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I think it is critical to differentiate price controls and purchasing controls. Most other markets with state insurance have purchasing controls. That is to sa

I think it is critical to differentiate price controls and purchasing controls. Most other markets with state insurance have purchasing controls. That is to say, if the price is too high, the government doesn't buy it. Very few places have price controls e.g. "products cant be sold for more than X". The US government is the outlier in that it situationally states it will pay the price no matter the cost. Reasonable government policy needs to start with putting a price on human life (QALY), and purchasing goods and services that come in under that price. This is how it works in other state insurance systems.

simfree 2y ago
We aren't other state insurance systems, though. Instead, we have a divided and fractured jigsaw and heavy lobbying to keep it that way.
- s1artibartfast 2y ago
  Correct. You have identified a problem
  - hahahacorn 2y ago
    Going to start using this response more frequently.
dkjaudyeqooe 2y ago
Although you're right, it's a little misleading. The point is that governments won't pay any price, they usually negotiate a (good) price given their buying power. As you say they may not buy it, but countries that dictate a price (generally) cannot force a company to supply it. Ultimately it comes down to market forces, even if the market looks very strange, with essentially one buyer and one seller.
- s1artibartfast 2y ago
  not sure what you find misleading?
- AnthonyMouse 2y ago
  > Ultimately it comes down to market forces, even if the market looks very strange, with essentially one buyer and one seller. That isn't really a market. Suppose you have a government that requires everyone to pay for public health insurance, effectively eliminating the market for private insurance because hardly anybody buys private insurance when they both already have public insurance and have paid the money they'd have used to buy it in taxes. Then the government insurance declares the maximum price they'll pay. Is there any meaningful way to distinguish this from price controls? The vast majority of customers can't afford the drug without insurance and the government is the insurance company and is setting the price through regulation. In particular, notice that this has all of the problems of price controls. There is no real market to enable price discovery, no effective way for customers to switch insurers and thereby punish insurers who pay too much and have high premiums or pay too little and have poor coverage, it's just regulators making up a number and saying take it or leave it. And even at that, you shouldn't have a problem for generic drugs because then the insurance can just put it out for bids and still have price discovery (i.e. a lowest bidder). But here we're talking about brand new drugs that are still under patent, which have one supplier because they're supposed to be expensive because that's the incentive for the drug companies to fund the R&D and cause them to exist to begin with.
  - yunwal 2y ago
    > There is no real market to enable price discovery Note also that this is a feature, not a bug. You don’t want drug companies figuring out what price makes them the most money, because the market for patented drugs is not a competitive market (or a transparent one for the consumer). The price that makes the company the most money is not the same as the one that maximizes welfare.
    - AnthonyMouse 2y ago
      > You don’t want drug companies figuring out what price makes them the most money, because the market for patented drugs is not a competitive market (or a transparent one for the consumer). The price that makes the company the most money is not the same as the one that maximizes welfare. It's not supposed to be competitive, that's the entire point of a patent. They're supposed to be able to extract nearly the full value of the drug during the patent term, because that's the value of the drug existing, so that's how much incentive you want there to be to create it. After that the patent expires and it becomes a cheap generic, which is what the public gets out of the deal.

simfree 2y ago

We aren't other state insurance systems, though. Instead, we have a divided and fractured jigsaw and heavy lobbying to keep it that way.

s1artibartfast 2y ago
Correct. You have identified a problem
- hahahacorn 2y ago
  Going to start using this response more frequently.

dkjaudyeqooe 2y ago

Although you're right, it's a little misleading. The point is that governments won't pay any price, they usually negotiate a (good) price given their buying power. As you say they may not buy it, but countries that dictate a price (generally) cannot force a company to supply it. Ultimately it comes down to market forces, even if the market looks very strange, with essentially one buyer and one seller.

s1artibartfast 2y ago
not sure what you find misleading?
AnthonyMouse 2y ago
> Ultimately it comes down to market forces, even if the market looks very strange, with essentially one buyer and one seller. That isn't really a market. Suppose you have a government that requires everyone to pay for public health insurance, effectively eliminating the market for private insurance because hardly anybody buys private insurance when they both already have public insurance and have paid the money they'd have used to buy it in taxes. Then the government insurance declares the maximum price they'll pay. Is there any meaningful way to distinguish this from price controls? The vast majority of customers can't afford the drug without insurance and the government is the insurance company and is setting the price through regulation. In particular, notice that this has all of the problems of price controls. There is no real market to enable price discovery, no effective way for customers to switch insurers and thereby punish insurers who pay too much and have high premiums or pay too little and have poor coverage, it's just regulators making up a number and saying take it or leave it. And even at that, you shouldn't have a problem for generic drugs because then the insurance can just put it out for bids and still have price discovery (i.e. a lowest bidder). But here we're talking about brand new drugs that are still under patent, which have one supplier because they're supposed to be expensive because that's the incentive for the drug companies to fund the R&D and cause them to exist to begin with.
- yunwal 2y ago
  > There is no real market to enable price discovery Note also that this is a feature, not a bug. You don’t want drug companies figuring out what price makes them the most money, because the market for patented drugs is not a competitive market (or a transparent one for the consumer). The price that makes the company the most money is not the same as the one that maximizes welfare.
  - AnthonyMouse 2y ago
    > You don’t want drug companies figuring out what price makes them the most money, because the market for patented drugs is not a competitive market (or a transparent one for the consumer). The price that makes the company the most money is not the same as the one that maximizes welfare. It's not supposed to be competitive, that's the entire point of a patent. They're supposed to be able to extract nearly the full value of the drug during the patent term, because that's the value of the drug existing, so that's how much incentive you want there to be to create it. After that the patent expires and it becomes a cheap generic, which is what the public gets out of the deal.