6 ms·

While shocking people have to keep in mind that pricing relates to more than cost but more importantly value. The fact that a particular product or service was

by larrys 11y ago

While shocking people have to keep in mind that pricing relates to more than cost but more importantly value. The fact that a particular product or service was priced a certain way for years is not as relevant as it might seem on the surface. I pay a very low price for a generic drug (copay doesn't even matter) but the value to me of the drug is much higher. The non generic version is priced perhaps 10 times as much but still provides value at that price. Perhaps these prices in the article are super inflated but my point is the fact that a drug was priced at $5 per tablet and now is $50 per tablet is not a non-starter in itself. Who cares what the % increase is? The question is does the drug provide value at $50 per tablet? Also a particular person's ability to pay doesn't really factor into this. I am sure the drug companies would love to be able to charge some classes of people more (Larry Ellison) and some less (jobless). But they are not allowed to do this. I know people's automatically will think "ripoff" (and maybe it is a "ripoff" whatever that is) however a price increase in itself does not indicate a ripoff. "Cycloserine, a drug used to treat dangerous multidrug-resistant tuberculosis, was just increased in price to $10,800 for 30 pills from $500 " Right and I don't take any drugs that even cost $500 for 30 pills (let alone $10,800). So this article could have just easily compared the pills that I buy 30 for $10 to 30 for $500 and written a similar article.

powera 11y ago
No, unless you feel that people who use medicine are nothing more than a resource to be exploited. Were it not for a (probably illegal in this case) monopoly, other people would be able to make that same pill for $5 per tablet. And then nobody would pay $50 for the pill. Supply and demand IS NOT the same as "charging everyone as much as they will pay for everything". It's inherently unfair to everyone who has to buy that thing, and that's why people think it's a rip-off, because it is. [edited to remove some hyperbole]
- qsucvatz 11y ago
  Quite an opener, do you practice hyperbole often? Fairness is whatever two people will agree to pay for a service. Imagine how silly it would be if we all paid the same amount for seats on an airline - which is how it worked before deregulation. Many seats would go empty, the utility would not be maximized, and we'd be missing out on the great transfer of wealth from the rich to the poor.
  - powera 11y ago
    And everybody also generally hates the airlines and feels the pricing is unfair because of this. You might say that without it airplanes would not fly at all, and you might be right. But it's incredulous to claim that without these profits the medicine would not exist at all; it has existed already for 5 decades. (And we have patents as a system specifically designed to allow for funding the creation of drugs)
- ikeboy 11y ago
  The question is, if it costs me X to make a product, and the value to you is 100X, who captures the 99X spread? I could charge 99X, you would pay it since the value is higher, and I'll capture most of it. I could charge 2X, it's still worth it to me to produce it, and you'll capture most of it. What value here is most fair? Why is one value fairer than another? The standard economic answer is "let the market decide", and that works, up to a point. If you reject that, you need a better way to decide. Let's say you have a government agency set prices: how do they choose? You've just pushed the problem around. Saying "get rid of the free market" in only a solution if you have a concrete alternative.
  - powera 11y ago
    I'm not saying "get rid of the free market". I'm saying that in a monopoly situation, there is no free market. And if there is no free market, claiming "the free market will work" is insanity, so we have no choice but to try something else.
    - ikeboy 11y ago
      What is that something else? In a monopoly situation, the price tends towards 100X in my example, which is still less than the value provided. Even in a monopoly, nobody's paying more for a product than they receive value from it. Yes, it may still seem unfair, but what else are you proposing? Nobody should sell the product? How is that making anyone better off?
      - ohazi 11y ago
        "Something else" is removing the artificial constraints that created the monopoly in the first place.
        ikeboy 11y ago
        What artificial constraints are those?
  - pxndx 11y ago
gdrulia 11y ago
What you're saying makes perfect sense on paper, but unfortunately reality is as always slightly more complex. Such simple thinking is full of the holes for exploitation and there will always be someone who will exploit them. Medicine is especially sensitive, because medicine can be priceless in value for the human who needs it, but that same human might not be able to pay that much. You can introduce government help, but if such exploitation is allowed, it would simply end up in a waste of tax money. One thing is to allow companies who invest into products creation to receive the profit from it by using monopoly and charging as much as they like, and completely another is buying the company and starting to charge many times higher for the medicine that was available for years. This might not be a popular view, but I can see no reason to think that such an exploitation should be tolerated. I simply cannot see how such things benefit humans as a society. I might be missing here something and if I do, please let me know.
- ikeboy 11y ago
  The question is how we can fix this systematically without making bigger problems. Should a government agency set prices? What if the company stops making the drug, then? The price is high because no other companies are willing to make it for lower, after all. Note that the drug in question is not under patent. I don't think you'd advocate for literally forcing the company to make it and sell it for a specific price. There's also the concerns I went over here: https://news.ycombinator.com/item?id=10248817 https://news.ycombinator.com/item?id=10248817
  - toomuchtodo 11y ago
    > Should a government agency set prices? Yes. > What if the company stops making the drug, then? A non-profit government sponsored entity manufactures the drug at cost.
    - ikeboy 11y ago
      Why not skip step 1, then? Let the company sell it for however much it wants, and the non profit competes them out of business?
alkonaut 11y ago
You seem to believe that one could assign a value to a drug, and that rational actors in a market would choose to buy that drug at a cost at or under this value.

by larrys 11y ago

powera 11y ago

No, unless you feel that people who use medicine are nothing more than a resource to be exploited. Were it not for a (probably illegal in this case) monopoly, other people would be able to make that same pill for $5 per tablet. And then nobody would pay $50 for the pill. Supply and demand IS NOT the same as "charging everyone as much as they will pay for everything". It's inherently unfair to everyone who has to buy that thing, and that's why people think it's a rip-off, because it is. [edited to remove some hyperbole]

qsucvatz 11y ago
Quite an opener, do you practice hyperbole often? Fairness is whatever two people will agree to pay for a service. Imagine how silly it would be if we all paid the same amount for seats on an airline - which is how it worked before deregulation. Many seats would go empty, the utility would not be maximized, and we'd be missing out on the great transfer of wealth from the rich to the poor.
- powera 11y ago
  And everybody also generally hates the airlines and feels the pricing is unfair because of this. You might say that without it airplanes would not fly at all, and you might be right. But it's incredulous to claim that without these profits the medicine would not exist at all; it has existed already for 5 decades. (And we have patents as a system specifically designed to allow for funding the creation of drugs)
ikeboy 11y ago
The question is, if it costs me X to make a product, and the value to you is 100X, who captures the 99X spread? I could charge 99X, you would pay it since the value is higher, and I'll capture most of it. I could charge 2X, it's still worth it to me to produce it, and you'll capture most of it. What value here is most fair? Why is one value fairer than another? The standard economic answer is "let the market decide", and that works, up to a point. If you reject that, you need a better way to decide. Let's say you have a government agency set prices: how do they choose? You've just pushed the problem around. Saying "get rid of the free market" in only a solution if you have a concrete alternative.
- powera 11y ago
  I'm not saying "get rid of the free market". I'm saying that in a monopoly situation, there is no free market. And if there is no free market, claiming "the free market will work" is insanity, so we have no choice but to try something else.
  - ikeboy 11y ago
    What is that something else? In a monopoly situation, the price tends towards 100X in my example, which is still less than the value provided. Even in a monopoly, nobody's paying more for a product than they receive value from it. Yes, it may still seem unfair, but what else are you proposing? Nobody should sell the product? How is that making anyone better off?
    - ohazi 11y ago
      "Something else" is removing the artificial constraints that created the monopoly in the first place.
      - ikeboy 11y ago
        What artificial constraints are those?
- pxndx 11y ago

gdrulia 11y ago

What you're saying makes perfect sense on paper, but unfortunately reality is as always slightly more complex. Such simple thinking is full of the holes for exploitation and there will always be someone who will exploit them. Medicine is especially sensitive, because medicine can be priceless in value for the human who needs it, but that same human might not be able to pay that much. You can introduce government help, but if such exploitation is allowed, it would simply end up in a waste of tax money. One thing is to allow companies who invest into products creation to receive the profit from it by using monopoly and charging as much as they like, and completely another is buying the company and starting to charge many times higher for the medicine that was available for years. This might not be a popular view, but I can see no reason to think that such an exploitation should be tolerated. I simply cannot see how such things benefit humans as a society. I might be missing here something and if I do, please let me know.

ikeboy 11y ago
The question is how we can fix this systematically without making bigger problems. Should a government agency set prices? What if the company stops making the drug, then? The price is high because no other companies are willing to make it for lower, after all. Note that the drug in question is not under patent. I don't think you'd advocate for literally forcing the company to make it and sell it for a specific price. There's also the concerns I went over here: https://news.ycombinator.com/item?id=10248817 https://news.ycombinator.com/item?id=10248817
- toomuchtodo 11y ago
  > Should a government agency set prices? Yes. > What if the company stops making the drug, then? A non-profit government sponsored entity manufactures the drug at cost.
  - ikeboy 11y ago
    Why not skip step 1, then? Let the company sell it for however much it wants, and the non profit competes them out of business?

alkonaut 11y ago

You seem to believe that one could assign a value to a drug, and that rational actors in a market would choose to buy that drug at a cost at or under this value.