6 ms·
Why would the price be any lower? If it costs $12.53 to manufacture an EpiPen equivalent, and the market price of the EpiPen is $300, it would make no sense to
by pravda 8y ago
Why would the price be any lower?
If it costs $12.53 to manufacture an EpiPen equivalent, and the market price of the EpiPen is $300, it would make no sense to sell it for any price other then $300.
- deleted 8y ago[deleted]
- jimmy1 8y ago/r/LateStageCapitalism/ But if you are being serious... Because $300 dollars for a drug that people rely on to live is too high, and it makes more economical sense to continue to sell alive people a drug at a price they can afford for longer, than keep selling it at $300 for a short time, until they go bankrupt and die.
- mythrowaway1124 8y agoYou're assuming your conclusion. Why should the market price be $300? If it only costs $12.53 to manufacture, someone could sell epipen equivalents for much less than $300 and capture the whole market.
- skksjsnaahs 8y agoSuppose there are only two competitors and the barrier to entry for a third is high. You profit $287.47 per unit with partial market share. If you try to charge $200 so you only make $187.47 per unit, your competitor will also lower the price to $200 and you will both end up with the same market share but less profit. Even if the two participants in the market never communicate, the obvious strategy in a two-player game is keep the high price.
- deleted 8y ago[deleted]
- antisthenes 8y ago> Even if the two participants in the market never communicate, the obvious strategy in a two-player game is keep the high price. No, it isn't. The default strategy is not collusion. It's lowering the price to capture more of the market.
- philipov 8y agoOne should be hesitant to proclaim knowledge of the optimal strategy without knowing all the details. Whether or not the default strategy is to cooperate or betray is sensitive to the precise weights of the rewards for each combination of decisions, as well as the number of times the game is played. For example, in the simple version of the Iterated Prisoner's Dilemma, the optimal strategy is tit-for-tat: the default is to cooperate, and only betray in exchange for being betrayed.
- TeMPOraL 8y agoThat's only default for actors that are dumb. Most humans are smart enough to take advantage of an obviously better strategy that also doesn't really require coordination.
- antisthenes 8y agoRight, but even that should be called implicit collusion.
- clairity 8y agotechnically yes, that is the default strategy in perfectly competitive markets, but collusion happens because it maximizes profit for both companies despite it being anti-capitalist. for plausible deniability, the two companies typically don't directly talk to each other, but a lot of signalling happens via public statements and marketing channels to indicate a desire not to compete (as a simplistic example: raising prices when the competitor lowers theirs).
- cortesoft 8y agoI mean, that really isn't the default strategy. As Adam Smith recognized in Wealth of Nations, the default strategy is always to collude: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
- mattnewton 8y agoThis works when there are two people (who can maybe even use the same golf resorts), but it’s impractical when there are 10 or more since anyone has a temporary advantage to defect. That’s how free markets are supposed to work and I think people might expect that to happen here. It’s just that, as you noted, with only two particiants allowed in the market, forming a cartel is trivial.
- jonlucc 8y agoThat's true because it's not trivial to launch a new drug/delivery system. Even generics have to prove that their drug matches the kinetics of the patent drug and has other similar properties. There is still an FDA process to approving a new drug, and if I'm not mistaken, the new delivery device also has to have it's own approval through the FDA medical devices division. All of that is before you even take into account how much it costs to re-tool your production line to make something different. Sure, you could lower the barriers to entry until they're barely existent and offer almost no consumer protection, but I'm not really sure we want to make it so easy that a company will spin up a production line to make a drug for 6 months while they think they can undercut the competition. Then again, I'm a big pharma biologist, so I probably am a bit biased toward safety and large, slow movements.
- mattnewton 8y agoA solution to this particular problem could be to make the patents on the existing, known to be safe methods expire earlier, so that in order to retain a monopoly on something big pharma must make a significant patentable improvement. Critics of this policy say that it would disincentive new drug development. That may be true, but for many people it doesn’t matter because they can’t afford them at current monopoly rates anyways, and our insurance industry is broken for them. I wonder how you would go about researching a better patent-expiration scheme and the effects it would have. Edit: maybe I misunderstood you- are you saying even with no patent protection, the barrier to entry is still high enough to disincentivize new entrants because of safety regulation and retooling costs? So patents aren’t the only roadblock, or not even necessarily the main roadblock?
- gamblor956 8y agoNo, it's more like this: I'm the CEO of a medical drug supply company. I want a new yacht, or a new Jetstream private plane, or hell--why choose between them when I can get both? What price should I charge for a drug millions of people need each year so that I can continue to enable my decadent lifestyle? If the historical price is X, but I can charge 4X because people need the drug, let's charge 5X so I can make even more profit because demand is inelastic.
- DaiPlusPlus 8y agoAnd the bad PR of news reports of people dying because they can’t afford our lifesaving products can be addressed by issuing a press release announcing price cuts and a coupon program which will both be ended after the public moral outrage dies down.
- hpbd 8y agoPeople like to believe bad PR kills companies because that makes them think they have control over their lives. Poor bastards...
- Someone 8y ago”Even if the two participants in the market never communicate” But you can’t get at identical prices without communication between parties. Without communication, initial price setting is as if both companies make a bid in a sealed envelope. It would be highly unlikely that both bids would be identical, and the lowest bidder with a price above $12.53 makes all the profit.
- saint_fiasco 8y agoThe two participants didn't appear at the same time. When the first participant appeared and set the original price, that price became an obvious Schelling point.
- mtgx 8y agoCan you really say the "market price is X" when there's only been one company making it? Either way, I think there are some hidden forces here that keep these prices so high. Like if the FDA would open the market to competitors from Europe, or even countries like India, I think that "market price" you say would dramatically lower. I think the U.S. pharmaceuticals market both lacks competition from generics, as well as has some weird laws like "Medicare can't negotiate prices with pharma companies," which only encourages pharma companies to raise their prices as much as possible. The law I mention is almost solely responsible for all the "drug X increased price by 5,000%" headlines you've seen lately. Pharma companies have figured out they can shamelessly rob taxpayers and nobody will do a thing about it, as long as they donate to the right politicians (from both parties).
- thaumasiotes 8y agoMedicare has a different negotiation system built in -- Medicare reimburses a fixed percentage of the minimum amount you charge, to anyone under any circumstances, for the same procedure. This means that doctors who accept Medicare have a price floor set for everyone else by the minimum they need to get from Medicare patients. (Yes, procedures from doctors aren't the same thing as drugs from manufacturers.)
- refurb 8y ago"Medicare can't negotiate prices with pharma companies" That's a common statement, but not really true. Medicare Part D, which covered prescription drugs, is managed by private insurers who can negotiate for the price of drugs. In Medicare Part B, which covered physician administered drugs, Medicare pays the average sales price. Which means every time a private insurer gets a lower price, some of that is passed onto Medicare. So the statement "Medicare can't negotiate drug prices" is technically true, but ignores all the other ways it can get lower drug prices.
- niftich 8y agoIt's worth noting that the Teva device that's the subject of the article is what the FDA considers an 'Authorized Generic'. From the press release [1]: >"An authorized generic is made under the brand name’s existing new drug application using the same formulation, process and manufacturing facilities that are used by the brand name manufacturer. The labeling or packaging is, however, changed to remove the brand name or other trade dress. In some cases, a company may choose to sell an authorized generic at a lower cost than the brand-name drug product." While this is different from what common language calls a 'generic drug' [2], in some cases either kind of "generic" could, may, or must be substituted by pharmacists, depending on various circumstances and the particular state's regulatory regime [3]. This interacts with the epinephrine autoinjector market in two ways. First, there is little upside for the manufacturer of the authorized generic to make the list price significantly lower, as the list price is rarely paid by the end-user out of pocket, and frequent mandatory substitution laws cause makers of Authorized Generics to gain marketshare as long as they're slightly cheaper than the brand Second, Authorized Generics of combination devices are only subsitutable for a corresponding brand, so different devices like Auvi-Q and Adrenaclick are technically a different market entirely: the doctor's prescription will note the exact sort of device. Therefore, while there are other epinephrine autoinjectors, the marketshare among them is decided in doctor's offices and insurance plans, rather than by direct consumer choice through the end-user's own spending. [1] https://www.fda.gov/newsevents/newsroom/pressannouncements/ucm617173.htm https://www.fda.gov/newsevents/newsroom/pressannouncements/u... [2] https://www.fda.gov/drugs/developmentapprovalprocess/howdrugsaredevelopedandapproved/approvalapplications/abbreviatednewdrugapplicationandagenerics/ucm126389.htm https://www.fda.gov/drugs/developmentapprovalprocess/howdrug... [3] (2008) (for illustration only) https://www.uspharmacist.com/article/generic-substitution-laws https://www.uspharmacist.com/article/generic-substitution-la...
- cgag 8y agoWhy would I buy a knockoff for the same price?
- exabrial 8y agoI previously worked for a prescription claim processor and can answer this. The unique thing about the Drug market is there are no knockoffs. A "Brand Name" drug in the USA has the _exact_ same active ingredients (and sometimes inactive, take inhalers) as the Generic. Even more hilariously, most drug companies will create a "generic" version of their drug as well as a "branded" because they can sell the same exact thing at a higher price point.
- antiterra 8y agoThat’s not entirely true when talking about auto-injectors that may or may not have needle hiding mechanisms, convenient form-factor, simple or well-known operation, or voice narration (auvi-q). I am a parent of two young children with tree nut allergies, and I strongly prefer the Auvi-Q despite them gouging my insurer/employer. I use the generic epi-pen for school and child care since that’s what teachers are familiar with. List price for Auvi-Q is around $5000 an injector. I carry _four_ of them everywhere I go. It’s utterly ridiculous for a dose of medicine worth less than $2, but when I need to use one I’m glad I’m not using a syringe or more complicated off-brand.
- exabrial 8y agoI was specifically referring to drugs, medical devices are a completely different animal.
- antiterra 8y agoAre you misunderstanding that the ‘medical devices’ I was referring to are just like the Epi-Pen, and pre-filled with epinephrine for one-time use? I assume your reference to inhalers was to drugs similar to albuterol that include aerosol delivery ‘devices.’
- deleted 8y ago[deleted]
- aaavl2821 8y agoTypically each new entrant prices lower than the previous entrant to gain market share. The PBMs and retailers already buy the Mylan authorized generic, which is the same product and same price as the Teva product. So they have ability to tell Teva that they need to drop the price or they wont work w them. This is a typical dynamic in newly generic pharma markets
- russdill 8y agoThe "easy" way to fix this is to take the market out of the equation.