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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

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...
- rlpb 10y ago
  > And expensive drugs are expensive primarily because it really does cost $1B+ to develop a new drug. Nope. More of the cost of a drug goes to marketing than development: https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-pharmaceutical-companies-are-spending-far-more-on-marketing-than-research/ https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p...
  - allenz 10y ago
    Nope. Development costs $1B+ by itself, as you can see from my source or your link. Marketing spend is on top of the R&D cost. I agree that we should limit drug advertising, but that Global Data report is off by an order of magnitude. Total advertising for Rx drugs is $15B to physicians and $5.2B to consumers.[1,2] The discrepancy is due to several factors. First, the Global Data report lists combined sales and marketing. Sales includes essential logistics needed for us to get our drugs, so you can't really say that marketing alone costs more than R&D. Second, most marketing is for over-the-counter drugs, for obvious reasons. Tylenol, sold by Johnson & Johnson, has an enormous marketing budget, but it's not exactly the kind of drug that forces people to buy insurance. Third, drugs only account for 40% of J&J sales--their scary marketing budget includes lots of advertising for non-pharmaceutical products. [1] http://www.pewtrusts.org/en/research-and-analysis/fact-sheets/2013/11/11/persuading-the-prescribers-pharmaceutical-industry-marketing-and-its-influence-on-physicians-and-patients http://www.pewtrusts.org/en/research-and-analysis/fact-sheet... [2] https://www.statnews.com/2016/03/09/drug-industry-advertising/ https://www.statnews.com/2016/03/09/drug-industry-advertisin...
    - rlpb 10y ago
      > Nope. Development costs $1B+ by itself, as you can see from my source or your link. Marketing spend is on top of the R&D cost. Irrelevant. You said: "And expensive drugs are expensive primarily because it really does cost $1B+ to develop a new drug" [emphasis mine] and I demonstrated this to be untrue. The data shows that the primary cost is not in R&D. It doesn't matter what you say about the necessity of that sales and marketing. I didn't comment on that. The primary cost is still not in R&D. > Third, drugs only account for 40% of J&J sales--their scary marketing budget includes lots of advertising for non-pharmaceutical products. This may be true and perhaps more data is needed, but I haven't seen any evidence that demonstrates unequivocally that the primary cost of drugs in the US is due to R&D.

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...

rlpb 10y ago
> And expensive drugs are expensive primarily because it really does cost $1B+ to develop a new drug. Nope. More of the cost of a drug goes to marketing than development: https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-pharmaceutical-companies-are-spending-far-more-on-marketing-than-research/ https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p...
- allenz 10y ago
  Nope. Development costs $1B+ by itself, as you can see from my source or your link. Marketing spend is on top of the R&D cost. I agree that we should limit drug advertising, but that Global Data report is off by an order of magnitude. Total advertising for Rx drugs is $15B to physicians and $5.2B to consumers.[1,2] The discrepancy is due to several factors. First, the Global Data report lists combined sales and marketing. Sales includes essential logistics needed for us to get our drugs, so you can't really say that marketing alone costs more than R&D. Second, most marketing is for over-the-counter drugs, for obvious reasons. Tylenol, sold by Johnson & Johnson, has an enormous marketing budget, but it's not exactly the kind of drug that forces people to buy insurance. Third, drugs only account for 40% of J&J sales--their scary marketing budget includes lots of advertising for non-pharmaceutical products. [1] http://www.pewtrusts.org/en/research-and-analysis/fact-sheets/2013/11/11/persuading-the-prescribers-pharmaceutical-industry-marketing-and-its-influence-on-physicians-and-patients http://www.pewtrusts.org/en/research-and-analysis/fact-sheet... [2] https://www.statnews.com/2016/03/09/drug-industry-advertising/ https://www.statnews.com/2016/03/09/drug-industry-advertisin...
  - rlpb 10y ago
    > Nope. Development costs $1B+ by itself, as you can see from my source or your link. Marketing spend is on top of the R&D cost. Irrelevant. You said: "And expensive drugs are expensive primarily because it really does cost $1B+ to develop a new drug" [emphasis mine] and I demonstrated this to be untrue. The data shows that the primary cost is not in R&D. It doesn't matter what you say about the necessity of that sales and marketing. I didn't comment on that. The primary cost is still not in R&D. > Third, drugs only account for 40% of J&J sales--their scary marketing budget includes lots of advertising for non-pharmaceutical products. This may be true and perhaps more data is needed, but I haven't seen any evidence that demonstrates unequivocally that the primary cost of drugs in the US is due to R&D.