Healthcare going forward

[Kulindahr]

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

R & D would only reduce profits "in the real sense" if they were not tax deductible -- then they'd be an actual expense.

 

[Kulindahr]

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.

The surgeon who did the job is rated one of the top three in the western U.S., which pretty much indicates the clinic looks for smarts.

He also explained why the replacements don't allow running: the surface is designed so that the bone grows and binds to it, and so is stronger than the bone itself, but the result is like having a wedge pushing into a glass tube: enough hammering, and the tube -- which in this case is the bone -- will shatter. I forget the figure, but the cost shown for retrieving that situation was on the order of twice the original cost.


On a personal note, I asked why they don't have a band that binds around the bone to keep it from splitting or shattering. The answer is that with present technology it would have to be custom-made for each bone -- but that his team is actually working on a way around that... so if in twenty-five years I'm still going strong, I can be part of a study testing the new device!

 

[Kulindahr]

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.

NO PRICE AT ALL is necessary to "recoup research and development" -- that's what a tax deduction does, it takes the money out of the equation as though it had never been spent.

In essence, by allowing the cost of R & D to be deducted, the U.S. government is paying for the research.

It's exactly like when I was doing the handyman thing and bought a new chipper: it was totally deductible from my revenues, which meant that in effect the government had bought it for me.

 

[gsdx]

I continue to rely on the Forbes study conclusion that the average cost to develop a new drug is 4 Billion.

Do you know what that supposed $4 billion includes? If you want to use that number, you have to factor in things like creating the drug, testing, getting approval, marketing, investors, etc. You are adding in things you have previously been arguing separately.

If you prefer to rely on Forbes, this is for you: https://www.forbes.com/sites/merril...drugs-and-of-not-inventing-them/#273f95a31c49

 

[Benvolio]

NO PRICE AT ALL is necessary to "recoup research and development" -- that's what a tax deduction does, it takes the money out of the equation as though it had never been spent.

In essence, by allowing the cost of R & D to be deducted, the U.S. government is paying for the research.

It's exactly like when I was doing the handyman thing and bought a new chipper: it was totally deductible from my revenues, which meant that in effect the government had bought it for me.

The deduction is no good unless you sell enough to make a gross profit; then you can deduct or amortize the R&D, which will only save the tax which would otherwise be paid on the profit. Deducting your chipper only saved you the income tax which would otherwise have been paid on an amount of income equal to the deduction.

 

[Benvolio]

Do you know what that supposed $4 billion includes? If you want to use that number, you have to factor in things like creating the drug, testing, getting approval, marketing, investors, etc. You are adding in things you have previously been arguing separately.

If you prefer to rely on Forbes, this is for you: https://www.forbes.com/sites/merril...drugs-and-of-not-inventing-them/#273f95a31c49

Your article did not include the cost of failures. To stay in business, drug companies have to make enough profit from sucessful drugs to recoup losses on experimental drugs which did not eventually make it to market.

 

[gsdx]

^ I guess you didn't read the headline.

 

[frankfrank]

NO PRICE AT ALL is necessary to "recoup research and development" -- that's what a tax deduction does, it takes the money out of the equation as though it had never been spent...It's exactly like when I was doing the handyman thing and bought a new chipper: it was totally deductible from my revenues, which meant that in effect the government had bought it for me.

Benvolio is right on this one. Let's say the chipper cost $6,000. (I really have no idea, I'm just using an example.) Let's also say that your marginal tax rate, at your income level, was 25% that year.

That means that you saved $1,500 on your taxes. However, you spent $6,000. (This $6,000 is still within the amount that the IRS allows you to write off, in its entirety, in the year of acquisition - without having to do those pesky depreciation calculations spread over multiple years.)

If you hadn't bought the chipper, you'd have $4,500 more in your account (all other things being equal).

You're thinking of a tax CREDIT, which is an entirely different animal; if you spend $1,000 on something that gives you a tax CREDIT for the amount you spend, you can "turn around" and deduct $1,000 from your taxes in return...THEN it's as though you didn't spend the money at all. There aren't many arrangements of this sort, that exist.

 

[KaraBulut]

Your article did not include the cost of failures. To stay in business, drug companies have to make enough profit from sucessful drugs to recoup losses on experimental drugs which did not eventually make it to market.

You've just described the fundamental flaw in the US healthcare system. It's the same logic that hospitals use to explain why they charge so much for their services- because the patients with insurance are expected to cover the uninsured who don't pay for their care (which is why there was a mandate in the ACA that everyone must have insurance).

If a pharmaceutical company can't get their act together and produce drugs that make it to market, their stockholders should be at risk for the cost of failed drugs. You're making the statement that, instead of the stockholders, the customers are expected to pay for pharmaceutical developer incompetence. That sounds a lot like socialism- taking money from customers and transferring it to stockholders.

 

[Benvolio]

You've just described the fundamental flaw in the US healthcare system. It's the same logic that hospitals use to explain why they charge so much for their services- because the patients with insurance are expected to cover the uninsured who don't pay for their care (which is why there was a mandate in the ACA that everyone must have insurance).

If a pharmaceutical company can't get their act together and produce drugs that make it to market, their stockholders should be at risk for the cost of failed drugs. You're making the statement that, instead of the stockholders, the customers are expected to pay for pharmaceutical developer incompetence. That sounds a lot like socialism- taking money from customers and transferring it to stockholders.

You as a doctor should know that it is not incompetence. Often a drug has promise up to and through the clinical trials, but it turns out that it does not have the beneficial effect expected. Or along the line side effects develop which outweigh the benefit. BUT companies cannot exist without profits for long. If the company cannot recoup all their research expenses, they eventually will get out of the business. Logically, it is better to continue to develop new drugs, even if some people cannot afford the price. Those people are no worse of than if the drug had not been developed at all.

 

[KaraBulut]

You as a doctor should know that it is not incompetence. Often a drug has promise up to and through the clinical trials, but it turns out that it does not have the beneficial effect expected. Or along the line side effects develop which outweigh the benefit. BUT companies cannot exist without profits for long. If the company cannot recoup all their research expenses, they eventually will get out of the business. Logically, it is better to continue to develop new drugs, even if some people cannot afford the price. Those people are no worse of than if the drug had not been developed at all.

Most of what is coming out of the drug companies is not new drugs. The new offerings are just isomers of existing drugs that they're developing to undercut their competition and to get a patent for exclusive use.

We need new antibiotics. We need new pain medications that are not addictive. The problem with these drugs is that they are only prescribed for 10-14 days and the drug companies want to develop drugs for chronic conditions that are high cost and must be taken for years.

If a drug gets to human trials and is determined to be harmful or ineffective, people should be fired. If it continues to happen with other drugs, the stockholders and the board should can the executive leadership.

I would be fine if the bad business decisions by pharmaceutical companies lowered their stock price and investors fled. The market lacks competition and good management. They're dependent upon consumers (and the insurance companies) covering their bad decisions. The free market would benefit consumers and get rid of exclusivity and monopoly.

 

[gsdx]

If a drug gets to human trials and is determined to be harmful or ineffective, people should be fired. If it continues to happen with other drugs, the stockholders and the board should can the executive leadership.

Unfortunately, by the time people start dying and the lawsuits pop up, the investors have made their millions and the company has made more than enough to pay off the penalties and still have enough in their coffers to spend a few bob on creating more drugs that kill people.

 

[Benvolio]

A major part of the problem is that all drugs do have side effects under some circumstances an for some people. Aspirin for instance can damage the stomach lining and otherwise promote excess bleeding. Whether the benefits outweigh the risks is not black and white, but is often a judgment decision to be made by the FDA, the company, the Doctor and ultimately, the patient. Watching ads on TV we wonder why anyone would take a drug with such awful risks. The answer is that the condition being treated is so painful or uncomfortable that the patient is willing to take the risk.

 

[Kulindahr]

Benvolio is right on this one. Let's say the chipper cost $6,000. (I really have no idea, I'm just using an example.) Let's also say that your marginal tax rate, at your income level, was 25% that year.

That means that you saved $1,500 on your taxes. However, you spent $6,000. (This $6,000 is still within the amount that the IRS allows you to write off, in its entirety, in the year of acquisition - without having to do those pesky depreciation calculations spread over multiple years.)

If you hadn't bought the chipper, you'd have $4,500 more in your account (all other things being equal).

You're thinking of a tax CREDIT, which is an entirely different animal; if you spend $1,000 on something that gives you a tax CREDIT for the amount you spend, you can "turn around" and deduct $1,000 from your taxes in return...THEN it's as though you didn't spend the money at all. There aren't many arrangements of this sort, that exist.

But I only saved $1500 in taxes because in essence the government paid for my chipper by letting me pretend I didn't make the money that paid for it. In other words, money spent on the equipment is money the government pretends I didn't earn in the first place.

 

[Kulindahr]

You've just described the fundamental flaw in the US healthcare system. It's the same logic that hospitals use to explain why they charge so much for their services- because the patients with insurance are expected to cover the uninsured who don't pay for their care (which is why there was a mandate in the ACA that everyone must have insurance).

If a pharmaceutical company can't get their act together and produce drugs that make it to market, their stockholders should be at risk for the cost of failed drugs. You're making the statement that, instead of the stockholders, the customers are expected to pay for pharmaceutical developer incompetence. That sounds a lot like socialism- taking money from customers and transferring it to stockholders.

Um, "taking money from customers and transferring it to stockholders" wouldn't be socialism, it would be extortion.

Though since all the money a company has comes from customers, it's of course not quite that simple.


BTW, having spent many hours doing research in both labs in college and in the real world, I have to say that "incompetence" isn't an accurate label unless you want to posit that researchers should omnisciently always have correct hypotheses. (The place the "incompetence" accusation fits is in failing to pursue actually new drugs actually curing things but rather spending most effort on tweaks to existing drugs -- and that's a management decision.)

 

[Kulindahr]

You as a doctor should know that it is not incompetence. Often a drug has promise up to and through the clinical trials, but it turns out that it does not have the beneficial effect expected. Or along the line side effects develop which outweigh the benefit. BUT companies cannot exist without profits for long. If the company cannot recoup all their research expenses, they eventually will get out of the business. Logically, it is better to continue to develop new drugs, even if some people cannot afford the price. Those people are no worse of than if the drug had not been developed at all.

I would think that from a doctor's perspective, it would be better to research actual cures, which pharmaceutical companies have little interest in. Essentially here you've admitted that pharmaceutical companies are not a real part of the health care system, since they're not interested in what a doctor needs to actually help patients, but only in what they can pass off as minimal improvements in ameliorating symptoms.

From an actual health-care perspective, it would be better to have a scaled tax system that rewarded actual new developments and passed on the tiny incremental tweaks beloved of the pharmaceutical companies.

 

[Kulindahr]

Most of what is coming out of the drug companies is not new drugs. The new offerings are just isomers of existing drugs that they're developing to undercut their competition and to get a patent for exclusive use.

We need new antibiotics. We need new pain medications that are not addictive. The problem with these drugs is that they are only prescribed for 10-14 days and the drug companies want to develop drugs for chronic conditions that are high cost and must be taken for years.

If a drug gets to human trials and is determined to be harmful or ineffective, people should be fired. If it continues to happen with other drugs, the stockholders and the board should can the executive leadership.

I would be fine if the bad business decisions by pharmaceutical companies lowered their stock price and investors fled. The market lacks competition and good management. They're dependent upon consumers (and the insurance companies) covering their bad decisions. The free market would benefit consumers and get rid of exclusivity and monopoly.

This is why the pharmaceuticals invariably weight in against decriminalizing marijuana: they know it has effective medical applications but don't want those allowed for use, since people can grow their own and don't need to enrich big corporations.

And that's just one illustration of how big pharma companies are actually engaged in opposing good health care.

 

[Kulindahr]

Unfortunately, by the time people start dying and the lawsuits pop up, the investors have made their millions and the company has made more than enough to pay off the penalties and still have enough in their coffers to spend a few bob on creating more drugs that kill people.

And that is due to the fact that Congress is far more interested in protecting the sources of large campaign funding than in doing good for the least of their voting constituents.

 

[Kulindahr]

A major part of the problem is that all drugs do have side effects under some circumstances an for some people. Aspirin for instance can damage the stomach lining and otherwise promote excess bleeding. Whether the benefits outweigh the risks is not black and white, but is often a judgment decision to be made by the FDA, the company, the Doctor and ultimately, the patient. Watching ads on TV we wonder why anyone would take a drug with such awful risks. The answer is that the condition being treated is so painful or uncomfortable that the patient is willing to take the risk.

A large part of the answer is that advertising loads an emotional impression that the drug being hyped will make things wonderful and beautiful, and the side effects are presented in a rushed manner designed to minimize any risk.

And that's why pharmaceutical advertising is immoral: it's basically a con job, hitting people below the belt in order to get them to bypass cognitive processes.

 

[gsdx]

^ Our government stopped pharmaceutical advertising when the commercials began not telling what the drug was for. The commercial would usually just show happy people and end with a voice-over saying, "Ask your doctor about 'insert drug name here'." The doctors complained about having to spend so much time explaining to their patients what the drugs were for and why they didn't need them.