3 ms·

> If the offer is "we will buy 1000 doses/year for no more than $15 each" the dynamic changes a lot. The dynamic changes a lot because the drug does not exist.

by mastax 5y ago

> If the offer is "we will buy 1000 doses/year for no more than $15 each" the dynamic changes a lot. The dynamic changes a lot because the drug does not exist. It costs $750M to research and develop so nobody bothers unless it's a common enough disease that it can be paid for with what people feel is a "moral price." It seems people only care about marginal cost of production in their moral calculus.

wongarsu 5y ago
Any business has fixed costs that are ignored in toy examples. Let's say the drug costs $750M to develop, $1/dose to produce, sales are free and no other fixed costs exist. Let's also pretend that you can sell during the full patent period of 20 years, but expect to be out-competed by generics after that. Also you need one dose per day. 750 million divided by 20 years and 365 days per year is 106000 (rounded up). The company could sell the medication for 1) $107 per dose, 1000 people can afford it and the company makes $0 profit. 2) $1000 per dose, 900 people can afford it, the company makes $880 profit per dose, for a total of $792,000/day 3) $10000 per dose, 100 people can afford it, the company makes $9882 profit per dose, for a total of $988,200 The research raises the lowest viable cost, and becomes more expensive per dose as you make fewer doses, but with an example as extreme as GPs it doesn't really matter (with the exception that we now have to assume the existence of some kind of insurance with copay, otherwise I don't know how 900 people afford $365k/year in medical costs). And you can still come in with the offer to purchase 1000 doses per day at a price that satisfies both sides.
- actually_a_dog 5y ago
  > ...we now have to assume the existence of some kind of insurance with copay, otherwise I don't know how 900 people afford $365k/year in medical costs You just hit upon the problem. > Some families spend thousands of dollars each year to buy orphan drugs, which are drugs that have received a special designation from the U.S. Food and Drug Administration. About 1 in 8 families [with children taking orphan drugs] paid more than $2,000 a year in 2018 – double the percentage who spent that much in 2013.[0] Put that up against the US median household income of $67.5k (or $46.6k for black households)[1], and you've got yourself a significant expense. Keep in mind, this is only the median income. 8.7% of households make between $15-25k per year[1] and probably can't afford the copays, much less the insurance. If it's a scenario where it's "take the drug or a kid dies," more than 1/10th of those kids die, absent any outside financial help. And, that would be quite a lot of financial help, too. Let's not also forget this kid is probably uninsurable, so, they'll have to have group health insurance for the entirre rest of their lives. Better not get fired from your job when you're past 26, kiddo! --- [0]: https://labblog.uofmhealth.org/lab-notes/big-costs-for-small-patients-rare-diseases-study-finds https://labblog.uofmhealth.org/lab-notes/big-costs-for-small... [1]: https://www.census.gov/library/publications/2021/demo/p60-273.html https://www.census.gov/library/publications/2021/demo/p60-27...
  - wongarsu 5y ago
    I absolutely agree, the way health insurance works in the US is completely broken. In a flood insurance it's simple, floods are singular events, if you had insurance at the time of the flood you are covered, if you didn't you are not covered (US flood insurance is broken for different reasons, but that's beside the point). With health that doesn't quite work, any system that allows people to enter and exit health insurance at their leisure is sure to be gamed by people who get insurance only while they have health problems. That leads to insurances having the power to screen and reject people, leading to a whole world of hurt and inequality. The reasonable way to run health insurance is what most European countries do, with various implementations: you get health insurance when you are born, and you can't get out. That way the insurance can actually work as an insurance (averaging out risk), can't be gamed, everyone is covered, and if your work isn't your insurance you have a freer labor market.

by mastax 5y ago

wongarsu 5y ago

Any business has fixed costs that are ignored in toy examples. Let's say the drug costs $750M to develop, $1/dose to produce, sales are free and no other fixed costs exist. Let's also pretend that you can sell during the full patent period of 20 years, but expect to be out-competed by generics after that. Also you need one dose per day. 750 million divided by 20 years and 365 days per year is 106000 (rounded up). The company could sell the medication for 1) $107 per dose, 1000 people can afford it and the company makes $0 profit. 2) $1000 per dose, 900 people can afford it, the company makes $880 profit per dose, for a total of $792,000/day 3) $10000 per dose, 100 people can afford it, the company makes $9882 profit per dose, for a total of $988,200 The research raises the lowest viable cost, and becomes more expensive per dose as you make fewer doses, but with an example as extreme as GPs it doesn't really matter (with the exception that we now have to assume the existence of some kind of insurance with copay, otherwise I don't know how 900 people afford $365k/year in medical costs). And you can still come in with the offer to purchase 1000 doses per day at a price that satisfies both sides.

actually_a_dog 5y ago
> ...we now have to assume the existence of some kind of insurance with copay, otherwise I don't know how 900 people afford $365k/year in medical costs You just hit upon the problem. > Some families spend thousands of dollars each year to buy orphan drugs, which are drugs that have received a special designation from the U.S. Food and Drug Administration. About 1 in 8 families [with children taking orphan drugs] paid more than $2,000 a year in 2018 – double the percentage who spent that much in 2013.[0] Put that up against the US median household income of $67.5k (or $46.6k for black households)[1], and you've got yourself a significant expense. Keep in mind, this is only the median income. 8.7% of households make between $15-25k per year[1] and probably can't afford the copays, much less the insurance. If it's a scenario where it's "take the drug or a kid dies," more than 1/10th of those kids die, absent any outside financial help. And, that would be quite a lot of financial help, too. Let's not also forget this kid is probably uninsurable, so, they'll have to have group health insurance for the entirre rest of their lives. Better not get fired from your job when you're past 26, kiddo! --- [0]: https://labblog.uofmhealth.org/lab-notes/big-costs-for-small-patients-rare-diseases-study-finds https://labblog.uofmhealth.org/lab-notes/big-costs-for-small... [1]: https://www.census.gov/library/publications/2021/demo/p60-273.html https://www.census.gov/library/publications/2021/demo/p60-27...
- wongarsu 5y ago
  I absolutely agree, the way health insurance works in the US is completely broken. In a flood insurance it's simple, floods are singular events, if you had insurance at the time of the flood you are covered, if you didn't you are not covered (US flood insurance is broken for different reasons, but that's beside the point). With health that doesn't quite work, any system that allows people to enter and exit health insurance at their leisure is sure to be gamed by people who get insurance only while they have health problems. That leads to insurances having the power to screen and reject people, leading to a whole world of hurt and inequality. The reasonable way to run health insurance is what most European countries do, with various implementations: you get health insurance when you are born, and you can't get out. That way the insurance can actually work as an insurance (averaging out risk), can't be gamed, everyone is covered, and if your work isn't your insurance you have a freer labor market.