10 ms·

Valeant’s Drug Price Strategy Enriches It, but Infuriates Patients and Lawmakers

42 points by pbhowmic 11y ago

steve19 11y ago
I can't help but think these drug companies are playing a very dangerous game. The last thing they want is regulation, but of they keep this up that's what they will get...
- amelius 11y ago
  Who cares about long-term issues anymore?
- stingraycharles 11y ago
  What I'm wondering about, however, as a European who never actually sees his own medical bills, how this will affect me or the country I live in. Will the powers that are in charge of buying medicine just suck it up and pay the bill? Will they use the power of the collective to get a better deal? How does this work?
  - seren 11y ago
    There is usually a contract between the state and the company providing the drug. An example there : http://www.fiercepharma.com/story/france-strikes-big-hep-c-treatment-deal-gileads-sovaldi/2014-11-20 http://www.fiercepharma.com/story/france-strikes-big-hep-c-t... The thing is that is the state refuse to reimburse the drug it won't likely be prescribed/used, so the company has an incentive to sell at an acceptable price. You can also read some of : https://en.wikipedia.org/wiki/Bevacizumab#Society_and_culture https://en.wikipedia.org/wiki/Bevacizumab#Society_and_cultur... to see how new drugs are approved or not, taking into account their cost and effectiveness.
  - visarga 11y ago
    I think countries could first try to legalize cheap generics of that drug, as it already happens in India. But then an economic war would ensue. Each country would counter sanctions with other sanctions. Then negotiations would come, where a middle point would be sought between the trade blocks, similar to WTO, or patent portfolios and non-aggression pacts.
    - curiouscats 11y ago
      Yes and the factors are the costs of accepting the government granted monopoly pricing (free markets don't have government saying you can't sell this thing because some other people have gotten the government to say only they can sell it) and the costs of saying we don't accept the current patent system. The costs of fighting the existing copyright/patent cartel led by the USA is very high. Countries want to avoid this and if the cost is diverting a few percent of their GDP to the USA's drug companies they likely will do so. If however that diversion because too great they will have huge incentive to decide the cost is too high and we have to fight the USA's governments policies put in place at the behest of their drug companies. The costs will be enormous to the countries that fight, especially at first. The USA is enormously rich and can accept losses internally and use economic power to punish those defying it's dictates. If several rich countries decide to align with India (which seems to be by far the leading advocate for fighting the copyright/patent cartel) costs to the USA will also get step. At some point step enough that others force the government to stop using the rest of the USA's economic clout to benefit the drug companies. But I think it is very unlikely the other countries could sustain the losses long enough for the USA to cave. It is a big if, but if China grows well economically for the next 20 years it is much more likely India and China together could work together on this to bring together a large coalition. I don't think China and India would work together as strong allies but they could come together in this area if the USA continues to demand large percentage of countries GDP be diverted to the USA drug companies. All these types of things get complicated. It isn't as if the Drug companies don't understand this same path. They will obviously seek to use corruption in other countries as successfully as they have in the USA to get those governments to act in their interest for cash payments that are peanuts compared to the costs those governments will place on their citizens to benefit the drug companies. The payments to corrupt political parties doesn't only work in the USA, it works most everywhere. So don't count out the insane movement of wealth into drug companies coffers changing anytime soon. If you want to be practical buying stock in these companies will likely reward you well. That is what I have done. I can understand if you think it is repugnant to profit from corruption in the political system on such a massive scale (very little corruption ever impacts multiple percentage points of GDP but, as this does). That is likely a higher ethical decision, weighing my options I accept that "hit" to my karma. If I were given the authority to decide the policy I would make a decision that would harm my stocks but I am not given that option. And based on my estimates of likely future outcomes betting on the USA political parties staying very corrupt in relation to providing benefits to drug companies seems a very likely bet.
  - scott_s 11y ago
    My understanding is that European countries do have regulation which prevents this kind of pricing, so the drugs are reasonably priced in your market. See point 3 in this piece on the price increase from the former hedge-fund guy: http://www.skepticalraptor.com/skepticalraptorblog.php/skyrocketing-prices-of-an-anti-parasitic-drug-the-facts/ http://www.skepticalraptor.com/skepticalraptorblog.php/skyro...
- venomsnake 11y ago
  Regulation is nasty. There are better and more humiliating ways to deal with that. Using eminent domain to seize patents and just the state manufacturing generics come to mind.
  - dangerlibrary 11y ago
    Violating property rights is more acceptable than regulation? I suspect that's not a widely held perspective. I, for one, really appreciate that things that belong to me continue to belong to me unless I sell them or don't pay my debts. I would accept fairly onerous regulation long before I would give up what I consider to be a fundamental benefit of not living in a failed state.
    - venomsnake 11y ago
      > nor shall private property be taken for public use, without just compensation. Eminent domain is constitutional. That is the whole idea - try to profiteer too much from your government granted monopoly, and we may seize it while paying you some price that the courts deem fair. Couple of cases like that and the industry will tone itself down. And no regulations.
      - dangerlibrary 11y ago
        Regulation is also constitutional.
        venomsnake 11y ago
        True that. And it depends on the situation which approach is better. If all drugs companies are profiteers - then regulation is the better and more effective option. If only some bad actors among them are - why burden the rest with regulation.
      - raverbashing 11y ago
        Example: Antrax medication
- refurb 11y ago
  Great point! A Republican senator said the exact same thing: "You guys figure it out on your own or else we'll figure it out for you and trust me, you won't like our ideas."
  - amelius 11y ago
    So this senator thinks that if the pharma companies figure it out, the government will like it? Shouldn't the ideas be coming from both sides in order to achieve a result that is satisfactory for both sides?
    - fluidcruft 11y ago
      The point is that there's only so much Congress can do to ignore the public. Legislative capture only works with a docile/annoyed/disinterested public. The public can and will eviscerate the status quo when it's out for blood. A Congress forced to action by the public isn't particularly interested in appeasing pharma companies and neither are the other lobbies. If they isolate themselves, pharma companies are easily hung out to dry in order to preserve the overall status quo.
    - cyphunk 11y ago
      Off topic: can't find a way to contact in your profile. So... do you have more information in relation to this trail of thought: https://news.ycombinator.com/item?id=9870061 https://news.ycombinator.com/item?id=9870061 Not that you have to. However, I'd be interested to follow such a conversation.
      - amelius 11y ago
        I don't have more information, I guess. It was just a thought that popped into my mind when reading the article. If you still want to discuss it further, then please provide your contact details in your profile. I'll check it later.
        cyphunk 11y ago
- deleted 11y ago
  [deleted]
pweissbrod 11y ago
Personally I see this as a result of the incentives for the drug makers to be completely disconnected from the people that depend on their product. Imagine other markets were similar: one company purchases the rights to manufacturing all laptops and now you must pay $10K for the same thing you used to buy for normal prices last week. Its interesting to consider how many people's lives would be greatly improved (or even saved) if vendor exclusivity rights were reduced in this market.
- pweissbrod 11y ago
  "For now, with Congress in the hands of Republicans and election season in full swing, quick government action on drug prices is considered unlikely." (Quote from the article) Not that I associate with any political party, but it confounds me why a political party would like to have a reputation for upholding such extreme corrupt corporate opportunism.
  - protomyth 11y ago
    Both major parties have their favorite cronies. Although you could shorten that statement to "election season" and expect the same outcome.
jbandela1 11y ago
Looking into it, according to http://www.drugpatentwatch.com/ultimate/tradename/CUPRIMINE http://www.drugpatentwatch.com/ultimate/tradename/CUPRIMINE, Cuprimine is not covered by patents, so all the talk about intellectual property and evil patents is moot point. We have 2 main competing interests. 1. Creation of new treatments 2. Affordability of treatments At the same time, we should have a minimum burden on the free market in terms of regulation. I believe we can do this with the following. 1. For all non-patent drugs, Medicare signs a 5 year contract to supply the drug at a given cost. This will allow off-patent drugs to be available for low expense. 2. For drugs covered by patent, Medicare should negotiate a price based on differential Quality adjusted life year, with the price per quality adjusted life year set by law. For example, if we set the price for quality adjusted life year to $100,000, then Medicare should pay up to $100,000 for a treatment that gives a person 1 quality adjusted life year. Drug companies are allowed to sell to others and negotiate a private sales without other regulation on what price they charge. I want the pharmaceutical industry to be one with outlandish rewards because I want very smart people to be thinking outside the box and taking risks with they try in pursuit of cures for disease. Even the rewards to life-saving medication should have outlandish rewards. If we continue to see outrage at pharma about the price of life-saving treatments (see Solvida), we will see companies shift resources away from such treatments to more elective drugs such as sexual enhancements, requiring less sleep, etc where they can still have great rewards without the moralizing by critics.
dangerlibrary 11y ago
Just give Medicare and Medicaid the ability to negotiate and publish what they pay for drugs. Right now they are forced to accept a (self reported) average market price for every drug they buy. They buy over half the prescription drugs in this country. They can be a bully and negotiate great prices for themselves. And once the prices are public, see if any insurance companies are willing to accept a 5000% premium over the Medicaid price.
- refurb 11y ago
  Medicaid and Medicare are very different beasts. Medicaid takes 23.1% off the top of most drugs and typically pays the least out of any insurer (including the private ones). There is even a "best price" provision that says Medicaid either gets a hefty discount or best price, whichever is lower. I wouldn't worry about Medicaid. Medicare (for physician administered drugs) pays the average of all the private payers, which isn't a bad way to do it. For prescription drugs, it pays list price, except for the Part-D private plans which already negotiate. To be honest, allowing Medicare to negotiate is a little bit like any company "negotiating" with the gov't. It's a take it or leave it proposition and is a more like "price by fiat" than a negotiation. Having the federal gov't negotiate drug prices is not necessarily a panacea. The largest US insurance companies cover 30-40M lives, that larger than the population of Canada. Yet, they pay more for drugs than Canada does. You know why? Because the Canadian gov't makes them (back to the "price by fiat").
  - dangerlibrary 11y ago
    You're right about Medicaid paying the least and having very favorable pricing in general. Also repayment rates vary wildly by state, etc. But the baseline rates are still based off the reported average price. Drug manufacturers know that the government will always pay some fraction of sticker price, regardless of the volume the average price is based on. CMS can't negotiate in the face of these dramatic price hikes. And yeah, it's price by fiat, through the market. Welcome to government contracts - plenty of people have become very rich in this space, and I have no sympathy to those that complain about their slim profit margins on incredibly high volume transactions. It's a big job. Get rich doing it, or get out of the way for someone who will, because it's got to get done.
jbapple 11y ago
FTA: "It says patients are largely shielded from price increases by insurance and financial assistance programs the company offers, so that virtually no one is denied a drug they need. But Mr. Pearson, a former McKinsey & Company consultant, has said he has a duty to shareholders to wring the maximum profit out of each drug." This is the classic coupon strategy to maximize revenue - if you set the price very high but offer discounts to those who can't afford it, you can get more revenue than if you pick a single price that would be less than what some buyers were willing to pay and more than others were willing to pay. In the first example of the article, an older woman (Susan Mannes) had to take on a second job to afford a drug that Valeant increased the price on in order to keep her husband from dying. I don't know what the upper limit is on how much Susan and Bruce Mannes will pay for this drug, but I suspect it is limited only by their current assets. In other words, Valeant could feasibly take everything they own. I don't see a way out of this without regulation, and I don't see that happening when the pharmaceutical industry has been so effective at influencing federal laws.
- bwb 11y ago
  Agreed, there needs to be some hard regulation here to change his environment. Worst case the government needs to regulate what they charge, and find a way to do that without killing all R&D.
  - chrischen 11y ago
    They should go beyond that and punish actors of bad faith.
    - basseq 11y ago
      What's bad faith? If I have a product that someone will pay a million dollars for, why wouldn't I charge a million dollars for it? Because the alternate is death? So what—I'm not a charity. There's a morality question here, and maybe I'm an asshole in this scenario, but being an asshole in of itself isn't a crime.
      - 11y ago
smoorman1024 11y ago
This strategy only works because its so expensive and time consuming to bring a competitor drug to market. If it was a lot easier to get a competitor drug approved and to market then this strategy wouldn't work. Alex Tabarrok has some enlightening opinions on the FDA: http://marginalrevolution.com/?s=FDA http://marginalrevolution.com/?s=FDA
- jobu 11y ago
  Most of these went off patent years ago though. Why is it so hard to bring a generic drug to market? The drugs already have studies proving their efficacy, so the only issue should be a clean manufacturing process.
  - wiredfool 11y ago
    In some cases, the generics have to prove that they have the same effectiveness/bioavailabilty as the brand name. The brand names have been restricting the distribution of the drugs to prevent this from happening easily.
  - smoorman1024 11y ago
    You're right but regulatory approval is still difficult even for generics. http://marginalrevolution.com/marginalrevolution/2015/09/generic-drug-regulation.html http://marginalrevolution.com/marginalrevolution/2015/09/gen...
  - ef4 11y ago
    Because the red tape is fairly extreme. For proof, look at the prices a company like this will pay to "buy up" a generic drug. You'd think it wouldn't really be possible to sell rights to a generic drug for millions of dollars, but apparently you'd be wrong. I guarantee there are manufacturers in the world who would be happy to have the business and could rapidly drive the price down to competitive generic levels again. But they are locked out by the bureaucracy.
cryoshon 11y ago
Relevant is the soon-to-be-debated-in-public trade agreements regarding "intellectual property" (a regressive and fiercely harmful concept spawned by greed, but that's a rant for another day) as it relates to the pharmas. The pharma companies lobbied very, very heavily for certain clauses in that trade agreement. The TTP is going to send their profits through the roof, likely by forcing formerly exempt countries on board with their pricing scheme. The money that the pharmas have allows them to corrupt the political process, enabling them to abuse patients/insurers with insane prices... this isn't new. The incentives are completely fucked at every level of organization: drug development, clinical trials, patient care. As far as the claim that patients are largely shielded from price increases, I think that claim was made in bad faith, and is laughably disconnected from reality. Medical-debt induced bankruptcy is very alive and well in the US, and is not in other places.
- curiouscats 11y ago
  Very true. The medical-debt induced bankruptcy is the most visible sign but don't ignore the absolutely huge sums diverted from paying employees to paying for health care The USA pays more than twice what the rest of the rich world does for health care for no better outcomes. This isn't only due to drug pricing but drug pricing obviously cost USA consumers tens of billions a year in increased health care costs just because it means they pay much more in insurance costs (or even less noticeable have part of their paycheck diverted to pay inflated drug prices impact on health care costs) doesn't mean they avoid the high costs of this corruption based pricing. It is very unlikely this system is going to be changed. It has been going on for decades at huge costs to the USA. Maybe (I just maybe) it will be slowed some if the public forces politicians to reduce the amount of the paybacks given by the Democrats and Republicans to drug companies at the expense of everyone else. Meaningful change is very unlikely. The parties are far too corrupt at this point to make any significant change in policy likely.
prodmerc 11y ago
Huh, I just realized that the Silk Road or a similar online black market could literally save lives in this case. People could sell generics and alternatives that are not yet approved by the FDA or whatever local authority at a much lower price, everyone wins (except the government and Big Pharma). Though there would be a lot of fraud I presume, sellers with fake pills and the like...
- mdpopescu 11y ago
  If fraud wasn't a problem for hard drugs, I doubt it will be significant for these.
  - prodmerc 11y ago
    There were cases of fraud, of course, but the review system apparently worked ok (never used it myself). However, dealing drugs that literally save one's life is kind of a big deal - one month's supply of a fake or impure medication could be deadly, unlike with shitty MDMA and meth...
- cheepin 11y ago
  In certain cases you would save a whole ton of money for exactly the same drug since India has much less patent protection (you can't patent the drug, only how you make it, and for a shorter period). According to their Wikipedia page, they have the 3rd largest pharmaceuticals industry, but only 14th in total value. It seems like you could get some pretty good prices on drugs at comparable quality. Hopefully the TPP agreement doesn't interfere.
  - prodmerc 11y ago
    Can't buy them legally, though, can you?
    - DanBC 11y ago
      Depending on the meds it's probably cheaper for some people to fly to UK and get a private prescription.
elipsey 11y ago
I think one of the big dreams of the "biotech revolution" that has yet to materialize is to reduce barriers to entry in drug manufacturing so that drug companies have less market power, at least for drugs/jurisdicitons that are not encumbered by IP. Fingers crossed... Isn't it weird that we can custom order synthetic cathinones from China for $100, but apparently no one has tried this with theruputic drugs?
rdancer 11y ago
The cost of living in India being much lower than the US, what prevents people from engaging in medical tourism for prescription drugs combined with a nice trip abroad? I think ultimately this is what will keep caps on the price that can be charged -- if your treatment plan costs you $1,800/month, and a return airfare from the U.S. East Cost to Delhi is $600 return on a budget, I'm surprised people are not booking trips right now.

42 points by pbhowmic 11y ago

I can't help but think these drug companies are playing a very dangerous game. The last thing they want is regulation, but of they keep this up that's what they will get...

amelius 11y ago
Who cares about long-term issues anymore?
stingraycharles 11y ago
What I'm wondering about, however, as a European who never actually sees his own medical bills, how this will affect me or the country I live in. Will the powers that are in charge of buying medicine just suck it up and pay the bill? Will they use the power of the collective to get a better deal? How does this work?
- seren 11y ago
  There is usually a contract between the state and the company providing the drug. An example there : http://www.fiercepharma.com/story/france-strikes-big-hep-c-treatment-deal-gileads-sovaldi/2014-11-20 http://www.fiercepharma.com/story/france-strikes-big-hep-c-t... The thing is that is the state refuse to reimburse the drug it won't likely be prescribed/used, so the company has an incentive to sell at an acceptable price. You can also read some of : https://en.wikipedia.org/wiki/Bevacizumab#Society_and_culture https://en.wikipedia.org/wiki/Bevacizumab#Society_and_cultur... to see how new drugs are approved or not, taking into account their cost and effectiveness.
- visarga 11y ago
  I think countries could first try to legalize cheap generics of that drug, as it already happens in India. But then an economic war would ensue. Each country would counter sanctions with other sanctions. Then negotiations would come, where a middle point would be sought between the trade blocks, similar to WTO, or patent portfolios and non-aggression pacts.
  - curiouscats 11y ago
    Yes and the factors are the costs of accepting the government granted monopoly pricing (free markets don't have government saying you can't sell this thing because some other people have gotten the government to say only they can sell it) and the costs of saying we don't accept the current patent system. The costs of fighting the existing copyright/patent cartel led by the USA is very high. Countries want to avoid this and if the cost is diverting a few percent of their GDP to the USA's drug companies they likely will do so. If however that diversion because too great they will have huge incentive to decide the cost is too high and we have to fight the USA's governments policies put in place at the behest of their drug companies. The costs will be enormous to the countries that fight, especially at first. The USA is enormously rich and can accept losses internally and use economic power to punish those defying it's dictates. If several rich countries decide to align with India (which seems to be by far the leading advocate for fighting the copyright/patent cartel) costs to the USA will also get step. At some point step enough that others force the government to stop using the rest of the USA's economic clout to benefit the drug companies. But I think it is very unlikely the other countries could sustain the losses long enough for the USA to cave. It is a big if, but if China grows well economically for the next 20 years it is much more likely India and China together could work together on this to bring together a large coalition. I don't think China and India would work together as strong allies but they could come together in this area if the USA continues to demand large percentage of countries GDP be diverted to the USA drug companies. All these types of things get complicated. It isn't as if the Drug companies don't understand this same path. They will obviously seek to use corruption in other countries as successfully as they have in the USA to get those governments to act in their interest for cash payments that are peanuts compared to the costs those governments will place on their citizens to benefit the drug companies. The payments to corrupt political parties doesn't only work in the USA, it works most everywhere. So don't count out the insane movement of wealth into drug companies coffers changing anytime soon. If you want to be practical buying stock in these companies will likely reward you well. That is what I have done. I can understand if you think it is repugnant to profit from corruption in the political system on such a massive scale (very little corruption ever impacts multiple percentage points of GDP but, as this does). That is likely a higher ethical decision, weighing my options I accept that "hit" to my karma. If I were given the authority to decide the policy I would make a decision that would harm my stocks but I am not given that option. And based on my estimates of likely future outcomes betting on the USA political parties staying very corrupt in relation to providing benefits to drug companies seems a very likely bet.
- scott_s 11y ago
  My understanding is that European countries do have regulation which prevents this kind of pricing, so the drugs are reasonably priced in your market. See point 3 in this piece on the price increase from the former hedge-fund guy: http://www.skepticalraptor.com/skepticalraptorblog.php/skyrocketing-prices-of-an-anti-parasitic-drug-the-facts/ http://www.skepticalraptor.com/skepticalraptorblog.php/skyro...
venomsnake 11y ago
Regulation is nasty. There are better and more humiliating ways to deal with that. Using eminent domain to seize patents and just the state manufacturing generics come to mind.
- dangerlibrary 11y ago
  Violating property rights is more acceptable than regulation? I suspect that's not a widely held perspective. I, for one, really appreciate that things that belong to me continue to belong to me unless I sell them or don't pay my debts. I would accept fairly onerous regulation long before I would give up what I consider to be a fundamental benefit of not living in a failed state.
  - venomsnake 11y ago
    > nor shall private property be taken for public use, without just compensation. Eminent domain is constitutional. That is the whole idea - try to profiteer too much from your government granted monopoly, and we may seize it while paying you some price that the courts deem fair. Couple of cases like that and the industry will tone itself down. And no regulations.
    - dangerlibrary 11y ago
      Regulation is also constitutional.
      - venomsnake 11y ago
        True that. And it depends on the situation which approach is better. If all drugs companies are profiteers - then regulation is the better and more effective option. If only some bad actors among them are - why burden the rest with regulation.
    - raverbashing 11y ago
      Example: Antrax medication
refurb 11y ago
Great point! A Republican senator said the exact same thing: "You guys figure it out on your own or else we'll figure it out for you and trust me, you won't like our ideas."
- amelius 11y ago
  So this senator thinks that if the pharma companies figure it out, the government will like it? Shouldn't the ideas be coming from both sides in order to achieve a result that is satisfactory for both sides?
  - fluidcruft 11y ago
    The point is that there's only so much Congress can do to ignore the public. Legislative capture only works with a docile/annoyed/disinterested public. The public can and will eviscerate the status quo when it's out for blood. A Congress forced to action by the public isn't particularly interested in appeasing pharma companies and neither are the other lobbies. If they isolate themselves, pharma companies are easily hung out to dry in order to preserve the overall status quo.
  - cyphunk 11y ago
    Off topic: can't find a way to contact in your profile. So... do you have more information in relation to this trail of thought: https://news.ycombinator.com/item?id=9870061 https://news.ycombinator.com/item?id=9870061 Not that you have to. However, I'd be interested to follow such a conversation.
    - amelius 11y ago
      I don't have more information, I guess. It was just a thought that popped into my mind when reading the article. If you still want to discuss it further, then please provide your contact details in your profile. I'll check it later.
      - cyphunk 11y ago
deleted 11y ago
[deleted]

pweissbrod 11y ago

Personally I see this as a result of the incentives for the drug makers to be completely disconnected from the people that depend on their product. Imagine other markets were similar: one company purchases the rights to manufacturing all laptops and now you must pay $10K for the same thing you used to buy for normal prices last week. Its interesting to consider how many people's lives would be greatly improved (or even saved) if vendor exclusivity rights were reduced in this market.

pweissbrod 11y ago
"For now, with Congress in the hands of Republicans and election season in full swing, quick government action on drug prices is considered unlikely." (Quote from the article) Not that I associate with any political party, but it confounds me why a political party would like to have a reputation for upholding such extreme corrupt corporate opportunism.
- protomyth 11y ago
  Both major parties have their favorite cronies. Although you could shorten that statement to "election season" and expect the same outcome.

jbandela1 11y ago

Looking into it, according to http://www.drugpatentwatch.com/ultimate/tradename/CUPRIMINE http://www.drugpatentwatch.com/ultimate/tradename/CUPRIMINE, Cuprimine is not covered by patents, so all the talk about intellectual property and evil patents is moot point. We have 2 main competing interests. 1. Creation of new treatments 2. Affordability of treatments At the same time, we should have a minimum burden on the free market in terms of regulation. I believe we can do this with the following. 1. For all non-patent drugs, Medicare signs a 5 year contract to supply the drug at a given cost. This will allow off-patent drugs to be available for low expense. 2. For drugs covered by patent, Medicare should negotiate a price based on differential Quality adjusted life year, with the price per quality adjusted life year set by law. For example, if we set the price for quality adjusted life year to $100,000, then Medicare should pay up to $100,000 for a treatment that gives a person 1 quality adjusted life year. Drug companies are allowed to sell to others and negotiate a private sales without other regulation on what price they charge. I want the pharmaceutical industry to be one with outlandish rewards because I want very smart people to be thinking outside the box and taking risks with they try in pursuit of cures for disease. Even the rewards to life-saving medication should have outlandish rewards. If we continue to see outrage at pharma about the price of life-saving treatments (see Solvida), we will see companies shift resources away from such treatments to more elective drugs such as sexual enhancements, requiring less sleep, etc where they can still have great rewards without the moralizing by critics.

dangerlibrary 11y ago

Just give Medicare and Medicaid the ability to negotiate and publish what they pay for drugs. Right now they are forced to accept a (self reported) average market price for every drug they buy. They buy over half the prescription drugs in this country. They can be a bully and negotiate great prices for themselves. And once the prices are public, see if any insurance companies are willing to accept a 5000% premium over the Medicaid price.

refurb 11y ago
Medicaid and Medicare are very different beasts. Medicaid takes 23.1% off the top of most drugs and typically pays the least out of any insurer (including the private ones). There is even a "best price" provision that says Medicaid either gets a hefty discount or best price, whichever is lower. I wouldn't worry about Medicaid. Medicare (for physician administered drugs) pays the average of all the private payers, which isn't a bad way to do it. For prescription drugs, it pays list price, except for the Part-D private plans which already negotiate. To be honest, allowing Medicare to negotiate is a little bit like any company "negotiating" with the gov't. It's a take it or leave it proposition and is a more like "price by fiat" than a negotiation. Having the federal gov't negotiate drug prices is not necessarily a panacea. The largest US insurance companies cover 30-40M lives, that larger than the population of Canada. Yet, they pay more for drugs than Canada does. You know why? Because the Canadian gov't makes them (back to the "price by fiat").
- dangerlibrary 11y ago
  You're right about Medicaid paying the least and having very favorable pricing in general. Also repayment rates vary wildly by state, etc. But the baseline rates are still based off the reported average price. Drug manufacturers know that the government will always pay some fraction of sticker price, regardless of the volume the average price is based on. CMS can't negotiate in the face of these dramatic price hikes. And yeah, it's price by fiat, through the market. Welcome to government contracts - plenty of people have become very rich in this space, and I have no sympathy to those that complain about their slim profit margins on incredibly high volume transactions. It's a big job. Get rich doing it, or get out of the way for someone who will, because it's got to get done.

jbapple 11y ago

FTA: "It says patients are largely shielded from price increases by insurance and financial assistance programs the company offers, so that virtually no one is denied a drug they need. But Mr. Pearson, a former McKinsey & Company consultant, has said he has a duty to shareholders to wring the maximum profit out of each drug." This is the classic coupon strategy to maximize revenue - if you set the price very high but offer discounts to those who can't afford it, you can get more revenue than if you pick a single price that would be less than what some buyers were willing to pay and more than others were willing to pay. In the first example of the article, an older woman (Susan Mannes) had to take on a second job to afford a drug that Valeant increased the price on in order to keep her husband from dying. I don't know what the upper limit is on how much Susan and Bruce Mannes will pay for this drug, but I suspect it is limited only by their current assets. In other words, Valeant could feasibly take everything they own. I don't see a way out of this without regulation, and I don't see that happening when the pharmaceutical industry has been so effective at influencing federal laws.

bwb 11y ago
Agreed, there needs to be some hard regulation here to change his environment. Worst case the government needs to regulate what they charge, and find a way to do that without killing all R&D.
- chrischen 11y ago
  They should go beyond that and punish actors of bad faith.
  - basseq 11y ago
    What's bad faith? If I have a product that someone will pay a million dollars for, why wouldn't I charge a million dollars for it? Because the alternate is death? So what—I'm not a charity. There's a morality question here, and maybe I'm an asshole in this scenario, but being an asshole in of itself isn't a crime.
    - 11y ago

smoorman1024 11y ago

This strategy only works because its so expensive and time consuming to bring a competitor drug to market. If it was a lot easier to get a competitor drug approved and to market then this strategy wouldn't work. Alex Tabarrok has some enlightening opinions on the FDA: http://marginalrevolution.com/?s=FDA http://marginalrevolution.com/?s=FDA

jobu 11y ago
Most of these went off patent years ago though. Why is it so hard to bring a generic drug to market? The drugs already have studies proving their efficacy, so the only issue should be a clean manufacturing process.
- wiredfool 11y ago
  In some cases, the generics have to prove that they have the same effectiveness/bioavailabilty as the brand name. The brand names have been restricting the distribution of the drugs to prevent this from happening easily.
- smoorman1024 11y ago
  You're right but regulatory approval is still difficult even for generics. http://marginalrevolution.com/marginalrevolution/2015/09/generic-drug-regulation.html http://marginalrevolution.com/marginalrevolution/2015/09/gen...
- ef4 11y ago
  Because the red tape is fairly extreme. For proof, look at the prices a company like this will pay to "buy up" a generic drug. You'd think it wouldn't really be possible to sell rights to a generic drug for millions of dollars, but apparently you'd be wrong. I guarantee there are manufacturers in the world who would be happy to have the business and could rapidly drive the price down to competitive generic levels again. But they are locked out by the bureaucracy.

cryoshon 11y ago

Relevant is the soon-to-be-debated-in-public trade agreements regarding "intellectual property" (a regressive and fiercely harmful concept spawned by greed, but that's a rant for another day) as it relates to the pharmas. The pharma companies lobbied very, very heavily for certain clauses in that trade agreement. The TTP is going to send their profits through the roof, likely by forcing formerly exempt countries on board with their pricing scheme. The money that the pharmas have allows them to corrupt the political process, enabling them to abuse patients/insurers with insane prices... this isn't new. The incentives are completely fucked at every level of organization: drug development, clinical trials, patient care. As far as the claim that patients are largely shielded from price increases, I think that claim was made in bad faith, and is laughably disconnected from reality. Medical-debt induced bankruptcy is very alive and well in the US, and is not in other places.

curiouscats 11y ago
Very true. The medical-debt induced bankruptcy is the most visible sign but don't ignore the absolutely huge sums diverted from paying employees to paying for health care The USA pays more than twice what the rest of the rich world does for health care for no better outcomes. This isn't only due to drug pricing but drug pricing obviously cost USA consumers tens of billions a year in increased health care costs just because it means they pay much more in insurance costs (or even less noticeable have part of their paycheck diverted to pay inflated drug prices impact on health care costs) doesn't mean they avoid the high costs of this corruption based pricing. It is very unlikely this system is going to be changed. It has been going on for decades at huge costs to the USA. Maybe (I just maybe) it will be slowed some if the public forces politicians to reduce the amount of the paybacks given by the Democrats and Republicans to drug companies at the expense of everyone else. Meaningful change is very unlikely. The parties are far too corrupt at this point to make any significant change in policy likely.

prodmerc 11y ago

Huh, I just realized that the Silk Road or a similar online black market could literally save lives in this case. People could sell generics and alternatives that are not yet approved by the FDA or whatever local authority at a much lower price, everyone wins (except the government and Big Pharma). Though there would be a lot of fraud I presume, sellers with fake pills and the like...

mdpopescu 11y ago
If fraud wasn't a problem for hard drugs, I doubt it will be significant for these.
- prodmerc 11y ago
  There were cases of fraud, of course, but the review system apparently worked ok (never used it myself). However, dealing drugs that literally save one's life is kind of a big deal - one month's supply of a fake or impure medication could be deadly, unlike with shitty MDMA and meth...
cheepin 11y ago
In certain cases you would save a whole ton of money for exactly the same drug since India has much less patent protection (you can't patent the drug, only how you make it, and for a shorter period). According to their Wikipedia page, they have the 3rd largest pharmaceuticals industry, but only 14th in total value. It seems like you could get some pretty good prices on drugs at comparable quality. Hopefully the TPP agreement doesn't interfere.
- prodmerc 11y ago
  Can't buy them legally, though, can you?
  - DanBC 11y ago
    Depending on the meds it's probably cheaper for some people to fly to UK and get a private prescription.

elipsey 11y ago

I think one of the big dreams of the "biotech revolution" that has yet to materialize is to reduce barriers to entry in drug manufacturing so that drug companies have less market power, at least for drugs/jurisdicitons that are not encumbered by IP. Fingers crossed... Isn't it weird that we can custom order synthetic cathinones from China for $100, but apparently no one has tried this with theruputic drugs?

rdancer 11y ago

The cost of living in India being much lower than the US, what prevents people from engaging in medical tourism for prescription drugs combined with a nice trip abroad? I think ultimately this is what will keep caps on the price that can be charged -- if your treatment plan costs you $1,800/month, and a return airfare from the U.S. East Cost to Delhi is $600 return on a budget, I'm surprised people are not booking trips right now.