5 ms·

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 over

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.
    - danmaz74 7y ago
      No competitor can produce a drug which is still under patent.
    - patpending 7y ago
      Is the market for drugs really free though? I believe that in a free market there is supposed to be no coercion between the parties to a transaction. In the case of drug purchases there may be a kind of coercion involved -- a health issue (diabetes, cancer, etc.) that makes one party to the transaction unable to negotiate effectively.
  - leakybit 7y ago
    I' am sure pharma board meeting go like this CFO: ABC pharma just got FDA approval to sell a generic version of Viagra, our revenue is projected to take a $1.5 billion hit. CEO: Fuck. Start raising the price of insulin, I gotta hit these wall street estimates.
- 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?

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.
  - danmaz74 7y ago
    No competitor can produce a drug which is still under patent.
  - patpending 7y ago
    Is the market for drugs really free though? I believe that in a free market there is supposed to be no coercion between the parties to a transaction. In the case of drug purchases there may be a kind of coercion involved -- a health issue (diabetes, cancer, etc.) that makes one party to the transaction unable to negotiate effectively.
- leakybit 7y ago
  I' am sure pharma board meeting go like this CFO: ABC pharma just got FDA approval to sell a generic version of Viagra, our revenue is projected to take a $1.5 billion hit. CEO: Fuck. Start raising the price of insulin, I gotta hit these wall street estimates.
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?