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You can't drive prices below a fundamental floor. Businesses stop operating without sufficient capitol. The pharma market is fighting hard to prevent becoming

by kaiju0 7y ago

You can't drive prices below a fundamental floor. Businesses stop operating without sufficient capitol. The pharma market is fighting hard to prevent becoming a commodity through legislated protections.

rayiner 7y ago
Sure, but the floor is not the efficient price level. The efficient price level balances the cost to the public with creating sufficient incentives for drug companies to invest in new drugs, thus maximizing long-term welfare. Driving prices to the floor doesn't do that. Yes, drug companies don't want drugs to become a commodity. Nobody wants their products to become commodities. And we have to acknowledge that, at least maybe, the public shouldn't want drugs to become commodities (at least, not during the period of patent protection). Companies in commodity markets don't innovate. Look at where innovation is happening in the PC market. It's happening in companies that can make a big profit (Google, Apple), not companies that deal in commodities (Acer, HP). But put that aside. Maybe the best thing is for drug companies to be like Acer rather than Apple. At the very least, honest reporting should acknowledge that we're talking about trade-offs. In the last few decades, new drugs and medical devices have revolutionized treatment for things like HIV, breast cancer, leukemia, Hepatitis C, prostate cancer, etc. The 5-year survival rate for prostate cancer has gone up from 68% in the 1970s, to 99% today. HIV went from being a death sentence to a chronic condition. Many leukemias went from being death sentences to being extremely treatable. That progress wouldn't be possible without the tens of billions of dollars a year that drug companies invest in R&D. We can choose to slow down that pace, in exchange for making the existing treatments more widely accessible. That's a totally acceptable choice. But it's deception to make it seem like it's not a choice.
- maxxxxx 7y ago
  How do you know that the higher drug prices in the US lead to more research instead of making executives and shareholders richer? You seem to imply that. Everything aside at a minimum the US needs more transparency about pricing. The whole system with its coupons, rebates and middlemen seems to be set up to hide the real cost of drugs. Without transparency no real discussion can be had.
  - rayiner 7y ago
    > How do you know that the higher drug prices in the US lead to more research instead of making executives and shareholders richer? You seem to imply that. Because I have an iPhone. It's made executives and shareholders at Apple quite rich. It's also, I'm confident, advanced the state-of-the-art far faster than if Apple had been a government-regulated utility of sorts, limited to a "fair" 10% profit margin. If people were talking about the government exercising monopsony power to drive down the price of iPhones, I'd (a) except Apple to protest vigorously; and (b) worry about the impact on smartphone innovation. Drugs are no different. The fact that drugs are important to society doesn't change the basic mechanics of a capital- and talent-intensive industry.
    - maxxxxx 7y ago
      Perfect line of reasoning. Very convincing. Let’s also stop negotiating any other government procurement. We will get some real cool fighter jets.
    - PretzelFisch 7y ago
      I have trouble with this iPhone analogy. The demand of an iPhone is fundamentally different then the demand for a drug. I don't think it's fair to compare price discovery of a luxury item to an item needed to survive or escape pain.
      - deleted 7y ago
        [deleted]
      - maxxxxx 7y ago
        It would be pretty bad if the only phone options were iPhones or Pixels. For broad society we need cheap phones. Same for drugs or other medical treatments. First we need cheap options for all before we should worry about luxury treatments.
        AnthonyMouse 7y ago
        > First we need cheap options for all before we should worry about luxury treatments. In this context the "luxury treatments" are drugs under patent and the "cheap options for all" are generics. And then we can identify a specific problem -- we don't have enough generics because unless a drug is under patent, nobody has the incentive to pay to put it through FDA trials. But you can't solve that by removing the profit from the "luxury drugs" -- that only makes it worse. Then nobody has the incentive to pay for FDA trials for anything. The actual problem is that FDA trials are an unfunded mandate. Either they need to be made significantly less expensive somehow or the government needs to fund them itself so that more unpatented generics can actually get approved.

by kaiju0 7y ago

rayiner 7y ago

Sure, but the floor is not the efficient price level. The efficient price level balances the cost to the public with creating sufficient incentives for drug companies to invest in new drugs, thus maximizing long-term welfare. Driving prices to the floor doesn't do that. Yes, drug companies don't want drugs to become a commodity. Nobody wants their products to become commodities. And we have to acknowledge that, at least maybe, the public shouldn't want drugs to become commodities (at least, not during the period of patent protection). Companies in commodity markets don't innovate. Look at where innovation is happening in the PC market. It's happening in companies that can make a big profit (Google, Apple), not companies that deal in commodities (Acer, HP). But put that aside. Maybe the best thing is for drug companies to be like Acer rather than Apple. At the very least, honest reporting should acknowledge that we're talking about trade-offs. In the last few decades, new drugs and medical devices have revolutionized treatment for things like HIV, breast cancer, leukemia, Hepatitis C, prostate cancer, etc. The 5-year survival rate for prostate cancer has gone up from 68% in the 1970s, to 99% today. HIV went from being a death sentence to a chronic condition. Many leukemias went from being death sentences to being extremely treatable. That progress wouldn't be possible without the tens of billions of dollars a year that drug companies invest in R&D. We can choose to slow down that pace, in exchange for making the existing treatments more widely accessible. That's a totally acceptable choice. But it's deception to make it seem like it's not a choice.

maxxxxx 7y ago
How do you know that the higher drug prices in the US lead to more research instead of making executives and shareholders richer? You seem to imply that. Everything aside at a minimum the US needs more transparency about pricing. The whole system with its coupons, rebates and middlemen seems to be set up to hide the real cost of drugs. Without transparency no real discussion can be had.
- rayiner 7y ago
  > How do you know that the higher drug prices in the US lead to more research instead of making executives and shareholders richer? You seem to imply that. Because I have an iPhone. It's made executives and shareholders at Apple quite rich. It's also, I'm confident, advanced the state-of-the-art far faster than if Apple had been a government-regulated utility of sorts, limited to a "fair" 10% profit margin. If people were talking about the government exercising monopsony power to drive down the price of iPhones, I'd (a) except Apple to protest vigorously; and (b) worry about the impact on smartphone innovation. Drugs are no different. The fact that drugs are important to society doesn't change the basic mechanics of a capital- and talent-intensive industry.
  - maxxxxx 7y ago
    Perfect line of reasoning. Very convincing. Let’s also stop negotiating any other government procurement. We will get some real cool fighter jets.
  - PretzelFisch 7y ago
    I have trouble with this iPhone analogy. The demand of an iPhone is fundamentally different then the demand for a drug. I don't think it's fair to compare price discovery of a luxury item to an item needed to survive or escape pain.
    - deleted 7y ago
      [deleted]
    - maxxxxx 7y ago
      It would be pretty bad if the only phone options were iPhones or Pixels. For broad society we need cheap phones. Same for drugs or other medical treatments. First we need cheap options for all before we should worry about luxury treatments.
      - AnthonyMouse 7y ago
        > First we need cheap options for all before we should worry about luxury treatments. In this context the "luxury treatments" are drugs under patent and the "cheap options for all" are generics. And then we can identify a specific problem -- we don't have enough generics because unless a drug is under patent, nobody has the incentive to pay to put it through FDA trials. But you can't solve that by removing the profit from the "luxury drugs" -- that only makes it worse. Then nobody has the incentive to pay for FDA trials for anything. The actual problem is that FDA trials are an unfunded mandate. Either they need to be made significantly less expensive somehow or the government needs to fund them itself so that more unpatented generics can actually get approved.