will now be part of the market access requirements for all drugs in order to satisfy the selection criteria for medico-economic assessment."
...
"Conclusion: In light of these changes, it clearly appears that the access to the French drug market will be increasingly driven by data pertaining to comparative-effectiveness and cost-effectiveness, and an increased role of postmarketing studies in the years to come."
http://www.jmahp.net/index.php/jmahp/article/download/20891/...
> Countries that ensure universal access to approved drugs generally keep costs down by the negotiation power of a government-backed monopsony combined with the threat of compulsory licensing should demands be excessive
Putting compulsory licensing aside, which does not happen in many countries, I don't think this contradicts the poster above - a government agency makes a judgement about the cost-effectiveness of a particular drug, and they either decide to buy or not to buy depending on whether the price is above or below that limit.
As your source notes, that does not affect "irreplaceable and expensive drugs". Cost-effectiveness concerns are typically about cases such as reimbursement for a generic vs. an equally-effective non-generic medicine.
> Putting compulsory licensing aside, which does not happen in many countries, I don't think this contradicts the poster above - a government agency makes a judgement about the cost-effectiveness of a particular drug, and they either decide to buy or not to buy depending on whether the price is above or below that limit.
Regarding compulsory licensing: contrary to what some people think, Europe isn't actually all that socialist; compulsory licensing exists as an ultima ratio in cases where the greed of a pharmaceutic corporation would endanger access to an important new drug or procedure (which was exactly the case in the BRCA case). It's a Sword of Damocles, not a weapon that's being wielded routinely. Whether the option actually exists is irrelevant: with a government-backed negotiator, it can always be legislated into practice (again, which is what happened in the BRCA case after a firestorm of criticism).
Regarding government agencies making a cost-effectiveness judgement about the purchase of a drug, that's again an inaccurate generalization.
First of all, recall that private insurance companies make such decisions all the time (see the article I referenced above), with the difference that they are interested only in their own bottom line, and that the health of their customers only enters into that calculation insofar as it affects profit or regulations force them to (the latter of which is the exact same situation as government backed-negotiation, except for the lack of the bargaining power of a monopsony).
Second, a minority of drugs are actually monopolies; price a drug for which there is competition out of the market, and you simply put money in your competitor's pocket. Likewise, drug companies don't just want to sell one single drug. Ask for too much for their one new irreplaceable drug, and they may see the income from their other ones go down (there is, after all, only so much money to be had in total).
Third, this is not necessarily how it happens. For example, it may not be a government agency (as in Germany, for example), and the agency may not have the power to make a decision whether to buy or not to buy a drug, but only whether the drug is effective (including relative effectiveness compared to other drugs), especially for life-saving drugs.
There is still a cost-effectiveness judgment even for irreplacable drugs (that's the SMR/ASMR category I):
"Two criteria must be met: 1) The ASMR of the drug claimed by the company is major, important, or moderate (ASMR I, II, or III, respectively); and 2) the drug is likely to have a significant impact on the health insurance budget regarding its impact on care organization, professional practices, or patient care and, when applicable, its price. This decree also specifies the medico-economic assessment procedure. The pharmaceutical company, together with its request for inclusion (or renewal of inclusion) of a medicine on the reimbursable drugs formulary, transmits all medico-economic data related to the drug to CEESP and CEPS. CEESP will provide an opinion [reported as a ‘flash opinion’ (14)] (Fig. 1) on the predictable or established efficiency of the drug and its coverage by health insurance. This opinion is based on comparative analysis, between the different therapeutic alternatives, of the ratio of the cost compared to the expected or observed benefit for patient health and quality of life."
I think here in the UK it's slightly more accurate to say that the NHS limits treatments on a balance of costs and expected benefits.
Has this ever actually happened? This reads like a caricature. The decisions about cost-effectiveness in Britain are made by the National Institute for Clinical Excellence, which has a very strong reputation for rigor and independence.
Does anyone have any reputable cites for this please?
http://www.advisory.com/~/media/Advisory-com/Daily-Briefing/...
If you live in any of the grey areas and don't make enough to get Obamacare, you cannot afford this drug, you will die.
That is 50+ million people. Hopefully only a tiny fraction of those people have Hep C because I feel horrible for them.
They didn't price it $5000, $10K, $20K or even $30k. They priced it $80k. Every 12 people is a million dollars for them.
Then they turn around and will sell it overseas for $8000.
The only hope for people in those states will be to buy a plane ticket to where it will be $8000 for the whole treatment, live there until cured and hopefully come back alive and not arrested for not giving the corporation $80k
Then you cannot get medicaid unless you make below a certain amount, in some states it is like $3000 a year, which I imagine you'd have to be homeless or living under someone else's roof for free.
All states were supposed to do medicaid "expansion" (raise the $3k minimum) to cover that big gap. Instead the supreme court ruled it was okay to let people be sick and/or die if they couldn't afford it.
So either get two jobs (with hep c, good luck) to make enough to get obamacare, or become homeless to get under the $3000 mark in half the country. Yay America and million dollar profit for every 12 people dying.
You mischaracterize the ruling. What the ruling said was the the federal government isn't allowed to coerce the states as it was trying to do.
Moreover, you're making the mistake of working backwards. You're starting from what you want the outcome to be. With that baseline, you then determine what the court should rule.
But surely you took enough classes in school about American history and civics to understand that this isn't how the American government works. There's a system of laws that determines what the government is allowed to do; if what it wants to do isn't permitted in that framework, then it's not allowed to do that.
Your desire to see a particular outcome - even if that outcome is agreed on by all to be a morally superior one - does not enable our government to take actions it isn't given the authority to execute.
(and apologies for wandering a bit astray into more concrete politics...)
A belief that we ought to ignore the legal framework and instead focus on what is sold to us as "a practical view" is the way that we get to such governmental actions as Guantanamo Bay and prisoner torture.
At the very least, it was a ballsy move that has generated about 6 billion in revenue in just the 1st 6 months on market in the U.S.
Note that Bristol Myers Squibb paid about 2.5Billion to acquire a competing company (Inhibitex) and that drug had to be junked for safety issues shortly after the acquisition.
> The United States health insurance system works better for costs that are spread out and predictable.
So the insurance companies want to reduce their tail-event risk. It's almost like they should buy some insurance. And they can do exactly that--it's called reinsurance.
The entire point of insurance from an individual's perspective should be to cover unexpected costs. Big costs, not small ones we can pay out of pocket. But it seems that over time, people have come to rely on their employer-sponsored plans to protect them from routine expenses like dental cleanings, eyeglasses, etc. That's not insurance--that's paying a premium to a middleman to manage your bills for you.
Insurance ought to be designed specifically for this sort of treatment: expensive, unexpected, and important.
The thing is, under the current system, it's not even that; it's some sort of complex mixture of insurance and collective bargaining. The "insurance" companies pay decidedly less than the rate you'd be asked to pay if you got any of these treatments, checkups, or whatever else, yourself. Therefore, it's only logical that you get your insurance company to pay for you.
I've run over this a few times in my head, and there doesn't really seem to be a feasible way to split up companies between "usual" and "unusual" treatments - collective bargaining groups vs insurance - in a fair way, and definitely not one that works out cheaper.
Think about how even complex elective procedures like Lasik or Lipo-suction are comparatively cheap. That's because the providers must compete on price. This could be the case for routine care if healthcare consumers could be exposed to price.
Do they have any idea how much it actually costs? Sure, the Shylocks in "management" are greedy for their pound of flesh (and which industry does not have those?), but there is a genuine cost to finding these chemical/biologic agents. The days of Alexander Fleming and Jonas Salk are long gone. Just as the days of one-off genius chemists/physicists/mathematicians/explorers now exist only in history books.
Original research & discovery, that is not of mere academic interest, that yields actual usable products, that people can put inside their bodies, is a non-trivial investment of manpower and resources that carries excruciating risk. This ain't some app you can write in your jammies, that can be MVPd by Tuesday and pitched to VCs over next Sunday's brunch.
As to the public funding of such endeavors, that is a subject for another post(s), requiring a larger keyboard than the one on my smartphone :P
If they needed to charge everyone on the order of $1000/pill to recoup expenses, that would be one thing. That's not the issue, since they are offering it to most people (who do have insurance) at dramatically lower prices.
I know HNers are in love with market segmentation, but isn't there an ethical problem with using price to segment a market for treatment for serious medical problems based on who has insurance and who doesn't?
It's been a while since the first thread on this, but I'll just quote from the sovaldi website:
We believe that cost should not be a barrier to receiving treatment. That’s why the makers of SOVALDI offer a co-pay coupon. If you are eligible, you may pay no more than $5 per co-pay.
The SOVALDI co-pay coupon program will cover the out-of-pocket costs of your SOVALDI prescriptions after you pay the first $5 per prescription fill, up to a maximum of 20% of the catalog price of a 12-week regimen of SOVALDI. The coupon can be applied to up to 6 fills
So, if your health insurance pharmacy coverage were 80/20, instead of paying your end (20%) out of pocket, you'd pay $5 per fill. So you're paying very close to $0 per pill, instead of $1000. Well, ignoring your deductable, which might be significant, but the obamacare max is $6350, so that's an order of magnitude cost decrease for the Sovaldi prescription even if you have no other out of pocket healthcare costs that year.
The only remaining, meaningful question is: how much are insurance companies paying Gilead per pill?
Right now the typical discount falls between 50% and 90% depending on the treatment and agreements made. If "Obamacare" had capped insurance discounting to something like 35-40% (which is still perfectly reasonable) we would have seen uninsured patient's costs drop between 10% and 60%.
As it stands Hospitals and drug companies know that insurance will negotiate a discount so they just increase the cost to compensate. Instead of something costing 3K with a 0% discount, it is 4.8K with a 60% "discount." If discounting were scrapped altogether it would be a huge "win" for almost everyone (e.g. reduced management overhead at hospitals, uninsured patients, et al).
The only party who wins by the current discounting culture is the insurance companies as it acts as a giant "lock in." Even if you're wealthy and can afford your own treatment insurance still makes sense as you'll get a huge discount not otherwise available.
That's almost two years of median salary for average family before taxes.
Lots of major therapies are discovered on the publicly funded research side. Don't conflate that sector of research with "mere academic interest", scientists on the public side are frequently even more motivated to find practical therapies.
If motivation alone were enough for scientists, most diseases would already be cured!
Now, how do I know that? Because, I'm one. Currently, my post-doctoral research is focused on structure guided drug design against HIV and Cancer targets, working closely with industrial groups. Other researchers in the group work on Hepatitis C targets, so I'm familiar with challenges. In the past, I worked at a drug discovery start-up on metabolic disease targets. With over a decade in the field, I guess I might know what I'm talking about :-)
But hey! I'm open to new ideas for improvement. I'll be happy to write more if HNers are interested.
I only skimmed the article but knew what it was about right away just from the headline. With healthcare, my copay per month was originally 200. My employer gutted my health insurance midway through treatment and my 2nd and 3rd months were quoted to me at a 2000 a month. I spoke with the specialized pharmacy and told them I couldn't afford that. They got me approved for a program that brought my cost of the Sovaldi down to 5 a month. The secondary medication (Ribasphere) to go with it was a little more expensive, but I forget how much.
Either way, I would have gladly paid the 2000 a month for this cure. Cost wasn't even a factor to me. If it came down to having to take out an 80K loan for it, I would have. My health is more important and the peace of mind knowing I've been cured is indescribable.
I'm open to questions since I've been dealing with this over the past 6 months.
http://www.gilead.com/responsibility/us-patient-access/suppo...
That being said, it was a pretty bloody fight.
But when their costs to manufacture are small and the process by which they develop drugs is so byzantine and opaque it's easy to see how people could get outraged.
I wonder how long before someone gets the bright idea to claim eminent domain on drug (or other) patents for the sake of medicare. Pay the drug company back R&D, maybe 2x R&D and then let people start making generics.
I'm not sure it's a good idea because it might well reduce investment in new drugs (developing drugs is like VC, you fail a lot and occasionally hit it out of the park) and that would be a bummer. But I could see it happening.
Before doing anything that radical, why not repeal the ban on Medicare negotiating drug prices? The "Medicare Prescription Drug, Improvement and Modernization Act" of 2003, which created the medicare prescription drug program, explicitly prevents Medicare from negotiating prices with the drug companies. The drug companies and the insurance companies decide the prices, and Medicare is stuck with that. This is one of the big reasons Medicare pays a lot more for drugs than the VA does--the VA directly negotiates with the drug companies the prices it pays.
There have been attempts to fix this. The House passed a bill in 2007 to do this, but Senate Republicans were able to stop it there. 6 Republicans joined Democrats in supporting it, but that was not enough to get the 60 votes needed to end debate, and the Republicans were ready to filibuster it if necessary. (They really hated it. Senator Cornyn of Texas said it was "a step down the road to a single-payer, government-run health care system"). President Bush promised a veto.
President Obama made repealing the ban on negotiation one of the key points of his campaign for 2008, but had to drop it from the ACA to get drug makers on board, and since then there has been no chance of getting such a thing past the Republican House.
The real reason why European countries (and Canada) pay less is because they legislate discounts. They give the drug companies no other options. I would call it arm-twisting more than negotiating.
And yes, Medicare doesn't negotiate, it legislates discounts. Medicare pays no more than the Average Selling Price for a drug (average price across all sales). It also legislated that the manufacturers pay a discount to cover the donut hole for Medicare Part-D.
ASP is a terrible price. The VA pays 42% of AWP (Average Wholesale Price). Drugs on the Federal Supply Schedule, which is what the Bureau of Prisons, the DoD, and most other government agencies use, are 53% of AWP. Medicare prices are 84% higher than Federal Supply Schedule. With their volume, Medicare should be able to get prices at least as good as what the Bureau of Prisons gets. [1]
[1] http://www.ncpssm.org/Document/ArticleID/207/Price-Negotiati...
The 42% of AWP that the VA pays sounds awesome, but AWP is inflated (typically 20-40% more than list price).
At any rate, yes, you are correct, the big four (DOD, BOIA, DOC and one I can't remember) get very discounted prices. However, they can also exercise a lot of control over what patients get without having to hear a lot of complaints. For example, the DOC is not using Sovaldi all that much, but if prisoners complain, not much is done.
Now imagine if Medicare said "no, too expensive, we're not paying for that drug". Congressmen would be getting hundreds of calls from seniors and the AARP about denying the elderly population the latest and greatest drugs.
What do you mean by 'legislate discounts'. As far as I'm aware, most European countries do not get involved with compulsory licensing, which is what it seems you're referring to.
I suspect the difference is more about public relations - an insurance company does not want to get in the news for turning down a particular treatment, because people will move to another company. With a public system, you are spending taxpayer money, so there's more of an acceptance of a balance between cost and benefit, and therefore the buyer has some credibility when they say they will not pay above the level of cost-effectiveness.
I don't understand why Republicans have such a raging hard-on against universal healthcare. Pretty much every country that has implemented such a program agrees it is a Good Thing and worth funding through new taxes.
Single-payer essentially nationalizes more than fifteen percent of the US economy (by dollars). It would more or less make every doctor, nurse, and technician an employee of the US government. But much more importantly than that, it would remove broad market price discovery from allocation of medical services. Instead of prices rising or falling to match demand from actual consumers, things would cost what a system of bureaucracies would say they cost.
Republicans aren't simply concerned about single-payer because they oppose entitlements (although they do). They also have a valid concern that single-payer would distort and degrade the health care system.
(For what it's worth, I like the balance Obamacare tries to strike, and support anything that puts us further along down the road to the Swiss system of health care).
Medicare paid out $583bn[0] in benefits in 2013. Total annual healthcare spending in the US $3.8tn[1]. Does that mean each healthcare professional is 15% employed by the government?
Not in the least.
Northrop Grumman has ~25bn in revenue as of 2012. A majority of its revenue comes from government spending. Does that mean Northrop Grumman employees are employed by the government?
You spend $12 on a movie ticket. Is the projectionist employed by you? The box office personnel? The on-set supplier of craft services?
> it would remove broad market price discovery from allocation of medical services.
Like we have broad market price discovery now?
For perfect price discovery, the purchaser of a product must have access to the same information as the provider of a product. Given the average citizen, can they make an informed decision about what the cost of an appendectomy should be? The outrage over the $82,000 hepatitis c cure informs us that no, they don't. And even if they did: is the average healthcare consumer going to refuse to purchase a life-saving drug or procedure because it's too expensive? The purchaser in this situation _has no bargaining power_. They cannot determine whether or not to purchase a life-saving service due to cost! It's buy it or _perish_.
For-profit healthcare is a hostage situation. In a hostage situation, market forces are moot.
0. http://kff.org/medicare/fact-sheet/medicare-spending-and-fin... 1. http://www.forbes.com/sites/danmunro/2014/02/02/annual-u-s-h...
Frontline did an interesting comparison of the UK, Japan, Germany, Taiwan, and Switzerland [2].
[1] http://www.pbs.org/wgbh/pages/frontline/sickaroundtheworld/c...
[2] http://www.pbs.org/wgbh/pages/frontline/sickaroundtheworld/c...
"In Britain, you never get a doctor bill. These systems tend to have low costs per capita, because the government, as the sole payer, controls what doctors can do and what they can charge."
That's plain wrong - there is still private health care here in the UK and, as far as I know, they charge what the market will bear.
Of course, most people use the NHS - but in the smallish city I am in (Edinburgh - 450K people) there are a number of private hospitals.
Private healthcare is generally seen as a way of keeping senior medical staff happy as they get to work at the NHS and do private healthcare work on the side.
Basically: I like private health insurance with guaranteed issue, community rating, and a coverage mandate.
Eh? Universal healthcare doesn't mean price regulation. The price signals are still there but you now have a very large public buyer able to negotiate prices with very big private suppliers. How is that not better than the current system where large numbers of citizens cannot afford adequate healthcare and big companies can extort whatever price they want out of those seeking access to life-saving drugs?
> They also have a valid concern that single-payer would distort and degrade the health care system.
Degrade how? Universal healthcare can still work with e.g. privately-run hospitals and clinics. You don't need the government to hire all the medical practitioners; just pay for the cost of treatment.
Already you can see that changes in the way Medicare reimburses and measures outcomes have impacts on the way services are delivered today, and Medicare is just a fraction of the overall market for health care in the US.
The federal government doesn't hire all the practitioners. They just fix all the prices.
At any rate, there's a difference between disagreeing with an argument and pretending that it doesn't exist, as other comments on this thread did.
(I am in part assuming the mantel of the GOP argument against single-payer here; I prefer the Swiss system to the NHS, but unlike most Republicans I strongly believed that a national solution was needed for health insurance and financing.)
http://data.worldbank.org/indicator/SH.XPD.PCAP
What you are suggesting is essentially that market failures have made private health care "too big to fail." Not a reasonable argument when public health is at stake.
Second, "lack of single-payer insurance" isn't why Americans overpay for health insurance. We have collusion between cartels of buyers and sellers (hospital chains and insurance companies) with secret price lists, funded by HR managers several hops away from the actual demand for services. It is probably enough to decouple insurance from employment. The Swiss, for instance, don't have a single-payer system, and they also pay far less than the US on health care.
(That latter argument, unlike the ones I've written about previously on this thread, actually does represent some of what I believe).
I'm not sure I follow. Price signals are based on demand. The same demand is still there in the sense that customers still interact with private health providers. The only thing that changes is payment is now handled by a single government system. Uncle Sam guarantees you access and his guys sort out the payment with the private provider, later.
> The (slow, error-prone) political process is engaged in every buying decision.
I'm not sure I agree with your premise for a start (i.e. publicly ran organisations are necessarily slow and error prone) but setting that aside, why is bulk billing between government financiers and the private health providers not an option? The government knows how much demand they have for XYZ product or service so they can negotiate based on volume. Have I missed something?
Price signals require both a supply side and a demand side. Government funded healthcare likely increases demand, since it reduces cost on an elastic good. However, it also reduces supply, since it reduces payment.
(There's a good discussion of this at http://www.cato.org/blog/price-controls-rise-latin-america)
To put it another way... if we passed a law saying that all programmers could charge at most $30/hr [edit: which is a good wage compared to other non-degree requiring jobs] we would have increased programmer demand (since now more businesses can afford programmers) and would also have less total programmers since many would switch careers to meet their financial needs. Something similar would happen in the medical industry with a single large federal buyer.
> The government knows how much demand they have for XYZ product or service so they can negotiate based on volume. Have I missed something?
This is also missing the supply side. When you take money from one group and give it to another it is very very important to look at what happens to the group you've taken from in addition to the group you've given to.
The real value in healthcare hasn't been created yet. It's in the drugs of the future. Changing the incentive structure for health startups changes how many people found healthcare startups.
A system with basically a single buyer is a reverse monopoly (ie http://en.wikipedia.org/wiki/Monopsony). If you find you're building a product for essentially a single customer... you should probably found a different company. They're not going to voluntarily pay you anywhere near what you'd make in a real market.
I'm not arguing for the government to fix the cost of drugs or health services. I'm arguing for the government to guarantee access to a minimum set of healthcare products and services and then negotiate price with the providers based on uptake. From a consumer perspective, this is much better. Far better than buying said products and services directly from a monolithic private entity.
From a supplier perspective, this is less good and there may be some incentive to artificially limit supply. But that's why we have governments in the first place: to take over in cases where the market is unable or unwilling to function in a way that is beneficial to society as a whole. If private hospitals decide to limit the number of e.g. heart procedures per year then government needs to step in and either regulate or take other measures to ensure the delivery of essential services.
2. If the reason is passing laws saying you have to give them a price break (as you imply in paragraph 2), how is that not price fixing?
Because you want to stay in business and there are other healthcare providers the government could use instead? Including those providers that are publicly funded?
In the case of expensive drugs, there are a myriad things the government could do including taxpayer subsidies, government health loans and placing limits on the length of the period a private company can exercise monopoly control over substances deemed necessary for universal health.
Okay, now suppose that you have a patent on a particular drug or device or procedure and as a result are the monopoly provider of it. Where does the government go to get the lower cost alternative? Where is the downward pressure on your prices?
>>> Because you want to stay in business and there are other healthcare providers the government could use instead?
>> Okay, now suppose that you have a patent on a particular drug or device or procedure and as a result are the monopoly provider of it. Where does the government go to get the lower cost alternative? Where is the downward pressure on your prices?
> Please refer to my points re subsides, loans and limits. These are not insurmountable problems.
So first you say that market forces will still be in play because the government could always go elsewhere. Then when provided with an example of a situation where market forces cannot come into play, you suggest that legislation can fix it. That is EXACTLY what tptacek was the problem, the loss of MARKET incentives and information.
> I'm not sure I follow. Price signals are based on demand.
No, no they're not. They're based on supply AND demand. This is literally econ 101. http://en.wikipedia.org/wiki/Supply_and_demand
Normally demand goes down as price goes up because more and more entities get priced out of the market. With the government as the sole (or very nearly sole) buyer demand is constant because the government quite literally has a mandate to supply healthcare to the citizens. That means that suppliers have no incentive (short of avoiding legislative action aimed at them which they can cheaply and easily dodge through lobbying) to bring prices down. It's in their interests (read profit motive) to supply as much as they can at as high of a price as they can. This is the problem that people are talking about.
> 1. If the government is guaranteeing it'll pay, why give them a price break?
Why indeed? The threat of legislative action? See my comments above re: lobbying. Got a way around that? Most of the population of the US would be VERY interested to hear how you circumvent it. So far the only halfway viable strategy is what Lawrence Lessig is doing with mayday.us and that's a long way from making it a solved problem.
2. If the reason is passing laws saying you have to give them a price break (as you imply in paragraph 2), how is that not price fixing?
Again, see comments re: lobbying. Unless there is no possible way to circumvent the lobbying problem you're simply proposing that we replace one broken system which you dislike -- and rightly so, it's not that great -- with another broken system which you like. Sure you like it better but others do not. We're at the point of arguing about opinions.
"But other countries do it just fine!" you say. Okay sure, but which other countries with single payer systems have the kind of demographics that we do here in the US? Answer: none. They're all relatively small countries (relative to 310mm people) with rather homogeneous demographics (again at least compared to the US).
It MIGHT work OK and it MIGHT not be more broken than the system we have now but those aren't guarantees.
Once again: universal health doesn't mean price regulation. Like any private insurer the government can negotiate for lower prices when multiple providers exist and subsidise the cost when they do not. I also see no problem with limiting monopoly control over life saving substances. That's why we have governments. To act in the best collective interest.
This is what bugs me. You're arguing against what you THINK I'm arguing, not against what I'm ACTUALLY arguing.
I'm not saying that American healthcare is a paragon of efficiency and low cost. Nor am I arguing against "commie health system" but instead that the idea that having a SINGLE purchaser of medical care will quite likely result in less good information about prices and as a result less efficiency.
Right now in the US we have a problem where not enough price information is known: almost no doctors list prices anywhere that a person can find PRIOR to going to a doctor. How could that be remotely efficient?
Wanna buy some Microsoft stock? OK just call up a million people who may or may not tell you how much they want for their shares. Depressed yet? That's how terrible the price information is in the medical world. It's no wonder everything is so damn expensive.
http://well.blogs.nytimes.com/2014/08/05/why-we-should-know-...
http://www.nytimes.com/2013/05/08/business/hospital-billing-...
Yes you can trot out the tired old trope about "but medical care isn't something you can't shop around for!" which is true really only in trauma cases where minutes are the difference between life and death. Got a cold? You've got time. The flu? You can check around. Broken bone? Uncomfortable yes but realistically you could spend 15 minutes on doctor-yelp so long as it's not a blood-gushing compound fracture. Mess up a joint like say an ACL? They're not going to operate on you the same day anyhow so might as well spend an hour reading reviews. Having a kid? Guess what, there's a roughly 9 month lead time on that one. You could spend a week shopping around.
> Once again: universal health doesn't mean price regulation.
If the government is the only buyer of medical care and they "negotiate" for discounts and don't do business with people who "charge too much" then that's EFFECTIVELY regulation. It might not be in the technical sense; there might be no law saying "an ACL surgery costs $4200" but if the sole purchaser of ACL surgeries says it's not willing to pay more than $4200 that kinda-sorta sets the price.
You can argue 'til you're blue in the face on technicalities and whatnot but if it walks like a duck and quacks like a duck most people will agree that its a duck.
Good. Because it isn't. American healthcare is a laughing stock in the developed world. Per capita, Americans spend more of their income on healthcare than countries with universal health. Ironically, health outcomes for Americans are actually worse.
http://www.stiglitz-sen-fitoussi.fr/documents/overview-eng.p...
> You could spend a week shopping around.
You can shop around for elective procedures. If you are sick however, shopping around is a terrible and exploitative burden. You're sick. Your primary concern should be to get help and get better, not whether or not you can afford it.
> If the government is the only buyer of medical care and they "negotiate" for discounts and don't do business with people who "charge too much" then that's EFFECTIVELY regulation. It might not be in the technical sense; there might be no law saying "an ACL surgery costs $4200" but if the sole purchaser of ACL surgeries says it's not willing to pay more than $4200 that kinda-sorta sets the price.
This isn't what I'm saying at all.
Firstly, I'm not saying the government is the sole buyer of healthcare services because experiences the world over (UK, Australia etc) have shown there's plenty of room for private insurers.
Secondly, I'm not saying that prices are kinda-sorta fixed. What I am saying is that if the government decides apriori that ACL surgeries (whatever that is) are something that's important to universal health, and something everyone should have access to, they subsidise the cost. Period. Whatever it is.
If multiple providers exist, they opt for the cheaper option. If they're getting stiffed by all the private providers then the government has two options: (i) they can decide to offer ACL surgeries in public hospitals for a lower price; (ii) (in the case ACL surgeries depend on some very expensive bit of licensed kit controlled by a single supplier) they can set limits on the amount of time that supplier can wield exclusive control over this technology. Break the monopoly, lower the price. Recall that they've decided beforehand ACL surgery is something everyone should access to.
Well, right there you have a problem. The U.S. has a larger % of the economy tied up in healthcare, and arguably worse services than any other civilized country:
http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS
the countries with the very best healthcare spend 10% of their GDP, the U.S. spends 7% MORE (17% according to the World Bank). And we're talking about very inefficient bureaucracies in most cases.
Every time I read about it, I'm amazed at how they can be so screwed up.
I have better healthcare than 99.9 of the U.S. population and I live in Uruguay - it is literally unbelievable for many that I can pay U$ 40 and get unlimited ER services with an ambulance at my door, doctor house visits for something like a fever, and amazing healthcare for U$ 150/month (plus small co-pay costs).
http://internationalliving.com/2013/06/the-worlds-best-healt...
And that's taking into account a very inefficient bureaucracy, with a corruption case affecting the government's perception right now.
http://www.latinnews.com/component/k2/item/61446.html?period...
Edit: further downthread, another poster found out the exact same data earlier
https://news.ycombinator.com/item?id=8130257
Second Edit: in any case, the solution is going to be very hard and will require a very strong leader - I'm sorry for the U.S. that Obama didn't turn out to be the solution. There are no easy answers, I can understand what tptacek says about the Republicans not wanting such a massive nationalization of 17% of the GDP, and I can understand the Democrats looking at the mess and wanting to get it under their control.
I don't know if the U.S. has a strong surgeon's union, but there are several healthcare unions here in Uruguay that can raise their salaries at will by threatening (and actually going on) strikes.
You realize the wealth of the top 10% of Americans, right? That inherently means you're wrong, and you were exaggerating to a hyper extreme.
I don't think you are likely to have better healthcare than the top 50% of Americans in fact. The top 50% of Americans have healthcare coming out their ears, in terms of spending, check-ups, early diagnosis, and in fact too much medical care - which is part of the cost problems, Americans are the most over-tested and over-doctored people in the world.
You realize very few Americans with a full time, decent paying job are not covered by proper health insurance, right? That gives them access to some of the best medical treatment options, doctors, and technology on the planet.
The US has many of the best health facilities and doctors in the world. In fact the US healthcare system is first world, it's the cost structure that is the problem, not the quality of the facilities and doctors.
The net worth for a one percenter in the United States is about 8 million dollars, or a salary of about 160.000 a year. To be a five percenter, you just need to earn about 80.000 a year, so yes, I definitely have better healthcare than someone making 80.000 in the U.S.
https://news.ycombinator.com/item?id=7257345
How do I believe I have better healthcare? Exactly in the opposite situations to check-ups - in situations where I need urgent medical services, or when there's an expensive or complicated condition requiring specialist services.
In the U.S., ambulance service is EXTREMELY limited and expensive (how the hell can it cost 20.000 dollars for a visit?), and you basically cannot have home visits by a doctor. I pay U$ 25 for ambulance services, and for an extra U$ 5 I get house visits by a doctor (as long as it's reasonable and I don't overuse the service).
Look at this stat:
http://en.wikipedia.org/wiki/House_call
"In the early 1960s, house calls by doctors were 40% of doctor-patient meetings. By 1980, they were 0.6%."
compare to a freaking 76.6% in Uruguay
heck, it seems it's a disruption-ready area:
http://edition.cnn.com/2014/07/31/health/doctor-house-call-a...
"The US has many of the best health facilities and doctors in the world. In fact the US healthcare system is first world"
Absolutely true. If I had a strange disease, or I wanted to be operated on by the absolute best doctors, I'd go to the United States.
It's the treatment for the "common man" which fails miserably.
I can get an appointment for any specialist within a week, and if it's a serious condition and I'm not picky, next-day or same-day (this is not true of most Uruguayans, I pay extra for that). Every Uruguayan can, and usually does, get at least once a year, same-day house doctor visits.
If I got one of these expensive conditions (say, the discussed cure for Hepatitis C), government will pay for my treatment (ok, there's lobbying, delays, sometimes bribes and other problems, but they will end up paying).
If I need a transplant, there's a national transplant service, same for prothesis, burns, cancer, etc.
Not a single Uruguayan has to file bankrupcy due to medical conditions (he can get destitute due to not working, which is a different problem).
So, Americans might be over-doctored in early health care, but they don't have access to some services which seem basic and essential, and are believed to be every man's right in my country.
Also, because it smacks of socialism, and socialism is considered a moral evil that creates an underclass of lazy underachievers who don't understand the dignity of a hard day's work and only want to feed at the government trough. And of course by implication vote for the other party.
It's probably also worth pointing out that it being the way things are done in Europe and elsewhere only makes it even more offensive, because Republicans believe in American exceptionalism - which implies at its core that our way is Just Better, and everyone else is Just Worse.
[1]https://en.wikiquote.org/wiki/Grover_Norquist
tldr; money, politics and xenophobia.
If American politicians sported their sponsors logos like nascar drivers do, things would become much clearer.
The idea that politicians assume public policy positions because they're captured by donors is sometimes true, but it's incorrect as often as not.
They only need to contribute to a few key people to influence lawmaking.
A significant number of politicians (of both parties) will oppose single-payer on principle. A significant number will oppose it based on what they think their electorate wants. Some will vote for single-payer on principle. And some are on the fence or just don't care.
Lobbyists are paid big money to ferret out these few and influence them.
Basically, an independent board of experts does a cost-benefit analysis on new drugs (note - they don't call it cost-benefit, but whatever).
If the drugs are "worth it", then the Australian government massively subsidises them. If they aren't "worth it", then people can still get them, but they cost more. Insurance companies rarely pay for them. Patients can pay for them, but they'll usually find an alternative.
Pharma companies then set their prices to a reasonable level.
Effectively, you have a monopoly buyer (the government) and a monopoly seller (the patent holder). This is, in theory, far superior to the situation where there's a monopoly seller and a huge number of buyers.
Of course, the US is doing God's work, by overpaying for drugs. This effectively subsidises drug research, and allows all the more socialist countries to freeload.
Another way of looking at it is that the government is paying what the drug is worth, and no more, alongside banning direct-to-consumer advertising, and heavily restricting marketing to doctors, and is therefore setting extremely direct incentives for drug companies. i.e. it is a market operating between experts with equal access to time and evidence. The money spent on marketing and advertising to consumers (who have little expertise) and doctors (who often don't have the time to make a serious judgment) not only massively increases costs, but also distorts the market.
The US cannot get in on this, too, without destroying the drug industry, which depends on revenue from the American customer base. Other systems are possible, but one should demonstrate their effectiveness before destroying the old system.
So, yeah, like the grandparent said, the US is "unfairly" subsidizing the rest of the world. It would be nice if other countries shared the load, but the US can't force them.
The mining sector often makes similar arguments whenever proposals are made to increase resource taxes and it's always a bunch of hot air. Introducing a government buyer to negotiate down the price of essential drugs (such as this Hep-C cure) will not put Big Pharma out business. It may impact profits but they'll still make billions upon billions of dollars.
Manufacturers have to offer a 23.1% discount, plus further discounts if prices rise faster than inflation. That's why some drugs have "penny pricing", basically Medicaid pays $0.01 for each unit of drug because of the mandatory discounts.
Now, the interesting question is: if this were the case -- if acquiring a patent on a drug means that you agree to the government setting a maximum price -- would this drug have ever been developed in the first place?
Over 30 Billion Dollars, about 1/3 of all biomedical research funding in the US is paid from tax money. The 2/3 that is left is divided between non-profit, hospitals, and drug companies. The one asking the state to grant patents is the drug companies, which is where the VC part kicks in.
It is worth talking about if this is a good idea. The sacrifice need to be talked about, openly, and admitted. It would be good to see research that show how the world would look like if that part of the 2/3 which is paid from drug companies would shrink. Maybe ask, experiment and test what happens if the incentive model could use other incentives than state granted patents. Calculate how much wealth society would gain, and could be reinvested into research, if poor people with work debilitating sicknesses was allowed to buy generic and get treated.
That said... pharma companies are pretty greedy entities. I know a certain ex-pharma rep closely and she's no fan of her former employers. I can dislike the greed, but I can't blame a company for trying to make a profit.
It isn't the benevolence of the butcher, baker or brewer that puts dinner on the table.
Basically, boiling down to "wanting money for profit" is greedy and evil/bad. But wanting "free money" or benefits/products is not, because well, it's not profit. Egh, don't think I articulated that quite nicely.
To me, the distinction is irrelevant. Wanting stuff is natural, whether your needs necessitate it or not.
Anyway, my point was that me being greedy is completely irrelevant. Even if I am, hypocrisy does not make one incorrect, and what does it have to do with the substance of my comment?
> I'm not sure it's a good idea because it might well reduce investment in new drugs (developing drugs is like VC, you fail a lot and occasionally hit it out of the park) and that would be a bummer.
10% is a profit. 50% is a profit. Heck even 100% is an understandable profit. You can and should blame them for screwing humanity over and above what is reasonable.
So a $5mm R&D project turns into a $50mm slog through approval and then you get to sell, what a few tends of thousands of units? Let's just say that you could somehow magically sell 50k units. That means you've got to charge $10k per unit just to cover the engineering & approval and stuff and that's before a DIME of profit. So a pacemaker costs $20k not because it's got $15k of raw materials inside of it but because the FDA says that it has to get approved and approval isn't cheap.
I'm sure drugs are the same way. It might cost only a few dollars to actually manufacture the ingredients in a pill but the R&D necessary to know WHAT ingredients might have cost $100mm. So even if you sell a million of them they've got to cost $100 each before you take anything else into account.
I am not suggesting that it would be OK for the government to basically just take the patents. But it also wouldn't surprise me if they did.
Which is more valuable: a definite life saved today or a potential life saved in the future? This is the constant struggle of everyone involved in economics. We never know the counter-factuals.
Perhaps some drug company is on the verge of an HIV vaccine but because of the eminent domain seizure they stop the program and we get a hep-C cure but lose an HIV cure. That'a a "bummer" or "travesty" or "moral outrage" or whatever you want to call it.
In this light it makes sense that Sovaldi costs so much. Gilead needs to get back their research costs and make as much profit as possible while there is a market for their product. A lot of these profits are going back into their research costs for HIV; this is the next disease they are trying to cure.
Even with a genetic non transmittable disease, such as Type 1 diabetes (which I have), there is less profit to be made with a cure and so there is a need to charge more for the product.
Right now I have to pay monthly for 2 forms of insulin, needles, testing supplies, hormones, pain killers. Due to the long term circulatory, liver, and kidney problems that come with this I can look forward to increased costs from additional medications and treatments over time (think blood thinners, ace inhibitors, dialysis). On top of this there is all of the cost for recurring labs and other medical testing that I have to go through on average about once every 3 months.
So yeah; give me one big expensive cure and a healthier future to look forward to and I will take that any day over "managed treatment" and control programs that will still lead to poor life conditions for me in the long run.
And this is very close to "miracle cure". I had Hep C when I was younger (blood transfusion) and I went on interferon and ribavirin, which was 6 months of daily (maybe twice daily, can't remember) shots. And I was told that there was still a very good chance that I would never be "cleared". And sure this is $1000 a pill, but that six months of shots was not cheap either. Probably at least half.
( http://www.bostonglobe.com/business/2014/05/31/costly-new-he... )
The piece where I am assuming you got your numbers from...
"Federal grants and Pharmasset’s research outlays on Sovaldi totaled more than $14 million, but Gilead spent tens of millions more to shepherd the drug through clinical trials."
That is only a tiny fraction of the cost invested by Gilead on this drug. If you read the whole article you would see that Gilead took a big risk and paid $11B to purchase Pharmasset before this drug had been approved so they could bring it to market. Their total cost is well over that by now.
Now add to this the fact that when a pharmaceutical company makes a new "wonder drug", the other big pharma companies get right to work on make workable variants so they can get a piece of that pie.
Take a look at GILD on Yahoo Finance sometime and you will notice they are remarkably flat lately despite great profit margins, P/E, etc... This is because investors are worried long term. A variant product could destroy the profitability; now add to that the government wants to get involved and start regulating the prices on this thing. PFFH
But how, and when, will the price be negotiated? I think it's important for pharmaceutical companies (or any company at all, really), that they know they can sell their product for its intended price. Otherwise they can't calculate whether the operation will be profitable or not (unless they know the maximum price beforehand).
But how do you set a sensible maximum price on a drug before it is developed?
I'm sure the government's investment department would be visited by a lot of lobbyists, for example.
But once you start doing buying private companies, you have to actually RUN those companies. The government isn't really very good at that.
But the US government is also very bad at negotiating pharmaceutical pricing. The flip side is that most other developed countries in Europe are good at it. So in order to keep their margins and meet financial targets, pharma companies just raise prices on their US customers to subsidize the thinner margins that European governments pay for drugs. It's hard to reform this because the pharma lobby is quite powerful and makes a lot of money off the status quo.
If Medicaid/Medicare were smart, they'd put out a tender when the competition arrives. Go to both companies and say "We're will to buy enough drug to treat 1 million HCV patients, what can you do for us."
A short summary of the issue: In the past HCV had terrible treatments. You would have to take interferon (makes you feel like you have the flu) for 8-12 months. Plenty of patients took their chances on their disease not getting worse. Even if you stuck it out, the cure rate was maybe 50%. The total cost of therapy? Around $80K (for most patients, others were much more expensive).
Gilead comes out with a wonder drug Solvaldi (it truly is revolutionary). You still have to take interferon, but only for 12 weeks. If you do tough it out, there is a 90% chance you're cured. The price? A little more than than the $80K of the previous treatments.
Honestly, if you think about it, for a little more money, society is get a much greater benefit. So what's the big deal?
Well, because this drug works so well and has much better side effects, all those HCV patients who before said "I'll wait and see if HCV gets worse" are now saying "cure me!". There are millions of HCV patients in the US, so if we tried to treat them all right now, it would bankrupt the system.
I can tell you exactly what will happen with Sovaldi and the newer drugs being launched later this year: governments and insurance companies will say "no, unless you are very sick, you're not getting this drug". It will still cost the same to cure everyone, but it'll just take longer.
Now, if you were Gilead, what would you do? Especially if competitors were coming? I know what I'd do, I'd go to Medicaid and Medicare and say "lets make a deal, I'll give you 50%, 60%, 70% off if you agree to let everyone get treated this year". The gov't would have to pay out a lot in one year, but they'd be getting a deal and Gilead would get their return.
Later this fall Gilead and Abbvie will be launching all oral combinations, so interferon will pretty much be gone by end of 2014.
[1] See eg http://www.nytimes.com/2013/12/07/business/fda-approves-pill...
The problem with US health care is invisible for-profit conglomerates that controls and owns major health care facilities across the country. There ridiculous charges works because consumers don't care because they don't pay out of pocket majority of expense in lot of cases. So all these conglomerates have to do is to make sure laws allow them to charge 3X-4X fees like above to have amazing margins.
One way to solve this issue in US is to promote non-profits to operate health care facilities. This can be done by government subsidies and grants in the same way they are provided to universities and research community. There are 200 major cities in US. If we want to build 2 great non-profit hospitals in each cities, it would cost 2 X 200 X 0.5 = $200 billion even at the higher end. If we spread this out to 5 years, it's less than $50 billion per year - drop in the bucket for current health care bugets. These hospitals can then charge 2X-3X lower amounts to drive the price down. Without introducing non-profit competition to for-profit organization we are in same situation where operating systems are controlled by one commercial company and there are no open source alternatives resulting in redicluously high prices and stagnated innovation.
- First, all medical and pharmaceutical companies should be non-profit. Health care is a basic human right, not a privilege reserved for those who can cough up the sick prices for treatment.
- The government should run all medical schools so doctors graduate without debt. You serve for 10 years as payment for the schooling. After this, you are free to pursue other goals.
- Pharmaceutical companies should hold no patents, no trademarks. Companies should be merged so their collective brain trust can solve the world's medical woes. Non-profit company results. R&D payed for by taxpayer money.
I severely dislike for-profit business in general, but more so when medicine is concerned. Human beings always should trump profits. Always. Doctors should become doctors to solve problems, not enrich themselves.
Sadly, I have several medical conditions which need repair, but even with insurance, I cannot afford the co-pays, upfront deductible costs, and other sick for-profit BS I would need to meet in order for my insurance to kick in at 100%. I have seriously toyed with moving overseas simply for tax-payed health care.
I'm in IT (non-profit), make OK money, but I refuse to enrich the for-profit system. I simply do without, because it's sick when your insurance costs equal 1/3 of your paycheck.
The polio vaccine was funded by federal money, which it allowed it to be reproduced freely.
It's not as well-defined as you'd think in all aspects. I suppose you've read some of the comments in this thread about R&D costs? Care to suggest how much this new government agency should get per year? Oh, and don't forget, if you don't give it enough funding, then you're an "evil bastard and you want people to die". And if you don't give them enough extra every year, then you're also an "evil bastard and want sick children to die".
I don't really mean to say you're an evil bastard or anything. But that is exactly the sort of arguments and public discourse that will crop up if such an agency were ever to be founded. And because "cost" or "profit" is not there anymore to temper the investment vs payout, the agency will end up being a funding black hole of guilt.
Sure, giving everyone access to health life is a noble ideal. But as I've said before, illness and death never end and we're fighting a losing game if we intend on beating it with public money. But who knows, maybe if we devote all of society's resources to the problem, we could eventually grant everyone healthy immortality. But we have no idea if/when that might happen.
I think the most sensible argument here is that there is nothing that is guaranteeing that you are on one particular side of that intercept, despite wherever you currently may be.
We're systematically collecting data on this exact conundrum - how much is a treatment that was, until recently, infinitely expensive worth? there's a whole lot of room for smart people to make a difference.
This is nothing new; the railroads were built with massive federal subsidies and guarantees (making Ayn Rand's hard-on for railroads hilariously misguided). Especially the trans-contitental railroad which was seen as a massive risk and almost entirely funded by US federal government loan guarantees. The US Interstate highway system and the internet were funded initially by the government as well.
Looking at it like a startup, the expected annual return on biomedical R&D if you have a huge portfolio is something like 10% even with the unrecovered government investment. In other words, better than investing in an S&P index fund and worse than broadly investing in early stage tech. Without the early government investing at a loss, it might not even be worth the money of the private sector to follow on for the development compared to other things they could be investing their money in.
Right now the NIH's budget is $30.1B. US pharmaceutical companies invest $48.5B in 2012. Note, that's only R&D expenditure, not all the capital costs (e.g. Pfizer spent $1B for a manufacturing unit in Ireland; the drug failed due to safety).
Same place it does now - the end user. But the money would cover research, development, trials, data mining, treatment, etc. It would not be used to mislead medical practitioners, patients, or government officials.
> Right now the NIH's budget is $30.1B. US pharmaceutical companies invest $48.5B in 2012. Note, that's only R&D expenditure, not all the capital costs ...
US-centric may not be the best way to come at a discussion about health costs (no disrespect - just it's not typical in the world stage, and you'd be hard pressed to find someone that considers it best practice).
How does that R&D component stack up against the industry's Sales and Marketing budget? (Hint - less than admirably.)
To answer your first point, you're saying that the cost of R&D would still be born by the end-user (patient). What's the benefit then if it's not saving money?
If you think a gov't run company would not pull some of the same stuff the private ones do, I'd have you take a look at some of the corruption that goes on at public companies. A gov't run company might not be for-profit, but someone there has budgets and revenue numbers to meet. The motive to cut corners doesn't disappear when it's run by the gov't.
And why shouldn't a pharma company have a sales and marketing budget? Do you think your doctor has time to sit down and analyze all of the clinical trial data? Getting in front of a doctor and touting the benefits of your drug sounds like a good thing to me. Sure, some sales reps use slimy tactics, but overall educating physicians doesn't sound like a bad thing.
Also if it were open (globally) countries could be the checks and balances for each other.
And no, pharma don't need marketing. Marketing is always used to trick people into buying things, or to create brand awareness, it's never about the good of the recipient. Dr's could simply have a database where they look up drugs and supporting material (i.e pull information rather than push marketing).
If marketing didn't exist, this need could easily be fulfilled by organizations acting on behalf of the buyers. Consumer buying guides and professional industry-specific journalists publishing reviews are examples.
Much R&D may be billed back to the US, or at least billed in USD, but I'd suggest it's been quite some years since even a sizeable minority of actual R&D work has been done within the borders of the US.
Quoting Ben Goldacre in "Bad Pharma" (2012)
"In the past, only 15 per cent of clinical trials were conducted outside the USA. Now it’s more than half. The average rate of growth in the number of trials in India is 20 per cent a year, in China 47 per cent, in Argentina 27 per cent, and so on, simply because they are better at attracting CRO business, at lower cost. At the same time, trials in the US are falling by 6 per cent a year (and in the UK by 10 per cent a year). As a result of these trends, many trials are now being conducted in developing countries, where regulatory oversight is poorer, as is the normal standard of clinical care."
* CRO = Clinical Research Organisation. Precisely as disarmingly harmless as it sounds.
> To answer your first point, you're saying that the cost of R&D would still be born by the end-user (patient). What's the benefit then if it's not saving money?
I wasn't suggesting that money won't be saved.
To the contrary - the cost of R&D is a relatively small component of the current pharma mechanism. Once you eradicate the need to (expensively) mislead and befuddle regulators, medicos, patients, there's a lot more to spend on actual R&D.
> If you think a gov't run company would not pull some of the same stuff the private ones do, I'd have you take a look at some of the corruption that goes on at public companies. A gov't run company might not be for-profit, but someone there has budgets and revenue numbers to meet. The motive to cut corners doesn't disappear when it's run by the gov't.
Rest assured my idealistic interpretation of this impossible world precludes this kind of corruption. :)
> And why shouldn't a pharma company have a sales and marketing budget? Do you think your doctor has time to sit down and analyze all of the clinical trial data? Getting in front of a doctor and touting the benefits of your drug sounds like a good thing to me. Sure, some sales reps use slimy tactics, but overall educating physicians doesn't sound like a bad thing.
Oh my. I'd strongly recommend you spend a few hours to read through Goldacre, B.'s book (ref above). The idea that the pharma industry is 'helping' doctors in their on-going education is ... worrisome, at best.
(Hint: overall .. it's a horrendously bad arrangement for everyone involved apart from the shareholders in the relevant big pharma org)
Medicare alone spends something like $50B per year on drugs, add also Medicaid and other agencies (VA and such), and there you have an ability to invest comparable numbers as the pharma companies do currently.
Could you quantify this? Is it because they're tackling the very difficult diseases and not the low-hanging (profitable) fruit?
The polio vaccine was developed with federal money and was provided for free as a result. There is no way the polio vaccine could have been done more efficiently if the private sector did it.
>“If it is cost-effective from a societal standpoint, it is not necessarily going to be cost-effective from a health plan standpoint,”
/sigh. Can we have a public option for health insurance already, please?
We have a pharma company not playing by the normal, "gentlemen's rules of the game" that backload costs. Instead, they've got a great cure and are going with the "fuck you, pay me" model. Which, fine, more power to them. I really have no trouble with it. However, unfortunately, it doesn't play well with our current racket of employer-based health insurance.
Really? We as a society have the knowledge necessary to cure a person's illness and yet they go untreated.
In the absence of IP legal protection, this would be a non-issue.
The company that developed this sold to Gilead for $11 billion (less than a WhatsApp) after 13 years. Why would Gilead even buy the company if they could copy the drug for free? And why spend 13 years building this company with no hope for an exit? Especially when drug development is incredibly risky. For every success like this, there are many companies that fold with nothing to show after burning eight or nine figures of capital.
Owning abstractions is mind-bogglingly absurd, akin to thoughtcrime.
Because Pharmasset (who Gilead bought) would have invested all that money they did without IP legal protection anyway, right? That would be totally logical.
If there was no IP protection, everything would have to be publicly funded. Which I'm ok with, but you can't go halfway.
Part of the problem is the mental models behind our concept of "health care." Everyone who is looking for a new drug (and I don't just mean researchers -- it is a broad cultural phenomenon and patients are equally guilty) or miracle cure tends to have their blinders on with regards to more effective but less splashy treatment modalities.
So far, this looks a major PITA for employees, because (correct me if I got this wrong) a new job with a new insurance policy meant that all (chronic) diseases you may have had in the past would not be covered by your new policy.
Now this time there is also a problem that affects the insurance companies - they might not profit from the cured liver (a cured client is a cheaper client), but they'll have to pay for the cure.
Seriously: NOBODY wants to switch insurance every five years. Why not get rid of this stupid requirement and allow people to shop for health insurance on a free market? Your health and your insurance is nobody's business, especially not your employer's.
because (correct me if I got this wrong) a new job with a
new insurance policy meant that all (chronic) diseases you
may have had in the past would not be covered by your new
policy.
Also the US does not force people to purchase their health insurance through their employer. You are free to get it elsewhere but usually getting it through your employer works out to be a better deal.
plus all these new cures and treatments further along their knowledge and ability which means the process continues and eventually they can chip away at the big problems in medicine.
and lets be honest, there are people working their both in the labs and the executive level who want to feel they did good and some want the recognition.
this story https://news.ycombinator.com/item?id=8131808 gives me hope that nothing is beyond their eventual reach
They said that the cost of treatment isn't really that out of line with other treatments insurance covers. The issue is that the payment is completely front loaded. Because of this, combined with the frequent changes of insurance in the U.S., you end up with one insurance company footing a giant bill for a customer who may end up switching providers in a year.
Here's an incentive to be healthy: medicine is not magic. It's not like I can opt to do all sorts of unhealthy stuff and just keep paying a certain sum to live a completely normal life.
For example, you mention smoking. I smoked for 5 years, one pack a day on the average. After a while, I was coughing my self to sleep at night. There's no pill or treatment that will fix that magically and allow you to keep smoking. Only quitting made it go away.
I mean, at least for me, my health is a very significant priority in my life.
I guess that US should just buy a billion pills with huge discount and then distribute those as they please.
If you have a better idea on how to reward pharmaceutical R&D, I'm all ears.
US: 3.2 million people with Hepatitis C. Price $1000/pill.
Egypt: 12 million people with Hepatitis C. Price $10/pill.
Drug companies get shit on when they charge a high price in developing countries. When they create a program that offers drugs at prices that are much more affordable, they get shit on as well.
I see the difference in price as a good thing.
Then they come up with a cure that you only need to take for a short time, works for most patients and has few side effects, and they get shit on again.
Best to keep coming up with $xxx/year therapies that you have to take for the rest of your life and only benefit a few percent of people that take them. (Statins for primary prevention, I'm looking at you).
I was disappointed.
Edit: Larger costs spread over the long term are more palatable than lesser costs compressed into a shorter term. Humans are bad at estimating scale.
We are past the age when one guy running a small lab can just decide to cure something. It's going to take lots of money and lots of researchers and lots of false leads to find each new thing, and even after that there are going to be lots and lots of tests.
The cycle of greed existed happily for millennia before science started being blamed on it.
They are entitled to profit if you want to argue for that, they are not entitled to destroying society.
$80,000 for hepatits cure is only the start if you let them get away with this.
Some company funds R&D for a product with their own money and sells it at their own price and since we as a society deem it too high we throw them in jail? Yea we need reforms but acting like an extremist doesn't help.
There are even laws making it illegal for the government to try to negotiate the price for medicaid/medicare.
So why not laws to protect the price?
We can regulate the consumer side but not the manufacturer side of the price?
Don't fall for the illusion that corporations are people and deserve freedom to price things however absurdly when there is a crisis.
Millions of lives have been saved (and will continue to be saved) by drugs that are now in the public domain.
A wonder for Pfizer's bank account maybe.