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> As a consumer, having the manufacturer "transfer" money from your pocket into their own sucks. Seems like the article's logic is actually pretty decent. As I

> As a consumer, having the manufacturer "transfer" money from your pocket into their own sucks. Seems like the article's logic is actually pretty decent. As I addressed in my second paragraph, it is not actually a transfer unless you introduce new assumptions into the standard model of a monopoly. Please describe them. > There are real costs in time, money, and resources for creating the packaging, transporting drugs, stocking/shelving them, unstocking them, sending them to a disposal location, and then disposing of them. These are, in almost all cases, trivial compared to the development cost of the drug. You can group them under the marginal cost of the pill. > Basically, outside of theoretical econ-land, wasting perfectly good things is wasteful. Much worse than theoretical econ-land is non-quantitative land where all "waste" is bad and cost-benefit analyses are never done, not even at the order of magnitude level. Please, by all means, construct a more accurate model. But just criticizing the imperfections of a model, which always exist, and then making non-quantitative value judgements is how we get recycling programs that cost 10 times the value of the material they recover.

breischl 9y ago
>Please, by all means, construct a more accurate model. Gee, you get to just hand-wave an entire manufacturing process and supply chain into insignificance, but I need a model, huh? Fine. Let's use a generic drug (ie, not paying patent/development costs) as a proxy for how much the entire supply side costs. How about loratidine. You can get that at Walmart (stocked on the shelf, since that's mostly what the article was discussing) for about 10 cents/pill.[1] Of course that's completely ignoring the disposal costs. I strongly doubt that disposing of hospital/pharmacy quantities of drugs is as easy as chucking them in the municipal landfill. Let's say it costs 10% of the purchase price. So 11 cents/pill just to run a pill through the supply chain and then dispose of it. Intensifying the napkin math... CDC says there were ~3.4 billion visits that resulted in drugs "provided or ordered". [2] Let's say that those were an average of 7 days worth of drugs ordered, so ~30 billion doses. Let's say that 10% of that much is either wasted by the consumer, or wasted while sitting on a shelf before anybody bought it - 3 billion pills. 3 billion pills/year * 0.11 cents/pill = $330 million/year. I dunno, seems potentially significant, at least to an order of magnitude level. Especially since the costs of the FDA program to extend the shelf life was around 1% of that much. Ref: [1] - https://www.walmart.com/ip/Equate-Loratadine-10-mg-300-ct/20629925 https://www.walmart.com/ip/Equate-Loratadine-10-mg-300-ct/20... [2] - https://www.cdc.gov/nchs/fastats/drug-use-therapeutic.htm https://www.cdc.gov/nchs/fastats/drug-use-therapeutic.htm
- jessriedel 9y ago
  > Gee, you get to just hand-wave an entire manufacturing process and supply chain into insignificance, but I need a model, huh? Nope, for this you just need a number! (In my comment, the "model" part referred to how monopoly pricing was done.) > So 11 cents/pill just to run a pill through the supply chain and then dispose of it. Good, your estimate process is a reasonable one, and I accept this number. > $330 million/year...I dunno, seems potentially significant, at least to an order of magnitude level. Ok, let's compare to what the article says: > Experts estimate such squandering eats up about $765 billion a year — as much as a quarter of all the country’s health care spending. So we see that our cocktail napkin math has been extremely useful, and that the article has overstated the size of the issue by some three orders of magnitude! (25% --> 0.01%) The many suggestions in the article that this is important on the level of the entire health care system is absolute bunk. Thank you for engaging in this exercise with me!
  - cbr 9y ago
    $765B is their estimate for all waste, not just wasted pills: ProPublica has been researching why the U.S. health care system is the most expensive in the world. One answer, broadly, is waste — some of it buried in practices that the medical establishment and the rest of us take for granted. We’ve documented how hospitals often discard pricey new supplies, how nursing homes trash valuable medications after patients pass away or move out, and how drug companies create expensive combinations of cheap drugs. Experts estimate such squandering eats up about $765 billion a year — as much as a quarter of all the country’s health care spending. Later on they say: Tossing such drugs when they expire is doubly hard. One pharmacist at Newton-Wellesley Hospital outside Boston says the 240-bed facility is able to return some expired drugs for credit, but had to destroy about $200,000 worth last year. A commentary in the journal Mayo Clinic Proceedings cited similar losses at the nearby Tufts Medical Center. Play that out at hospitals across the country and the tab is significant: about $800 million per year. And that doesn’t include the costs of expired drugs at long-term care pharmacies, retail pharmacies and in consumer medicine cabinets. This isn't estimating the same thing as the GP's $330M (hospital waste instead of consumer waste) but $800M is on the same scale, suggesting to me that the marginal cost of drugs might matter some. (I do agree with your point that most of the cost, and especially the most egregious examples like the wasted epi-pens, don't represent real costs because of monopolies.)

breischl 9y ago

>Please, by all means, construct a more accurate model. Gee, you get to just hand-wave an entire manufacturing process and supply chain into insignificance, but I need a model, huh? Fine. Let's use a generic drug (ie, not paying patent/development costs) as a proxy for how much the entire supply side costs. How about loratidine. You can get that at Walmart (stocked on the shelf, since that's mostly what the article was discussing) for about 10 cents/pill.[1] Of course that's completely ignoring the disposal costs. I strongly doubt that disposing of hospital/pharmacy quantities of drugs is as easy as chucking them in the municipal landfill. Let's say it costs 10% of the purchase price. So 11 cents/pill just to run a pill through the supply chain and then dispose of it. Intensifying the napkin math... CDC says there were ~3.4 billion visits that resulted in drugs "provided or ordered". [2] Let's say that those were an average of 7 days worth of drugs ordered, so ~30 billion doses. Let's say that 10% of that much is either wasted by the consumer, or wasted while sitting on a shelf before anybody bought it - 3 billion pills. 3 billion pills/year * 0.11 cents/pill = $330 million/year. I dunno, seems potentially significant, at least to an order of magnitude level. Especially since the costs of the FDA program to extend the shelf life was around 1% of that much. Ref: [1] - https://www.walmart.com/ip/Equate-Loratadine-10-mg-300-ct/20629925 https://www.walmart.com/ip/Equate-Loratadine-10-mg-300-ct/20... [2] - https://www.cdc.gov/nchs/fastats/drug-use-therapeutic.htm https://www.cdc.gov/nchs/fastats/drug-use-therapeutic.htm

jessriedel 9y ago
> Gee, you get to just hand-wave an entire manufacturing process and supply chain into insignificance, but I need a model, huh? Nope, for this you just need a number! (In my comment, the "model" part referred to how monopoly pricing was done.) > So 11 cents/pill just to run a pill through the supply chain and then dispose of it. Good, your estimate process is a reasonable one, and I accept this number. > $330 million/year...I dunno, seems potentially significant, at least to an order of magnitude level. Ok, let's compare to what the article says: > Experts estimate such squandering eats up about $765 billion a year — as much as a quarter of all the country’s health care spending. So we see that our cocktail napkin math has been extremely useful, and that the article has overstated the size of the issue by some three orders of magnitude! (25% --> 0.01%) The many suggestions in the article that this is important on the level of the entire health care system is absolute bunk. Thank you for engaging in this exercise with me!
- cbr 9y ago
  $765B is their estimate for all waste, not just wasted pills: ProPublica has been researching why the U.S. health care system is the most expensive in the world. One answer, broadly, is waste — some of it buried in practices that the medical establishment and the rest of us take for granted. We’ve documented how hospitals often discard pricey new supplies, how nursing homes trash valuable medications after patients pass away or move out, and how drug companies create expensive combinations of cheap drugs. Experts estimate such squandering eats up about $765 billion a year — as much as a quarter of all the country’s health care spending. Later on they say: Tossing such drugs when they expire is doubly hard. One pharmacist at Newton-Wellesley Hospital outside Boston says the 240-bed facility is able to return some expired drugs for credit, but had to destroy about $200,000 worth last year. A commentary in the journal Mayo Clinic Proceedings cited similar losses at the nearby Tufts Medical Center. Play that out at hospitals across the country and the tab is significant: about $800 million per year. And that doesn’t include the costs of expired drugs at long-term care pharmacies, retail pharmacies and in consumer medicine cabinets. This isn't estimating the same thing as the GP's $330M (hospital waste instead of consumer waste) but $800M is on the same scale, suggesting to me that the marginal cost of drugs might matter some. (I do agree with your point that most of the cost, and especially the most egregious examples like the wasted epi-pens, don't represent real costs because of monopolies.)