3 ms·

it is completely different situation. you should use the right tool for the job, not the same for every job

by ptah 8y ago

rayiner 8y ago
Exercise of monopoly or monopsony power to drive prices away from the efficient level is an economic concept that applies to pretty much every situation where things are bought and sold.
- ptah 8y ago
  that is a very narrow view of it. monopsony is pretty much the way things are done for drug pricing in every first world country except the US for over 50 years
  - rayiner 8y ago
    Other countries can do it because the U.S. doesn't do it: https://thehill.com/opinion/healthcare/369727-us-drug-prices-higher-than-in-the-rest-of-the-world-heres-why https://thehill.com/opinion/healthcare/369727-us-drug-prices... > Although this question is difficult to answer, several studies suggest that the benefit of lower prices today is offset by the forgone value created by drugs that never reach the market. According to one estimate, if the U.S. were to adopt European-level price controls, the reductions in U.S. prices today would result in 0.7 years lower longevity for future cohorts of Americans and Europeans due to fewer new drugs. This would cost Americans more than $50,000 per person when the value of foregone health is valued. (Author is a professor at Harvard Medical School.)
    - munk-a 8y ago
      US Pharmaceutical companies have a very high profit margin and spend a significant amount of money on advertising - in addition their research is subsidized or outright paid for by the US government, many of the drugs they produce they have had to invest nothing for research of - including that cash cow insulin. (Commentor works MedTech adjacent)
      - refurb 8y ago
        Yes, the successful drug companies make a high profit margin, but you're ignoring all the companies that spend hundreds of millions and then go under because their drug doesn't work. Their research is no paid for by the US gov't. Basic research is heavily subsidized, but basic research doesn't get you a drug and basic research is the cheapest part of the entire process. They are still shoving billions of dollars into bringing drugs to market, again, often not successfully.
        munk-a 8y ago
        Research is expensive and quite risky, drug research especially. R&D investment by companies into more efficient manufacturing are definitely good things to let the free-market do as it will with - but drug innovation is currently highly subsidized by the government, and my hope is that it ends up being transitioned to being entirely subsidized. It's an academic pursuit so we want to encourage experimentation without personal financial risk - solving the problem by just remitting enough money to the pharma industry (in the form of unnegotiated prices leading to wild profits) is a highly inefficient allocation - there is no guarantee that a company will reinvest those profits into radical research (many times they won't instead preferring business concerns like a high dividend yield or stock buy backs to cement contained wealth) and, since the government is already subsidizing a lot of research, the "correct" move from a profit perspective is to avoid innovation costs and just focus on snapping up any new discoveries coming out of academia.
        refurb 8y ago
        New discoveries coming out of academia are lucky if they are a decade and hundreds of millions of dollars away from being an actual drug. Usually what comes out of academia is an idea or starting point, not a drug. And no, drug innovation is not highly subsidized by the gov't. Just look at budgets. NIH budget is $38B, of which a fraction is actually spent on research leading to new drugs. PhRMA (just the largest drug companies) spent $71B in 2017.[1] And that ignores the billions spent by VCs to fund start-ups, another $13B in the first 10 months of 2017.[2] Adding it up, private spending on drug R&D is probably 5-10x that of what the gov't spends. [1]https://www.biopharmadive.com/news/phrma-research-development-spending-industry-report/529943/ https://www.biopharmadive.com/news/phrma-research-developmen... [2]http://www.pharmatimes.com/magazine/2018/december_2018/a_record-breaking_year_for_biotech_funding http://www.pharmatimes.com/magazine/2018/december_2018/a_rec...
    - ptah 8y ago
      pure opinion. I think the US should try it and gather real data rather than these kinds of handwavy articles
- jellicle 8y ago
  Well, I'd be okay with eliminating all drug patents in exchange for NOT using government monopsony purchasing power. Are you game? After all, if we want an efficient level, drug patents are the enemy. And hey, if we look around the world at countries that are lax at enforcing drug patents, we see their drug prices are massively lower than the US's. So it seems like there might be a pretty big market distortion here, in the upwards direction, caused by drug patents.
  - rayiner 8y ago
    You can get rid of patents, but you need something else to prevent free-riding, or else that will undermine the efficient price level. Patents and unfair competition law aren't just things we made up for funsies--they address a real economic problem that undermines efficient markets. (And if you look at countries that don't enforce drug patents, they have cheap drugs, but produce almost zero medical innovation.)

it is completely different situation. you should use the right tool for the job, not the same for every job

by ptah 8y ago

it is completely different situation. you should use the right tool for the job, not the same for every job

Exercise of monopoly or monopsony power to drive prices away from the efficient level is an economic concept that applies to pretty much every situation where things are bought and sold.

ptah 8y ago
that is a very narrow view of it. monopsony is pretty much the way things are done for drug pricing in every first world country except the US for over 50 years
- rayiner 8y ago
  Other countries can do it because the U.S. doesn't do it: https://thehill.com/opinion/healthcare/369727-us-drug-prices-higher-than-in-the-rest-of-the-world-heres-why https://thehill.com/opinion/healthcare/369727-us-drug-prices... > Although this question is difficult to answer, several studies suggest that the benefit of lower prices today is offset by the forgone value created by drugs that never reach the market. According to one estimate, if the U.S. were to adopt European-level price controls, the reductions in U.S. prices today would result in 0.7 years lower longevity for future cohorts of Americans and Europeans due to fewer new drugs. This would cost Americans more than $50,000 per person when the value of foregone health is valued. (Author is a professor at Harvard Medical School.)
  - munk-a 8y ago
    US Pharmaceutical companies have a very high profit margin and spend a significant amount of money on advertising - in addition their research is subsidized or outright paid for by the US government, many of the drugs they produce they have had to invest nothing for research of - including that cash cow insulin. (Commentor works MedTech adjacent)
    - refurb 8y ago
      Yes, the successful drug companies make a high profit margin, but you're ignoring all the companies that spend hundreds of millions and then go under because their drug doesn't work. Their research is no paid for by the US gov't. Basic research is heavily subsidized, but basic research doesn't get you a drug and basic research is the cheapest part of the entire process. They are still shoving billions of dollars into bringing drugs to market, again, often not successfully.
      - munk-a 8y ago
        Research is expensive and quite risky, drug research especially. R&D investment by companies into more efficient manufacturing are definitely good things to let the free-market do as it will with - but drug innovation is currently highly subsidized by the government, and my hope is that it ends up being transitioned to being entirely subsidized. It's an academic pursuit so we want to encourage experimentation without personal financial risk - solving the problem by just remitting enough money to the pharma industry (in the form of unnegotiated prices leading to wild profits) is a highly inefficient allocation - there is no guarantee that a company will reinvest those profits into radical research (many times they won't instead preferring business concerns like a high dividend yield or stock buy backs to cement contained wealth) and, since the government is already subsidizing a lot of research, the "correct" move from a profit perspective is to avoid innovation costs and just focus on snapping up any new discoveries coming out of academia.
        refurb 8y ago
        New discoveries coming out of academia are lucky if they are a decade and hundreds of millions of dollars away from being an actual drug. Usually what comes out of academia is an idea or starting point, not a drug. And no, drug innovation is not highly subsidized by the gov't. Just look at budgets. NIH budget is $38B, of which a fraction is actually spent on research leading to new drugs. PhRMA (just the largest drug companies) spent $71B in 2017.[1] And that ignores the billions spent by VCs to fund start-ups, another $13B in the first 10 months of 2017.[2] Adding it up, private spending on drug R&D is probably 5-10x that of what the gov't spends. [1]https://www.biopharmadive.com/news/phrma-research-development-spending-industry-report/529943/ https://www.biopharmadive.com/news/phrma-research-developmen... [2]http://www.pharmatimes.com/magazine/2018/december_2018/a_record-breaking_year_for_biotech_funding http://www.pharmatimes.com/magazine/2018/december_2018/a_rec...
  - ptah 8y ago
    pure opinion. I think the US should try it and gather real data rather than these kinds of handwavy articles
jellicle 8y ago
Well, I'd be okay with eliminating all drug patents in exchange for NOT using government monopsony purchasing power. Are you game? After all, if we want an efficient level, drug patents are the enemy. And hey, if we look around the world at countries that are lax at enforcing drug patents, we see their drug prices are massively lower than the US's. So it seems like there might be a pretty big market distortion here, in the upwards direction, caused by drug patents.
- rayiner 8y ago
  You can get rid of patents, but you need something else to prevent free-riding, or else that will undermine the efficient price level. Patents and unfair competition law aren't just things we made up for funsies--they address a real economic problem that undermines efficient markets. (And if you look at countries that don't enforce drug patents, they have cheap drugs, but produce almost zero medical innovation.)