Healthcare going forward

[Kulindahr]

I have to presume that if all the churches in the U.S. got together and ran a not-for-profit insurance for prescriptions for their members, Ben would be very unhappy about them negotiating prices because they would have so much clout -- or that he would be perfectly happy to pay a hundred times as much for his drugs since he is avowedly not a church member.

And that reveals the bias: he has no problem with giant corporations wielding sufficient power that their customers have no choice, but for customers to wield any power at all is rejected.

 

[ballcaphair]

Would I be out of place mentioning that our flu vaccine is free?

It is actually free to our staff because we are considered "at risk," - "administer staff." For this we get a tax credit and so do the producers. There is a tax incentive to lower costs for the "general health of the public." I'd never considered these factors and I appreciate the debate. I'm still all in on this debate because meds are a mighty tool in healthcare, often expensive at times. gsdx, I am thrilled when we tell a client it's free. Don't worry.

 

[KaraBulut]

So THAT'S where Martin Shkreli got his idea.

Interesting that there was so much outrage when Shkreli did it, but then it was so public. Are Americans generally ignorant about the pricing practices pharmaceuticals or do they simply accept it as 'what can we do about it?'

What Shkreli did was what hundreds of other hedge funds, private investors and large pharmaceutical companies were also doing. Shkreli was just such an obnoxious little prick that he called attention to it.

There are drugs that have been generic for decades that have increased 1000% or more in the past few years. In most cases, the pattern is that the drug was being produced in a foreign country at low cost by a small generic manufacturer. The small company is bought by a large competitor or a hedge fund acquires a majority share. The prices of the generic drugs are increased.

It's a trend that started about 5 years ago and has been noted in several industry articles. Congress has held hearings but until the Democrats have a majority, it's unlikely that there will be any action on the issue. Here's several articles, each of which comes to a different conclusion about why the prices increased:
http://www.sfgate.com/health/article/Prices-soar-for-some-generic-drugs-5105538.php
https://www.nytimes.com/2015/09/21/...ncrease-in-a-drugs-price-raises-protests.html
https://www.npr.org/sections/health...ame-for-increased-price-of-some-generic-drugs

It is actually free to our staff because we are considered "at risk," - ...

I'd be curious what the cost is to your employer.

For many healthcare workers, the flu shot is mandated and in exchange, the employer offers the shots at no cost to the employee. The cost of the injection and the labor to administer it are written off as an "employee health" expenditure. It's a wise investment since an employee who contracts the flu costs the company a lot of money in sick time paid and the overtime/per diem costs to pay someone else to cover the shift.

 

[Benvolio]

What Shkreli did was what hundreds of other hedge funds, private investors and large pharmaceutical companies were also doing. Shkreli was just such an obnoxious little prick that he called attention to it.

There are drugs that have been generic for decades that have increased 1000% or more in the past few years. In most cases, the pattern is that the drug was being produced in a foreign country at low cost by a small generic manufacturer. The small company is bought by a large competitor or a hedge fund acquires a majority share. The prices of the generic drugs are increased.

It's a trend that started about 5 years ago and has been noted in several industry articles. Congress has held hearings but until the Democrats have a majority, it's unlikely that there will be any action on the issue. Here's several articles, each of which comes to a different conclusion about why the prices increased:
http://www.sfgate.com/health/article/Prices-soar-for-some-generic-drugs-5105538.php
https://www.nytimes.com/2015/09/21/...ncrease-in-a-drugs-price-raises-protests.html
https://www.npr.org/sections/health...ame-for-increased-price-of-some-generic-drugs


I'd be curious what the cost is to your employer.

For many healthcare workers, the flu shot is mandated and in exchange, the employer offers the shots at no cost to the employee. The cost of the injection and the labor to administer it are written off as an "employee health" expenditure. It's a wise investment since an employee who contracts the flu costs the company a lot of money in sick time paid and the overtime/per diem costs to pay someone else to cover the shift.

Raising the price on genetics and less critical drugs is not necessarily a bad thing. It is a way for companies to sell critical drugs at lower prices by generating cost recovery and profits elsewhere. It is better for them to collect big profits on Viagra, for instance than on life dependent drugs.

 

[thewiz]

"I am not aware that consumers in large numbers are impeded from negotiating. The objection is to government “negotiating” since it amounts to “price controls”, and impedes R&D."

Question for Ben:

You do realize that "consumers" are the government? Government is not a "thing" -- it is us who collectively (see also: "We the people...")

 

[Benvolio]

Nevertheless, there is a difference between the government and groups of customers. My point is that the government will be such a big purchaser of drugs that any ” negotiation” amounts to price controls.

 

[Kulindahr]

"I am not aware that consumers in large numbers are impeded from negotiating. The objection is to government “negotiating” since it amounts to “price controls”, and impedes R&D."

Question for Ben:

You do realize that "consumers" are the government? Government is not a "thing" -- it is us who collectively (see also: "We the people...")

Maybe Obama should have had a web page put up where citizens could sign up to ask the government to negotiate prices for them.

 

[KaraBulut]

Nevertheless, there is a difference between the government and groups of customers. My point is that the government will be such a big purchaser of drugs that any ” negotiation” amounts to price controls.

So?

 

[Benvolio]

So?

Price controls in the US will impede new drug development world wide. Who is going to want to invest billions in research and development in the gamble that the liberal bureaucrats will allow them to recover big profits when they succeed? In other countries as well, drug companies invest in the expectation that a new drug can, upon approval, be sold in the huge rich US market free from price controls and with advertising.

 

[KaraBulut]

Price controls in the US will impede new drug development world wide. Who is going to want to invest billions in research and development in the gamble that the liberal bureaucrats will allow them to recover big profits when they succeed? In other countries as well, drug companies invest in the expectation that a new drug can, upon approval, be sold in the huge rich US market free from price controls and with advertising.

Evidence?

 

[Benvolio]

Evidence?

Here is some. https://themedicinemaker.com/issues/1016/the-potential-pitfalls-of-price-controls/

 

[Benvolio]

Evidence?

It is a familiar axium of economics that price controls cause shortages. https://en.m.wikipedia.org/wiki/Price_controls. By extension. price controls will impede the very creation of new drugs, I.e. a shortage of new drugs.

 

[TX-Beau]

Evidence?

 

[TX-Beau]

Oh man, when you've lived through decades of Thanksgiving dinners with conspiracy crazy drunken uncle Goober, it's just silly to ask him to explain.

 

[Stardreamer]

The government setting prices usually does not go well. The regulators often don't have enough information or understanding of all the market forces to set them properly. There is world of difference though in allowing government agencies and groups to negotiate prices as that gives the drug makers ability to participate in setting a basement level. That is the market way of managing prices.

 

[KaraBulut]

Evidence?

Here is some. https://themedicinemaker.com/issues/1016/the-potential-pitfalls-of-price-controls/

The way fact-based opinions work is that you actually learn something about the subject so that you can form your opinion, support it with evidence and find real-world examples of that both support and challenge that opinion.

Stating an opinion and then looking in Google to find something that supports it and posting the link is not supporting your opinion.

With that said, the article that you cited is by George Chressanthis. I've met Dr Chressanthis- he worked for... wait for it... AstraZeneca! Yes, the same AstraZeneca that we discussed earlier- the one with the large layoffs because of their exorbitant R&D spending that the investment analysts dinged them for. It's a small world.

Not surprisingly, as a former executive of a pharmaceutical company and a free-market economist, he's favoring the view that prices drive innovation.

Here's the thing about that article: much of the text probably wasn't written by him. It was written with a research associate with a graduate degree who works at Axtria (a market analytics firm). It reads like an academic paper written by someone working on a healthcare administration degree which is why it's a pretty good analysis.

With that in mind, there's some things in the article that you probably didn't catch... here's a few:

That is to say, patents and price controls create a balancing act of conflicting forces. On one hand, patents create government-protected IP monopoly power, thereby rewarding companies taking risks – though at the expense of higher prices. On the other hand, direct price controls lower drug prices but also reduce rewards for innovation. There is no “right” answer here, but rather which trade-off society wishes to accept.

Similar studies have been conducted by the same author showing country life expectancy rising alongside pharmaceutical innovation. However, not all empirical studies show a strong relationship between pharmaceutical spending and life expectancy; for example, one study in Canada found no effect between drug spending, and infant mortality and life expectancy at 65.

Given that drug pricing has been a big topic during the US elections, it is possible that the country will see some form of direct drug price controls in the future. Instituting drug price controls would be a policy approach consistent with a populist-oriented Trump presidency. Whether the Republicans in Congress – who now control both chambers and have traditionally voted against such controls – would go along with it remains to be seen. Pressure will be exerted by the progressive wing of the Democratic party, which has gained in influence during this election cycle from the Bernie Sanders run, and will most certainly push for direct government-imposed drug price controls.

Also buried in the article is a pretty sad statistic:

Pharmaceutical innovation was estimated to increase life expectancy by 1.27 years during the period 2000–2009 for 30 developing and high-income countries.

10 years and billions of dollars for 1.2 years of increased life expectancy? That's a pretty disappointing statistic. If you compare the 20th century innovations like new vaccines and major antibiotic discoveries with some of the more recent large-molecule research that he's talking about, consumers and shareholders aren't getting much bang for their buck. And for the most part, consumers are paying a lot of money for pretty disappointing results.

So, while you happened upon the article and you're using it to support statements like "Price controls in the US will impede new drug development world wide. ", the article is painting a much bleaker picture- that innovations in the market aren't going to come easy and that societies have to begin making some decisions about whether these investments in "new drugs" is really the way to go- it's expensive and it's not really producing significant improvements in objective measures like life expectancy. He's also saying that price controls are coming in the US and that favoring one drug over another ("biosimilars") may not necessarily be a bad thing but that it might discourage companies from developing new brand-name products.

The article asks a lot of good questions but it doesn't support your absolute statement that price controls are going to impede worldwide drug development.

 

[Benvolio]

The way fact-based opinions work is that you actually learn something about the subject so that you can form your opinion, support it with evidence and find real-world examples of that both support and challenge that opinion.

Stating an opinion and then looking in Google to find something that supports it and posting the link is not supporting your opinion.

With that said, the article that you cited is by George Chressanthis. I've met Dr Chressanthis- he worked for... wait for it... AstraZeneca! Yes, the same AstraZeneca that we discussed earlier- the one with the large layoffs because of their exorbitant R&D spending that the investment analysts dinged them for. It's a small world.

Not surprisingly, as a former executive of a pharmaceutical company and a free-market economist, he's favoring the view that prices drive innovation.

Here's the thing about that article: much of the text probably wasn't written by him. It was written with a research associate with a graduate degree who works at Axtria (a market analytics firm). It reads like an academic paper written by someone working on a healthcare administration degree which is why it's a pretty good analysis.

With that in mind, there's some things in the article that you probably didn't catch... here's a few:




Also buried in the article is a pretty sad statistic:

10 years and billions of dollars for 1.2 years of increased life expectancy? That's a pretty disappointing statistic. If you compare the 20th century innovations like new vaccines and major antibiotic discoveries with some of the more recent large-molecule research that he's talking about, consumers and shareholders aren't getting much bang for their buck. And for the most part, consumers are paying a lot of money for pretty disappointing results.

So, while you happened upon the article and you're using it to support statements like "Price controls in the US will impede new drug development world wide. ", the article is painting a much bleaker picture- that innovations in the market aren't going to come easy and that societies have to begin making some decisions about whether these investments in "new drugs" is really the way to go- it's expensive and it's not really producing significant improvements in objective measures like life expectancy. He's also saying that price controls are coming in the US and that favoring one drug over another ("biosimilars") may not necessarily be a bad thing but that it might discourage companies from developing new brand-name products.

The article asks a lot of good questions but it doesn't support your absolute statement that price controls are going to impede worldwide drug development.

It certainly does support my statement, and I don’t start with a blank slate. That companies respond to economic rewards and penalties is not a new and surprising concept, requiring proof. It is the basis for most economics. Certainly nothing you or the article have said detracts from my statement.
Your point that innovation has not raised the over all life expectancy is not a question which I have addressed. While you think the slow rise in expectancy may make price controls—and discouragement of innovation—more acceptable, the opposing argument is more valid: since the expensive new drugs do not increase over all life expectancy, they are not important and there is no reason to make them available to those who can’t afford them. Better to let them use old cheap therapies which your statistic shows are just as good anyway. Better also to allow companies to have the freedom to innovate and sell at high prices for those who choose to waste their money on unimportant new therapies. You cannot have it both ways, saying that innovation is unimportant in raising life expectancy BUT we must control prices so everyone can afford them, even if it makes future innovation less likely.
Actually, the overall life expectancy is not relevant. Innovations often achieve great results in improving the lives of individuals and we should do nothing to impede innovation.
It is illogical to impede innovations because some people cannot afford them. We should allow the research, development and innovation even if no one in the world can afford them. The knowledge gained ultimately will benefit mankind.

 

[KaraBulut]

Negotiating does not work so well when one party has excess bargaining power.

Which is why several members here have pointed out that Medicare and the ACA's removal of government's power to negotiate gives PhRMA undue power.

You're trying to argue for absolute power for corporations solely because you don't like government. The rest of us are arguing that government should be able to negotiate pricing on behalf of its policy holders, just like insurance companies do.

And negotiating power is exactly the issue with exclusive pharmaceutical patents. Governments give pharmaceutical companies unequal power to be the only producer and supplier of a drug for 20 years. That gives these companies unequal power in any negotiation. It's only fair that- if government grants the power- that they should have equal power to negotiate pricing when making purchases of those same pharmaceuticals.

In the case of companies like Canada, the exclusive pharmaceutical patent already creates an unequal relationship- if Canada wants the drug for its patients, it must negotiate with the company that has the patent in order to get it. The only power that Canada has is the volume of purchases it makes. Pharmaceutical companies agree to Canada's prices because they want the business. That's no different than the same thing that Walmart does with its suppliers.

Actually, the overall life expectancy is not relevant.

The article that you cited as your sole support of your statements uses life expectancy as its primary metric.

You cited the article. Now you're claiming its metric is not relevant?

 

[gsdx]

You cited the article. Now you're claiming its metric is not relevant?

Déjà vu.

He doesn't seem to like his own evidence being used against him.

 

[Benvolio]

Which is why several members here have pointed out that Medicare and the ACA's removal of government's power to negotiate gives PhRMA undue power.

You're trying to argue for absolute power for corporations solely because you don't like government. The rest of us are arguing that government should be able to negotiate pricing on behalf of its policy holders, just like insurance companies do.

And negotiating power is exactly the issue with exclusive pharmaceutical patents. Governments give pharmaceutical companies unequal power to be the only producer and supplier of a drug for 20 years. That gives these companies unequal power in any negotiation. It's only fair that- if government grants the power- that they should have equal power to negotiate pricing when making purchases of those same pharmaceuticals.

In the case of companies like Canada, the exclusive pharmaceutical patent already creates an unequal relationship- if Canada wants the drug for its patients, it must negotiate with the company that has the patent in order to get it. The only power that Canada has is the volume of purchases it makes. Pharmaceutical companies agree to Canada's prices because they want the business. That's no different than the same thing that Walmart does with its suppliers.


The article that you cited as your sole support of your statements uses life expectancy as its primary metric.

You cited the article. Now you're claiming its metric is not relevant?

I cited the article as support for the problem that price controls impede innovation, which is what we are discussing. Life expectancy is irrelevant to that. Canada negotiates prices, but your post at 1965 shows that Canadian drug companies are not doing much research. That is the critical question. The purpose of negotiating is to bring down prices, which the bureaucrat negotiators will have the power to do and will do with a vengeance. But that should not be the most important goal. Innovation, not cheap prices should be the goal. Will the negotiators allow companies enough profit to fund and encourage further research and development? Almost certainly not. They like all liberals will predictably be dismissive of the need by companies for high profits. Future medical innovation should not hang on the slender thread of reasonableness of bureaucrats.