Healthcare going forward

[KaraBulut]

What you are describing is known as “product hopping.” It is a scheme in which minor changes to the original (patented) product, such as dosage per capsule, tablet, etcetera renders the reformulated product not-equivalent to the original and therefore not subject to generic substitution. By combining introduction of the reformulated product with a switch in the market (convincing physicians to prescribe the reformulated drug), pharmaceutical companies can effectively prevent generic substitution for their products and thereby thwart consumers’ access to a lower-priced generic alternatives.

We should also note that there is a price disconnect in the pharmaceutical market, because the consumer of the drug does not choose which product to purchase. The doctor makes that decision and then the consumer (or insurer) pays for the product. By preventing or limiting choices (gaming the system), the pharmaceutical companies remove competition from the marketplace; which increases their profits, reduces options for consumers, and unfairly maintains higher prices.

This is correct.

In some cases, the pharmaceutical company creates a new drug that is slightly altered- a new delivery method, a slight change in chemical structure or a combination of two existing drugs. The drug company has the option of then discontinuing production of the original drug which forces patients to take the new brand name version. It's also no coincidence that many of the physicians who prescribe the brand name are also on that CMS list of physicians who have been paid consulting fees by the drug company that makes the brand name drug.

Because patents are granted for a particular molecular structure, this creates all sorts of opportunities for drug companies to create new versions of very similar molecules that they can then obtain a second patent on.

You might have seen some ads that Vanda runs on US television for "Non 24 disorder". In some blind people, they do have issues with maintaining a 24 hour day- something that is actually called "circadian rhythm sleep disorder" (CRSD). In 2000, researchers discovered that people with CRSD, melatonin may be effective in helping normalize the 24 hour sleep-wake cycle. You can buy 100 melatonin pills for about $7 retail.

Vanda had developed a molecule that was similar to melatonin around the same time, however researchers found that the new melatonin-like molecule wasn't as effective as short-acting benzodiazepines like Ambien. Vanda decided to market their drug- now called Hetlioz- for "Non-24" and they started running television ads showing blind people. The drug company did not do studies comparing Hetlioz to melatonin- saying that they had trouble finding enough blind people with Non-24 to do a study. Other research has shown that the drug is probably not effective but the commercials continue to run on most US stations.

Hetlioz- because it is a brand name drug- costs about $5,000 per month or about $4,993 more than melatonin.

 

[gsdx]

Hetlioz- because it is a brand name drug- costs about $5,000 per month or about $4,993 more than melatonin.

I wonder how much of that goes to R&D and advertising? I also wonder how it can be justified?

 

[KaraBulut]

I wonder how much of that goes to R&D and advertising? I also wonder how it can be justified?

The Hetlioz story is a fucking trainwreck. The studies that they submitted for FDA approval involved only 52 subjects (because Vanda said they couldn't find enough people with the disorder to do a more robust study). The studies were cery flawed and it was difficult to ascertain whether the drug even worked on those 52 subjects.

While this lowered the "R&D" costs, it begs the question, "If you can't find enough people with the disorder for your study, is the drug really needed?".

The FDA panel almost didn't approve the drug but when they did approve it, they made a big mistake on the approval. The drug was supposed to be for blind people who have no light perception (i.e. they cannot see ANY light). The drug was accidentally approved for all blind people- including people who have light perception.

Further reading:
https://seekingalpha.com/article/18...m-vote-vanda-will-struggle-to-remain-relevant
https://www.citizen.org/sites/default/files/2265.pdf

Given the number of commercials they run, there's little doubt that the advertising cost is substantial for this drug:

 

[gsdx]

^ I've seen a commercial, but not any of those above.

Still, the story you just told makes it much easier to understand why there are so many lawsuits over FDA-approved drugs. No wonder it takes so much time for those drugs to become available up here. This is from the Government of Canada website:

How are drugs reviewed in Canada?

Drugs are authorized for sale in Canada once they have successfully gone through the drug review process. This process is the means by which a drug application is reviewed by scientists in the Health Products and Food Branch (HPFB) of Health Canada, and on occasion, outside experts, to assess the safety, efficacy and quality of a drug.

Throughout the process, the safety and well-being of Canadians is the paramount concern.

What is the Health Products and Food Branch?

Health Canada's HPFB is the national authority that regulates, evaluates and monitors the safety, efficacy, and quality of therapeutic and diagnostic products available to Canadians. These products include drugs, medical devices, disinfectants and sanitizers with disinfectant claims.

https://www.canada.ca/en/health-can...oducts/fact-sheets/drugs-reviewed-canada.html

EDIT: By the way, there have been instances wherein drug companies are involved in class-action suits before the drugs are approved for sale up here.

 

[KaraBulut]

...EDIT: By the way, there have been instances wherein drug companies are involved in class-action suits before the drugs are approved for sale up here.

There's a lot of attention on pharmaceutical lawsuits but we probably should be as concerned with medical device lawsuits.

In the US, the FDA approves medical devices before they are mass-marketed. This includes things like IV pumps, pacemakers, orthopedic implants like hip joints, surgical implants like breast implant or blood clot filters, etc.

There's a loophole in the law called a 501K exception that says if a new device is similar to a device that has already been approved, then it doesn't require the same level of review. So, for example, if I were to say that my hip implant product that is made of cobalt is similar to a titanium hip implant on the market, I could ask for expedited approval for my cobalt implant.

If later my cobalt implant is discovered to be defective and it results in cobalt shrapnel escaping into your pelvis, then you would have to sue someone to get the money to a) have the bad implant removed, b) install a safer implant, c) pay for any cleanup required to get the cobalt shrapnel out of your body and d) pay for any lost wages, pain/suffering or other costs that were incurred as a result of my bad implant.

This is just one reason why there's so many lawsuits on medical devices in the US.

 

[gsdx]

^ Wow. I did not know that.

 

[ballcaphair]

At one of our inservice meetings, an "implant rep" displayed and described various "items" wrapping each offering with an estimate on "price points." KaraBulut is on the money. tried and true does not apply to new "items." The results can be crushing.

 

[KaraBulut]

On October 12th, Trump reduced payments that were made to insurance companies that helped lower the cost of insurance for people who get their insurance through the Healthcare Exchange. So far, Congress has not restored the funding that Trump removed.

Open enrollment begins on 1-Nov-2017 for those who get their insurance through the Healthcare exchange.

A new study out from Kaiser Foundation gives an idea of how Trump's actions will increase the costs on the average by 20% for people who are insured through the Exchange.

This increase in costs will hit the US government and people who are in the middle and upper class. Because 84% of people who get insurance through the Marketplace receive partial or complete Federal subsidies that cover their monthly premiums, the US government will pick up most of the increased costs. For the 16% of the people in the Marketplace whose income is too high to qualify for the subsidies, they will have to pay out-of-pocket for the additional 20% average increase in their monthly costs that resulted from Trump's action.

 

[ballcaphair]

^ Also if two or more meds are piggy-backed, they fall into a "not covered" provision. Some of our clients cannot afford a combo that is "out of pocket." No pun intended, but it is a bitter pill to swallow.

 

[Kulindahr]

I assume the do make a marginal profit in price controlled companies, and any tiny profit on those units is better than none at all. The big question is whether they make enough to recover their R&D expense and then make a profit. A small profit will not keep them in business. And they can make a small profit by investing the company's capital in government bonds without the risk.
They need advertising to sell enough in the patent window to recover investment and to advise the public of potential side effects.

R & D costs do not come out of profits. They are freebies because the costs can be deducted from revenues.

 

[Kulindahr]

What your have described is competition. In a sense all competition aims to eliminate the competition. While it ain't pretty, even in your example it results in the development of better products, more options, and lower prices. Don't focus on the intent, focus on the result.

The focus was on the result: little improvement, lots of game-playing.

 

[Kulindahr]

There's a lot of attention on pharmaceutical lawsuits but we probably should be as concerned with medical device lawsuits.

In the US, the FDA approves medical devices before they are mass-marketed. This includes things like IV pumps, pacemakers, orthopedic implants like hip joints, surgical implants like breast implant or blood clot filters, etc.

There's a loophole in the law called a 501K exception that says if a new device is similar to a device that has already been approved, then it doesn't require the same level of review. So, for example, if I were to say that my hip implant product that is made of cobalt is similar to a titanium hip implant on the market, I could ask for expedited approval for my cobalt implant.

If later my cobalt implant is discovered to be defective and it results in cobalt shrapnel escaping into your pelvis, then you would have to sue someone to get the money to a) have the bad implant removed, b) install a safer implant, c) pay for any cleanup required to get the cobalt shrapnel out of your body and d) pay for any lost wages, pain/suffering or other costs that were incurred as a result of my bad implant.

This is just one reason why there's so many lawsuits on medical devices in the US.

^ Wow. I did not know that.

I learned it when I got my hips done. The doctor's office had a pamphlet explaining why they used the particular brand they did, and that was in there. It made me really think about the whole system.

Interestingly, the office was being paid for a long-term study of the replacement bits in patients -- after they'd turned down identical offers from other manufacturers because they weren't convinced of the quality of the product.

 

[Benvolio]

R & D costs do not come out of profits. They are freebies because the costs can be deducted from revenues.

R&D is deducted for tax purposes and saves the marginal tax rate, but it reduces profits in the real sense.

 

[gsdx]

^ It is moot. Single-digit millions in R&D do not justify the triple-digit millions in profit.

 

[Benvolio]

^ It is moot. Single-digit millions in R&D do not justify the triple-digit millions in profit.

We are not taking about millions, but billions. As we have shown, the average cost to develop a new drug is about 4 Billion. For Astra Zeneca the cost of development including failures is about 11 Billion for a new drug. To justify that risk and investment and fund future development, big profits are essential or it will not happen. If you don’t like it, use only drugs developed by people not looking for big profits.

 

[KaraBulut]

....As we have shown, the average cost to develop a new drug is about 4 Billion...

No such evidence has been produced. In fact, you have been given plenty of evidence that shows that the cost of both "novel" drugs and drugs that are just isomers of products already on the market is nowhere near $4 billion.

You're missing the point of the entire AstraZeneca example in spite of the posts that explain the context to you: the industry analysts are criticizing AstraZeneca for ridiculous R&D expenses on their income statement when they have failed to produce any new or novel drugs out of their research pipeline. Most of their R&D expenditures are coming from plant and equipment purchases and other bad business decisions. Because of this criticism of their ridiculous R&D expense claims and inadequate new product pipeline, AZ has laid off over 32,000 people in the past 10 years.

All of this is clearly stated in this thread and in industry publications like this Modern Healthcare article from March 2017:

Pharmaceutical companies often cite research and development spending to justify high drug prices in the U.S. But they make much more from those high prices than they spend on R&D, researchers found.

According to research published on the Health Affairs blog, the 15 drug companies that made the 20 best-selling drugs worldwide in 2015 made $116 billion in excess revenue from premium drug prices in the U.S. Meanwhile, they spent only $76 billion on global research and development.

The excess revenue comes from drug prices that are much higher in the U.S. than in Canada, Denmark, Ireland and the U.K., the researchers said. Drug prices in those countries for the 15 companies studied were 41% of their U.S. counterparts on average.

I learned it when I got my hips done. The doctor's office had a pamphlet explaining why they used the particular brand they did, and that was in there.

That's smart disclosure on their part. Most people don't give a second thought to the implication of medical implants. When your doctor writes a prescription for you and it doesn't work, you can just stop taking the medication. On the other hand, if your doctor removes your hip joint and replaces it with a defective hip implant, the process of getting that corrected is painful, expensive and can be even life-endangering.

 

[Benvolio]

No such evidence has been produced. In fact, you have been given plenty of evidence that shows that the cost of both "novel" drugs and drugs that are just isomers of products already on the market is nowhere near $4 billion.

You're missing the point of the entire AstraZeneca example in spite of the posts that explain the context to you: the industry analysts are criticizing AstraZeneca for ridiculous R&D expenses on their income statement when they have failed to produce any new or novel drugs out of their research pipeline. Most of their R&D expenditures are coming from plant and equipment purchases and other bad business decisions. Because of this criticism of their ridiculous R&D expense claims and inadequate new product pipeline, AZ has laid off over 32,000 people in the past 10 years.

All of this is clearly stated in this thread and in industry publications like this Modern Healthcare article from March 2017:






That's smart disclosure on their part. Most people don't give a second thought to the implication of medical implants. When your doctor writes a prescription for you and it doesn't work, you can just stop taking the medication. On the other hand, if your doctor removes your hip joint and replaces it with a defective hip implant, the process of getting that corrected is painful, expensive and can be even life-endangering.

I continue to rely on the Forbes study conclusion that the average cost to develop a new drug is 4 Billion. The problem with the Modern Healthcare article is that it labels as “excess revenue”, revenue recieved from selling drugs at a higher price in the US than other (price control) countries. But we have shown that US prices are higher in the US because they are low in other countries. And prices are lower in other countries because higher in the US. Higher prices in the US are needed to recoup research and development. ‘Excess Revenue” is not an accounting term, or business but a political term. Revenue does not mean profit.
The article is critical that “they make more from those high prices than they spend on R%D.” Well yes, Duh, they intend to make a profit and would not do it otherwise.

 

[ballcaphair]

R&D is deducted for tax purposes and saves the marginal tax rate, but it reduces profits in the real sense.

I does not reduce profits. It is shifted to the profit column. (Special rules may apply regarding some products.) Who knew drugs and money would be so complicated?

 

[DantheManFL]

Goddamn! My premiums went up by $450 a month for next year! Fucking Trump.

 

[gsdx]

^ Waiting patiently for the explanation by those who said that would never happen.