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Let's say they succeed in launching a new generics company. Ten years down the line they will divest in order to build each hospital a shiny new geriatrics win
by fludlight 9y ago
Let's say they succeed in launching a new generics company. Ten years down the line they will divest in order to build each hospital a shiny new geriatrics wing. Within six months the spun-off drug company will jack up prices and the cycle will continue.
- TillE 9y agoFrom that perspective, does any country have their own publicly owned pharmaceutical manufacturer? It's the kind of thing the NHS should do, since they control most other aspects of health care, but I don't think they do. There's so little benefit to competition with generics, you may as well have that vertical integration to at least provide what hospitals need.
- ekianjo 9y agoCountry-owned means of production have usually not fared well vs competitive forces in the past. And it could be considered as unfair competition: a state-owned manufacturer could basically have a blank check from the government for any kind of investment and would not have to worry at all about profitability. It sounds very nice as a thought exercise, but economical incentives are very tightly linked with productivity.
- chrisbennet 9y agoThinking of it as “unfair competition” implies that companies have some sort of entitlement to a market. They don’t. If my town wants to have its own fire department, it’s not “unfair” to privately owned fire departments anymore than working on my own car is “unfair” to professional mechanics.
- mindcrime 9y agoNationalized producers are generally considered "unfair" because they're usually (always??) tax subsidized in some way. As such, they're not competing on a level playing field with the other players. In fact, the other players are being taxed... to pay for subsidizing their direct competitor! Now if you wanted to setup a nationalized producer, put a "chinese wall" between it and the State and force it to compete without subsidies or special (favourable) regulations, sure, go for it. But then what's the advantage of it being nationalized to begin with? Anybody could start a non-profit corporation and do the same thing.
- apatters 9y agoNationalized production is usually something to discourage for the same reason monopolies and oligopolies should be discouraged--they are insulated from competition in special ways, and as a result in the long run they tend to become inefficient (which in the worst case translates to basically extorting customers). The root of the problem with American drug companies is that they're insulated from open market competition by a government approvals process that costs billions--only a few companies have enough money to take a new drug to market. The government could reform this process but chooses not to, claiming it's necessary for consumer safety (certainly some kind of approvals process is).
- thatcat 9y agoThe problem is anti-competitave behavior though, right? The pharmacutical market is highly consolidated. Trying to rely on some startup to successfully compete in a highly consolidated market that requires a lot of capital and specialized labor isn't going to work, only the government can compete at that level so they should - especially when it is so clearly in the public's best interest for everyone to have access to the services provided by the market. >Country-owned means of production have usually not fared well vs competitive forces in the past Currently in the exact markets being discussed ISP markets are in a similar situation. If you look at municipal broadband providers, they has fared very well - providing better service (fiber) for lower costs while protecting the public interest by opting in to net neutrality. Outside of ideological concerns it's hard for me to the problem with the government intervening in stagnant markets by competing directly.
- toomanybeersies 9y agoIn New Zealand, Pharmac [1] is a government run entity that bulk negotiates bulk contracts for supplying the entire country with prescription drugs. It's not quite the same as manufacturing it themselves, but the bulk buying does bring the price down quite substantially. [1] https://en.wikipedia.org/wiki/Pharmac https://en.wikipedia.org/wiki/Pharmac
- thatcat 9y agoThis is common, the US is alone in its legislation against negotiating as a group for prescription prices.
- selectodude 9y agothe government is not allowed to negotiate at all on drug prices (utterly insane, thank you W. Bush) but insurance companies can, and do, negotiate as a group.
- refurb 9y agoThat's an over simplification. Sure Medicare and Medicaid don't negotiate directly. Instead they impose discounts by fiat (no discount, no gov't business). Look up the 340B program and mandatory Medicaid rebates. They add up to huge discounts. In most cases Medicaid pays the lowest price of any customer and Medicare often pays the same as private insurers. It's a fallacy to say the gov't is getting screwed over by not negotiating over drug prices.
- thatcat 9y agoTo show that it is a fallacy you would need to compare the final drug costs after rebate with an average of foriegn govs that do negotiate rather than private insurers.
- refurb 9y agoI'm cherry picking data, but the new hepatitis C drugs are cheaper in the US than the major EU countries. As for a proper analysis of your question, I'm not sure that data is available. Net prices in the US are confidential.
- aa111111111 9y agowww.spc.lk
- chillydawg 9y agoBecause of the purchasing power of the NHS (enormous) they don't usually run into many problems like described in this thread, although they do happen here. Drug company monopolies need a drug purchasing monopsony to keep them in check.
- majormajor 9y agoThis is all nice and cynical sounding like HN loves when it comes to big companies, but even then: is that such a bad thing? You have ten years of a lot of people getting cheaper and better access to drugs, and you have a bunch of hospitals getting much-needed capacity increases with state-of-the-art facilities, and you have a proven business model for someone else to come in and take their turn at the money-making wheel. It's like saying nobody should start a new company cause "best case they'll be another evil surveillance company like Google/Facebook/Microsoft/Amazon, worst case they'll lose all their money."
- mojomark 9y agoConcur with maj maj maj maj... additionally, the the cynisism ignores the introduction of new competitive forces with a different moral vector in a largley unchecked market, the repurcussions of which are certainly uncertain, for certain.
- garettmd 9y agoI agree with you that more competition is a good thing, but I don't think you can say that hospitals have a different moral vector than drug companies. Hospitals are as much huge corporations trying to please stockholders as big pharma is, they just happen to have people working for them who have a different moral vector. But I wouldn't put much hope in hospitals making a huge investment like this for the good of their patients
- tbihl 9y agoUnchecked? What about the FDA check on new entrants to the market?
- thatcat 9y agoUnchecked by market forces, since the market has been consolidated and lacks competition.
- nostrademons 9y agoThat's pretty much the case with all of the economy, though. Industry is dominated by big companies that are overpriced and consumer-hostile; new startup enters that actually delivers a decent product at a decent price; startup becomes wildly popular because it's better than entrenched encumbents; startup founders/investors/early employees want liquidity and either sell to big competitor or go public and are forced to be responsive to shareholders; startup jacks up prices and cuts costs; everybody starts to hate the new big company; the cycle repeats. Think of it as the full-employment theorem for entrepreneurs, or the social-mobility conveyor belt, or the way in which society stays dynamic & responsive. At least savvy customers get a decade of decent service at reasonable prices, and people (from all backgrounds!) with chutzpah and persistence have a shot at becoming fabulously wealthy.
- eeZah7Ux 9y agoThe first paragraph is true. > people (from all backgrounds!) with chutzpah and persistence have a shot Economic mobility is lower that what most people think across developed countries and it's decreasing.
- thinkloop 9y agoAgree, however the market would have an additional significant competitor, as well as a blue-print and success example for others to emulate if they decide not to defend their value prop.
- philipov 9y agoThe problem is that the most effective way to defend your value proposition seems to be buying laws that protect you against new competition. Entrenched players might compete with each other, but they can all agree to crush the new guy together.
- incompatible 9y agoThat would be an interesting cycle. Perhaps the hospitals could document the process of setting up the drugs company, so that as soon as the prices are jacked up, they can start up another one. It could be quite a profitable business model: starting up and selling drugs companies.
- justinph 9y agoHow would that going to work? The article says they're setting up a nonprofit company. Can't spin that off and sell it.