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> As much as I hate socialism, the only solution appears to be Single Payer. The problem is, "How do we establish a market that provides medication to patients

> As much as I hate socialism, the only solution appears to be Single Payer. The problem is, "How do we establish a market that provides medication to patients who may not be able to afford it while still generating enough profit to allow research and development of new drugs 10 years from now?" Establishing a monopsony doesn't actually solve this problem. It changes the flow of money slightly[0], but it doesn't actually solve the fundamental problem: in the aggregate, R&D costs more than patients are able to provide. Since we're talking about a national scale, we can't use the argument that adding external money to the system - taxpayer funds - would solve the problem, because the two sets - "Patients" and "Taxpayers" - are the same[1]. The funds are still coming from patients, whether they come in the form of insurance premiums or tax withholdings[2]. [0] but a lot less than most people think! Health insurance in the US already is much more like a monopsony than most people realize. [1] Technically not exactly the same, but close enough that, economically, they can be treated as one. [2] One might argue that taxes can vary with income. Aside from the fact that insurance premiums already can (and do) explicitly vary with income, this actually already is the current state: patients on private insurance (and especially the ones with very expensive, luxury health plans) already subsidize patients on public insurance. Changing the system so that we collect these subsidies through tax funds doesn't change the problem (though ironically, it does increase the risk that those funds will be diverted to other government budgets).

jjoonathan 11y ago
If the US bargained with drug companies on more even footing with other countries, we might not get stuck footing such a disproportionate fraction of the bill (R&D and otherwise). > Health insurance in the US already is much more like a monopsony than most people realize. Dead wrong, Medicare part D is hobbled so that the US is not even close to being a half-monopsony, let alone a full monopsony, in the drug market. > in the aggregate, R&D costs more than patients are able to provide. R&D is 10-20% of a typical pharma co's budget. Eroom's law says that in the limit you're correct (until we get over the genetic engineering bump), but there's plenty of room to speculate about constant factors. The pharma business is notoriously infested with rent-seeking shenanigans. See: OP.
- chimeracoder 11y ago
  > If the US bargained with drug companies on more even footing with other countries, we might not get stuck footing such a disproportionate fraction of the bill (R&D and otherwise). That's an odd way to phrase it, because it implies that the amount of research being done globally is constant. But it isn't; it's driven by the available funds. This actually proves my point: a disproportionate amount of the research that happens globally happens in the US[0], and that's because there's enough profit in the US market for companies to conduct that research. If that profit is reduced, then yes, it's possible that the short-term prices would decrease, but at the cost of delaying further discoveries and advances in medicine. That's not an easy tradeoff to make, precisely because it's unclear which choice benefits patients more. It's a much easier choice for a country that has a small population, or for a country that doesn't contribute that much to the global R&D (because the impact would be smaller), but the US is in neither of those two categories. > Dead wrong, Medicare part D is hobbled so that the US is not even close to being a half-monopsony (let alone a full monopsony) in the drug market. I'm actually not referring to Medicare Part D with that footnote, but that's a separate discussion. [0] The US's share has dropped in the last decade or so, but only because China and India have become even more lucrative.
codemac 11y ago
Why do we have to establish a market?
- chimeracoder 11y ago
  By definition, it's a market if there are two or more entities exchanging scarce goods or services. Medical care is a scarce good, medical research is a scarce good, and money is a scarce good, so it's a market, no matter how we structure it. If one (or both) of those parties is a sovereign state, or if we set arbitrary restrictions on the price and/or quantities traded, that doesn't change the fact that it's a market.
  - codemac 11y ago
    That's a much broader definition for the word market than I generally use. Thank you for the explanation.
astazangasta 11y ago
We don't need pharma to pay for R&D. Total pharma R&D on drug development comes to a paltry $26 billion a year. This could easily be paid for by the government. We already have the infrastructure, we just need to fund it.
teh 11y ago
The R&D costs argument is a diversion. Profit margins for Pharma companies are consistently 3-5x of more competitive industries (e.g. car makers [1], [2]). Health is a failed market full of rentier corporations. It's hard to argue against them because they are doing good (inventing life saving medicines) but the opportunity cost of money paid out as profits instead of reinvested into research must be huge. [1] https://ycharts.com/companies/VLKPY/gross_profit_margin https://ycharts.com/companies/VLKPY/gross_profit_margin https://ycharts.com/companies/BAMXY/gross_profit_margin https://ycharts.com/companies/BAMXY/gross_profit_margin [2] https://ycharts.com/companies/PFE/gross_profit_margin https://ycharts.com/companies/PFE/gross_profit_margin

jjoonathan 11y ago

If the US bargained with drug companies on more even footing with other countries, we might not get stuck footing such a disproportionate fraction of the bill (R&D and otherwise). > Health insurance in the US already is much more like a monopsony than most people realize. Dead wrong, Medicare part D is hobbled so that the US is not even close to being a half-monopsony, let alone a full monopsony, in the drug market. > in the aggregate, R&D costs more than patients are able to provide. R&D is 10-20% of a typical pharma co's budget. Eroom's law says that in the limit you're correct (until we get over the genetic engineering bump), but there's plenty of room to speculate about constant factors. The pharma business is notoriously infested with rent-seeking shenanigans. See: OP.

chimeracoder 11y ago
> If the US bargained with drug companies on more even footing with other countries, we might not get stuck footing such a disproportionate fraction of the bill (R&D and otherwise). That's an odd way to phrase it, because it implies that the amount of research being done globally is constant. But it isn't; it's driven by the available funds. This actually proves my point: a disproportionate amount of the research that happens globally happens in the US[0], and that's because there's enough profit in the US market for companies to conduct that research. If that profit is reduced, then yes, it's possible that the short-term prices would decrease, but at the cost of delaying further discoveries and advances in medicine. That's not an easy tradeoff to make, precisely because it's unclear which choice benefits patients more. It's a much easier choice for a country that has a small population, or for a country that doesn't contribute that much to the global R&D (because the impact would be smaller), but the US is in neither of those two categories. > Dead wrong, Medicare part D is hobbled so that the US is not even close to being a half-monopsony (let alone a full monopsony) in the drug market. I'm actually not referring to Medicare Part D with that footnote, but that's a separate discussion. [0] The US's share has dropped in the last decade or so, but only because China and India have become even more lucrative.

codemac 11y ago

Why do we have to establish a market?

chimeracoder 11y ago
By definition, it's a market if there are two or more entities exchanging scarce goods or services. Medical care is a scarce good, medical research is a scarce good, and money is a scarce good, so it's a market, no matter how we structure it. If one (or both) of those parties is a sovereign state, or if we set arbitrary restrictions on the price and/or quantities traded, that doesn't change the fact that it's a market.
- codemac 11y ago
  That's a much broader definition for the word market than I generally use. Thank you for the explanation.

astazangasta 11y ago

We don't need pharma to pay for R&D. Total pharma R&D on drug development comes to a paltry $26 billion a year. This could easily be paid for by the government. We already have the infrastructure, we just need to fund it.

teh 11y ago

The R&D costs argument is a diversion. Profit margins for Pharma companies are consistently 3-5x of more competitive industries (e.g. car makers [1], [2]). Health is a failed market full of rentier corporations. It's hard to argue against them because they are doing good (inventing life saving medicines) but the opportunity cost of money paid out as profits instead of reinvested into research must be huge. [1] https://ycharts.com/companies/VLKPY/gross_profit_margin https://ycharts.com/companies/VLKPY/gross_profit_margin https://ycharts.com/companies/BAMXY/gross_profit_margin https://ycharts.com/companies/BAMXY/gross_profit_margin [2] https://ycharts.com/companies/PFE/gross_profit_margin https://ycharts.com/companies/PFE/gross_profit_margin