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> Americans pay the highest health-care prices in the world, including the highest for drugs, medical devices, and other health-care services and products. Our

> Americans pay the highest health-care prices in the world, including the highest for drugs, medical devices, and other health-care services and products. Our fragmented system produces many opportunities for excessive charges. But one lesser-known reason for those high prices is the stranglehold that a few giant intermediaries have secured over distribution. The antitrust laws are supposed to provide protection against just this kind of concentrated economic power. But in one area after another in today’s economy, federal antitrust authorities and the courts have failed to intervene. In this case, PBMs are sucking money out of the health-care system—and our wallets—with hardly any public awareness of what they are doing. As I and other have mentioned before, the easiest way to fix this would be to permit re-importing drugs that were manufactured within the US. For example, permitting trade across the US-Canadian border provides an equalizing force on the prices across the border, even though, at steady-state, no drugs actually need to make the return trip. In other words, allowing the trade puts an upper bound on the difference between the prices charged in the US and the prices charged in Canada: that difference can be no greater than the costs of reimporting those drugs, or else it becomes cheaper for people to source their drugs from Canada. By disallowing the trade, we allow the difference to grow unbounded. A few days 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_...

awinder 10y ago
Or: we could just emulate what those other countries are doing to control prices, which apparently has been empirically proven to be effective. Why set up this rube goldberg export / import system when we could, apparently, just import some good legislation?
- chimeracoder 10y ago
  > Or: we could just emulate what those other countries are doing to control prices Because centrally setting prices is very difficult, and that difficulty scales super-linearly with size. Every other country that controls pharmaceutical prices is significantly smaller than the US is, and they also fund much less pharmaceutical R&D than the US does[0], even though they essentially import the benefits of that R&D at reduced prices[1]. If the US tried to do that, pharmaceutical research would completely evaporate in the US, which would impact every other country that either produces or imports drugs produced in the US as well[2]. Instead, cross-border trade ensures that research funding is proportional to drug consumption. [0] Until a few years ago, US funded more than half the R&D of the entire world. It's now around 44%, mostly because China and India have been growing rapidly. [1] Even pharmaceutical companies based in Europe receive most of their R&D funding either directly or indirectly from the US. [2] Which is literally every other country in the world, even countries like India which do not recognize US pharmaceutical patents.
  - jcfrei 10y ago
    In your comment you suggest that most of the profits of pharma companies go into R&D but that's not the case. There's a lot of rent seeking behavior by these companies due to poor legislation. This kind of behavior (incentives/"conferences" for physicians, lobbying, etc.) shows up under sales in their annual reports and it's clear they spend a lot more on it than on R&D: 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... Clearly the current legal framework is not optimal for consumers.
    - chimeracoder 10y ago
      > In your comment you suggest that most of the profits of pharma companies go into R&D but that's not the case. No, I didn't say that most of the profits of pharmaceutical companies go to R&D. I said that most R&D funding comes from the US (and that a large deal of that funding comes from profits, mostly profits on sales within the US).
    - refurb 10y ago
      What a poorly written article. It looks like just lumped all the business expenses under "sales and marketing". I think it's absurd to assume that all of that spending is completely discretionary. Contrary to what people think, you need to do a certain level of sales support in the pharmaceutical market. The drugs don't sell themselves.
      - jellicle 10y ago
        We don't want them to be "sold". We want them to be prescribed as needed by medical professionals.
        refurb 10y ago
        Yes, but medical professionals can't prescribe if they don't know enough about the drug. Here is an interesting example: People complain about direct to consumer advertising of drugs in the US. What an outrage!! Well, the FDA did some analysis and found out that when patients asked for the drug: (1) 87 percent actually had the condition the drug treats, (2) 6 percent of those DTC-generated visits, a previously undiagnosed condition was discovered, (3) Only 7 percent of doctors said they felt "very pressured to prescribe" a particular advertised drug - the real pressure was time pressure. More patients are coming in armed with more questions.[1] Sounds like DTC is pretty good huh? [1]http://drugwonks.com/blog/fake-dtc-news-mustn-t-drive-the-healthcare-debate http://drugwonks.com/blog/fake-dtc-news-mustn-t-drive-the-he...
refurb 10y ago
The challenge with that is that simply allowing drugs to be imported doesn't prevent drug companies from allocating volume on a country-by-country level and maintaining price discrimination. This happened back 6-7 years ago when getting your script filled by a Canadian pharmacy was all the rage. The drug companies simply setup quotas for Canada. They have a good estimate of how much drug Canadians need. If a wholesaler tries to buy more, the drug company tells them no. Then all of a sudden Canadian wholesalers are in a bind. Do they sell to Americans and tell the Canadians no?[1] In an April 8 letter to Canadian pharmacies and wholesalers, AstraZeneca wrote that some prescription drug orders would be reduced because of a new allotment program designed to address "unexpected sales increases" [1]http://khn.org/morning-breakout/dr00017294/ http://khn.org/morning-breakout/dr00017294/
- chimeracoder 10y ago
  > doesn't prevent drug companies from allocating volume on a country-by-country level and maintaining price discrimination. It does; for price discrimination, there are three criteria that all need to be satisfied, and one of them is the ability to restrict resale between market segments. If market segments are free to trade with each other, the supplier cannot price-discriminate. > This happened back 6-7 years ago when getting your script filled by a Canadian pharmacy was all the rage. The drug companies simply setup quotas for Canada. They have a good estimate of how much drug Canadians need. If a wholesaler tries to buy more, the drug company tells them no. Then all of a sudden Canadian wholesalers are in a bind. Do they sell to Americans and tell the Canadians no? It's important to understand the difference between the short-term impact and the long-term (steady-state) impact. The case you're referencing is an amusing one, because it's actually AstraZeneca's proactive campaign against what was then a touchstone of the healthcare reform bills[0]. At the time, unrestricted trade in pharmaceuticals was not possible between the US and Canada, and AstraZeneca was making a threat to try and kill the provisions that would have permitted it[1]. The only reason that they can set these quotas in the first place is that US wholesalers can't (freely) export to Canada, and vice versa. If the ban on that had been lifted, AstraZeneca wouldn't be able to set quotas per-country in the first place. They could try, and succeed in the short-term, but in the long term, the prices in both markets would be forced to converge (with the difference bounded by the costs of import/export). [0] Remember the date: April 2009, just a few months into Obama's inauguration. The public option was still theoretically on the table, and the Baucus plan hadn't happened yet. [1] It worked - that was one of the parts of the ACA that was killed before it got a vote.
rayiner 10y ago
We "disallow trade" for lots of legitimate reasons. One such reason is when government intervention in another country drives prices below market levels (e.g. we put high tariffs on Chinese steel to counter heavy Chinese government subsidization of that industry). That's exactly what happens in Canada. Because the healthcare system is publicly funded, the government has enormous market power that it can use to drive drug prices below efficient levels: http://www.becker-posner-blog.com/2009/12/should-the-government-use-its-monopsony-power-to-reduce-the-price-of-drugs-posner.html http://www.becker-posner-blog.com/2009/12/should-the-governm.... Allowing re-importation of those drugs into the U.S. would create a price ceiling at whatever level the Canadian government had negotiated, and would effectively allow the Canadian government to set drug prices in the U.S. That would be good for consumers in the short term, but not necessarily in the long term. It's no coincidence that the U.S. is the epicenter of pharmaceutical advancements. When I was a kid (early 1990s), HIV/AIDS was something we regarded as a death sentence. I vividly remember people talking in hushed tones when Magic Johnson was diagnosed in 1991. 26 years later, Magic Johnson is still kicking, HIV is no longer a death sentence, and we have Big Pharma to thank for it (and not Canada).
- chimeracoder 10y ago
  > we put high tariffs on Chinese steel to counter heavy Chinese government subsidization of that industry That's not a good comparison, because we're talking about reimportation - ie, drugs that are produced in the US and exported to another country before being reimported. In general, nobody's interested in reimporting steel produced in the US and exported to China. > Because the healthcare system is publicly funded, the government has enormous market power that it can use to drive drug prices below efficient levels First, Canadian healthcare is run at the provincial level, not at the federal level. So while each province/territory is a monopsony, they're each fairly small. Secondly, pharmaceuticals are typically not covered in Canada; patients pay for most drugs out of pocket, and their generic prices are actually not much lower than they are in the US[0] > Allowing re-importation of those drugs into the U.S. in effect allows the Canadian government to set drug prices in the U.S. With free trade, another country is still free to subsidize the goods that it imports from the US, but with the knowledge that they'll be subsidizing whatever portion of Americans choose to reimport those drugs at the subsidized prices. In reality, that reimportation won't need to happen, because it'll just apply backpressure on the initial sale prices in both markets from the manufacturer. [0] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3107113/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3107113/
jonahrd 10y ago
It's insane. I need a drug that costs about $8k every two months in the US. However, I'm living in Canada right now, where it costs $4k. My US insurance company just decided they will no longer cover the drug in Canada, so instead of paying the $4k CAD, they're now going to pay $8k USD and I'll go pick up the drug across the border. Seems like a lose-lose.
- gleb 10y ago
  You are misunderstanding the incentives of the insurance company. They get to keep 20% of money that passes through them. The only way they can make more money is by increasing the money flow. You lose though. Insurance is part of your total compensation, you are paying for all this. It's averaged out across a bunch of people, but you are still paying for it. In summary, drug company wins, insurance company wins, your employer doesn't care and you lose. But you don't even know you lost, and can do nothing about it even if you wanted to.
e40 10y ago
As I and other have mentioned before, the easiest way to fix this would be to permit re-importing drugs that were manufactured within the US. The easiest way to fix this is to have cost controls like every other 1st-world country in the world on drugs and medical procedures. Unfortunately, this is treasonous to Republicans and Democrats are spineless. The current system will be upheld until people get fed up enough to vote for real change.
- chimeracoder 10y ago
  > The easiest way to fix this is to have cost controls like every other 1st-world country in the world on drugs Ignoring the incredibly loaded term "first world country", that's not true. Not all other "first-world" countries implement price controls on drugs. Secondly, as explained below, the only reason that works for them is that the single largest consumer of patent-protected drugs (the US) does not, and thereby ends up subsidizing medical research for the rest of the world. (Half of all medical research in the world is funded by the US, and even many European pharmaceutical companies fund their research from the US).
  - duwease 10y ago
    Wait, so following suit would then lower prices in the US and pass on the costs to the rest of the world? ..Sold!
    - chimeracoder 10y ago
      > Wait, so following suit would then lower prices in the US and pass on the costs to the rest of the world? ..Sold! Yes, which is why basically any American should support drug reimporting[0]. But pharmaceutical companies lobbied heavily against it, so it was taken out of the ACA, and it's been defeated in Congress (albeit by a narrow margin) each time it's come up since then. [0] Conversely, countries which import drugs from the US (which includes all developed nations) have a very vested interest in not letting pharmaceutical prices in the US drop.
  - e40 10y ago
jobu 10y ago
I've been buying albuterol inhalers from Mexico for a several years now. Most of my life these inhalers cost a few bucks, but a few years back (2010?) they started costing me $50 for just the copay. It turns out the pharma lobby was able to get congress to ban CFCs from inhalers (even though the amount of CFCs in these is trivial). Because of that they were able to re-patent them and start charging more. Now I go to Mexico every couple years and buy a bunch of them for less than $1 each. It's the same medication I've always used, now with spanish on the package. EDIT Here's a link that talks about the pharma lobby shenanigans for albuterol inhalers: http://www.motherjones.com/kevin-drum/2013/10/heres-why-your-asthma-inhaler-costs-so-damn-much http://www.motherjones.com/kevin-drum/2013/10/heres-why-your... And here's another that talks more about medical patent evergreening: http://www.nytimes.com/2013/10/13/us/the-soaring-cost-of-a-simple-breath.html http://www.nytimes.com/2013/10/13/us/the-soaring-cost-of-a-s...
- deleted 10y ago
  [deleted]

awinder 10y ago

Or: we could just emulate what those other countries are doing to control prices, which apparently has been empirically proven to be effective. Why set up this rube goldberg export / import system when we could, apparently, just import some good legislation?

chimeracoder 10y ago
> Or: we could just emulate what those other countries are doing to control prices Because centrally setting prices is very difficult, and that difficulty scales super-linearly with size. Every other country that controls pharmaceutical prices is significantly smaller than the US is, and they also fund much less pharmaceutical R&D than the US does[0], even though they essentially import the benefits of that R&D at reduced prices[1]. If the US tried to do that, pharmaceutical research would completely evaporate in the US, which would impact every other country that either produces or imports drugs produced in the US as well[2]. Instead, cross-border trade ensures that research funding is proportional to drug consumption. [0] Until a few years ago, US funded more than half the R&D of the entire world. It's now around 44%, mostly because China and India have been growing rapidly. [1] Even pharmaceutical companies based in Europe receive most of their R&D funding either directly or indirectly from the US. [2] Which is literally every other country in the world, even countries like India which do not recognize US pharmaceutical patents.
- jcfrei 10y ago
  In your comment you suggest that most of the profits of pharma companies go into R&D but that's not the case. There's a lot of rent seeking behavior by these companies due to poor legislation. This kind of behavior (incentives/"conferences" for physicians, lobbying, etc.) shows up under sales in their annual reports and it's clear they spend a lot more on it than on R&D: 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... Clearly the current legal framework is not optimal for consumers.
  - chimeracoder 10y ago
    > In your comment you suggest that most of the profits of pharma companies go into R&D but that's not the case. No, I didn't say that most of the profits of pharmaceutical companies go to R&D. I said that most R&D funding comes from the US (and that a large deal of that funding comes from profits, mostly profits on sales within the US).
  - refurb 10y ago
    What a poorly written article. It looks like just lumped all the business expenses under "sales and marketing". I think it's absurd to assume that all of that spending is completely discretionary. Contrary to what people think, you need to do a certain level of sales support in the pharmaceutical market. The drugs don't sell themselves.
    - jellicle 10y ago
      We don't want them to be "sold". We want them to be prescribed as needed by medical professionals.
      - refurb 10y ago
        Yes, but medical professionals can't prescribe if they don't know enough about the drug. Here is an interesting example: People complain about direct to consumer advertising of drugs in the US. What an outrage!! Well, the FDA did some analysis and found out that when patients asked for the drug: (1) 87 percent actually had the condition the drug treats, (2) 6 percent of those DTC-generated visits, a previously undiagnosed condition was discovered, (3) Only 7 percent of doctors said they felt "very pressured to prescribe" a particular advertised drug - the real pressure was time pressure. More patients are coming in armed with more questions.[1] Sounds like DTC is pretty good huh? [1]http://drugwonks.com/blog/fake-dtc-news-mustn-t-drive-the-healthcare-debate http://drugwonks.com/blog/fake-dtc-news-mustn-t-drive-the-he...

refurb 10y ago

The challenge with that is that simply allowing drugs to be imported doesn't prevent drug companies from allocating volume on a country-by-country level and maintaining price discrimination. This happened back 6-7 years ago when getting your script filled by a Canadian pharmacy was all the rage. The drug companies simply setup quotas for Canada. They have a good estimate of how much drug Canadians need. If a wholesaler tries to buy more, the drug company tells them no. Then all of a sudden Canadian wholesalers are in a bind. Do they sell to Americans and tell the Canadians no?[1] In an April 8 letter to Canadian pharmacies and wholesalers, AstraZeneca wrote that some prescription drug orders would be reduced because of a new allotment program designed to address "unexpected sales increases" [1]http://khn.org/morning-breakout/dr00017294/ http://khn.org/morning-breakout/dr00017294/

chimeracoder 10y ago
> doesn't prevent drug companies from allocating volume on a country-by-country level and maintaining price discrimination. It does; for price discrimination, there are three criteria that all need to be satisfied, and one of them is the ability to restrict resale between market segments. If market segments are free to trade with each other, the supplier cannot price-discriminate. > This happened back 6-7 years ago when getting your script filled by a Canadian pharmacy was all the rage. The drug companies simply setup quotas for Canada. They have a good estimate of how much drug Canadians need. If a wholesaler tries to buy more, the drug company tells them no. Then all of a sudden Canadian wholesalers are in a bind. Do they sell to Americans and tell the Canadians no? It's important to understand the difference between the short-term impact and the long-term (steady-state) impact. The case you're referencing is an amusing one, because it's actually AstraZeneca's proactive campaign against what was then a touchstone of the healthcare reform bills[0]. At the time, unrestricted trade in pharmaceuticals was not possible between the US and Canada, and AstraZeneca was making a threat to try and kill the provisions that would have permitted it[1]. The only reason that they can set these quotas in the first place is that US wholesalers can't (freely) export to Canada, and vice versa. If the ban on that had been lifted, AstraZeneca wouldn't be able to set quotas per-country in the first place. They could try, and succeed in the short-term, but in the long term, the prices in both markets would be forced to converge (with the difference bounded by the costs of import/export). [0] Remember the date: April 2009, just a few months into Obama's inauguration. The public option was still theoretically on the table, and the Baucus plan hadn't happened yet. [1] It worked - that was one of the parts of the ACA that was killed before it got a vote.

rayiner 10y ago

We "disallow trade" for lots of legitimate reasons. One such reason is when government intervention in another country drives prices below market levels (e.g. we put high tariffs on Chinese steel to counter heavy Chinese government subsidization of that industry). That's exactly what happens in Canada. Because the healthcare system is publicly funded, the government has enormous market power that it can use to drive drug prices below efficient levels: http://www.becker-posner-blog.com/2009/12/should-the-government-use-its-monopsony-power-to-reduce-the-price-of-drugs-posner.html http://www.becker-posner-blog.com/2009/12/should-the-governm.... Allowing re-importation of those drugs into the U.S. would create a price ceiling at whatever level the Canadian government had negotiated, and would effectively allow the Canadian government to set drug prices in the U.S. That would be good for consumers in the short term, but not necessarily in the long term. It's no coincidence that the U.S. is the epicenter of pharmaceutical advancements. When I was a kid (early 1990s), HIV/AIDS was something we regarded as a death sentence. I vividly remember people talking in hushed tones when Magic Johnson was diagnosed in 1991. 26 years later, Magic Johnson is still kicking, HIV is no longer a death sentence, and we have Big Pharma to thank for it (and not Canada).

chimeracoder 10y ago
> we put high tariffs on Chinese steel to counter heavy Chinese government subsidization of that industry That's not a good comparison, because we're talking about reimportation - ie, drugs that are produced in the US and exported to another country before being reimported. In general, nobody's interested in reimporting steel produced in the US and exported to China. > Because the healthcare system is publicly funded, the government has enormous market power that it can use to drive drug prices below efficient levels First, Canadian healthcare is run at the provincial level, not at the federal level. So while each province/territory is a monopsony, they're each fairly small. Secondly, pharmaceuticals are typically not covered in Canada; patients pay for most drugs out of pocket, and their generic prices are actually not much lower than they are in the US[0] > Allowing re-importation of those drugs into the U.S. in effect allows the Canadian government to set drug prices in the U.S. With free trade, another country is still free to subsidize the goods that it imports from the US, but with the knowledge that they'll be subsidizing whatever portion of Americans choose to reimport those drugs at the subsidized prices. In reality, that reimportation won't need to happen, because it'll just apply backpressure on the initial sale prices in both markets from the manufacturer. [0] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3107113/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3107113/

jonahrd 10y ago

It's insane. I need a drug that costs about $8k every two months in the US. However, I'm living in Canada right now, where it costs $4k. My US insurance company just decided they will no longer cover the drug in Canada, so instead of paying the $4k CAD, they're now going to pay $8k USD and I'll go pick up the drug across the border. Seems like a lose-lose.

gleb 10y ago
You are misunderstanding the incentives of the insurance company. They get to keep 20% of money that passes through them. The only way they can make more money is by increasing the money flow. You lose though. Insurance is part of your total compensation, you are paying for all this. It's averaged out across a bunch of people, but you are still paying for it. In summary, drug company wins, insurance company wins, your employer doesn't care and you lose. But you don't even know you lost, and can do nothing about it even if you wanted to.

e40 10y ago

As I and other have mentioned before, the easiest way to fix this would be to permit re-importing drugs that were manufactured within the US. The easiest way to fix this is to have cost controls like every other 1st-world country in the world on drugs and medical procedures. Unfortunately, this is treasonous to Republicans and Democrats are spineless. The current system will be upheld until people get fed up enough to vote for real change.

chimeracoder 10y ago
> The easiest way to fix this is to have cost controls like every other 1st-world country in the world on drugs Ignoring the incredibly loaded term "first world country", that's not true. Not all other "first-world" countries implement price controls on drugs. Secondly, as explained below, the only reason that works for them is that the single largest consumer of patent-protected drugs (the US) does not, and thereby ends up subsidizing medical research for the rest of the world. (Half of all medical research in the world is funded by the US, and even many European pharmaceutical companies fund their research from the US).
- duwease 10y ago
  Wait, so following suit would then lower prices in the US and pass on the costs to the rest of the world? ..Sold!
  - chimeracoder 10y ago
    > Wait, so following suit would then lower prices in the US and pass on the costs to the rest of the world? ..Sold! Yes, which is why basically any American should support drug reimporting[0]. But pharmaceutical companies lobbied heavily against it, so it was taken out of the ACA, and it's been defeated in Congress (albeit by a narrow margin) each time it's come up since then. [0] Conversely, countries which import drugs from the US (which includes all developed nations) have a very vested interest in not letting pharmaceutical prices in the US drop.
- e40 10y ago

jobu 10y ago

I've been buying albuterol inhalers from Mexico for a several years now. Most of my life these inhalers cost a few bucks, but a few years back (2010?) they started costing me $50 for just the copay. It turns out the pharma lobby was able to get congress to ban CFCs from inhalers (even though the amount of CFCs in these is trivial). Because of that they were able to re-patent them and start charging more. Now I go to Mexico every couple years and buy a bunch of them for less than $1 each. It's the same medication I've always used, now with spanish on the package. EDIT Here's a link that talks about the pharma lobby shenanigans for albuterol inhalers: http://www.motherjones.com/kevin-drum/2013/10/heres-why-your-asthma-inhaler-costs-so-damn-much http://www.motherjones.com/kevin-drum/2013/10/heres-why-your... And here's another that talks more about medical patent evergreening: http://www.nytimes.com/2013/10/13/us/the-soaring-cost-of-a-simple-breath.html http://www.nytimes.com/2013/10/13/us/the-soaring-cost-of-a-s...

deleted 10y ago
[deleted]