8 ms·

Sneaky deals are keeping cheaper generic medicines off the market

100 points by prostoalex 7y ago

typenil 7y ago
I don't see how this doesn't already violate price fixing laws. This isn't the market at work, but a calculated distortion of it within the pharmaceutical oligopoly.
rayiner 7y ago
> The Federal Trade Commission estimates that pay-for-delay deals cost American consumers $3.5 billion a year in the form of higher drug prices. Pay for delay is bad, but let’s put it into perspective. This is 0.1% of healthcare spending. That’s the most frustrating thing about the healthcare debate in the US. Nobody has a clear idea of where all the money is going. Germany spends 1.56% of GDP on pharmaceuticals. The US spends 2%. If we forced drug makers to give us discounts to German levels, we’d save $86 billion. To get our overall healthcare expenditures down to German levels (11% of GDP), we need to cut $1.4 trillion. Where is the rest coming from?
- iaw 7y ago
  It's a lot of financial engineering by private equity. Think 1000 papercuts from optimizations intended to increase revenues while sacrificing patient care quality.
- harryh 7y ago
  Where is the rest coming from? ~16 "we spend a bit more on pharmaceuticals than Germany" sized problems. Snarky answer, but I think probably somewhat close to the truth. There is no silver bullet.
- acq_question 7y ago
  The bulk is spent on inpatient hospital stays I believe. People like to blame pharma, but hospitals charge absurd prices and many times just make people sicker.
  - ssdjuka 7y ago
    Perfect time for me to vent on the topic. My experience confirms your claim. My wife and baby stayed 3 days at the hospital after the c-section. Charge for room and board item on the bill is $30,000 for her and $50,000 for the baby. In total $80,000 for 3 days. And it was shared room. There was another woman with her baby with them. That single hospital room's rate is $53,000 a day. All other charges are 10% of room and board.
    - m10i 7y ago
      Forgive my ignorance, but does any of this have to do with insurance (I assume you're in the U.S.)? Those prices are absurd, so I'm wondering how is it possible for the average American household to afford to pay for that? I imagine one argument being "that's the thing, they can't afford it"; but.. isn't that what hundreds of thousands of Americans are doing per year?
      - jtbayly 7y ago
        I suspect it does, but who knows? That's part of the problem. Three people do the same thing at the same hospital, but since two of them have different insurance and one is just paying cash, they might get three very different prices on their bill.
      - ssdjuka 7y ago
        You are correct, this is U.S. No idea how insurance affects prices. But here's another anecdotal evidence: When we were poor (minimum wage level), my wife was on Medicaid or Medicare; think we did not pay anything for it. I'd remember having to pay anything over $1,000 back then. Don't have the receipt to actually say how much hospital charged and how much Medicare payed for it. In that case we'd have 2 points to compare.
    - 14 7y ago
      Wow. I am now imagining a black market where I invite pregnant mothers and families to come stay with me. I could literally house you and entertain you and provide all your needs for 2 months prior to birth at which point you would roll into any hospital and have the child. In Canada the estimated cost for a regular birth is $5000-$8000 or $10000-12000 for a c-section. THAT IS CANADIAN DOLLARS! You spent 80k usd. Again wow. If I only had half of what you paid I could offer a lavish stay with everything taken care of. Plus world class doctors. How come more people are not traveling to have babies? Baby number 2 in the works yet?;)
- Aloha 7y ago
  It's death by a thousand cuts though - we spend so much money because the entire system is so inefficient.
- kgwgk 7y ago
  Average compensation for US specialists is [2006 data] $230k (5.7x per capita GDP), for German specialists is $77k (2.7x per capita GDP). If you force US doctors to give you discounts to German levels you'll save another hundred billion dollars at least...
  - deogeo 7y ago
    Don't think German specialists have it so bad - medical school in Germany costs almost nothing, housing and rent cost much less, as does health insurance.
    - jtbayly 7y ago
      > as does health insurance Hmm.... I'm getting that same spidy-sense feeling I got the first time I learned about recursive functions. :)
    - kgwgk 7y ago
      > In the United States, households on average spend 19% of their gross adjusted disposable income on keeping a roof over their heads, below the OECD average of 20%. For Germany it’s 20%, in line with the OECD average (and the average number of rooms per person is 1.8, compared to 2.4 for the US). http://www.oecdbetterlifeindex.org/topics/housing/ http://www.oecdbetterlifeindex.org/topics/housing/ So adjusting for average income housing costs about the same, and adjusting for average income US doctors make more than twice as much as German doctors. How many years of income do you think a doctor needs to buy a median house in the US and Germany? If you think the number is lower in Germany I’d like to see your numbers.
      - deogeo 7y ago
        As I said, housing is cheaper in Germany - they spend about the same % on housing, but that's out of a smaller income.
        kgwgk 7y ago
        Ok, so they “don’t have it so bad” because even though they make much less money housing costs a bit less. Understood. (Just in case: the relevant comparison here was US doctors vs. German doctors, not German doctors vs. German non-doctors.)
- tomcam 7y ago
  I get your point. It’s a good one. What about the fact that Americans are essentially subsidizing world health care via private R&D? Other countries benefit from our new drugs yet won’t pay market prices for them, and it’s $2 billion to create a new drug these days, minimum. The reason a huge majority of pharma innovation happens here is because there is an incentive for it. Honest question: if we further regulate the amount of money pharma companies can make, who will innovate?
  - deogeo 7y ago
    > Other countries benefit from our new drugs yet won’t pay market prices for them, and it’s $2 billion to create a new drug these days, minimum. What makes you think drug prices in other countries aren't 'market' prices? Is it because they're negotiated on a country-wide level by the governments? I.e. because the buyer is a larger entity than the seller? But when the buyer is smaller than the multinational drug company, such as an individual or a medium-sized insurance company, then the price somehow is a market price? > What about the fact that Americans are essentially subsidizing world health care via private R&D? This tired argument again. Given that pharmaceutical companies spend more on just marketing than they do on R&D [1], isn't it more accurate to say that the US is subsidizing drug ads? How high would drug prices have to get, and how small the R&D budget, before you'd stop claiming the US is 'subsidizing' R&D? Or would whoever pays the highest price always be hailed as subsidizing R&D, to try and guilt everyone else into paying more? > The reason a huge majority of pharma innovation happens here is because there is an incentive for it. Given that drugs are sold internationally, pharma could continue their extortionate pricing in the US no matter where the drugs are developed, so the cost of drugs doesn't act as an incentive for where to conduct innovation. [1] https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-pharmaceutical-companies-are-spending-far-more-on-marketing-than-research/ https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p...
    - zaroth 7y ago
      Your Washington Post article is misleading. They are conflating “SG&A” with “Marketing”. Pfizer, for example, does spend more on “SG&A” than it does on “R&D” but marketing makes up just a small part of “SG&A”. > Pfizer topped that list with $622.3 million in ad spending last year. Pfizer came in fourth on FierceBiotech's list of R&D budgets, with $7.9 billion. That means DTC ads were less than one-tenth the size of its R&D budget. Moreover, look across any number of research industries be it Pharma, Tech, Industrial Automation, whatever, you will find SG&A as a rule of thumb tends to roughly equal R&D spending as a total share of expenses. [1] - https://www.fiercepharma.com/regulatory/does-pharma-spend-more-on-marketing-than-r-d-a-numbers-check https://www.fiercepharma.com/regulatory/does-pharma-spend-mo...
- keenmaster 7y ago
  Single-payer healthcare is the answer. Period. If all Americans were in a single pool negotiating for drugs and healthcare, prices would plummet. It worked in Europe and it’ll work here. We are spending somewhere between 150% and 200% of what we should be on healthcare on a national level. We don’t get better outcomes either. So the harsh truth is that the whole industry needs to take a pay cut. That includes doctors, who actually make more than they should be in a well-lubricated market economy. Make no mistake, the healthcare market is colossally broken. Zero price transparency combined with high price insensitivity (due to extremely high value of life) and no practical substitute services (“protest” healthcare and go uninsured....at your peril) is a toxic combination. It guarantees that people are fleeced for every penny they could pay. Almost no other industry in America works in that way. Imagine a grocery store with no listed prices. When you roll up to the register and ask for the price, the employees are baffled. How dare you question the value of those who provide you sustenance. Do you even know how many years it took to optimize our supply chain so that you can have organic chicken and avocados? Our executives have to pay off their MBA debt somehow. They then inform you that the price of your basket is probably somewhere between $100-$1000, and that it’s really up to your grocery insurance provider. You call the insurance company, which then ask for the chicken code, avocado code, toilet paper code, etc... 2 hours later, they say they can give you an answer on how much your groceries will take from your deductible, but it’s going to take a week. They can quote the same prices for a couple other in-network grocery stores too, but you have a choice to make. Leave your groceries for today and wait a week for an answer, or buy your damn groceries like 99.9% of other people and get on with your life. You decide to wait. You find out that all the prices are exorbitant, but the grocery store that’s 2 hours away would only charge $300 as opposed to $500. Alas, it’s not even worth taking off work for that. If that sounds utterly dystopian, that’s healthcare in America today. It’s a game of name-your-price for providers. Insurance companies are in on it too. They want prices to be higher because high total spending results in higher insurance premiums. Businesses mostly shrug at the problem because of tax subsidies and because they want employees to fear losing their insurance along with their job. Americans must be unapologetic to medical organizations complaining about single-payer (“We’ll literally go out of business! We’ll close rural hospitals! Insurance workers will lose their jobs! Long socialist wait times! Government death panels!”). They want to keep the status quo at the expense of American families. For that reason, I assign close to no value to what healthcare insiders have to say about solving the spending problem. Lastly, consider this: American employees take home less of their paycheck than employees in all other developed nations except Netherlands. Note that this takes into consideration the portion of your premiums paid by your employer, which otherwise would have been paid to you in income. That’s why tax increases seem so unfathomable in the U.S. The healthcare industry is parasitically sucking out all the slack. Imagine if all that economic rent went to education and infrastructure instead.
neonate 7y ago
http://archive.is/f4TCi http://archive.is/f4TCi
mikece 7y ago
There's also the practice of the Big Pharma companies either buying the generics producers or contracting with them not to make generics. I think Big Pharma might be more hated than Congress at this point.
maxxxxx 7y ago
It seems everything around heath care billing is sneaky in the US. It's probably the most rotten, inefficient and corrupt sector of the whole economy. I am not talking about the actual health care but only about billing practices.
- idDriven 7y ago
  From the healthcare delivery standpoint there are so many rotten, inefficient and corrupt practices that many days it feels like you are delivering good care despite the system. Certainly not because of it. It's kafa-esque and there is zero incentive for your boss' boss' boss' boss' calling the shots to improve patient care. Healthcare providers are also just as mystified as to where all the money goes, not the workers doing the direct patient care.

100 points by prostoalex 7y ago

I don't see how this doesn't already violate price fixing laws. This isn't the market at work, but a calculated distortion of it within the pharmaceutical oligopoly.

rayiner 7y ago

> The Federal Trade Commission estimates that pay-for-delay deals cost American consumers $3.5 billion a year in the form of higher drug prices. Pay for delay is bad, but let’s put it into perspective. This is 0.1% of healthcare spending. That’s the most frustrating thing about the healthcare debate in the US. Nobody has a clear idea of where all the money is going. Germany spends 1.56% of GDP on pharmaceuticals. The US spends 2%. If we forced drug makers to give us discounts to German levels, we’d save $86 billion. To get our overall healthcare expenditures down to German levels (11% of GDP), we need to cut $1.4 trillion. Where is the rest coming from?

iaw 7y ago
It's a lot of financial engineering by private equity. Think 1000 papercuts from optimizations intended to increase revenues while sacrificing patient care quality.
harryh 7y ago
Where is the rest coming from? ~16 "we spend a bit more on pharmaceuticals than Germany" sized problems. Snarky answer, but I think probably somewhat close to the truth. There is no silver bullet.
acq_question 7y ago
The bulk is spent on inpatient hospital stays I believe. People like to blame pharma, but hospitals charge absurd prices and many times just make people sicker.
- ssdjuka 7y ago
  Perfect time for me to vent on the topic. My experience confirms your claim. My wife and baby stayed 3 days at the hospital after the c-section. Charge for room and board item on the bill is $30,000 for her and $50,000 for the baby. In total $80,000 for 3 days. And it was shared room. There was another woman with her baby with them. That single hospital room's rate is $53,000 a day. All other charges are 10% of room and board.
  - m10i 7y ago
    Forgive my ignorance, but does any of this have to do with insurance (I assume you're in the U.S.)? Those prices are absurd, so I'm wondering how is it possible for the average American household to afford to pay for that? I imagine one argument being "that's the thing, they can't afford it"; but.. isn't that what hundreds of thousands of Americans are doing per year?
    - jtbayly 7y ago
      I suspect it does, but who knows? That's part of the problem. Three people do the same thing at the same hospital, but since two of them have different insurance and one is just paying cash, they might get three very different prices on their bill.
    - ssdjuka 7y ago
      You are correct, this is U.S. No idea how insurance affects prices. But here's another anecdotal evidence: When we were poor (minimum wage level), my wife was on Medicaid or Medicare; think we did not pay anything for it. I'd remember having to pay anything over $1,000 back then. Don't have the receipt to actually say how much hospital charged and how much Medicare payed for it. In that case we'd have 2 points to compare.
  - 14 7y ago
    Wow. I am now imagining a black market where I invite pregnant mothers and families to come stay with me. I could literally house you and entertain you and provide all your needs for 2 months prior to birth at which point you would roll into any hospital and have the child. In Canada the estimated cost for a regular birth is $5000-$8000 or $10000-12000 for a c-section. THAT IS CANADIAN DOLLARS! You spent 80k usd. Again wow. If I only had half of what you paid I could offer a lavish stay with everything taken care of. Plus world class doctors. How come more people are not traveling to have babies? Baby number 2 in the works yet?;)
Aloha 7y ago
It's death by a thousand cuts though - we spend so much money because the entire system is so inefficient.
kgwgk 7y ago
Average compensation for US specialists is [2006 data] $230k (5.7x per capita GDP), for German specialists is $77k (2.7x per capita GDP). If you force US doctors to give you discounts to German levels you'll save another hundred billion dollars at least...
- deogeo 7y ago
  Don't think German specialists have it so bad - medical school in Germany costs almost nothing, housing and rent cost much less, as does health insurance.
  - jtbayly 7y ago
    > as does health insurance Hmm.... I'm getting that same spidy-sense feeling I got the first time I learned about recursive functions. :)
  - kgwgk 7y ago
    > In the United States, households on average spend 19% of their gross adjusted disposable income on keeping a roof over their heads, below the OECD average of 20%. For Germany it’s 20%, in line with the OECD average (and the average number of rooms per person is 1.8, compared to 2.4 for the US). http://www.oecdbetterlifeindex.org/topics/housing/ http://www.oecdbetterlifeindex.org/topics/housing/ So adjusting for average income housing costs about the same, and adjusting for average income US doctors make more than twice as much as German doctors. How many years of income do you think a doctor needs to buy a median house in the US and Germany? If you think the number is lower in Germany I’d like to see your numbers.
    - deogeo 7y ago
      As I said, housing is cheaper in Germany - they spend about the same % on housing, but that's out of a smaller income.
      - kgwgk 7y ago
        Ok, so they “don’t have it so bad” because even though they make much less money housing costs a bit less. Understood. (Just in case: the relevant comparison here was US doctors vs. German doctors, not German doctors vs. German non-doctors.)
tomcam 7y ago
I get your point. It’s a good one. What about the fact that Americans are essentially subsidizing world health care via private R&D? Other countries benefit from our new drugs yet won’t pay market prices for them, and it’s $2 billion to create a new drug these days, minimum. The reason a huge majority of pharma innovation happens here is because there is an incentive for it. Honest question: if we further regulate the amount of money pharma companies can make, who will innovate?
- deogeo 7y ago
  > Other countries benefit from our new drugs yet won’t pay market prices for them, and it’s $2 billion to create a new drug these days, minimum. What makes you think drug prices in other countries aren't 'market' prices? Is it because they're negotiated on a country-wide level by the governments? I.e. because the buyer is a larger entity than the seller? But when the buyer is smaller than the multinational drug company, such as an individual or a medium-sized insurance company, then the price somehow is a market price? > What about the fact that Americans are essentially subsidizing world health care via private R&D? This tired argument again. Given that pharmaceutical companies spend more on just marketing than they do on R&D [1], isn't it more accurate to say that the US is subsidizing drug ads? How high would drug prices have to get, and how small the R&D budget, before you'd stop claiming the US is 'subsidizing' R&D? Or would whoever pays the highest price always be hailed as subsidizing R&D, to try and guilt everyone else into paying more? > The reason a huge majority of pharma innovation happens here is because there is an incentive for it. Given that drugs are sold internationally, pharma could continue their extortionate pricing in the US no matter where the drugs are developed, so the cost of drugs doesn't act as an incentive for where to conduct innovation. [1] https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-pharmaceutical-companies-are-spending-far-more-on-marketing-than-research/ https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p...
  - zaroth 7y ago
    Your Washington Post article is misleading. They are conflating “SG&A” with “Marketing”. Pfizer, for example, does spend more on “SG&A” than it does on “R&D” but marketing makes up just a small part of “SG&A”. > Pfizer topped that list with $622.3 million in ad spending last year. Pfizer came in fourth on FierceBiotech's list of R&D budgets, with $7.9 billion. That means DTC ads were less than one-tenth the size of its R&D budget. Moreover, look across any number of research industries be it Pharma, Tech, Industrial Automation, whatever, you will find SG&A as a rule of thumb tends to roughly equal R&D spending as a total share of expenses. [1] - https://www.fiercepharma.com/regulatory/does-pharma-spend-more-on-marketing-than-r-d-a-numbers-check https://www.fiercepharma.com/regulatory/does-pharma-spend-mo...
keenmaster 7y ago
Single-payer healthcare is the answer. Period. If all Americans were in a single pool negotiating for drugs and healthcare, prices would plummet. It worked in Europe and it’ll work here. We are spending somewhere between 150% and 200% of what we should be on healthcare on a national level. We don’t get better outcomes either. So the harsh truth is that the whole industry needs to take a pay cut. That includes doctors, who actually make more than they should be in a well-lubricated market economy. Make no mistake, the healthcare market is colossally broken. Zero price transparency combined with high price insensitivity (due to extremely high value of life) and no practical substitute services (“protest” healthcare and go uninsured....at your peril) is a toxic combination. It guarantees that people are fleeced for every penny they could pay. Almost no other industry in America works in that way. Imagine a grocery store with no listed prices. When you roll up to the register and ask for the price, the employees are baffled. How dare you question the value of those who provide you sustenance. Do you even know how many years it took to optimize our supply chain so that you can have organic chicken and avocados? Our executives have to pay off their MBA debt somehow. They then inform you that the price of your basket is probably somewhere between $100-$1000, and that it’s really up to your grocery insurance provider. You call the insurance company, which then ask for the chicken code, avocado code, toilet paper code, etc... 2 hours later, they say they can give you an answer on how much your groceries will take from your deductible, but it’s going to take a week. They can quote the same prices for a couple other in-network grocery stores too, but you have a choice to make. Leave your groceries for today and wait a week for an answer, or buy your damn groceries like 99.9% of other people and get on with your life. You decide to wait. You find out that all the prices are exorbitant, but the grocery store that’s 2 hours away would only charge $300 as opposed to $500. Alas, it’s not even worth taking off work for that. If that sounds utterly dystopian, that’s healthcare in America today. It’s a game of name-your-price for providers. Insurance companies are in on it too. They want prices to be higher because high total spending results in higher insurance premiums. Businesses mostly shrug at the problem because of tax subsidies and because they want employees to fear losing their insurance along with their job. Americans must be unapologetic to medical organizations complaining about single-payer (“We’ll literally go out of business! We’ll close rural hospitals! Insurance workers will lose their jobs! Long socialist wait times! Government death panels!”). They want to keep the status quo at the expense of American families. For that reason, I assign close to no value to what healthcare insiders have to say about solving the spending problem. Lastly, consider this: American employees take home less of their paycheck than employees in all other developed nations except Netherlands. Note that this takes into consideration the portion of your premiums paid by your employer, which otherwise would have been paid to you in income. That’s why tax increases seem so unfathomable in the U.S. The healthcare industry is parasitically sucking out all the slack. Imagine if all that economic rent went to education and infrastructure instead.

neonate 7y ago

http://archive.is/f4TCi http://archive.is/f4TCi

mikece 7y ago

There's also the practice of the Big Pharma companies either buying the generics producers or contracting with them not to make generics. I think Big Pharma might be more hated than Congress at this point.

maxxxxx 7y ago

It seems everything around heath care billing is sneaky in the US. It's probably the most rotten, inefficient and corrupt sector of the whole economy. I am not talking about the actual health care but only about billing practices.

idDriven 7y ago
From the healthcare delivery standpoint there are so many rotten, inefficient and corrupt practices that many days it feels like you are delivering good care despite the system. Certainly not because of it. It's kafa-esque and there is zero incentive for your boss' boss' boss' boss' calling the shots to improve patient care. Healthcare providers are also just as mystified as to where all the money goes, not the workers doing the direct patient care.