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Market-oriented people have long noted that the US medical consumer is funding cheaper drugs for the entire world. If we wanted a system that's more equitable,

Market-oriented people have long noted that the US medical consumer is funding cheaper drugs for the entire world. If we wanted a system that's more equitable, we could create a law that sets the maximum price for medicine in the US at some multiple of what's charged abroad. For example: we could say that it's illegal to charge a US person more than 2x what you charge for the drug anywhere else in the world. This would do two things: it would bring down the cost for US consumers, and it would increase the cost for consumers abroad -- effectively reducing the free-rider effect we currently see in Europe.

ma2rten 7y ago
Sounds like they are doing something similar: Separately, the Trump administration is pursuing a regulation that would tie what Medicare pays for drugs administered in doctors’ offices to lower international prices.
danmaz74 7y ago
"what's charged abroad" includes poor countries that will never be able to afford prices comparable to the US. Companies are able to make money in those markets too, as long as the marginal cost of production is lower than the price they can ask there. Prohibiting this doesn't look very market-oriented to me.
thatfrenchguy 7y ago
> This would do two things: it would bring down the cost for US consumers, and it would increase the cost for consumers abroad -- effectively reducing the free-rider effect we currently see in Europe. In most European countries, a government regulator fixes the prices with industry. It's not freeloading in that case, they have the choice between negotiating a fair price or not having access to the market at all. And because they're not idiots, they choose to have access to the market. Most of that money doesn't go to fund R&D and go back to their shareholders anyway :-)
Waterluvian 7y ago
That sounds positively awful. They'll just chop off the lower end and let people in developing nations die. They're not a huge revenue source anyway.
tmd83 7y ago
I have heard it a lot but I'm not sure how true that is. Given all the specifics of essentially abuse/corruption (whatever you might call it) by US medical industry it's hard to believe their claim of subsidizing the world. There's probably some of that going on but I find it unlikely to be as big as claimed.
- nostromo 7y ago
  Ignore US companies completely then -- look at European pharmaceutical companies. They make far more money selling drugs to Americans than Europeans, and they use that money to develop new drugs back in Europe. I'm not sure how you could blame European actions on your US abuse/corruption theory.
  - smahony 7y ago
    Yes but is per unit profitability (measured at the pharma co) higher in the US? That's what you need to be true for your claim to hold water, not that the overall revenue pool is larger.
    - nostromo 7y ago
      Yes, US consumers pay more for almost every drug per unit, regardless of the nationality of the drug company: https://i.imgur.com/6QOta9X.png https://i.imgur.com/6QOta9X.png Full source: https://aspe.hhs.gov/system/files/pdf/259996/ComparisonUSInternationalPricesTopSpendingPartBDrugs.pdf https://aspe.hhs.gov/system/files/pdf/259996/ComparisonUSInt...
      - arcticbull 7y ago
        I thought this was capitalism? Isn't the idea of a company under a capitalist system to generate the maximum amount of profit possible for each product they sell? Drugs aren't priced relative to what they cost to make or develop any more than airlines price flights based on how much it costs to fly someone between any given city. They're priced at the highest level the market will bear. Is it any surprise that the largest, most powerful economy in the world will bear higher prices? The drugs by definition have higher value because treating someone in a strong economy delivers more marginal value than in other markets. That's math. Now we can talk about different systems but this is the one being held up today.
mtgx 7y ago
Or maybe that's just an excuse pharma companies use because they'd like to have their cake and eat it, too. If they didn't actually want to sell their drugs for pennies on the dollar in some countries, they wouldn't. If they are "forced" to sell there, it's only because of two reasons: 1) the US companies started selling there of their own free will, and after their patents expired in those countries, other companies were free to use the formula 2) Other companies would have created the same drugs with or without their patents, and the American companies would've lost all of that market share/brand image in that country. And I bet the competitors would do it for a tiny fraction of the faux R&D costs Big Pharma likes to claim for inventing a new drug. Besides, the idea that if a company patents something that means it's the only one that could have ever invented that thing needs to die already. The "first to file" patent system that has been adopted in most major countries because of big companies' lobbying is another dead-giveaway that this whole idea is bogus. Why would you have a "first to file" if you didn't have multiple people inventing the same thing at the same time. Many people or groups of people can come up with the same invention around the world roughly at the same time. Often, those alternatives don't become popular because their papers are in their native tongue and they lack investment, but the "invention" was already made.
- deleted 7y ago
  [deleted]
mempko 7y ago
This is wrong. The companies are making profits abroad (example, insulin costs $6 to produce and in Canada they sell for $36). If you are claiming American consumers are paying for research via high drug prices, this is wrong too, since most of the research is funded by the government via universities and other orgs. In other words, US citizens AND the rest of the world can have low drug costs.
- losvedir 7y ago
  Er, no? Drug companies spend on average about $1-2 billion in R&D per new drug[0]. [0] https://www.sciencedirect.com/science/article/pii/S0167629616000291 https://www.sciencedirect.com/science/article/pii/S016762961...
  - mempko 7y ago
    How is this a good thing ? Corporate research is more susceptible to bias and their focus is on what's profitable. What incentive do they have on making drugs that cure vs those thay address symptoms?
  - dv_dt 7y ago
    And they spend even more or marketing which is allowed only in the US and few other nations.
    - chimeracoder 7y ago
      > And they spend even more or marketing which is allowed only in the US and few other nations. No, most marketing is not direct-to-consumer marketing. Marketing absolutely is allowed in Europe, as evidenced by the massive amounts of money that drug companies spend on marketing within Europe.
slg 7y ago
>If we wanted a system that's more equitable, we could create a law that sets the maximum price for medicine in the US at some multiple of what's charged abroad. Should people in third world countries being excluded from the chance of receiving lifesaving drugs just because they happen to live in a place that isn't as economically successful as the US? Maybe I could be convinced if you pegged the prices to some measure of local purchasing power, but almost any proposal that amounts to poor people not being able to afford medical care in the name of capitalism is verging on immoral in my opinion. EDIT: It is disappointing that I get downvoted on HN for basically stating the controversial opinion that "people shouldn't die from being poor".
- programbreeding 7y ago
  I completely agree with your point. But as someone that lives in the US and is married to a person that requires prescriptions that can cost $30,000+/month each (cystic fibrosis), I'm in a first world country and am being excluded from the chance to receive lifesaving drugs.
  - slg 7y ago
    That is our problem to fix and we are a rich enough country to do that ourselves without offloading that problem onto poor people abroad.
Ididntdothis 7y ago
“Market-oriented people have long noted that the US medical consumer is funding cheaper drugs for the entire world.” They have claimed that but I have my doubts it’s true. It seems more likely that they make good profits outside US and obscene profits in the US. And why should the US subsidize other counties? Maybe we should also pay 200k for a Honda Civic so other countries have cheaper cars?
- rayiner 7y ago
  What is an “obscene profit?” Drug company return on investment is similar to other high-tech, capital and skilled-labor intensive industries: https://www.forbes.com/sites/johnlamattina/2018/01/23/about-those-soaring-pharma-profits https://www.forbes.com/sites/johnlamattina/2018/01/23/about-.... Their net margins are somewhere between software and semiconductors: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/.... Does Intel (not to mention Google or Facebook) make “obscene profits?” (Note the first source is data collected together by someone at Pfizer; the second source is a study by an NYU Business School professor. These are public financials, you can run the numbers yourself on Yahoo Finance.)
  - Ididntdothis 7y ago
    The point is that if drug prices in the US go lower maybe profit will go down but drug development won’t stop because they still will be making profit.
    - rayiner 7y ago
      It's not enough to make a non-zero profit. You have to be as profitable as similarly risky industries, or else capital will flow to those industries instead. Drug development is similar to tech in many respects--a lot of the work is done by startups (which are later acquired by the big companies). If profits go down, the money for acquisitions goes down, and the incentives to form and invest in the startups goes down. Instead, the capital goes elsewhere. If the government decided that Internet tech companies were "obscenely profitable" and started regulated prices so profits went down to 10% (instead of 30%+ for some companies like Facebook), do you think Silicon Valley would still produce the same output?
stereographic 7y ago
I don't think that implementing something that would raise the price for non-US citizens would do anything positive, mainly if I'm understanding you it will disproportionately affect low-income individuals in Canada
drtillberg 7y ago
Charging exploitative prices for necessities of life slowly will be merged into a larger body of unfair and deceptive practices. Charging someone 50% or 90% more for a lifesaving treatment because they're not on the right 'club'-- some enterprising lawyer somewhere will eventually pick up the right collection of cases to demonstrate this isn't a proper way to make a buck, under the law of most U.S. states.
tastygreenapple 7y ago
I don't think tying American prices to a multiple of the next highest price is very equitable, especially since Americans have been funding the majority of the world's pharmaceutical research for ages. I think it'd be equitable for America to get drugs near cost and for the rest of the world to pay for drug development for at least 50 years.
dpatru 7y ago
> we could create a law that sets the maximum price for medicine in the US at some multiple of what's charged abroad. Why create more laws and complexity? Why not simply repeal the laws that prohibit importation of drugs and possibly also refuse to enforce private contracts prohibiting reimportation? The reason drugs are cheaper in Canada and Europe than in America is because of American laws that prevent importation.
- nostromo 7y ago
  Because we not only want to pay less for drugs in America, we would like other countries to pay a bit more too and help shoulder the cost of R&D for new drugs and treatments. An analogy: you live in an apartment building in which every other apartment has rent control. Because of this you're going to pay every extra expense for the entire building. You could decide to become a rent controlled unit as well -- but the building owners would have less money to improve the building, and it would fall into disrepair. Or, instead, you could try and find a way to get everyone to equitably share the improvements to the building.
  - burn2theground 7y ago
    R&D costs are more than covered by the price paid in Canada and indeed most nations; the US is merely funding massive pharma profit margins and fat executive bonuses.
    - microcolonel 7y ago
      > R&D costs are more than covered by the price paid in Canada and indeed most nations And you would know... how?
      - llukas 7y ago
        big pharma spends more on marketing than R&D: https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-pharmaceutical-companies-are-spending-far-more-on-marketing-than-research/?utm_term=.f9dd0ca251de https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p...

ma2rten 7y ago

Sounds like they are doing something similar: Separately, the Trump administration is pursuing a regulation that would tie what Medicare pays for drugs administered in doctors’ offices to lower international prices.

danmaz74 7y ago

"what's charged abroad" includes poor countries that will never be able to afford prices comparable to the US. Companies are able to make money in those markets too, as long as the marginal cost of production is lower than the price they can ask there. Prohibiting this doesn't look very market-oriented to me.

thatfrenchguy 7y ago

> This would do two things: it would bring down the cost for US consumers, and it would increase the cost for consumers abroad -- effectively reducing the free-rider effect we currently see in Europe. In most European countries, a government regulator fixes the prices with industry. It's not freeloading in that case, they have the choice between negotiating a fair price or not having access to the market at all. And because they're not idiots, they choose to have access to the market. Most of that money doesn't go to fund R&D and go back to their shareholders anyway :-)

Waterluvian 7y ago

That sounds positively awful. They'll just chop off the lower end and let people in developing nations die. They're not a huge revenue source anyway.

tmd83 7y ago

I have heard it a lot but I'm not sure how true that is. Given all the specifics of essentially abuse/corruption (whatever you might call it) by US medical industry it's hard to believe their claim of subsidizing the world. There's probably some of that going on but I find it unlikely to be as big as claimed.

nostromo 7y ago
Ignore US companies completely then -- look at European pharmaceutical companies. They make far more money selling drugs to Americans than Europeans, and they use that money to develop new drugs back in Europe. I'm not sure how you could blame European actions on your US abuse/corruption theory.
- smahony 7y ago
  Yes but is per unit profitability (measured at the pharma co) higher in the US? That's what you need to be true for your claim to hold water, not that the overall revenue pool is larger.
  - nostromo 7y ago
    Yes, US consumers pay more for almost every drug per unit, regardless of the nationality of the drug company: https://i.imgur.com/6QOta9X.png https://i.imgur.com/6QOta9X.png Full source: https://aspe.hhs.gov/system/files/pdf/259996/ComparisonUSInternationalPricesTopSpendingPartBDrugs.pdf https://aspe.hhs.gov/system/files/pdf/259996/ComparisonUSInt...
    - arcticbull 7y ago
      I thought this was capitalism? Isn't the idea of a company under a capitalist system to generate the maximum amount of profit possible for each product they sell? Drugs aren't priced relative to what they cost to make or develop any more than airlines price flights based on how much it costs to fly someone between any given city. They're priced at the highest level the market will bear. Is it any surprise that the largest, most powerful economy in the world will bear higher prices? The drugs by definition have higher value because treating someone in a strong economy delivers more marginal value than in other markets. That's math. Now we can talk about different systems but this is the one being held up today.

mtgx 7y ago

Or maybe that's just an excuse pharma companies use because they'd like to have their cake and eat it, too. If they didn't actually want to sell their drugs for pennies on the dollar in some countries, they wouldn't. If they are "forced" to sell there, it's only because of two reasons: 1) the US companies started selling there of their own free will, and after their patents expired in those countries, other companies were free to use the formula 2) Other companies would have created the same drugs with or without their patents, and the American companies would've lost all of that market share/brand image in that country. And I bet the competitors would do it for a tiny fraction of the faux R&D costs Big Pharma likes to claim for inventing a new drug. Besides, the idea that if a company patents something that means it's the only one that could have ever invented that thing needs to die already. The "first to file" patent system that has been adopted in most major countries because of big companies' lobbying is another dead-giveaway that this whole idea is bogus. Why would you have a "first to file" if you didn't have multiple people inventing the same thing at the same time. Many people or groups of people can come up with the same invention around the world roughly at the same time. Often, those alternatives don't become popular because their papers are in their native tongue and they lack investment, but the "invention" was already made.

deleted 7y ago
[deleted]

mempko 7y ago

This is wrong. The companies are making profits abroad (example, insulin costs $6 to produce and in Canada they sell for $36). If you are claiming American consumers are paying for research via high drug prices, this is wrong too, since most of the research is funded by the government via universities and other orgs. In other words, US citizens AND the rest of the world can have low drug costs.

losvedir 7y ago
Er, no? Drug companies spend on average about $1-2 billion in R&D per new drug[0]. [0] https://www.sciencedirect.com/science/article/pii/S0167629616000291 https://www.sciencedirect.com/science/article/pii/S016762961...
- mempko 7y ago
  How is this a good thing ? Corporate research is more susceptible to bias and their focus is on what's profitable. What incentive do they have on making drugs that cure vs those thay address symptoms?
- dv_dt 7y ago
  And they spend even more or marketing which is allowed only in the US and few other nations.
  - chimeracoder 7y ago
    > And they spend even more or marketing which is allowed only in the US and few other nations. No, most marketing is not direct-to-consumer marketing. Marketing absolutely is allowed in Europe, as evidenced by the massive amounts of money that drug companies spend on marketing within Europe.

slg 7y ago

>If we wanted a system that's more equitable, we could create a law that sets the maximum price for medicine in the US at some multiple of what's charged abroad. Should people in third world countries being excluded from the chance of receiving lifesaving drugs just because they happen to live in a place that isn't as economically successful as the US? Maybe I could be convinced if you pegged the prices to some measure of local purchasing power, but almost any proposal that amounts to poor people not being able to afford medical care in the name of capitalism is verging on immoral in my opinion. EDIT: It is disappointing that I get downvoted on HN for basically stating the controversial opinion that "people shouldn't die from being poor".

programbreeding 7y ago
I completely agree with your point. But as someone that lives in the US and is married to a person that requires prescriptions that can cost $30,000+/month each (cystic fibrosis), I'm in a first world country and am being excluded from the chance to receive lifesaving drugs.
- slg 7y ago
  That is our problem to fix and we are a rich enough country to do that ourselves without offloading that problem onto poor people abroad.

Ididntdothis 7y ago

“Market-oriented people have long noted that the US medical consumer is funding cheaper drugs for the entire world.” They have claimed that but I have my doubts it’s true. It seems more likely that they make good profits outside US and obscene profits in the US. And why should the US subsidize other counties? Maybe we should also pay 200k for a Honda Civic so other countries have cheaper cars?

rayiner 7y ago
What is an “obscene profit?” Drug company return on investment is similar to other high-tech, capital and skilled-labor intensive industries: https://www.forbes.com/sites/johnlamattina/2018/01/23/about-those-soaring-pharma-profits https://www.forbes.com/sites/johnlamattina/2018/01/23/about-.... Their net margins are somewhere between software and semiconductors: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/.... Does Intel (not to mention Google or Facebook) make “obscene profits?” (Note the first source is data collected together by someone at Pfizer; the second source is a study by an NYU Business School professor. These are public financials, you can run the numbers yourself on Yahoo Finance.)
- Ididntdothis 7y ago
  The point is that if drug prices in the US go lower maybe profit will go down but drug development won’t stop because they still will be making profit.
  - rayiner 7y ago
    It's not enough to make a non-zero profit. You have to be as profitable as similarly risky industries, or else capital will flow to those industries instead. Drug development is similar to tech in many respects--a lot of the work is done by startups (which are later acquired by the big companies). If profits go down, the money for acquisitions goes down, and the incentives to form and invest in the startups goes down. Instead, the capital goes elsewhere. If the government decided that Internet tech companies were "obscenely profitable" and started regulated prices so profits went down to 10% (instead of 30%+ for some companies like Facebook), do you think Silicon Valley would still produce the same output?

stereographic 7y ago

I don't think that implementing something that would raise the price for non-US citizens would do anything positive, mainly if I'm understanding you it will disproportionately affect low-income individuals in Canada

drtillberg 7y ago

Charging exploitative prices for necessities of life slowly will be merged into a larger body of unfair and deceptive practices. Charging someone 50% or 90% more for a lifesaving treatment because they're not on the right 'club'-- some enterprising lawyer somewhere will eventually pick up the right collection of cases to demonstrate this isn't a proper way to make a buck, under the law of most U.S. states.

tastygreenapple 7y ago

I don't think tying American prices to a multiple of the next highest price is very equitable, especially since Americans have been funding the majority of the world's pharmaceutical research for ages. I think it'd be equitable for America to get drugs near cost and for the rest of the world to pay for drug development for at least 50 years.

dpatru 7y ago

> we could create a law that sets the maximum price for medicine in the US at some multiple of what's charged abroad. Why create more laws and complexity? Why not simply repeal the laws that prohibit importation of drugs and possibly also refuse to enforce private contracts prohibiting reimportation? The reason drugs are cheaper in Canada and Europe than in America is because of American laws that prevent importation.

nostromo 7y ago
Because we not only want to pay less for drugs in America, we would like other countries to pay a bit more too and help shoulder the cost of R&D for new drugs and treatments. An analogy: you live in an apartment building in which every other apartment has rent control. Because of this you're going to pay every extra expense for the entire building. You could decide to become a rent controlled unit as well -- but the building owners would have less money to improve the building, and it would fall into disrepair. Or, instead, you could try and find a way to get everyone to equitably share the improvements to the building.
- burn2theground 7y ago
  R&D costs are more than covered by the price paid in Canada and indeed most nations; the US is merely funding massive pharma profit margins and fat executive bonuses.
  - microcolonel 7y ago
    > R&D costs are more than covered by the price paid in Canada and indeed most nations And you would know... how?
    - llukas 7y ago
      big pharma spends more on marketing than R&D: https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-pharmaceutical-companies-are-spending-far-more-on-marketing-than-research/?utm_term=.f9dd0ca251de https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p...