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Pharmaceuticals are only about 10% of all healthcare costs [1]. The vast majority of healthcare spending goes to hospitals and doctors, yet the political envir

Pharmaceuticals are only about 10% of all healthcare costs [1]. The vast majority of healthcare spending goes to hospitals and doctors, yet the political environment hyper focuses on drugmakers. Why isn't there a larger focus on reducing the costs of hospitals and healthcare professionals? [1] http://www.pfizer.com/files/about/Position-Role-of-Pharmaceuticals-in-US-Healthcare-Spending.pdf http://www.pfizer.com/files/about/Position-Role-of-Pharmaceu...

saycheese 10y ago
Worth noting this was "Issued by Global Policy & International Public Affairs, Pfizer Inc." (a large pharmaceuticals company) in October 2015 and there is an odd phrase in the footer that reads "Do Not Detail."
- deleted 10y ago
  [deleted]
- Animats 10y ago
  "Detail", in pharma parlance, refers to making sales presentations to physicians. The people who do this were once called "detail men".[1] This has declined somewhat now that pharma can advertise prescription drugs directly to patients. [1] https://www.theatlantic.com/magazine/archive/2006/04/the-drug-pushers/304714/ https://www.theatlantic.com/magazine/archive/2006/04/the-dru...
mseebach 10y ago
Because every time someone gets around to focusing on anything, there's a loud chorus of people who thinks the focus should be elsewhere. The fact of democratic policy making is that it's hugely inefficient, and is rarely able to focus on anything at all, so the only way forward if you want to get anything done is to ride the wave of opportunity when it presents itself.
adevine 10y ago
So what? 10% of all healthcare costs is a gigantic number. And you'll have to excuse me if I take a position paper from Pfizer with a grain of salt.
- cloakandswagger 10y ago
  On what grounds do you dispute the figure?
  - adevine 10y ago
    I'm not disputing the 10% number (though I don't know what all it includes - does it include drug delivery systems, like what is under discussion in OP's article?). I'm disputing the overall conclusion in that paper that "drug costs aren't really worth focusing on." I also dispute the assertion that other areas of health care aren't also being focused on for cost insanity. 10% is still a huge number, and if you happen to be one of the unlucky souls dependent on a medicine that goes up in price by many multiples it's a gigantic deal to you.
- alexqgb 10y ago
  Also, this is arguably the most corrupt aspect of medical pricing. Putting these sociopathic predators under the thumb of good governance satisfies a moral as well as an economic desire.
cle 10y ago
One reason would be if pharma has a sufficiently larger margin than hospitals and doctors. It might be the case that there's more to save in that 10% than the rest of the 90% (especially when the cost of implementing change is considered).
- dexterdog 10y ago
  Yes, but if you cut the cost in half you would be saving 5% of the overall. We all know there is far more than 5% savings in the 90% piece.
  - cle 10y ago
    Perhaps, but at what cost? (I'm playing devil's advocate, I don't know what's the right move here, but I do know that the post I replied to only offered an incomplete picture.)
eberkund 10y ago
I agree, why is it that doctors make such high salaries? Is it because of the long and relatively difficult education and training that they have to go through? That is definitely part of it but in my opinion those salaries (which in many countries are publicly funded) could be reduced drastically by training more doctors. Professional societies have a strong interest in artificially keeping the supply of qualified doctors low in order to keep salaries high. University admissions for medical school continue to be extraordinarily low in proportion to the number of applicants yet there are still shortages in many parts of the country.
- ng12 10y ago
  In the US a lot of non-specialty doctors make around $150-$200k, meaning they're in line with some snot-nosed kid with a bachelor's in CS and an offer from Google. Becoming a doctor isn't the end-all it used to be unless you really love it and/or are really good.
  - iheartmemcache 10y ago
    Plus, you know the whole 4 years of graduate work, 3 tiers of USMLE testing, 3 years of residency at what works out to be less than what you can make at Starbucks, a few more as a fellow before you can even start practicing. Even at the top end (cardiologists, anesthesiologists, neurologists), you're going to pretty much salary cap at around $750k pre-tax. There is a lot of waste in medicine, but the salary of doctors is pretty fairly priced. Imagine if cardiologists all of a sudden went 'value-based free market' in their pricing. With all the retiring boomers in their waning years, I could very easily see 6 hours of labor for a staff of ~6-8 in the OR performing a bypass being billed at $100k.
    - Retric 10y ago
      Most countries have doctors skip undergrad which makes a huge difference. The US problem is people become doctors late in life and retire relatively soon after that. In UK Medical school might be 4-6 years, but saving 4+ up front and possibly a 'gap' year is huge. No only do people work longer, but they also have fewer years of compounding interest effing them over. Net result is you simply need around 20% fewer people to go though medical school.
jt2190 10y ago
You haven't explained why 10% of total healthcare costs should not be subject to price transparency.
hockley 10y ago
The margins are much higher in Rx. About 8% for payors, 12% for providers, and 20% for drugs.
- rayiner 10y ago
  And 25-30% for Facebook/Google...
  - Broken_Hippo 10y ago
    Which is fine, honestly. I don't actually pay money for either of those (Obviously I pay with data and things). They also aren't something that is going to save my life in the same way as insulin does for a diabetic or an epi pen does for those allergic enough to need one. I don't actually care what percentage profit the drug companies make so long as the end user can both access the medication and clearly afford to pay for them.
    - rayiner 10y ago
      > They also aren't something that is going to save my life in the same way as insulin does for a diabetic or an epi pen does for those allergic enough to need one. Which is more reason for those companies to be profitable, not less. The bright kid choosing between making $200k straight out of college peddling advertising or entertainment and making that much mid-career with a bio-chem PhD is willing to take a little bit of a haircut to work on socially-valuable things, but probably not that much of one. > I don't actually care what percentage profit the drug companies make so long as the end user can both access the medication and clearly afford to pay for them. That's a failure of the government's healthcare programs, not drug companies' pricing methods.
      - Broken_Hippo 10y ago
        I'd agree they should be more profitable, but like most things, profit doesn't follow good works. The point was more that it doesn't matter that entertainment companies make a higher profit because that profit doesn't generally put folks lives in danger. Unless the government reorganizing health care to provide more straightforward profits, upping the profits hurts folks because they are more likely to feel the increase. Hence the last statement: The important part is that the end folks get access. And you are right, that is the government's fault. It isn't just healthcare programs, however. They could go different routes to reimburse drug companies for r&d costs, for example. Sure, the money would still come from taxes, but hopefully(!) it'd be more transparent with some of these things.
Broken_Hippo 10y ago
Because this is the cost that the consumer meets more often (if you've maintenance medications at least) and it generally costs more.
rayiner 10y ago
> Why isn't there a larger focus on reducing the costs of hospitals and healthcare professionals? Because the public interest media is well-intenioned but largely irrational/innumerate.
freeflight 10y ago
>Why isn't there a larger focus on reducing the costs of hospitals and healthcare professionals? Because that's exactly the wrong end to save money with health care. Drugs work with an economy of scale, highly specialized jobs, like medical doctors and the myriad of others, don't scale like that. I'd rather save money buying generic drugs, than saving money by visiting an inexperienced/barely educated medical doctor. Not to mention: Dumping wages isn't a good long-term approach to any sector, least of all health care sector. When Edward Burger Flipper has a bad day, due to low pay and crappy working conditions, the worst that can happen to you as a customer is you get some stomach troubles from badly prepared food. If a doctor or nurse has a bad day, due to low pay and crappy working conditions, it may cost you your life.
- chii 10y ago
  if there's no money to be made with drugs, there may be less research into drugs, and they might mean no drugs at all.
mrleinad 10y ago
Let's compare costs (in billions): (1970) Cost of proffesional services: $19.8 Prescription drugs: $5.5 (2013) Cost of proffesional services: $777.9 Prescription drugs: $271.1 % change: Cost of proffesional services: 3928% Prescription drugs: 4929% The drugs increased in cost a lot more than proffesional services. [1] https://www.cdc.gov/nchs/data/hus/hus14.pdf#103 https://www.cdc.gov/nchs/data/hus/hus14.pdf#103
- rayiner 10y ago
  Bad comparison. The results doctors by themselves can achieve hasn't changed all that much since 1970. What drugs can do has changed completely.
  - areyousure 10y ago
    What do you mean by "results doctors by themselves can achieve"? Do you just mean to exclude drugs? Or are you somehow also excluding IVF, MRIs, CTs, LASIK, stents, DNA sequencing, laparoscopic surgery, newborn screening, liposuction, and transplants?
    - mrleinad 10y ago
      That's right. New procedures are part of what professionals do, and knowing which one to apply each time is their trade. You can't buy that in a bottle.
refurb 10y ago
To add to that, the percentage spent on drugs is a bit of a meaningless number. Let's say a magic pill was produced that completely prevented heart attacks. Drug spending would go up and all other costs would dramatically decrease (hospital stay, surgeries, etc). Suddenly the cost of drugs is 20% and everything else is 80%. That would be a good thing, no?
WalterBright 10y ago
The Atlantic ran an analysis of where the costs go: https://www.theatlantic.com/magazine/archive/2009/09/how-ame.. https://www.theatlantic.com/magazine/archive/2009/09/how-ame.... Essentially, it's a mess of perverse incentives that are unintended side effects of heavy regulation.

saycheese 10y ago

Worth noting this was "Issued by Global Policy & International Public Affairs, Pfizer Inc." (a large pharmaceuticals company) in October 2015 and there is an odd phrase in the footer that reads "Do Not Detail."

deleted 10y ago
[deleted]
Animats 10y ago
"Detail", in pharma parlance, refers to making sales presentations to physicians. The people who do this were once called "detail men".[1] This has declined somewhat now that pharma can advertise prescription drugs directly to patients. [1] https://www.theatlantic.com/magazine/archive/2006/04/the-drug-pushers/304714/ https://www.theatlantic.com/magazine/archive/2006/04/the-dru...

mseebach 10y ago

Because every time someone gets around to focusing on anything, there's a loud chorus of people who thinks the focus should be elsewhere. The fact of democratic policy making is that it's hugely inefficient, and is rarely able to focus on anything at all, so the only way forward if you want to get anything done is to ride the wave of opportunity when it presents itself.

adevine 10y ago

So what? 10% of all healthcare costs is a gigantic number. And you'll have to excuse me if I take a position paper from Pfizer with a grain of salt.

cloakandswagger 10y ago
On what grounds do you dispute the figure?
- adevine 10y ago
  I'm not disputing the 10% number (though I don't know what all it includes - does it include drug delivery systems, like what is under discussion in OP's article?). I'm disputing the overall conclusion in that paper that "drug costs aren't really worth focusing on." I also dispute the assertion that other areas of health care aren't also being focused on for cost insanity. 10% is still a huge number, and if you happen to be one of the unlucky souls dependent on a medicine that goes up in price by many multiples it's a gigantic deal to you.
alexqgb 10y ago
Also, this is arguably the most corrupt aspect of medical pricing. Putting these sociopathic predators under the thumb of good governance satisfies a moral as well as an economic desire.

cle 10y ago

One reason would be if pharma has a sufficiently larger margin than hospitals and doctors. It might be the case that there's more to save in that 10% than the rest of the 90% (especially when the cost of implementing change is considered).

dexterdog 10y ago
Yes, but if you cut the cost in half you would be saving 5% of the overall. We all know there is far more than 5% savings in the 90% piece.
- cle 10y ago
  Perhaps, but at what cost? (I'm playing devil's advocate, I don't know what's the right move here, but I do know that the post I replied to only offered an incomplete picture.)

eberkund 10y ago

I agree, why is it that doctors make such high salaries? Is it because of the long and relatively difficult education and training that they have to go through? That is definitely part of it but in my opinion those salaries (which in many countries are publicly funded) could be reduced drastically by training more doctors. Professional societies have a strong interest in artificially keeping the supply of qualified doctors low in order to keep salaries high. University admissions for medical school continue to be extraordinarily low in proportion to the number of applicants yet there are still shortages in many parts of the country.

ng12 10y ago
In the US a lot of non-specialty doctors make around $150-$200k, meaning they're in line with some snot-nosed kid with a bachelor's in CS and an offer from Google. Becoming a doctor isn't the end-all it used to be unless you really love it and/or are really good.
- iheartmemcache 10y ago
  Plus, you know the whole 4 years of graduate work, 3 tiers of USMLE testing, 3 years of residency at what works out to be less than what you can make at Starbucks, a few more as a fellow before you can even start practicing. Even at the top end (cardiologists, anesthesiologists, neurologists), you're going to pretty much salary cap at around $750k pre-tax. There is a lot of waste in medicine, but the salary of doctors is pretty fairly priced. Imagine if cardiologists all of a sudden went 'value-based free market' in their pricing. With all the retiring boomers in their waning years, I could very easily see 6 hours of labor for a staff of ~6-8 in the OR performing a bypass being billed at $100k.
  - Retric 10y ago
    Most countries have doctors skip undergrad which makes a huge difference. The US problem is people become doctors late in life and retire relatively soon after that. In UK Medical school might be 4-6 years, but saving 4+ up front and possibly a 'gap' year is huge. No only do people work longer, but they also have fewer years of compounding interest effing them over. Net result is you simply need around 20% fewer people to go though medical school.

jt2190 10y ago

You haven't explained why 10% of total healthcare costs should not be subject to price transparency.

hockley 10y ago

The margins are much higher in Rx. About 8% for payors, 12% for providers, and 20% for drugs.

rayiner 10y ago
And 25-30% for Facebook/Google...
- Broken_Hippo 10y ago
  Which is fine, honestly. I don't actually pay money for either of those (Obviously I pay with data and things). They also aren't something that is going to save my life in the same way as insulin does for a diabetic or an epi pen does for those allergic enough to need one. I don't actually care what percentage profit the drug companies make so long as the end user can both access the medication and clearly afford to pay for them.
  - rayiner 10y ago
    > They also aren't something that is going to save my life in the same way as insulin does for a diabetic or an epi pen does for those allergic enough to need one. Which is more reason for those companies to be profitable, not less. The bright kid choosing between making $200k straight out of college peddling advertising or entertainment and making that much mid-career with a bio-chem PhD is willing to take a little bit of a haircut to work on socially-valuable things, but probably not that much of one. > I don't actually care what percentage profit the drug companies make so long as the end user can both access the medication and clearly afford to pay for them. That's a failure of the government's healthcare programs, not drug companies' pricing methods.
    - Broken_Hippo 10y ago
      I'd agree they should be more profitable, but like most things, profit doesn't follow good works. The point was more that it doesn't matter that entertainment companies make a higher profit because that profit doesn't generally put folks lives in danger. Unless the government reorganizing health care to provide more straightforward profits, upping the profits hurts folks because they are more likely to feel the increase. Hence the last statement: The important part is that the end folks get access. And you are right, that is the government's fault. It isn't just healthcare programs, however. They could go different routes to reimburse drug companies for r&d costs, for example. Sure, the money would still come from taxes, but hopefully(!) it'd be more transparent with some of these things.

Broken_Hippo 10y ago

Because this is the cost that the consumer meets more often (if you've maintenance medications at least) and it generally costs more.

rayiner 10y ago

> Why isn't there a larger focus on reducing the costs of hospitals and healthcare professionals? Because the public interest media is well-intenioned but largely irrational/innumerate.

freeflight 10y ago

>Why isn't there a larger focus on reducing the costs of hospitals and healthcare professionals? Because that's exactly the wrong end to save money with health care. Drugs work with an economy of scale, highly specialized jobs, like medical doctors and the myriad of others, don't scale like that. I'd rather save money buying generic drugs, than saving money by visiting an inexperienced/barely educated medical doctor. Not to mention: Dumping wages isn't a good long-term approach to any sector, least of all health care sector. When Edward Burger Flipper has a bad day, due to low pay and crappy working conditions, the worst that can happen to you as a customer is you get some stomach troubles from badly prepared food. If a doctor or nurse has a bad day, due to low pay and crappy working conditions, it may cost you your life.

chii 10y ago
if there's no money to be made with drugs, there may be less research into drugs, and they might mean no drugs at all.

mrleinad 10y ago

Let's compare costs (in billions): (1970) Cost of proffesional services: $19.8 Prescription drugs: $5.5 (2013) Cost of proffesional services: $777.9 Prescription drugs: $271.1 % change: Cost of proffesional services: 3928% Prescription drugs: 4929% The drugs increased in cost a lot more than proffesional services. [1] https://www.cdc.gov/nchs/data/hus/hus14.pdf#103 https://www.cdc.gov/nchs/data/hus/hus14.pdf#103

rayiner 10y ago
Bad comparison. The results doctors by themselves can achieve hasn't changed all that much since 1970. What drugs can do has changed completely.
- areyousure 10y ago
  What do you mean by "results doctors by themselves can achieve"? Do you just mean to exclude drugs? Or are you somehow also excluding IVF, MRIs, CTs, LASIK, stents, DNA sequencing, laparoscopic surgery, newborn screening, liposuction, and transplants?
  - mrleinad 10y ago
    That's right. New procedures are part of what professionals do, and knowing which one to apply each time is their trade. You can't buy that in a bottle.

refurb 10y ago

To add to that, the percentage spent on drugs is a bit of a meaningless number. Let's say a magic pill was produced that completely prevented heart attacks. Drug spending would go up and all other costs would dramatically decrease (hospital stay, surgeries, etc). Suddenly the cost of drugs is 20% and everything else is 80%. That would be a good thing, no?

WalterBright 10y ago

The Atlantic ran an analysis of where the costs go: https://www.theatlantic.com/magazine/archive/2009/09/how-ame.. https://www.theatlantic.com/magazine/archive/2009/09/how-ame.... Essentially, it's a mess of perverse incentives that are unintended side effects of heavy regulation.