6 ms·

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 indu

by 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.
      - tathougies 7y ago
        Indeed charging the max possible is the idea. The idea is also that the market is free so a competitor could also extract profit by making the same drug for slightly less. Of course another competitor could come in and make it for even less. All these price cutters force the higher priced competitor to lower their price to still produce profit. The lower bound here is the cost of production below which all companies would stop production. So in a capitalist system in a free market profit should always be trending towards zero. The issue is government allowing companies to be anti competitive. For example, the government is currently entertaining a lawsuit by one insulin company against another company trying to sell insulin for a lower price. While that lawsuit is ongoing Americans must pay the higher price. Thus really government willing to enforce continued monopoly is one of the problems
        arcticbull 7y ago
        If that's the case, why does a flight from SFO-JFK cost way less than a flight from JFK-LHR in business class? Approximately the same distance, approximately the same cost basis. Dramatically more competition between JFK and LHR. It's not always about competition or cost basis.
        FeeJai 7y ago
        Why do you think there is more competition to LHR than domestically? The airport has been maxed out for almost 30 years, it is incedibly hard to get landing slots there. Also the weather over the atlantic makes flights longer and use more fuel.
        tathougies 7y ago
        Because I said profit is driven zero not revenue. JFK to lhr requires all sorts of international permitting that is a fixed and varying cost that domestic routes do not have. Airlines are a great example of the race to zero profit. Airline margins are slim and thus the cost of travel often reflects exactly the cost of doing the flight itself. JFK to Heathrow requires participation in multiple markets, currency instability, multiple regulators etc which make the cost more excessive. Also london and new York airports are busier than sfo increasing airport fees. Thus in a market with low basically zero margins, the cost from ny to London is more as competitors that cant make the unit economics work leave the market entirely. New competitora cant enter the market at a lower price point because their profit would be zero.
    - siidooloo 7y ago
      Is that US price with or without any insurance? Most countries negotiate a lower price with the drug companies the same way insurance companies do. I don’t see how Canadians negotiating a lower group price is worse then Americans paying someone to do that.
      - nostromo 7y ago
        It's the average sale price of the drug in the US. So, mostly with insurance (~90% of Americans are covered). (The study was done by HHS and was focused on Medicare, which sets prices based on a weighted average of market sales price, including negotiated discounts by insurers.)
    - Scoundreller 7y ago
      US consumers pay more, but US marketing expenses are much higher too, eating up more revenue than R&D does.
      - fuzz4lyfe 7y ago
        If marketing was not yielding a return why would they do it? Presumably spending $1.00 to market a drug returns at least $1.01 in profits. If that is true then a lower marketing budget would result in a lower R and D budget provided you keep all the percentages the same.
        Scoundreller 7y ago
        The point being made was that, while US prices are higher, they may not outweigh profits from EU sales. Selling your product for 50% more in the US may not be more profitable than selling in EU where your marketing costs are a lot lower. Of course you’d sell in all markets where you can, but the claim was that US profits > EU profits because US prices > EU prices. Also, there’s R&D/education that’s really marketing. E.g. advisory panels, grants to the “right” organizations, agencies or researchers
        mikeash 7y ago
        A lot of marketing is a prisoners’ dilemma. There is little if any gain from the steady state where everyone does it, but you have to do it because if you don’t then your competitors will and they’ll eat you alive. In which case you could kill this stupid marketing budget without much effect on R&D by outlawing drug advertising.
        Scoundreller 7y ago
        That’s why they get together and make a bunch of rules about what is “ethical” marketing. In reality, the established players halve their marketing expense and make it difficult for any upstarts.
      - ddingus 7y ago
        Why are prescription drugs marketed at all?
- mikeash 7y ago
  Why wouldn’t a European pharma company take advantage of the abuse and corruption in the American system? It boils down to this: drugs are a pretty anti-competitive market, and the US doesn’t have much in the way of opposing rules that would bring prices down. No surprise that companies make more money compared to European countries. The real question is: if the US stopped allowing this and brought prices under control, would it wreck pharma R&D? People seem to assume the answer is “yes” when they bring up this disparity but I don’t see it being that obvious.
Scoundreller 7y ago
If we’re worried about funding innovation, we could do a lot by only funding the innovator. When every manufacturer has their own statin or their own ARB inhibitor, etc., the revenue is split between a true innovator and a bunch of copycats. Fixing that could allow much more reward for true innovators, at lower prices but profits protected by volume.
- rayiner 7y ago
  We went through a phase of this in the 1930s-1950s where the government decided that competition was harmful and duplicative. It was a disaster. By your reasoning, we shouldn’t have both iOS and Android—the government should make a single OS where all R&D can be invested without duplication.
  - Scoundreller 7y ago
    It’s a lot easier to see which of two blood pressure drugs that work through the same mechanism works better at... reducing blood pressure. The usual problem is that we don’t compare drugs in the same class against each other (for fear of negative results).
    - zaroth 7y ago
      You only think this because in the case of iOS and Android you can get your hands dirty and form opinions for one versus the other. In the case of the blood pressure medicine, that process is not possible for the consumer, and as you say, not practiced by the labs. But that doesn’t mean there aren’t a hundred possible pros and cons for one type of molecule versus another to treat XYZ condition in ABC population, with potentially huge variation between patients both explained and unexplained.
      - Scoundreller 7y ago
        > But that doesn’t mean there aren’t a hundred possible pros and cons for one type of molecule versus another to treat XYZ condition in ABC population, with potentially huge variation between patients both explained and unexplained. There really aren't when comparing different molecules with the same mechanism of action. Individual hospitals and health systems will usually tender out their contracts to the cheapest molecule in each class, or sign up with a buying group that does. It simplifies prescribing, inventory, distribution and administration too.

by tmd83 7y ago

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.
    - tathougies 7y ago
      Indeed charging the max possible is the idea. The idea is also that the market is free so a competitor could also extract profit by making the same drug for slightly less. Of course another competitor could come in and make it for even less. All these price cutters force the higher priced competitor to lower their price to still produce profit. The lower bound here is the cost of production below which all companies would stop production. So in a capitalist system in a free market profit should always be trending towards zero. The issue is government allowing companies to be anti competitive. For example, the government is currently entertaining a lawsuit by one insulin company against another company trying to sell insulin for a lower price. While that lawsuit is ongoing Americans must pay the higher price. Thus really government willing to enforce continued monopoly is one of the problems
      - arcticbull 7y ago
        If that's the case, why does a flight from SFO-JFK cost way less than a flight from JFK-LHR in business class? Approximately the same distance, approximately the same cost basis. Dramatically more competition between JFK and LHR. It's not always about competition or cost basis.
        FeeJai 7y ago
        Why do you think there is more competition to LHR than domestically? The airport has been maxed out for almost 30 years, it is incedibly hard to get landing slots there. Also the weather over the atlantic makes flights longer and use more fuel.
        tathougies 7y ago
        Because I said profit is driven zero not revenue. JFK to lhr requires all sorts of international permitting that is a fixed and varying cost that domestic routes do not have. Airlines are a great example of the race to zero profit. Airline margins are slim and thus the cost of travel often reflects exactly the cost of doing the flight itself. JFK to Heathrow requires participation in multiple markets, currency instability, multiple regulators etc which make the cost more excessive. Also london and new York airports are busier than sfo increasing airport fees. Thus in a market with low basically zero margins, the cost from ny to London is more as competitors that cant make the unit economics work leave the market entirely. New competitora cant enter the market at a lower price point because their profit would be zero.
  - siidooloo 7y ago
    Is that US price with or without any insurance? Most countries negotiate a lower price with the drug companies the same way insurance companies do. I don’t see how Canadians negotiating a lower group price is worse then Americans paying someone to do that.
    - nostromo 7y ago
      It's the average sale price of the drug in the US. So, mostly with insurance (~90% of Americans are covered). (The study was done by HHS and was focused on Medicare, which sets prices based on a weighted average of market sales price, including negotiated discounts by insurers.)
  - Scoundreller 7y ago
    US consumers pay more, but US marketing expenses are much higher too, eating up more revenue than R&D does.
    - fuzz4lyfe 7y ago
      If marketing was not yielding a return why would they do it? Presumably spending $1.00 to market a drug returns at least $1.01 in profits. If that is true then a lower marketing budget would result in a lower R and D budget provided you keep all the percentages the same.
      - Scoundreller 7y ago
        The point being made was that, while US prices are higher, they may not outweigh profits from EU sales. Selling your product for 50% more in the US may not be more profitable than selling in EU where your marketing costs are a lot lower. Of course you’d sell in all markets where you can, but the claim was that US profits > EU profits because US prices > EU prices. Also, there’s R&D/education that’s really marketing. E.g. advisory panels, grants to the “right” organizations, agencies or researchers
      - mikeash 7y ago
        A lot of marketing is a prisoners’ dilemma. There is little if any gain from the steady state where everyone does it, but you have to do it because if you don’t then your competitors will and they’ll eat you alive. In which case you could kill this stupid marketing budget without much effect on R&D by outlawing drug advertising.
        Scoundreller 7y ago
        That’s why they get together and make a bunch of rules about what is “ethical” marketing. In reality, the established players halve their marketing expense and make it difficult for any upstarts.
    - ddingus 7y ago
      Why are prescription drugs marketed at all?
mikeash 7y ago
Why wouldn’t a European pharma company take advantage of the abuse and corruption in the American system? It boils down to this: drugs are a pretty anti-competitive market, and the US doesn’t have much in the way of opposing rules that would bring prices down. No surprise that companies make more money compared to European countries. The real question is: if the US stopped allowing this and brought prices under control, would it wreck pharma R&D? People seem to assume the answer is “yes” when they bring up this disparity but I don’t see it being that obvious.

Scoundreller 7y ago

If we’re worried about funding innovation, we could do a lot by only funding the innovator. When every manufacturer has their own statin or their own ARB inhibitor, etc., the revenue is split between a true innovator and a bunch of copycats. Fixing that could allow much more reward for true innovators, at lower prices but profits protected by volume.

rayiner 7y ago
We went through a phase of this in the 1930s-1950s where the government decided that competition was harmful and duplicative. It was a disaster. By your reasoning, we shouldn’t have both iOS and Android—the government should make a single OS where all R&D can be invested without duplication.
- Scoundreller 7y ago
  It’s a lot easier to see which of two blood pressure drugs that work through the same mechanism works better at... reducing blood pressure. The usual problem is that we don’t compare drugs in the same class against each other (for fear of negative results).
  - zaroth 7y ago
    You only think this because in the case of iOS and Android you can get your hands dirty and form opinions for one versus the other. In the case of the blood pressure medicine, that process is not possible for the consumer, and as you say, not practiced by the labs. But that doesn’t mean there aren’t a hundred possible pros and cons for one type of molecule versus another to treat XYZ condition in ABC population, with potentially huge variation between patients both explained and unexplained.
    - Scoundreller 7y ago
      > But that doesn’t mean there aren’t a hundred possible pros and cons for one type of molecule versus another to treat XYZ condition in ABC population, with potentially huge variation between patients both explained and unexplained. There really aren't when comparing different molecules with the same mechanism of action. Individual hospitals and health systems will usually tender out their contracts to the cheapest molecule in each class, or sign up with a buying group that does. It simplifies prescribing, inventory, distribution and administration too.