9 ms·

On the scale of a market in the many many billions, the costs imposed by FDA aren’t even a rounding error. That’s not why drugs are expensive. Generally, Pharm

by mft_ 6y ago

On the scale of a market in the many many billions, the costs imposed by FDA aren’t even a rounding error. That’s not why drugs are expensive. Generally, Pharma companies charge a lot for medications in the US _because they can_ - because no one stops them. Lots of other countries have systems which limit price, or set drug prices according to value, or similar. Why doesn’t the US? Fundamentally, it’s got to come back to allowing money and thus big business to influence the US political system so directly. Until this is fixed, sadly little is likely to change.

nickff 6y ago
Your comment seems to suppose that basic economics do not apply to healthcare; do you believe that it's a 'special case'? I see healthcare as being similar to every other market, and think that the cost issues are driven by regulations and incentives.
- Xylakant 6y ago
  Healthcare is an inelastic market. If the new iPhone is too expensive, keep an old one, of buy a used one. If your insulin dose is too expensive, you die. Normal market rules of supply and demand do not entirely apply to Health care markets.
  - nickff 6y ago
    There are lots of inelastic markets, and I'd agree they do often suffer from short-term price volatility, but the US healthcare market suffers from longer-term price 'anomalies', which I believe are a product of its unique regulatory landscape.
    - Xylakant 6y ago
      Other markets with inelastic demand and/or supply also suffer from long-term price anomalies: take housing/rental in SF. There’s certainly some more contributing factors that make an inelastic market turn into a problem, but it’s fairly obvious that it’s not governed by the regular “simple” market explanation of supply and demand converging to a price point if the demand is essentially fixed.
      - nickff 6y ago
        Housing and real estate have a regulatory environment which may be as Byzantine as that in healthcare! Real estate is a little 'better' because you have competing regulatory regimes which serve to (somewhat) moderate the extremes, but it's still quite bad. If you're looking for a contrasting inelastic market (one with a simpler regulatory landscape), I'd look for other industries with high capital costs, such as semiconductor manufacturing.
  - RHSeeger 6y ago
    > If your insulin dose is too expensive, you die. While that is true, you are not including the option of switching to a cheaper insulin. The older insulins (R/N/L) were, the last time I checked, something like $25 per bottle, over the counter.
    - TeaDrunk 6y ago
      Cheaper insulin is worse insulin, harder to manage, and ultimately will shorten your lifespan. If you've never used it before/are underresourced about its useage it can 100% still mean a death sentence. Still inelastic imo.
      - RHSeeger 6y ago
        I was replying to the statement that "if your insulin is too expensive, you die". Cheaper insulin is not harder to manage than dying.
        TeaDrunk 6y ago
        Cheaper insulin, being harder to manage, can and does kill you.
  - renewiltord 6y ago
    Haha, no. If your insulin dose is too expensive, you die. If my insulin dose is too expensive in America, I ship it from generics factories in India¹. The problem for you is that you can't do what I do. And maybe the problem for you is also that I can't sell you what I get this way. So in America you have 'shortages'. I do not. And if you wanted, you could also choose not to have 'shortages'. I remember the same thing happening when Chloroquine was 'in short supply'. I could always get some. You never could. This is by choice. You live by rules that the universe does not require of you. These are probably for other reasons like perhaps you believe in living by the categorical imperative. But there are predators in this forest who do not believe in that. ¹ Even insulin can come here stably and safe. But drugs for other conditions are easier. And what I'm saying here is not strictly true if you're familiar with the details: it's not actually a generic, etc. etc. The important thing is that it's cheap and available.
    - deleted 6y ago
      [deleted]
    - jakelazaroff 6y ago
      It sounds like you’re saying “this isn’t a problem if you simply break the law”, which obviously isn’t a real solution to the problem.
      - mrkstu 6y ago
        It makes obvious that the problem is the law.
        renewiltord 6y ago
        Exactly. Thank you.
  - anonuser123456 6y ago
    Demand is relatively inelastic in healthcare. Supply is not. The fact that I need a product does not constrain suppliers from supplying it. So normal supply elasticity of supply rules apply.
- mft_ 6y ago
  FWIW, I was sketching out the situation in the US healthcare market generally, and not specifically referring to the insulin situation. To expand slightly (all IM opinion/observation): a) Often, there isn't a 'market', as there might not be multiple competitive options for each disease. b) Even in situations where there are (say) two roughy similar treatments for a disease, market forces don't always apply - manufacturers differentiate via other routes and try to avoid price erosion. c) It's uncertain how often price directly influences prescribing decisions (in the US, or indeed in many countries).
hnracer 6y ago
Why doesn't competition step in and increase the supply of insulin, thereby decreasing its cost? If insulin is 1/8th the cost elsewhere why can't I import it from overseas and sell it locally, making arbitrage profits? Is there something other than regulatory capture going on here? If not it's less a case of "because they can" and more a case of "because others can't".
- 9HZZRfNlpR 6y ago
  Because your cheaper product needs to be fda proved, which either is extremely expensive or these is some huge cartel conspiracy. Probably the first.
- StreamBright 6y ago
  Short answer: because of regulations. Just to give you an example how ridiculous the US health care is. I used to live in California and I had an inflamed wisdom tooth. It cost me so much to get it out (fully insured, premium+, high income insurance) that the amount I had to pay __after__ insurance (out of pocket) would have been enough to buy a ticket to go to Europe, visit a random country get the operation done, fully pay for (without insurance coverage) it and fly home to Cali.
  - deleted 6y ago
    [deleted]
  - mrkstu 6y ago
    The state of Utah flies employees to Mexico to fill prescriptions there because: "The cost difference is big enough that the state's program can pay for each patient's flight, provide them with a $500-per-trip bonus, and still save tens of thousands of dollars" https://www.pharmacist.com/article/utah-sends-employees-mexico-lower-prescription-prices https://www.pharmacist.com/article/utah-sends-employees-mexi...
  - Barrin92 6y ago
    >would have been enough to buy a ticket to go to Europe, visit a random country get the operation done, fully pay for (without insurance coverage) it and fly home to Cali. This isn't even uncommon among people in Europe. A lot of people from Western Europe get on a 50 bucks Ryanair flight to Hungary or Romania, get their dental work done and fly back home.
psadauskas 6y ago
Health insurance company profits are capped at 20% of the premiums they take in[1]. So not only because they _can_, but they actively want healthcare costs to go up, because that's the only way they get to increase their profits. https://www.healthcare.gov/health-care-law-protections/rate-review/ https://www.healthcare.gov/health-care-law-protections/rate-...
- throw0101a 6y ago
  Meanwhile in Germany and Switzerland there are non-profit health insurance companies: * https://en.wikipedia.org/wiki/Healthcare_in_Germany#Health_insurance https://en.wikipedia.org/wiki/Healthcare_in_Germany#Health_i... * https://en.wikipedia.org/wiki/Healthcare_in_Switzerland#Compulsory_coverage_and_costs https://en.wikipedia.org/wiki/Healthcare_in_Switzerland#Comp... Both usually rank quite well in various international comparisons. The US has a great healthcare system, but abysmal health insurance.
  - tshaddox 6y ago
    Lots (perhaps most?) of US health insurance providers also non-profit.
    - Retric 6y ago
      Are lot of tiny non profit insurance companies exist generally created by companies or religious groups to run their insurance. However, in terms of the overall market share it’s under 1/3 and significantly less when you look at companies that accept anyone.
    - sangnoir 6y ago
      Lot's of Hospital Systems in the US are ostensibly non-profit, but the number of Administrators & executives (and their salaries and bonuses) have been going way up
- m16ghost 6y ago
  This doesn't appear to be true. There are other ways for health insurance companies to increase profits. The US Health insurance industry spends on average, 86% of premiums on healthcare costs[0], which means they can increase their profits by reducing those costs, since 80% is the floor. 12% of the left over premium gets spent on operating expenses, which leaves the industry with a 2-3% profit margin[0]. So another way of increasing profits is for the companies to become more efficient. These figures are for the industry as a whole. Any individual company will have other avenues of increasing profit, such as growing their market share. [0] https://content.naic.org/sites/default/files/inline-files/2019%20Health%20Industry%20Commentary_0.pdf https://content.naic.org/sites/default/files/inline-files/20...
BurningFrog 6y ago
This is not about direct costs. It's about FDA banning competing products so one company can charge astronomical prices.
- HarryHirsch 6y ago
  It's not that other countries didn't have the same rules. Before you can market a generic in Germany you must convince the Institute for Pharmaceuticals and Medical Devices that your product is comparable to the brand-name medication. People like to blame the FDA but tend to disregard that Europe and Japan have similar safety requirements. When you read some of the inspection reports from White Oak you wonder: what would pharma manufacturing in <insert faraway country here> look like if they knew the FDA didn't exist!
  - BurningFrog 6y ago
    As I understand it the FDA is different. Even if your product is comparable to the brand-name medication, the cost, time, and uncertainty of getting a permit is so prohibitive that many smaller medications are left with well protected monopolists. That's at least what I hear. I don't work in the industry.
    - HarryHirsch 6y ago
      The monopoly or the public authorities aren't even the problem, natural monopolies are well understood and brought under control by regulation. There are three manufacturers of insulin in the US, about six worldwide. Everywhere else the natural monopoly is dealt with by price controls, except in the US. They could, but they don't want to.
      - BurningFrog 6y ago
        Why would insulin be a natural monopoly? It seems like a commodity, which is kinda the opposite. Aside from modern insulin variations under patent, but that's different. I suspect the barrier to entry that creates these monopolies is again the access to FDA approval. You can only really make money in the US market, due to the price controls elsewhere. The high US drug prices subsidizes the world to a big extent, and I wonder how much of a drug industry would survive if the US also went for price controls.
roenxi 6y ago
> Generally, Pharma companies charge a lot for medications in the US _because they can_ - because no one stops them. Walmart charges what they do because they can as well. Pretty much everyone charges what they can and nobody stops them. There aren't many business out there pricing stuff lower than what they can get away with. There is a billion dollar opportunity here for whoever sells insulin at half price to the US market. Looking at the enormous price differences, it seems very likely that the opportunity exists. These are manufacturing prices; presumably before subsidy [0]. Unless I've really misunderstood what they are saying there is a huge opportunity for someone to get rich here. The most likely reason the prices are high is because the US government has somehow made it illegal to sell cheap insulin. [0] "First, the manufacturer prices available in the MIDAS data do not reflect rebates or other discounts that might have been applied after drugs left the factory; we expect that, in many countries (and particularly in the United States), the net price paid for drugs was lower than the reported manufacturer prices shown in our results tables." - In the linked report
- phonon 6y ago
  Walmart sells an inexpensive OTC insulin type ($25 a vial). https://diabetesstrong.com/walmart-insulin/ https://diabetesstrong.com/walmart-insulin/ It's an older formulation, and not commonly prescribed, unless you're cost sensitive.

by mft_ 6y ago

nickff 6y ago

Your comment seems to suppose that basic economics do not apply to healthcare; do you believe that it's a 'special case'? I see healthcare as being similar to every other market, and think that the cost issues are driven by regulations and incentives.

Xylakant 6y ago
Healthcare is an inelastic market. If the new iPhone is too expensive, keep an old one, of buy a used one. If your insulin dose is too expensive, you die. Normal market rules of supply and demand do not entirely apply to Health care markets.
- nickff 6y ago
  There are lots of inelastic markets, and I'd agree they do often suffer from short-term price volatility, but the US healthcare market suffers from longer-term price 'anomalies', which I believe are a product of its unique regulatory landscape.
  - Xylakant 6y ago
    Other markets with inelastic demand and/or supply also suffer from long-term price anomalies: take housing/rental in SF. There’s certainly some more contributing factors that make an inelastic market turn into a problem, but it’s fairly obvious that it’s not governed by the regular “simple” market explanation of supply and demand converging to a price point if the demand is essentially fixed.
    - nickff 6y ago
      Housing and real estate have a regulatory environment which may be as Byzantine as that in healthcare! Real estate is a little 'better' because you have competing regulatory regimes which serve to (somewhat) moderate the extremes, but it's still quite bad. If you're looking for a contrasting inelastic market (one with a simpler regulatory landscape), I'd look for other industries with high capital costs, such as semiconductor manufacturing.
- RHSeeger 6y ago
  > If your insulin dose is too expensive, you die. While that is true, you are not including the option of switching to a cheaper insulin. The older insulins (R/N/L) were, the last time I checked, something like $25 per bottle, over the counter.
  - TeaDrunk 6y ago
    Cheaper insulin is worse insulin, harder to manage, and ultimately will shorten your lifespan. If you've never used it before/are underresourced about its useage it can 100% still mean a death sentence. Still inelastic imo.
    - RHSeeger 6y ago
      I was replying to the statement that "if your insulin is too expensive, you die". Cheaper insulin is not harder to manage than dying.
      - TeaDrunk 6y ago
        Cheaper insulin, being harder to manage, can and does kill you.
- renewiltord 6y ago
  Haha, no. If your insulin dose is too expensive, you die. If my insulin dose is too expensive in America, I ship it from generics factories in India¹. The problem for you is that you can't do what I do. And maybe the problem for you is also that I can't sell you what I get this way. So in America you have 'shortages'. I do not. And if you wanted, you could also choose not to have 'shortages'. I remember the same thing happening when Chloroquine was 'in short supply'. I could always get some. You never could. This is by choice. You live by rules that the universe does not require of you. These are probably for other reasons like perhaps you believe in living by the categorical imperative. But there are predators in this forest who do not believe in that. ¹ Even insulin can come here stably and safe. But drugs for other conditions are easier. And what I'm saying here is not strictly true if you're familiar with the details: it's not actually a generic, etc. etc. The important thing is that it's cheap and available.
  - deleted 6y ago
    [deleted]
  - jakelazaroff 6y ago
    It sounds like you’re saying “this isn’t a problem if you simply break the law”, which obviously isn’t a real solution to the problem.
    - mrkstu 6y ago
      It makes obvious that the problem is the law.
      - renewiltord 6y ago
        Exactly. Thank you.
- anonuser123456 6y ago
  Demand is relatively inelastic in healthcare. Supply is not. The fact that I need a product does not constrain suppliers from supplying it. So normal supply elasticity of supply rules apply.
mft_ 6y ago
FWIW, I was sketching out the situation in the US healthcare market generally, and not specifically referring to the insulin situation. To expand slightly (all IM opinion/observation): a) Often, there isn't a 'market', as there might not be multiple competitive options for each disease. b) Even in situations where there are (say) two roughy similar treatments for a disease, market forces don't always apply - manufacturers differentiate via other routes and try to avoid price erosion. c) It's uncertain how often price directly influences prescribing decisions (in the US, or indeed in many countries).

hnracer 6y ago

Why doesn't competition step in and increase the supply of insulin, thereby decreasing its cost? If insulin is 1/8th the cost elsewhere why can't I import it from overseas and sell it locally, making arbitrage profits? Is there something other than regulatory capture going on here? If not it's less a case of "because they can" and more a case of "because others can't".

9HZZRfNlpR 6y ago
Because your cheaper product needs to be fda proved, which either is extremely expensive or these is some huge cartel conspiracy. Probably the first.
StreamBright 6y ago
Short answer: because of regulations. Just to give you an example how ridiculous the US health care is. I used to live in California and I had an inflamed wisdom tooth. It cost me so much to get it out (fully insured, premium+, high income insurance) that the amount I had to pay __after__ insurance (out of pocket) would have been enough to buy a ticket to go to Europe, visit a random country get the operation done, fully pay for (without insurance coverage) it and fly home to Cali.
- deleted 6y ago
  [deleted]
- mrkstu 6y ago
  The state of Utah flies employees to Mexico to fill prescriptions there because: "The cost difference is big enough that the state's program can pay for each patient's flight, provide them with a $500-per-trip bonus, and still save tens of thousands of dollars" https://www.pharmacist.com/article/utah-sends-employees-mexico-lower-prescription-prices https://www.pharmacist.com/article/utah-sends-employees-mexi...
- Barrin92 6y ago
  >would have been enough to buy a ticket to go to Europe, visit a random country get the operation done, fully pay for (without insurance coverage) it and fly home to Cali. This isn't even uncommon among people in Europe. A lot of people from Western Europe get on a 50 bucks Ryanair flight to Hungary or Romania, get their dental work done and fly back home.

psadauskas 6y ago

Health insurance company profits are capped at 20% of the premiums they take in[1]. So not only because they _can_, but they actively want healthcare costs to go up, because that's the only way they get to increase their profits. https://www.healthcare.gov/health-care-law-protections/rate-review/ https://www.healthcare.gov/health-care-law-protections/rate-...

throw0101a 6y ago
Meanwhile in Germany and Switzerland there are non-profit health insurance companies: * https://en.wikipedia.org/wiki/Healthcare_in_Germany#Health_insurance https://en.wikipedia.org/wiki/Healthcare_in_Germany#Health_i... * https://en.wikipedia.org/wiki/Healthcare_in_Switzerland#Compulsory_coverage_and_costs https://en.wikipedia.org/wiki/Healthcare_in_Switzerland#Comp... Both usually rank quite well in various international comparisons. The US has a great healthcare system, but abysmal health insurance.
- tshaddox 6y ago
  Lots (perhaps most?) of US health insurance providers also non-profit.
  - Retric 6y ago
    Are lot of tiny non profit insurance companies exist generally created by companies or religious groups to run their insurance. However, in terms of the overall market share it’s under 1/3 and significantly less when you look at companies that accept anyone.
  - sangnoir 6y ago
    Lot's of Hospital Systems in the US are ostensibly non-profit, but the number of Administrators & executives (and their salaries and bonuses) have been going way up
m16ghost 6y ago
This doesn't appear to be true. There are other ways for health insurance companies to increase profits. The US Health insurance industry spends on average, 86% of premiums on healthcare costs[0], which means they can increase their profits by reducing those costs, since 80% is the floor. 12% of the left over premium gets spent on operating expenses, which leaves the industry with a 2-3% profit margin[0]. So another way of increasing profits is for the companies to become more efficient. These figures are for the industry as a whole. Any individual company will have other avenues of increasing profit, such as growing their market share. [0] https://content.naic.org/sites/default/files/inline-files/2019%20Health%20Industry%20Commentary_0.pdf https://content.naic.org/sites/default/files/inline-files/20...

BurningFrog 6y ago

This is not about direct costs. It's about FDA banning competing products so one company can charge astronomical prices.

HarryHirsch 6y ago
It's not that other countries didn't have the same rules. Before you can market a generic in Germany you must convince the Institute for Pharmaceuticals and Medical Devices that your product is comparable to the brand-name medication. People like to blame the FDA but tend to disregard that Europe and Japan have similar safety requirements. When you read some of the inspection reports from White Oak you wonder: what would pharma manufacturing in <insert faraway country here> look like if they knew the FDA didn't exist!
- BurningFrog 6y ago
  As I understand it the FDA is different. Even if your product is comparable to the brand-name medication, the cost, time, and uncertainty of getting a permit is so prohibitive that many smaller medications are left with well protected monopolists. That's at least what I hear. I don't work in the industry.
  - HarryHirsch 6y ago
    The monopoly or the public authorities aren't even the problem, natural monopolies are well understood and brought under control by regulation. There are three manufacturers of insulin in the US, about six worldwide. Everywhere else the natural monopoly is dealt with by price controls, except in the US. They could, but they don't want to.
    - BurningFrog 6y ago
      Why would insulin be a natural monopoly? It seems like a commodity, which is kinda the opposite. Aside from modern insulin variations under patent, but that's different. I suspect the barrier to entry that creates these monopolies is again the access to FDA approval. You can only really make money in the US market, due to the price controls elsewhere. The high US drug prices subsidizes the world to a big extent, and I wonder how much of a drug industry would survive if the US also went for price controls.

roenxi 6y ago

> Generally, Pharma companies charge a lot for medications in the US _because they can_ - because no one stops them. Walmart charges what they do because they can as well. Pretty much everyone charges what they can and nobody stops them. There aren't many business out there pricing stuff lower than what they can get away with. There is a billion dollar opportunity here for whoever sells insulin at half price to the US market. Looking at the enormous price differences, it seems very likely that the opportunity exists. These are manufacturing prices; presumably before subsidy [0]. Unless I've really misunderstood what they are saying there is a huge opportunity for someone to get rich here. The most likely reason the prices are high is because the US government has somehow made it illegal to sell cheap insulin. [0] "First, the manufacturer prices available in the MIDAS data do not reflect rebates or other discounts that might have been applied after drugs left the factory; we expect that, in many countries (and particularly in the United States), the net price paid for drugs was lower than the reported manufacturer prices shown in our results tables." - In the linked report

phonon 6y ago
Walmart sells an inexpensive OTC insulin type ($25 a vial). https://diabetesstrong.com/walmart-insulin/ https://diabetesstrong.com/walmart-insulin/ It's an older formulation, and not commonly prescribed, unless you're cost sensitive.