7 ms·

Removal of Safe Harbor Protection for Rebates

53 points by victor106 8y ago

rossjudson 8y ago
The linked ruling is quite interesting. It outlines how drug plans dupe consumers into paying significantly higher percentages of drug costs than they are supposed to. An example provided shows how a consumer with a 25% copay ends up paying 35% of the cost of the drug, because the 25% copay is calculated on the "list price" rather than the price their insurance plan actually pays (which may be considerably later). Good read, and a good example of why regulation is just necessary. It all depends on what the definition of the word "copay" is, doesn't it?
- NoblePublius 8y ago
  “Regulation” is what permits the price discrepancy in the first place.
  - aiiane 8y ago
    How do you figure?
    - heyjudy 8y ago
      Libertarian, monochromatic blind hatred toward all government as some monoplithic bogeyman is utopian ignorance that values anarchism, billionaire propaganda, omnipresent privatization and imposing crushing austerity on those who cannot afford it.
      - ggm 8y ago
        Hear hear.
      - kbenson 8y ago
        I can't help but think that if your point is to communicate a point and/or change someone's mind, a more approachable, conversational strategy might yield more benefit. In other words, just because something can be expressed some way doesn't mean it's useful to do so.
      - robdachshund 8y ago
        If only people were so homogenized that you could put them in boxes like that. Your comment is not constructive, and you are speaking as if you have an objective argument rather than a highly subjective one. If you feel so strongly about your opinion, articulating it in the way you have done is sure to convince no one.
    - mafm 8y ago
      The main reason markets existed historically was to ensure transactions were done in public. Prices were publicly observable, stolen goods were difficult so sell, etc. Having a single market everyone trades in does have efficiency advantages, but the main reason we have had organised markets in jurisdictions all over the world, for thousands of years, is because the people making the rules wanted transactions to be done out in the open to keep the people doing the transactions honest.
  - ggm 8y ago
    Under drug IPR rules no market price can exist for many drugs because they are single source. If you want to admit a market permit Indian generics into the USA and watch prices tumble.
    - AnthonyMouse 8y ago
      > Under drug IPR rules no market price can exist for many drugs because they are single source. If you want to admit a market permit Indian generics into the USA and watch prices tumble. There is still a market price because the customer has an alternative. There is a second best drug. In the worst case (e.g. the only alternative is death), there is still a price because the drug company can't demand a billion dollars if the customer doesn't have a billion dollars. The fact that we get into this position of no alternative but death is problematic, but it's also how the patent system is designed to work. If the drug didn't exist, you would die. If it does exist, you have the choice between death or bankruptcy. This is still not ideal, but it's better than the original situation, and eventually the drug patent expires. There are a number of implementation failures with this, like public funding going to drug research that is subsequently patented, and a regulatory system that gives no one an incentive to do clinical trials for promising treatments they don't hold a patent on, and so on. But the basic idea is not without merit. It costs a mint to do research and trials. If there isn't money in it then companies wouldn't do it. So if there is a patented drug which is the only thing that can save your life, would you rather have to file for bankruptcy paying for it, or have it not exist because we said they're not allowed to make enough money to get them to do the R&D to begin with? In some cases there isn't really a third option. In principle you can have the government fund the research instead of depending on the market, and then not patent it so patients don't have to pay a lot. Which works fine when that finds the cure. But if it doesn't, do you still want the system that allows the market to find it as a backup, or not?
      - cheschire 8y ago
        So basically on top of dealing with the stress of a life threatening disease, you're suggesting that a family must either decide to watch a parent die, and maintain financial stability, or attempt to live and set the whole family back? That's definitely a perspective, I guess.
  - lhopki01 8y ago
    This doesn't make any sense. If you are the sole provider of a drug that is the only drug that can cure a certain illness then it makes sense to charge every single customer exactly as much as they can afford. (probably enough to bankrupt them) You'd expect extreme price discrepancy in those cases. This applies even if the drug is just the best one for what it does. edit Unless you mean that regulation in the form of patent protections.
  - linuxlizard 8y ago
    Found the Libertarian!
  - dtech 8y ago
    How would the absence of regulation solve this problem?
- jzwinck 8y ago
  This applies to hospital and doctor charges too, not just prescription drugs. I was shocked when I found out that "20% copay" is simply a lie.
seibelj 8y ago
You have an extraordinarily complex web of payers and providers that takes PhD’s in regulation science to unwrap, and the solution proposed is “more regulations”. Some better, free-market oriented solutions would be to remove patent protection from drugs discovered from tax payer funded research, or auction the right to be the exclusive distributor. It’s very sad that a large contingent of intelligent tech people, who have made small to large fortunes operating in one of the few unregulated industries in America (software), begging for yet more regulation in biotech and pharmaceuticals. The system is extremely distorted as it stands.
- rayiner 8y ago
  > remove patent protection from drugs discovered from tax payer funded research That would make government funded research a poison pill nobody would rely on. If you come up with the idea for an app, then someone else spends a bunch of money hiring coders to actually build, test, and commercialize it, does that give you the right to force release of the app as open source?
  - seibelj 8y ago
    If the government spends millions to do the fundamental research required to find a molecule with potential, then society should benefit from its investment. It’s a different beast from a mobile app.
    - rayiner 8y ago
      "Should" doesn't matter. It's the same basic economic transaction. Nobody will agree to a deal where you demand complete ownership of a finished product based on funding some of the early development. They won't do it with mobile apps, and they won't do it with lifesaving drugs.
    - Reelin 8y ago
      I'm not a fan of the current state of affairs, but the cost of clinical trials is very real and absolutely enormous. Any workable solution will have to fully account for that.
throwitaway6512 8y ago
The problem this solves is to shine a light on the inverse price wars going on in drug pricing. List prices increase dramatically while rebates are offers to lower the net price. Pharmacy benefits managers who do the negotiation like this because they earn money on the rebates(which are also shared with insurance companies) and insurance likes this because copay is a fixed rate on list price and not net price. And both of these actors who cooperate to increase list prices get to blame the increases on drug producers who year after year earn less per sold product because of the rebates. This will however not solve anything only make it visible. Copay should be changed to work on net price after rebates, and some serius investigation of the middlemen needs to be instigated.

53 points by victor106 8y ago

The linked ruling is quite interesting. It outlines how drug plans dupe consumers into paying significantly higher percentages of drug costs than they are supposed to. An example provided shows how a consumer with a 25% copay ends up paying 35% of the cost of the drug, because the 25% copay is calculated on the "list price" rather than the price their insurance plan actually pays (which may be considerably later). Good read, and a good example of why regulation is just necessary. It all depends on what the definition of the word "copay" is, doesn't it?

NoblePublius 8y ago
“Regulation” is what permits the price discrepancy in the first place.
- aiiane 8y ago
  How do you figure?
  - heyjudy 8y ago
    Libertarian, monochromatic blind hatred toward all government as some monoplithic bogeyman is utopian ignorance that values anarchism, billionaire propaganda, omnipresent privatization and imposing crushing austerity on those who cannot afford it.
    - ggm 8y ago
      Hear hear.
    - kbenson 8y ago
      I can't help but think that if your point is to communicate a point and/or change someone's mind, a more approachable, conversational strategy might yield more benefit. In other words, just because something can be expressed some way doesn't mean it's useful to do so.
    - robdachshund 8y ago
      If only people were so homogenized that you could put them in boxes like that. Your comment is not constructive, and you are speaking as if you have an objective argument rather than a highly subjective one. If you feel so strongly about your opinion, articulating it in the way you have done is sure to convince no one.
  - mafm 8y ago
    The main reason markets existed historically was to ensure transactions were done in public. Prices were publicly observable, stolen goods were difficult so sell, etc. Having a single market everyone trades in does have efficiency advantages, but the main reason we have had organised markets in jurisdictions all over the world, for thousands of years, is because the people making the rules wanted transactions to be done out in the open to keep the people doing the transactions honest.
- ggm 8y ago
  Under drug IPR rules no market price can exist for many drugs because they are single source. If you want to admit a market permit Indian generics into the USA and watch prices tumble.
  - AnthonyMouse 8y ago
    > Under drug IPR rules no market price can exist for many drugs because they are single source. If you want to admit a market permit Indian generics into the USA and watch prices tumble. There is still a market price because the customer has an alternative. There is a second best drug. In the worst case (e.g. the only alternative is death), there is still a price because the drug company can't demand a billion dollars if the customer doesn't have a billion dollars. The fact that we get into this position of no alternative but death is problematic, but it's also how the patent system is designed to work. If the drug didn't exist, you would die. If it does exist, you have the choice between death or bankruptcy. This is still not ideal, but it's better than the original situation, and eventually the drug patent expires. There are a number of implementation failures with this, like public funding going to drug research that is subsequently patented, and a regulatory system that gives no one an incentive to do clinical trials for promising treatments they don't hold a patent on, and so on. But the basic idea is not without merit. It costs a mint to do research and trials. If there isn't money in it then companies wouldn't do it. So if there is a patented drug which is the only thing that can save your life, would you rather have to file for bankruptcy paying for it, or have it not exist because we said they're not allowed to make enough money to get them to do the R&D to begin with? In some cases there isn't really a third option. In principle you can have the government fund the research instead of depending on the market, and then not patent it so patients don't have to pay a lot. Which works fine when that finds the cure. But if it doesn't, do you still want the system that allows the market to find it as a backup, or not?
    - cheschire 8y ago
      So basically on top of dealing with the stress of a life threatening disease, you're suggesting that a family must either decide to watch a parent die, and maintain financial stability, or attempt to live and set the whole family back? That's definitely a perspective, I guess.
- lhopki01 8y ago
  This doesn't make any sense. If you are the sole provider of a drug that is the only drug that can cure a certain illness then it makes sense to charge every single customer exactly as much as they can afford. (probably enough to bankrupt them) You'd expect extreme price discrepancy in those cases. This applies even if the drug is just the best one for what it does. edit Unless you mean that regulation in the form of patent protections.
- linuxlizard 8y ago
  Found the Libertarian!
- dtech 8y ago
  How would the absence of regulation solve this problem?
jzwinck 8y ago
This applies to hospital and doctor charges too, not just prescription drugs. I was shocked when I found out that "20% copay" is simply a lie.

seibelj 8y ago

You have an extraordinarily complex web of payers and providers that takes PhD’s in regulation science to unwrap, and the solution proposed is “more regulations”. Some better, free-market oriented solutions would be to remove patent protection from drugs discovered from tax payer funded research, or auction the right to be the exclusive distributor. It’s very sad that a large contingent of intelligent tech people, who have made small to large fortunes operating in one of the few unregulated industries in America (software), begging for yet more regulation in biotech and pharmaceuticals. The system is extremely distorted as it stands.

rayiner 8y ago
> remove patent protection from drugs discovered from tax payer funded research That would make government funded research a poison pill nobody would rely on. If you come up with the idea for an app, then someone else spends a bunch of money hiring coders to actually build, test, and commercialize it, does that give you the right to force release of the app as open source?
- seibelj 8y ago
  If the government spends millions to do the fundamental research required to find a molecule with potential, then society should benefit from its investment. It’s a different beast from a mobile app.
  - rayiner 8y ago
    "Should" doesn't matter. It's the same basic economic transaction. Nobody will agree to a deal where you demand complete ownership of a finished product based on funding some of the early development. They won't do it with mobile apps, and they won't do it with lifesaving drugs.
  - Reelin 8y ago
    I'm not a fan of the current state of affairs, but the cost of clinical trials is very real and absolutely enormous. Any workable solution will have to fully account for that.

throwitaway6512 8y ago

The problem this solves is to shine a light on the inverse price wars going on in drug pricing. List prices increase dramatically while rebates are offers to lower the net price. Pharmacy benefits managers who do the negotiation like this because they earn money on the rebates(which are also shared with insurance companies) and insurance likes this because copay is a fixed rate on list price and not net price. And both of these actors who cooperate to increase list prices get to blame the increases on drug producers who year after year earn less per sold product because of the rebates. This will however not solve anything only make it visible. Copay should be changed to work on net price after rebates, and some serius investigation of the middlemen needs to be instigated.