17 ms·

Why drug prices in America are so high (2016)

143 points by ThomPete 10y ago

ThomPete 10y ago
"The simple answer is because they can. European governments control prices in various ways—Britain has the strictest system, refusing to pay for medicines that fail to meet a threshold of cost-effectiveness. But in America companies set whatever official price they like."
- Apfel 10y ago
  If anyone's interested, England's system of health technology assessment (HTA) for the NHS is extremely transparent and world-leading. It's one of the things that we Brits should be extremely proud of (although pharma-sponsored sob story campaigns in tabloid newspapers may suggest otherwise). All new technologies are investigated in terms of incremental quality of life gain (vs current treatment norms) and changes in costs. Furthermore, they consider everything in a wider context of opportunity cost of adopting a new treatment and budget constraints. For a lot more detail, have a look at the NICE reference case here: https://www.nice.org.uk/process/pmg9/chapter/the-reference-case https://www.nice.org.uk/process/pmg9/chapter/the-reference-c...
  - grabcocque 10y ago
    The interesting thing about NIHCE and its short existence is that it's a startling reminder that the idea that health policy should be evidence-based is still a new one. NIHCE's greatest contribution has been that, in insisting on being evidence-based as de-politicised any and all questions about what treatments should be available. I think this week's US shenanigans have showed that de-politicising healthcare is a very laudable goal.
    - Apfel 10y ago
      Just for the record, although the acronym does technically spell out NIHCE since they changed the name, they've stuck with the "NICE" branding. It allows for all sorts of pun titles for academic papers like the following: [i] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1734179/pdf/v031p00373.pdf https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1734179/pdf/v03... [ii] http://www.nature.com/bdj/journal/v215/n5/full/sj.bdj.2013.832.html http://www.nature.com/bdj/journal/v215/n5/full/sj.bdj.2013.8...
  - chimeracoder 10y ago
    > It's one of the things that we Brits should be extremely proud of (although pharma-sponsored sob story campaigns in tabloid newspapers may suggest otherwise). They consider everything in a wider context of opportunity cost of adopting a new treatment and budget constraints. For context, this is literally what risk-bearing entities in the US already do (both insurers and at-risk providers). I could get behind the statement that risk-bearing entities should be performing methodical cost-benefit analysis of care coverage, but the fact remains that, at the end of the day, that means that someone is making the decision to deny certain people coverage because it's not cost-effective. Whether you have clinicians and analysts at an insurance insurance company performing that role or the government clinical panel of clinicians and analysts performing that role, it still results in some people having their care approved and some having their treatments denied[0]. It's weird to then dismiss the negative side of the tradeoffs as "pharma-sponsored sob story campaigns" in the UK, when those same stories are accepted as evidence of the systemic problems within the US. [0] And to pre-empt the common misguided criticism that "it's better because it's not a for-profit company making the decision", that assumes that government agencies don't have a profit motive just because they that's not recorded on their balance sheet (they do), and it also forgets the counterintuitive fact that the explicit profit incentive in the US actually incentivizes the company to permit claims on more expensive treatments if the patient requests them.
    - sharemywin 10y ago
      -> that assumes that government agencies don't have a profit motive just because they that's not recorded on their balance sheet (they do) As long as you say so. Every must agree.
    - sharemywin 10y ago
      At the end of the day if you don't have the money to pay for a treatment yourself then someone else is making a cost to benefit analysis.
      - chimeracoder 10y ago
        > At the end of the day if you don't have the money to pay for a treatment yourself then someone else is making a cost to benefit analysis. Exactly, that's the point. You can label it however you want, and set up whatever system you want to allocate the resources, but that doesn't change the fact that this decision has to be made.
  - refurb 10y ago
    I would argue HTA is not without it's problems. That's why the UK has a cancer drug fund. NICE has said "no" to those drugs, yet the public still clammers for them. So a separate funding mechanism was created to pay for them.[1] [1]https://www.england.nhs.uk/cancer/cdf/ https://www.england.nhs.uk/cancer/cdf/
    - chimeracoder 10y ago
      > I would argue HTA is not without it's problems. That's why the UK has a cancer drug fund. NICE has said "no" to those drugs, yet the public still clammers for them. So a separate funding mechanism was created to pay for them. See also: PrEP. PrEP is available in the US (and covered by almost every private insurer[0] with drug co-pays covered by the manufacturer[1]). And while it's less convenient, there are public clinics where you can get prescriptions to avoid paying the co-pay to a GP. In other words, absent the cost of your time, you can get it in the US for free. In the UK, PrEP is not covered by the NHS. The National AIDS Trust had to sue the NHS just to get them to announce their decision not to cover it - before that, they refused to make a statement one way or the other, and kept kicking the can down the road. Now, you can only get it by paying a private doctor (out-of-pocket) for a prescription, and then fill that prescription privately, which can cost up to $13/pill. (This is technically not HTA, but for the purposes of this discussion that distinction isn't relevant.) [0] And, as an aside, on the rare case that your insurer does not cover it, Gilead (the manufacuter) offers assistance programs that provide it essentially for free. [1] This is a separate program to enroll in; Gilead basically reimburses the co-pays that the insurers charge
      - DanBC 10y ago
        Sexual health is part of public health, and thus we'd expect PrEP to be funded by Public Health England, not the NHS. The target of your anger here should be local authorities (who hold responsibility for Public Health), not the NHS. https://www.england.nhs.uk/2016/11/update-on-prep/ https://www.england.nhs.uk/2016/11/update-on-prep/
        chimeracoder 10y ago
- chimeracoder 10y ago
  > "The simple answer is because they can. The easiest way to fix the fact that 'they can' would be to permit re-importating drugs that were manufactured within the US. Shortly before Obama left office, there was a bill that would have fixed that, but nine Democrats joined the Republicans in voting it down: https://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=115&session=1&vote=00020 https://www.senate.gov/legislative/LIS/roll_call_lists/roll_...
  - refurb 10y ago
    Please explain how that would work. If I'm Pfizer, why on earth would I dramatically increase my sales of drugs to Canada knowing they're just going to be reimported into the US? The answer is, I wouldn't. I would put a quota on Canadian sales. Sell them enough drugs for Canadians. This was actually done about a decade ago when reimportation was more popular.
    - toomuchtodo 10y ago
      That's how you get your patent broken.
      - harryh 10y ago
        Has the US ever disallowed a patent because the company holding it refused to sell a product to the government at the price the government wanted? It's hard to imagine SCOTUS allowing that sort of thing. The US gov't is subject to its own laws.
        toomuchtodo 10y ago
        Has the US ever fought hard to institute a travel ban in order to prevent people of a certain religion from entering the country, despite judicial intervention. That's the thing about governments: they can do whatever they want. And your recourse is to deal with it or spend years fighting against it (or die in the streets fighting it, lest we forget that option). Disclaimer: I'm for breaking patents when necessary, although 3D printing drugs is around the corner making it a moot point. EDIT: @refurb: I love coming to HN and having people say "its too hard, it'll never be done". ;) I can run the laser sintering machine in my garage and build metal parts from a fine powder, parts that are aircraft grade, but I won't be able to 3D print drugs at home? No imagination.
- dustingetz 10y ago
  That quote seems to me to be missing a really important bit, which is that there doesn't seem to be a functioning free market which is a necessary condition to determine the price. (This comment is not aimed at you, it is aimed at the article for supplying such a broken explanation)
  - sharemywin 10y ago
    if a company has a monopoly there isn't by definition a functioning free market.
    - ancap 10y ago
      The question therefore is, why does the monopoly exist? You will find that, as _jal has commented, it is not because of some natural phenomenon springing out of a free market.
      - sharemywin 10y ago
        sure it's natural. why would anyone compete if they could carve up a market and make monopoly profits.
        clarkmoody 10y ago
        Because in a free market, companies cannot keep out competitors. Only through regulatory capture / cooperating with government are monopolies sustained. Even the greatest monopoly of all time -- Standard Oil -- which at its peak had 96% market share was whittled down to 64% by competition by the time the "white knight" regulators had it broken up. And who knows the long-term consequences of empowering the government to determine what is and isn't a monopoly? Well in the case of friendly relationships with well-lobbied corporate interests, there will probably not be any anti-monopoly action forthcoming.
  - _jal 10y ago
    This is very, very important. The drug market is one of the farthest things we have from a free market in the US outside of military weapons. It is just massively dysfunctional due to a combination of special interest lobbying combined with stepwise path-dependency. A huge part of the health care discussion in the US starts from assuming our current system is somehow natural. It isn't. It is an engineered thing, with the engineering performed by in a non-coordinated fashion with incompatible goals by non-experts, piecewise, over a long period of time. Even though I doubt it (healthcare truly is different than most services/goods), a truly free market might even be superior to what we have, in terms of outcomes by patient count. Of course, that would lead to unsightly public corpses, a much different drug industry and a lot of unemployed clerical workers, among other things. And the big, unanswered question remains: why the US is such a special snowflake that what works in various ways in every other first-world country cannot work here. (Aside from the obvious answer.)
- ancap 10y ago
  For a publication named "The Economist" that's quite the intellectually lazy answer. They say nothing of the existing conditions which make it possible for a company to arbitrarily set drug prices (after all, few other businesses in the economy enjoy such a privilege). Furthermore, the answer is not even satisfying to those who may have a rudimentary grasp on economics. After all, if the reason is "because they can" why not raise the price of their drugs to $1 million per dose? This argumentum ad absurdum demonstrates that even with the lack of medicinal alternatives, there are certain economic factors which prevent astronomically high prices.
vowelless 10y ago
> And it is illegal for Medicare to negotiate with drug companies Why is this the case ? Also, this is from September 2016.
- dv_dt 10y ago
  It was part of the Medicare part D program - and likely put in via lobbying of Drug companies to politicians: https://en.wikipedia.org/wiki/Medicare_Part_D#Criticisms https://en.wikipedia.org/wiki/Medicare_Part_D#Criticisms https://en.wikipedia.org/wiki/Medicare_Prescription_Drug,_Improvement,_and_Modernization_Act https://en.wikipedia.org/wiki/Medicare_Prescription_Drug,_Im...
  - chimeracoder 10y ago
    > It was part of the Medicare part D program - and likely put in via lobbying of Drug companies to politicians: The prices are still negotiated. They're negotiated by the plans that provide Medicare Part D, rather than determined unilaterally by Medicare itself (which is what happens for Medicare A and B reimbursement rates).
    - dv_dt 10y ago
      Any private drug negotiator is going to be in a terrible position because they don't have 100% of the market. They can't walk away, the drugs will just flow through another private drug body. The drug makers have no reason to give a discount if the drugs will be sold under plan distributor B vs distributor A. When you compare prices in the US vs nations with governmental bodies controlling drug prices, you can validate that the US way is ineffectual for controlling drug prices.
      - chimeracoder 10y ago
        > Any private drug negotiator is going to be in a terrible position because they don't have 100% of the market. They can't walk away, Having 100% of the market is the definition of a monopsony. That's bad for both patients (in the long run) and pharmaceutical companies (in the short run). In any case, even an ostensible monopsony pharmaceutical purchaser can't really just "walk away", because so so many of the drugs that they're purchasing are deemed essential. Let's say the government just said, "sorry, you've been taking this critical blood-pressure medication since it was released seven years ago, but now we're not going to pay for it, because we're taking a hard-line stance in our negotiation with Pfizer". At that point, there are two possibilities: 1) Patients stop taking the drug, and they die 2) Patients pay for the drug out-of-pocket (if they can afford it), and the remaining patients die. #1 is possible, but a political disaster. #2 is a no longer a monopsony, which defeats the whole premise of "having 100% of the market".
Overtonwindow 10y ago
Please add (2016) to the title.
- ThomPete 10y ago
  Done
senior_james 10y ago
Drug prices are high because of government regulation. It can take up to a billion dollars and decades to get FDA approval and drug companies only have a limited time to recoup their investment before their patent expires. So they are forced to charge high prices. This also reduces competition and creates a monopoly in the market. If regulations were reduced, it would bring in more competition and force the prices down.
doktrin 10y ago
> These high prices support innovation, they argue—not just for America, but for the world. I suspect this is in fact somewhat true, but how is it a coherent argument in favor of higher prices? The American people / American elderly (obviously) don't have some unspoken moral obligation to subsidize pharmaceutical R&D for the whole world. Governments around the world are able to negotiate affordable rates for their citizens, yet in the US we have to listen to these completely insane justifications? IMO if the US government (who presumably agree with the drug companies on this) feels this strongly about subsidizing research they could always expand federal research grants and/or NIH funding. Yet I suspect that's a non starter for political reasons.
- ferentchak 10y ago
  This. Do we need to subsidize Sweden and Germany? I have wondered for a while why we don't make a law saying the highest price you can sell a drug for in the US is no higher than the lowest negotiated price that drug is sold to in other rich countries. So if Canada negotiates a drug for $10 then that is the highest price you can sell it for here etc. That way they can set the prices however they want but collective buying agreements that are a part of socialized healthcare don't end up shifting the burden of cost to the US.
  - themihai 10y ago
    Something tells me this would be against some WTO rules. The US gov could simply negotiate a better deal just like Germany, Sweden or any other country does but...I guess the lobby plays a important role in the grand scheme of things so unless the US electorate puts pressure on the government you won't see a better deal.
  - chimeracoder 10y ago
    > I have wondered for a while why we don't make a law saying the highest price you can sell a drug for in the US is no higher than the lowest negotiated price that drug is sold to in other rich countries. You don't need a rule to enforce that. You just need to allow the US to reimport prescription drugs that were originally exported from the US. It would be far and away the simplest solution and would have the same end result[0]. Unfortunately, Congress has voted against that, so we're stuck with the status quo. [0] The difference between the prices charged in the US and the prices charged in any other country could be no greater than the costs of reimporting the drugs from that country - or else people would just buy the reimported versions instead of the domestic ones[1]. This has the desired outcome of equalizing the prices [1] Which, remember, are literally the same drugs manufactured at the same plants by the same company.
uptown 10y ago
1. Drug companies donate to politicians. 2. Politicians promote drug-company-friendly policies. 3. Drug companies earn outsized profits. 4. Repeat
RcouF1uZ4gsC 10y ago
This has a very simple fix, and is a fix that would appeal to Donald Trump: Require that pharmaceutical companies do not charge Americans any more for their drugs than what they charge any developed country. This lets other countries do the dirty work of negotiating prices while reaping the benefits for the US. In addition, it goes along with his whole America is getting screwed narrative - ie that other companies are taking advantage of the fact that American markets pay for the drug developments, and other countries reap benefits of cheap drugs and that he would put America back on equal footing. EDIT: Thanks for the great comments. To ease with the concern about hurting the very poor countries, we could substitute "developed country" with "OECD country" (http://www.oecd.org/about/membersandpartners/list-oecd-member-countries.htm http://www.oecd.org/about/membersandpartners/list-oecd-membe... which are relatively rich countries).
- prostoalex 10y ago
  Can't the manufacturers still inflate list prices by introducing heavy rebates?
- pascalxus 10y ago
  this sounds like a good start.
- frgtpsswrdlame 10y ago
  Why would that appeal to Donald Trump? It would hurt the profits of the drug industry in America which will cost jobs, pharma execs will tell him how bad this is for America and how harmful it is to drug R&D, etc etc. Donald Trump may have campaigned as a negotiator for the common man but he identifies with CEOs, anything that hurts them is not something that appeals to him.
  - dv_dt 10y ago
    The high price of medical care costs lives as well as jobs in other industries...
    - frgtpsswrdlame 10y ago
lcfcjs 10y ago
It's quite simple. The American Republican party is in the pocket of healthcare's biggest businesses. They accept "donations" if their policies are favorable to these companies. If these donations became illegal, the problem would be solved. It really is as simple as that. Anybody who complicates it further has purely partisan reasons.
known 10y ago
Make in China?
deleted 10y ago
[deleted]
marcgcombi 10y ago
The key challenge is that the government has so grossly distorted the market, on multiple dimensions, that the actual levers within the pharma vertical are opaque to all but the most embedded incumbents. (economists refer to these as hidden externalities). These market-distortions have all but eliminated the natural cost-competition that one would observe in other sectors, such as commodities or manufacturing. The best thing the government can do is back off completely and make those pharma companies REALLY sharpen their pencils. For those of you who believe MORE regulation is the way out, that's called "trying to dig your way out of a hole" or "repeating the same nonsense and expecting a different outcome." Please challenge your beliefs.
caseysoftware 10y ago
Negotiation is only effective if you can walk away from the deal. The drug companies can't afford to lose their biggest customer. But since the customer can't go anywhere else, it's not like they would. It's a detente where neither side can really make a move because the other just says "Nope." I think transparency - as in publicly available pricing - would be the only thing to change the balance here. Even then, it's not a fix..
calvinbhai 10y ago
Drug prices in US go up because of collusion between Insurance Companies and Drug manufacturers. Would I buy expensive health insurance if drugs cost me $100 a month? Most probably never. What if the sticker price for my monthly dose of drugs was $10,000 or $50,000? You bet I'd go get an insurance that'd cost $500 a month. With such sticker shock, manufacturer reaps in profits. Insurance companies get to charge higher premiums. Solution: Fix IP laws for drugs in US. If the drug costs beyond the 2x or 5X of what it costs in India, or than the average of drug prices in a few countries, then that drug loses all its IP protections in US. Manufacturer is still free to charge zillions for that product, but there'll be no restrictions on copycats or generic versions from outside US taking over the market. It'll help in keeping a sensible profit margin for manufacturers without ripping off Americans. Most problems in healthcare costs in US, are due to insurance companies dictating terms.
- TheCoelacanth 10y ago
  Or even simpler, just allow people to buy the drugs elsewhere and import them into the US. With most products that is allowed, which through market pressure keeps prices from diverging too much between different countries. With drugs it is not allowed, so drug prices can diverge to a much greater extent.
  - aianus 10y ago
    This will either kill people in poor countries that can't afford to pay more or it will cripple new development of drugs since the successful drugs really do need huge profit margins to pay for all of the losers that never made a dime.
- allenz 10y ago
  > Drug prices in US go up because of collusion between Insurance Companies and Drug manufacturers. It's great that you're interested in healthcare policy, but you should be careful about making blanket statements without the evidence. Drugs are 9% of healthcare costs[1] and 14% of insurance costs[2]--hardly the decisive factor in your choice of health insurance. And expensive drugs are expensive primarily because it really does cost $1B+ to develop a new drug.[3] Even if you wipe out drug company profits (which we really don't want to do), you'll save at most 3% on your insurance.[4] Like other types of insurance, cheap health insurance is cheap primarily because it limits your coverage. The biggest impact is that you pay more to see fewer specialists and undergo fewer procedures. It also results in situations in which you're denied a cure for liver disease until you have severe liver damage.[5] Your solution doesn't solve collusion so much as make a major tradeoff: we can have a world in which drugs cost $1000/year, if we stop researching drugs that cure liver disease. We can have cheap health insurance, if we give up most of the coverage. You probably didn't know you were making that tradeoff, and that's probably not a tradeoff you want to make. [1] http://www.huffingtonpost.com/2014/12/03/health-care-spending_n_6256166.html http://www.huffingtonpost.com/2014/12/03/health-care-spendin... [2] PwC report, page 12 http://www.amcp.org/WorkArea/DownloadAsset.aspx?id=12727 http://www.amcp.org/WorkArea/DownloadAsset.aspx?id=12727 [3] https://www.washingtonpost.com/news/wonk/wp/2014/11/18/does-it-really-cost-2-6-billion-to-develop-a-new-drug/ https://www.washingtonpost.com/news/wonk/wp/2014/11/18/does-... [4] Profit margins are less than 20% http://www.bbc.com/news/business-28212223 http://www.bbc.com/news/business-28212223 [5] http://america.aljazeera.com/articles/2015/10/16/insurance-providers-deny-hepatitis-drugs.html http://america.aljazeera.com/articles/2015/10/16/insurance-p...
andrewla 10y ago
> Private insurers do so instead, but the government binds their hands, for example by requiring them to pay for six broad categories of drugs, without exception I'd like to understand more of this -- it seems like there is hand-tying at multiple levels. In addition to insurance companies, why isn't it possible for pharmacies, for example, to compete on price directly -- CVS, or Walgreens, or potentially even Walmart, seem like they would have sufficient market share to negotiate prices as well.
- maxerickson 10y ago
  Pharmacies do charge (fairly) low prices for generics.
- refurb 10y ago
  The largest pharmacies do compete on price. It's common for CVS or Walgreens to get an additional discount on products.
abfabry 10y ago
I work at Blink Health (www.blinkhealth.com) and we're working to solve this problem and offer patients a fair price for their medication, often saving patients up to 90% of list price. We negotiate with pharmacies and pharmaceutical manufacturers to get the lowest rates and improve price transparency in an opaque market. We have a kick-ass engineering team -- if you're interested in these problems and want to help us fix healthcare shoot me an email at alexander [at] blinkhealth [dot] com
- maxerickson 10y ago
  Why is an account with you better than no account at GoodRx? I assume you are pretty much just a PBM?
rayiner 10y ago
The idea that you can point to even one or two "whys" is patently ridiculous. The goal is easy to state: how do you set drug prices at the level that optimally balances consumer welfare (benefit realized minus money spent)? Simply setting prices as low as possible is of course not the answer--a big part of maximizing the benefit realized involves creating adequate incentives for drug companies to create new medicines. But there are a dizzying array of factors that make it hard to even understand what that optimal price should be: 1) The potential free rider effect is huge. Drug companies would not invest billions into creating new drugs if after six months on the market they could be duplicated by a competitor and sold for a far lower price. 2) To avoid (1), we give drug companies a patent. But in the process, we make it much harder to use market mechanisms to regulate drug pricing, since patents inherently give drug companies monopoly power. 3) Moreover, in most of the developed world, we want to make a certain level of medical care accessible to everyone. That results in systems like Medicare, the U.K. NHS, etc. That too stymies market mechanisms, except in the other direction. Single-buyer markets are monopsonies, and unchecked result in driving prices below efficient level. (That is likely what has happened in Europe, and is the reason why Medicare is prohibited from negotiating drug prices.) 4) The pharmaceutical market is international, and thus rich in arbitrage opportunities for national governments. So long as the American market is willing to foot the R&D bill, other countries have enormous incentives to drive prices local below the efficient level for their own citizens. 5) Conceptions of morality also complicate things. We ordinarily accept the idea that companies are permitted to charge based on the value they create for their customers. We accept Apple charging $2,400 for a Macbook Pro and understand that people only buy it because they think they will get more than $2,400 of utility from it. What's the value to the customer of HIV anti-retrovirals? How much would you pay to extend your life by decades? Almost certainly more than what those drugs cost. There is an impulse to try and say "well, it's okay for Apple to charge based on value created, but not drug companies." That impulse is surely well-intentioned, but is counter-productive. It has the effect of driving talent and capital out of areas that have the greatest positive impact on humanity.
- maxerickson 10y ago
  The US seems to need better regulation. How did it take so long for esomeprazole to be revealed as a marketing sham? https://www.quora.com/Is-there-a-significant-difference-in-effectiveness-between-Nexium-esomeprazole-and-OTC-omeprazole-brand-name-Prilosec-when-treating-GERD https://www.quora.com/Is-there-a-significant-difference-in-e... Not necessarily more regulation or less regulation, but better. I guess that falls into easy to say hard to do. I also wonder about things like the significance of the improvements made to the Epipen (the related patents allowed Milan to push generics off the market).
togoshigekata 10y ago
Why is the government getting involved in health care? What is the role of government? Shouldnt we let the free market run free? Also what if drug patents didnt last so long so that there can be more competition? People have good intentions, but don't understand the unintended consequences...
togoshigekata 10y ago
Why is the government involved in health care? What is the role of government? Shouldnt we let the free market run free? People have good intentions, but don't understand the unintended consequences... "Basic Economics" by Thomas Sowell https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465060730/ https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465... Please make this required reading in all classrooms
AngeloAnolin 10y ago
Answered practically in the first two paragraph of the article: Despite the furor, drug companies continue to charge exorbitant prices in America. Why? THE SIMPLE ANSWER IS BECAUSE THEY CAN There's no quick fix to the insatiable greed on all the parties involved. Profit over people's well-being.
- mgrennan 10y ago
  I have never understood for profit medicine. There is a very fine moral line between, selling a blue pill that gives someone a "fun time" and selling cocaine for the same resin? Drug companies are making dugs and machines to "extend life" to drain the saving of the elderly. I've seen who could not pay for a "live saving" drug, give away everything they own so they can go on medicaid to be "saved".
danans 10y ago
Friends in the pharma and medical device development industry have told me that the business case for any drug or medical device is built on top of US sales at currently inflated US prices. According to them, the other developed countries that have negotiated lower rates for drugs serve a different purpose. Those countries have lower requirements around testing of drugs and medical devices, and they are able to move to human trials and market sooner there. The trade-off for those countries is slightly higher risk of sub-optimal outcomes, but this appears to be more accepted by the populations of those countries than it is by Americans. I'm not writing this to vouch for this setup - it seems like it is pretty unbalanced and ultimately does a lot of harm to people in the US due to drug inaccessibility - but I thought I'd share it for another perspective.
- _acme 10y ago
  Do you have support for the claim that US-developed drugs are generally available sooner in non-US markets? My understanding was that these drugs are generally available first in the US market, but that the developers may use FDA approval to help with EU approval, etc.
  - danans 10y ago
    In the case of the medical device company in question, the trials took place in Europe due to an easier regulatory process around testing. As I said, it's their personal story, but here is an article that describes the differences between the systems: http://www.nejm.org/doi/full/10.1056/NEJMhle1113918#t=article http://www.nejm.org/doi/full/10.1056/NEJMhle1113918#t=articl... I didn't mean to imply that US drug prices necessarily have anything to do with its regulatory structure, or that the European regulatory structure had anything to do with their prices, only that the companies have probably optimized their development and pricing strategies for the economic and political situations in the local markets.
- dodgedcactii 10y ago
  Same execs that probably sell you a line about R&D costs, right? Not sure why you'd ever trust them to speak truthfully about delivering good health to Americans.
WallWextra 10y ago
My father recently passed, and a month or so afterwards we got a bill from the nursing home pharmacy who, apparently, couldn't figure out how to bill his insurance. The price for 30 atorvastatin, whose out-of-pocket cost is about $20, was $160. The same with other cheap generic heart medications. Complaining about high drug costs is a red herring. Drug prices are a small fraction of healthcare costs, and even if new drugs were made cheap, healthcare providers would still overcharge for them.
shakencrew 10y ago
Previous discussion on Hacker News: https://news.ycombinator.com/item?id=12494927 https://news.ycombinator.com/item?id=12494927
pc2g4d 10y ago
To me this is why single-payer is unwise. The distortions of having a single massive customer with various mandates are bound to cause distortions like this. Government-subsidized HSAs for everybody is my pet alternative.
MrFantastic 10y ago
The reason is that private health insurance companies suffer from the Classic Agency Problem. They want their costs to increase at a sustainable rate so that they can keep growing their Net Income. Historically, private health insurance companies earn ~ 6% of their total revenue as profit. To justify an increase in their premiums they have to "miss" their payout ratio slightly every year. Drugs that patients will take for life are a great way off locking in that increased cost in a "controlled" way.
faragon 10y ago
In most European countries drug prices are negotiated at scale, because of public institution negotiating directly with pharmaceutical companies (most expensive drugs are the ones in international shortage, e.g. hepatitis C drugs, etc.). So what happens in the US is that pharmaceutical companies apply the "divide an conquer" rule, having a de facto monopoly.
WalterBright 10y ago
Sam Peltzman in "Regulation of Pharmaceutical Innovation" shows with statistics how the 1962 FDA Amendments resulted in massive drug price increases and a halving of new drugs being developed, with no net increase in efficacy.
narrowrail 10y ago
I searched all the comments and saw no mention of hospitals. I believe hospitals[0], pharma companies, and insurance companies have colluded to set prices for all healthcare which prevents the actual 'users' from price discovery. [0]https://en.wikipedia.org/wiki/American_Hospital_Association https://en.wikipedia.org/wiki/American_Hospital_Association
sigil 10y ago
"Why can't we just control prices?" wonders a publication called The Economist in the second graf. This article doesn't meet the Hacker News bar for me. Why read a shallow, dataless, meandering, "could the grass be greener" thinkpiece when you could be reading and discussing a deep statistical analysis like: High US health care spending is quite well explained by its high material standard of living https://randomcriticalanalysis.wordpress.com/2016/09/25/high-us-health-care-spending-is-quite-well-explained-by-its-high-material-standard-of-living/ https://randomcriticalanalysis.wordpress.com/2016/09/25/high... The two follow up posts on that blog (Random Critical Analysis) are also quite good. So many surprising discoveries await us in the actual data, but I guess opining and confirming bias is more fun? If real journalism is going to require active philanthropy to survive, I'm funding the kind of critical analysis on open data sets that makes me think & rethink, not the kind of stuff that makes me go "that's just, like, your opinion, man." This article was the latter.

143 points by ThomPete 10y ago

"The simple answer is because they can. European governments control prices in various ways—Britain has the strictest system, refusing to pay for medicines that fail to meet a threshold of cost-effectiveness. But in America companies set whatever official price they like."

Apfel 10y ago
If anyone's interested, England's system of health technology assessment (HTA) for the NHS is extremely transparent and world-leading. It's one of the things that we Brits should be extremely proud of (although pharma-sponsored sob story campaigns in tabloid newspapers may suggest otherwise). All new technologies are investigated in terms of incremental quality of life gain (vs current treatment norms) and changes in costs. Furthermore, they consider everything in a wider context of opportunity cost of adopting a new treatment and budget constraints. For a lot more detail, have a look at the NICE reference case here: https://www.nice.org.uk/process/pmg9/chapter/the-reference-case https://www.nice.org.uk/process/pmg9/chapter/the-reference-c...
- grabcocque 10y ago
  The interesting thing about NIHCE and its short existence is that it's a startling reminder that the idea that health policy should be evidence-based is still a new one. NIHCE's greatest contribution has been that, in insisting on being evidence-based as de-politicised any and all questions about what treatments should be available. I think this week's US shenanigans have showed that de-politicising healthcare is a very laudable goal.
  - Apfel 10y ago
    Just for the record, although the acronym does technically spell out NIHCE since they changed the name, they've stuck with the "NICE" branding. It allows for all sorts of pun titles for academic papers like the following: [i] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1734179/pdf/v031p00373.pdf https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1734179/pdf/v03... [ii] http://www.nature.com/bdj/journal/v215/n5/full/sj.bdj.2013.832.html http://www.nature.com/bdj/journal/v215/n5/full/sj.bdj.2013.8...
- chimeracoder 10y ago
  > It's one of the things that we Brits should be extremely proud of (although pharma-sponsored sob story campaigns in tabloid newspapers may suggest otherwise). They consider everything in a wider context of opportunity cost of adopting a new treatment and budget constraints. For context, this is literally what risk-bearing entities in the US already do (both insurers and at-risk providers). I could get behind the statement that risk-bearing entities should be performing methodical cost-benefit analysis of care coverage, but the fact remains that, at the end of the day, that means that someone is making the decision to deny certain people coverage because it's not cost-effective. Whether you have clinicians and analysts at an insurance insurance company performing that role or the government clinical panel of clinicians and analysts performing that role, it still results in some people having their care approved and some having their treatments denied[0]. It's weird to then dismiss the negative side of the tradeoffs as "pharma-sponsored sob story campaigns" in the UK, when those same stories are accepted as evidence of the systemic problems within the US. [0] And to pre-empt the common misguided criticism that "it's better because it's not a for-profit company making the decision", that assumes that government agencies don't have a profit motive just because they that's not recorded on their balance sheet (they do), and it also forgets the counterintuitive fact that the explicit profit incentive in the US actually incentivizes the company to permit claims on more expensive treatments if the patient requests them.
  - sharemywin 10y ago
    -> that assumes that government agencies don't have a profit motive just because they that's not recorded on their balance sheet (they do) As long as you say so. Every must agree.
  - sharemywin 10y ago
    At the end of the day if you don't have the money to pay for a treatment yourself then someone else is making a cost to benefit analysis.
    - chimeracoder 10y ago
      > At the end of the day if you don't have the money to pay for a treatment yourself then someone else is making a cost to benefit analysis. Exactly, that's the point. You can label it however you want, and set up whatever system you want to allocate the resources, but that doesn't change the fact that this decision has to be made.
- refurb 10y ago
  I would argue HTA is not without it's problems. That's why the UK has a cancer drug fund. NICE has said "no" to those drugs, yet the public still clammers for them. So a separate funding mechanism was created to pay for them.[1] [1]https://www.england.nhs.uk/cancer/cdf/ https://www.england.nhs.uk/cancer/cdf/
  - chimeracoder 10y ago
    > I would argue HTA is not without it's problems. That's why the UK has a cancer drug fund. NICE has said "no" to those drugs, yet the public still clammers for them. So a separate funding mechanism was created to pay for them. See also: PrEP. PrEP is available in the US (and covered by almost every private insurer[0] with drug co-pays covered by the manufacturer[1]). And while it's less convenient, there are public clinics where you can get prescriptions to avoid paying the co-pay to a GP. In other words, absent the cost of your time, you can get it in the US for free. In the UK, PrEP is not covered by the NHS. The National AIDS Trust had to sue the NHS just to get them to announce their decision not to cover it - before that, they refused to make a statement one way or the other, and kept kicking the can down the road. Now, you can only get it by paying a private doctor (out-of-pocket) for a prescription, and then fill that prescription privately, which can cost up to $13/pill. (This is technically not HTA, but for the purposes of this discussion that distinction isn't relevant.) [0] And, as an aside, on the rare case that your insurer does not cover it, Gilead (the manufacuter) offers assistance programs that provide it essentially for free. [1] This is a separate program to enroll in; Gilead basically reimburses the co-pays that the insurers charge
    - DanBC 10y ago
      Sexual health is part of public health, and thus we'd expect PrEP to be funded by Public Health England, not the NHS. The target of your anger here should be local authorities (who hold responsibility for Public Health), not the NHS. https://www.england.nhs.uk/2016/11/update-on-prep/ https://www.england.nhs.uk/2016/11/update-on-prep/
      - chimeracoder 10y ago
chimeracoder 10y ago
> "The simple answer is because they can. The easiest way to fix the fact that 'they can' would be to permit re-importating drugs that were manufactured within the US. Shortly before Obama left office, there was a bill that would have fixed that, but nine Democrats joined the Republicans in voting it down: https://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=115&session=1&vote=00020 https://www.senate.gov/legislative/LIS/roll_call_lists/roll_...
- refurb 10y ago
  Please explain how that would work. If I'm Pfizer, why on earth would I dramatically increase my sales of drugs to Canada knowing they're just going to be reimported into the US? The answer is, I wouldn't. I would put a quota on Canadian sales. Sell them enough drugs for Canadians. This was actually done about a decade ago when reimportation was more popular.
  - toomuchtodo 10y ago
    That's how you get your patent broken.
    - harryh 10y ago
      Has the US ever disallowed a patent because the company holding it refused to sell a product to the government at the price the government wanted? It's hard to imagine SCOTUS allowing that sort of thing. The US gov't is subject to its own laws.
      - toomuchtodo 10y ago
        Has the US ever fought hard to institute a travel ban in order to prevent people of a certain religion from entering the country, despite judicial intervention. That's the thing about governments: they can do whatever they want. And your recourse is to deal with it or spend years fighting against it (or die in the streets fighting it, lest we forget that option). Disclaimer: I'm for breaking patents when necessary, although 3D printing drugs is around the corner making it a moot point. EDIT: @refurb: I love coming to HN and having people say "its too hard, it'll never be done". ;) I can run the laser sintering machine in my garage and build metal parts from a fine powder, parts that are aircraft grade, but I won't be able to 3D print drugs at home? No imagination.
dustingetz 10y ago
That quote seems to me to be missing a really important bit, which is that there doesn't seem to be a functioning free market which is a necessary condition to determine the price. (This comment is not aimed at you, it is aimed at the article for supplying such a broken explanation)
- sharemywin 10y ago
  if a company has a monopoly there isn't by definition a functioning free market.
  - ancap 10y ago
    The question therefore is, why does the monopoly exist? You will find that, as _jal has commented, it is not because of some natural phenomenon springing out of a free market.
    - sharemywin 10y ago
      sure it's natural. why would anyone compete if they could carve up a market and make monopoly profits.
      - clarkmoody 10y ago
        Because in a free market, companies cannot keep out competitors. Only through regulatory capture / cooperating with government are monopolies sustained. Even the greatest monopoly of all time -- Standard Oil -- which at its peak had 96% market share was whittled down to 64% by competition by the time the "white knight" regulators had it broken up. And who knows the long-term consequences of empowering the government to determine what is and isn't a monopoly? Well in the case of friendly relationships with well-lobbied corporate interests, there will probably not be any anti-monopoly action forthcoming.
- _jal 10y ago
  This is very, very important. The drug market is one of the farthest things we have from a free market in the US outside of military weapons. It is just massively dysfunctional due to a combination of special interest lobbying combined with stepwise path-dependency. A huge part of the health care discussion in the US starts from assuming our current system is somehow natural. It isn't. It is an engineered thing, with the engineering performed by in a non-coordinated fashion with incompatible goals by non-experts, piecewise, over a long period of time. Even though I doubt it (healthcare truly is different than most services/goods), a truly free market might even be superior to what we have, in terms of outcomes by patient count. Of course, that would lead to unsightly public corpses, a much different drug industry and a lot of unemployed clerical workers, among other things. And the big, unanswered question remains: why the US is such a special snowflake that what works in various ways in every other first-world country cannot work here. (Aside from the obvious answer.)
ancap 10y ago
For a publication named "The Economist" that's quite the intellectually lazy answer. They say nothing of the existing conditions which make it possible for a company to arbitrarily set drug prices (after all, few other businesses in the economy enjoy such a privilege). Furthermore, the answer is not even satisfying to those who may have a rudimentary grasp on economics. After all, if the reason is "because they can" why not raise the price of their drugs to $1 million per dose? This argumentum ad absurdum demonstrates that even with the lack of medicinal alternatives, there are certain economic factors which prevent astronomically high prices.

vowelless 10y ago

> And it is illegal for Medicare to negotiate with drug companies Why is this the case ? Also, this is from September 2016.

dv_dt 10y ago
It was part of the Medicare part D program - and likely put in via lobbying of Drug companies to politicians: https://en.wikipedia.org/wiki/Medicare_Part_D#Criticisms https://en.wikipedia.org/wiki/Medicare_Part_D#Criticisms https://en.wikipedia.org/wiki/Medicare_Prescription_Drug,_Improvement,_and_Modernization_Act https://en.wikipedia.org/wiki/Medicare_Prescription_Drug,_Im...
- chimeracoder 10y ago
  > It was part of the Medicare part D program - and likely put in via lobbying of Drug companies to politicians: The prices are still negotiated. They're negotiated by the plans that provide Medicare Part D, rather than determined unilaterally by Medicare itself (which is what happens for Medicare A and B reimbursement rates).
  - dv_dt 10y ago
    Any private drug negotiator is going to be in a terrible position because they don't have 100% of the market. They can't walk away, the drugs will just flow through another private drug body. The drug makers have no reason to give a discount if the drugs will be sold under plan distributor B vs distributor A. When you compare prices in the US vs nations with governmental bodies controlling drug prices, you can validate that the US way is ineffectual for controlling drug prices.
    - chimeracoder 10y ago
      > Any private drug negotiator is going to be in a terrible position because they don't have 100% of the market. They can't walk away, Having 100% of the market is the definition of a monopsony. That's bad for both patients (in the long run) and pharmaceutical companies (in the short run). In any case, even an ostensible monopsony pharmaceutical purchaser can't really just "walk away", because so so many of the drugs that they're purchasing are deemed essential. Let's say the government just said, "sorry, you've been taking this critical blood-pressure medication since it was released seven years ago, but now we're not going to pay for it, because we're taking a hard-line stance in our negotiation with Pfizer". At that point, there are two possibilities: 1) Patients stop taking the drug, and they die 2) Patients pay for the drug out-of-pocket (if they can afford it), and the remaining patients die. #1 is possible, but a political disaster. #2 is a no longer a monopsony, which defeats the whole premise of "having 100% of the market".

Overtonwindow 10y ago

Please add (2016) to the title.

ThomPete 10y ago
Done

senior_james 10y ago

Drug prices are high because of government regulation. It can take up to a billion dollars and decades to get FDA approval and drug companies only have a limited time to recoup their investment before their patent expires. So they are forced to charge high prices. This also reduces competition and creates a monopoly in the market. If regulations were reduced, it would bring in more competition and force the prices down.

doktrin 10y ago

> These high prices support innovation, they argue—not just for America, but for the world. I suspect this is in fact somewhat true, but how is it a coherent argument in favor of higher prices? The American people / American elderly (obviously) don't have some unspoken moral obligation to subsidize pharmaceutical R&D for the whole world. Governments around the world are able to negotiate affordable rates for their citizens, yet in the US we have to listen to these completely insane justifications? IMO if the US government (who presumably agree with the drug companies on this) feels this strongly about subsidizing research they could always expand federal research grants and/or NIH funding. Yet I suspect that's a non starter for political reasons.

ferentchak 10y ago
This. Do we need to subsidize Sweden and Germany? I have wondered for a while why we don't make a law saying the highest price you can sell a drug for in the US is no higher than the lowest negotiated price that drug is sold to in other rich countries. So if Canada negotiates a drug for $10 then that is the highest price you can sell it for here etc. That way they can set the prices however they want but collective buying agreements that are a part of socialized healthcare don't end up shifting the burden of cost to the US.
- themihai 10y ago
  Something tells me this would be against some WTO rules. The US gov could simply negotiate a better deal just like Germany, Sweden or any other country does but...I guess the lobby plays a important role in the grand scheme of things so unless the US electorate puts pressure on the government you won't see a better deal.
- chimeracoder 10y ago
  > I have wondered for a while why we don't make a law saying the highest price you can sell a drug for in the US is no higher than the lowest negotiated price that drug is sold to in other rich countries. You don't need a rule to enforce that. You just need to allow the US to reimport prescription drugs that were originally exported from the US. It would be far and away the simplest solution and would have the same end result[0]. Unfortunately, Congress has voted against that, so we're stuck with the status quo. [0] The difference between the prices charged in the US and the prices charged in any other country could be no greater than the costs of reimporting the drugs from that country - or else people would just buy the reimported versions instead of the domestic ones[1]. This has the desired outcome of equalizing the prices [1] Which, remember, are literally the same drugs manufactured at the same plants by the same company.

uptown 10y ago

1. Drug companies donate to politicians. 2. Politicians promote drug-company-friendly policies. 3. Drug companies earn outsized profits. 4. Repeat

RcouF1uZ4gsC 10y ago

This has a very simple fix, and is a fix that would appeal to Donald Trump: Require that pharmaceutical companies do not charge Americans any more for their drugs than what they charge any developed country. This lets other countries do the dirty work of negotiating prices while reaping the benefits for the US. In addition, it goes along with his whole America is getting screwed narrative - ie that other companies are taking advantage of the fact that American markets pay for the drug developments, and other countries reap benefits of cheap drugs and that he would put America back on equal footing. EDIT: Thanks for the great comments. To ease with the concern about hurting the very poor countries, we could substitute "developed country" with "OECD country" (http://www.oecd.org/about/membersandpartners/list-oecd-member-countries.htm http://www.oecd.org/about/membersandpartners/list-oecd-membe... which are relatively rich countries).

prostoalex 10y ago
Can't the manufacturers still inflate list prices by introducing heavy rebates?
pascalxus 10y ago
this sounds like a good start.
frgtpsswrdlame 10y ago
Why would that appeal to Donald Trump? It would hurt the profits of the drug industry in America which will cost jobs, pharma execs will tell him how bad this is for America and how harmful it is to drug R&D, etc etc. Donald Trump may have campaigned as a negotiator for the common man but he identifies with CEOs, anything that hurts them is not something that appeals to him.
- dv_dt 10y ago
  The high price of medical care costs lives as well as jobs in other industries...
  - frgtpsswrdlame 10y ago

lcfcjs 10y ago

It's quite simple. The American Republican party is in the pocket of healthcare's biggest businesses. They accept "donations" if their policies are favorable to these companies. If these donations became illegal, the problem would be solved. It really is as simple as that. Anybody who complicates it further has purely partisan reasons.

known 10y ago

Make in China?

deleted 10y ago

[deleted]

marcgcombi 10y ago

The key challenge is that the government has so grossly distorted the market, on multiple dimensions, that the actual levers within the pharma vertical are opaque to all but the most embedded incumbents. (economists refer to these as hidden externalities). These market-distortions have all but eliminated the natural cost-competition that one would observe in other sectors, such as commodities or manufacturing. The best thing the government can do is back off completely and make those pharma companies REALLY sharpen their pencils. For those of you who believe MORE regulation is the way out, that's called "trying to dig your way out of a hole" or "repeating the same nonsense and expecting a different outcome." Please challenge your beliefs.

caseysoftware 10y ago

Negotiation is only effective if you can walk away from the deal. The drug companies can't afford to lose their biggest customer. But since the customer can't go anywhere else, it's not like they would. It's a detente where neither side can really make a move because the other just says "Nope." I think transparency - as in publicly available pricing - would be the only thing to change the balance here. Even then, it's not a fix..

calvinbhai 10y ago

Drug prices in US go up because of collusion between Insurance Companies and Drug manufacturers. Would I buy expensive health insurance if drugs cost me $100 a month? Most probably never. What if the sticker price for my monthly dose of drugs was $10,000 or $50,000? You bet I'd go get an insurance that'd cost $500 a month. With such sticker shock, manufacturer reaps in profits. Insurance companies get to charge higher premiums. Solution: Fix IP laws for drugs in US. If the drug costs beyond the 2x or 5X of what it costs in India, or than the average of drug prices in a few countries, then that drug loses all its IP protections in US. Manufacturer is still free to charge zillions for that product, but there'll be no restrictions on copycats or generic versions from outside US taking over the market. It'll help in keeping a sensible profit margin for manufacturers without ripping off Americans. Most problems in healthcare costs in US, are due to insurance companies dictating terms.

TheCoelacanth 10y ago
Or even simpler, just allow people to buy the drugs elsewhere and import them into the US. With most products that is allowed, which through market pressure keeps prices from diverging too much between different countries. With drugs it is not allowed, so drug prices can diverge to a much greater extent.
- aianus 10y ago
  This will either kill people in poor countries that can't afford to pay more or it will cripple new development of drugs since the successful drugs really do need huge profit margins to pay for all of the losers that never made a dime.
allenz 10y ago
> Drug prices in US go up because of collusion between Insurance Companies and Drug manufacturers. It's great that you're interested in healthcare policy, but you should be careful about making blanket statements without the evidence. Drugs are 9% of healthcare costs[1] and 14% of insurance costs[2]--hardly the decisive factor in your choice of health insurance. And expensive drugs are expensive primarily because it really does cost $1B+ to develop a new drug.[3] Even if you wipe out drug company profits (which we really don't want to do), you'll save at most 3% on your insurance.[4] Like other types of insurance, cheap health insurance is cheap primarily because it limits your coverage. The biggest impact is that you pay more to see fewer specialists and undergo fewer procedures. It also results in situations in which you're denied a cure for liver disease until you have severe liver damage.[5] Your solution doesn't solve collusion so much as make a major tradeoff: we can have a world in which drugs cost $1000/year, if we stop researching drugs that cure liver disease. We can have cheap health insurance, if we give up most of the coverage. You probably didn't know you were making that tradeoff, and that's probably not a tradeoff you want to make. [1] http://www.huffingtonpost.com/2014/12/03/health-care-spending_n_6256166.html http://www.huffingtonpost.com/2014/12/03/health-care-spendin... [2] PwC report, page 12 http://www.amcp.org/WorkArea/DownloadAsset.aspx?id=12727 http://www.amcp.org/WorkArea/DownloadAsset.aspx?id=12727 [3] https://www.washingtonpost.com/news/wonk/wp/2014/11/18/does-it-really-cost-2-6-billion-to-develop-a-new-drug/ https://www.washingtonpost.com/news/wonk/wp/2014/11/18/does-... [4] Profit margins are less than 20% http://www.bbc.com/news/business-28212223 http://www.bbc.com/news/business-28212223 [5] http://america.aljazeera.com/articles/2015/10/16/insurance-providers-deny-hepatitis-drugs.html http://america.aljazeera.com/articles/2015/10/16/insurance-p...

andrewla 10y ago

> Private insurers do so instead, but the government binds their hands, for example by requiring them to pay for six broad categories of drugs, without exception I'd like to understand more of this -- it seems like there is hand-tying at multiple levels. In addition to insurance companies, why isn't it possible for pharmacies, for example, to compete on price directly -- CVS, or Walgreens, or potentially even Walmart, seem like they would have sufficient market share to negotiate prices as well.

maxerickson 10y ago
Pharmacies do charge (fairly) low prices for generics.
refurb 10y ago
The largest pharmacies do compete on price. It's common for CVS or Walgreens to get an additional discount on products.

abfabry 10y ago

I work at Blink Health (www.blinkhealth.com) and we're working to solve this problem and offer patients a fair price for their medication, often saving patients up to 90% of list price. We negotiate with pharmacies and pharmaceutical manufacturers to get the lowest rates and improve price transparency in an opaque market. We have a kick-ass engineering team -- if you're interested in these problems and want to help us fix healthcare shoot me an email at alexander [at] blinkhealth [dot] com

maxerickson 10y ago
Why is an account with you better than no account at GoodRx? I assume you are pretty much just a PBM?

rayiner 10y ago

The idea that you can point to even one or two "whys" is patently ridiculous. The goal is easy to state: how do you set drug prices at the level that optimally balances consumer welfare (benefit realized minus money spent)? Simply setting prices as low as possible is of course not the answer--a big part of maximizing the benefit realized involves creating adequate incentives for drug companies to create new medicines. But there are a dizzying array of factors that make it hard to even understand what that optimal price should be: 1) The potential free rider effect is huge. Drug companies would not invest billions into creating new drugs if after six months on the market they could be duplicated by a competitor and sold for a far lower price. 2) To avoid (1), we give drug companies a patent. But in the process, we make it much harder to use market mechanisms to regulate drug pricing, since patents inherently give drug companies monopoly power. 3) Moreover, in most of the developed world, we want to make a certain level of medical care accessible to everyone. That results in systems like Medicare, the U.K. NHS, etc. That too stymies market mechanisms, except in the other direction. Single-buyer markets are monopsonies, and unchecked result in driving prices below efficient level. (That is likely what has happened in Europe, and is the reason why Medicare is prohibited from negotiating drug prices.) 4) The pharmaceutical market is international, and thus rich in arbitrage opportunities for national governments. So long as the American market is willing to foot the R&D bill, other countries have enormous incentives to drive prices local below the efficient level for their own citizens. 5) Conceptions of morality also complicate things. We ordinarily accept the idea that companies are permitted to charge based on the value they create for their customers. We accept Apple charging $2,400 for a Macbook Pro and understand that people only buy it because they think they will get more than $2,400 of utility from it. What's the value to the customer of HIV anti-retrovirals? How much would you pay to extend your life by decades? Almost certainly more than what those drugs cost. There is an impulse to try and say "well, it's okay for Apple to charge based on value created, but not drug companies." That impulse is surely well-intentioned, but is counter-productive. It has the effect of driving talent and capital out of areas that have the greatest positive impact on humanity.

maxerickson 10y ago
The US seems to need better regulation. How did it take so long for esomeprazole to be revealed as a marketing sham? https://www.quora.com/Is-there-a-significant-difference-in-effectiveness-between-Nexium-esomeprazole-and-OTC-omeprazole-brand-name-Prilosec-when-treating-GERD https://www.quora.com/Is-there-a-significant-difference-in-e... Not necessarily more regulation or less regulation, but better. I guess that falls into easy to say hard to do. I also wonder about things like the significance of the improvements made to the Epipen (the related patents allowed Milan to push generics off the market).

togoshigekata 10y ago

Why is the government getting involved in health care? What is the role of government? Shouldnt we let the free market run free? Also what if drug patents didnt last so long so that there can be more competition? People have good intentions, but don't understand the unintended consequences...

togoshigekata 10y ago

Why is the government involved in health care? What is the role of government? Shouldnt we let the free market run free? People have good intentions, but don't understand the unintended consequences... "Basic Economics" by Thomas Sowell https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465060730/ https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465... Please make this required reading in all classrooms

AngeloAnolin 10y ago

Answered practically in the first two paragraph of the article: Despite the furor, drug companies continue to charge exorbitant prices in America. Why? THE SIMPLE ANSWER IS BECAUSE THEY CAN There's no quick fix to the insatiable greed on all the parties involved. Profit over people's well-being.

mgrennan 10y ago
I have never understood for profit medicine. There is a very fine moral line between, selling a blue pill that gives someone a "fun time" and selling cocaine for the same resin? Drug companies are making dugs and machines to "extend life" to drain the saving of the elderly. I've seen who could not pay for a "live saving" drug, give away everything they own so they can go on medicaid to be "saved".

danans 10y ago

Friends in the pharma and medical device development industry have told me that the business case for any drug or medical device is built on top of US sales at currently inflated US prices. According to them, the other developed countries that have negotiated lower rates for drugs serve a different purpose. Those countries have lower requirements around testing of drugs and medical devices, and they are able to move to human trials and market sooner there. The trade-off for those countries is slightly higher risk of sub-optimal outcomes, but this appears to be more accepted by the populations of those countries than it is by Americans. I'm not writing this to vouch for this setup - it seems like it is pretty unbalanced and ultimately does a lot of harm to people in the US due to drug inaccessibility - but I thought I'd share it for another perspective.

_acme 10y ago
Do you have support for the claim that US-developed drugs are generally available sooner in non-US markets? My understanding was that these drugs are generally available first in the US market, but that the developers may use FDA approval to help with EU approval, etc.
- danans 10y ago
  In the case of the medical device company in question, the trials took place in Europe due to an easier regulatory process around testing. As I said, it's their personal story, but here is an article that describes the differences between the systems: http://www.nejm.org/doi/full/10.1056/NEJMhle1113918#t=article http://www.nejm.org/doi/full/10.1056/NEJMhle1113918#t=articl... I didn't mean to imply that US drug prices necessarily have anything to do with its regulatory structure, or that the European regulatory structure had anything to do with their prices, only that the companies have probably optimized their development and pricing strategies for the economic and political situations in the local markets.
dodgedcactii 10y ago
Same execs that probably sell you a line about R&D costs, right? Not sure why you'd ever trust them to speak truthfully about delivering good health to Americans.

WallWextra 10y ago

My father recently passed, and a month or so afterwards we got a bill from the nursing home pharmacy who, apparently, couldn't figure out how to bill his insurance. The price for 30 atorvastatin, whose out-of-pocket cost is about $20, was $160. The same with other cheap generic heart medications. Complaining about high drug costs is a red herring. Drug prices are a small fraction of healthcare costs, and even if new drugs were made cheap, healthcare providers would still overcharge for them.

shakencrew 10y ago

Previous discussion on Hacker News: https://news.ycombinator.com/item?id=12494927 https://news.ycombinator.com/item?id=12494927

pc2g4d 10y ago

To me this is why single-payer is unwise. The distortions of having a single massive customer with various mandates are bound to cause distortions like this. Government-subsidized HSAs for everybody is my pet alternative.

MrFantastic 10y ago

The reason is that private health insurance companies suffer from the Classic Agency Problem. They want their costs to increase at a sustainable rate so that they can keep growing their Net Income. Historically, private health insurance companies earn ~ 6% of their total revenue as profit. To justify an increase in their premiums they have to "miss" their payout ratio slightly every year. Drugs that patients will take for life are a great way off locking in that increased cost in a "controlled" way.

faragon 10y ago

In most European countries drug prices are negotiated at scale, because of public institution negotiating directly with pharmaceutical companies (most expensive drugs are the ones in international shortage, e.g. hepatitis C drugs, etc.). So what happens in the US is that pharmaceutical companies apply the "divide an conquer" rule, having a de facto monopoly.

WalterBright 10y ago

Sam Peltzman in "Regulation of Pharmaceutical Innovation" shows with statistics how the 1962 FDA Amendments resulted in massive drug price increases and a halving of new drugs being developed, with no net increase in efficacy.

narrowrail 10y ago

I searched all the comments and saw no mention of hospitals. I believe hospitals[0], pharma companies, and insurance companies have colluded to set prices for all healthcare which prevents the actual 'users' from price discovery. [0]https://en.wikipedia.org/wiki/American_Hospital_Association https://en.wikipedia.org/wiki/American_Hospital_Association

sigil 10y ago

"Why can't we just control prices?" wonders a publication called The Economist in the second graf. This article doesn't meet the Hacker News bar for me. Why read a shallow, dataless, meandering, "could the grass be greener" thinkpiece when you could be reading and discussing a deep statistical analysis like: High US health care spending is quite well explained by its high material standard of living https://randomcriticalanalysis.wordpress.com/2016/09/25/high-us-health-care-spending-is-quite-well-explained-by-its-high-material-standard-of-living/ https://randomcriticalanalysis.wordpress.com/2016/09/25/high... The two follow up posts on that blog (Random Critical Analysis) are also quite good. So many surprising discoveries await us in the actual data, but I guess opining and confirming bias is more fun? If real journalism is going to require active philanthropy to survive, I'm funding the kind of critical analysis on open data sets that makes me think & rethink, not the kind of stuff that makes me go "that's just, like, your opinion, man." This article was the latter.