

The $2.7 Trillion Medical Bill - nh
http://www.nytimes.com/2013/06/02/health/colonoscopies-explain-why-us-leads-the-world-in-health-expenditures.html

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w1ntermute
One big problem with the current system for pharmaceutical products is that
the drug companies make little to no margnial profit in non-US markets, due to
the monopsonistic pressures of a single-payer system driving down prices as
low as they can possibly go. This means that pharmaceutical companies have to
recoup their fixed costs (R&D) and generate their real profits from the US
market. Without the US market, there would be no incentive to actually create
the drugs.

In essence, Americans are subsidizing the socialized healthcare systems of
other countries.

~~~
antr
Your entire statement is false/untrue and lacks intellectual rigour.

Let me start by saying that half of my family works in the healthcare sector:
my dad is trauma surgeon, my sister is a chemical engineer at a (very) large
European pharma company, and my mum works extensively with pharma
sales/marketing teams around Europe. I'm no expert, but I tangentially know
the industry.

i. 6 out of the top 10 pharma companies by revenues are European (Novartis,
Roche, GSK, Sanofi, Bayer, Astra Zeneca).

ii. Europe accounts for 1/3 of all pharma R&D in the world.

So with the above two points in context, let me pull apart your
unsubstantiated comment:

First, lets talk about pharma and drugs for a second.

 _> make little to no margnial profit in non-US markets_

European pharma co. Novartis made in 2012 revenues of $19.7bn in Europe vs
$18.6bn in the US (and a total of $56.7bn). Novartis invested 21% of sales
into R&D.

U.S. pharma company Pfeizer, total revenues of $59bn in 2012, U.S. was $27bn
and international $36bn. Pfeizer invested $7.9bn in R&D (c. 13% of revenues).

Look at any other large US or European company and you will see that Europe is
as profitable, if not more, than the U.S. Europe, by itself, on a total
revenue minus total R&D expenditure, is (in the $ billions) profitable.

 _> pressures of a single-payer system driving down prices as low as they can
possibly go._

No European country has a single-payer, that is false. Purchasing is not made
by a country, and it is not even done at the regional level. Purchasing
decisions are made at a hospital per hospital level. Each hospital manages its
own budget and pretty much pay market rates (to check this simply go to the
pharma companies annual reports and do the math).

 _> This means that pharmaceutical companies have to recoup their fixed costs
(R&D) and generate their real profits from the US market._

So given the math above, and given that R&D is a fixed investment (even if the
final compound is produced ad infinitum), the U.S. tends to contribute to 25%
to 35% of any pharma companies' revenues, while the rest of the world makes up
the rest. This simply means that the U.S. by itself would cover R&D, but in no
way it could cover for R&D + operational costs.

 _> Without the US market, there would be no incentive to actually create the
drugs._

European pharma, by itself, makes over 1/3 of all world R&D in pharma, while
U.S. contributes 1/3 of all revenues. Without the rest of the world, U.S.
companies would not invest at all.

Second, lets talk ER and other primary patient care with no drugs involved.

How is it that any transplant, operation, etc. in any part of the world is
cheaper, face value wise, in RoW than in the US?

Well, let me say that while in Europe healthcare is considered important, it
is not seen as a business, but a basic right. Not the right to FREE
healthcare, but the right to healthcare. Healthcare in EU countries is seen as
the recurring cost of keeping the citizens healthy, and hence healthcare is
managed as a cost centre and not a profit centre. E.g. Doctors and nurses,
across the same EU country get paid very consistent salaries, unlike the US,
where a surgeon in Orlando makes a completely different salary than one in
Idaho, or even in the same city! Salaries of public employees in the EU are
transparent and consistent. The overall U.S. healthcare system lacks price
transparency at every level. How can it be that the same surgical procedure in
the same U.S. city varies in price by 2x or 3x? In the U.S., hospitals, large
healthcare companies and other parties are there to make a profit, not to run
a business at a loss. They have shareholders, it's understandable. In Europe,
the shareholder is the citizen, and healthcare is not a for-profit business.
Nevertheless, if you want more "customer service" in your European healthcare
you can have it, pay for private insurance, but pay for it, it's not illegal.

My final comment would be this insightful chart:
[https://www.e-education.psu.edu/drupal6/files/geog438w/image...](https://www.e-education.psu.edu/drupal6/files/geog438w/images/module5/LifeExpectancy.gif)

~~~
smalltalk
i. What does the nationality of companies have to do with anything?

ii. Do you understand that revenue and profits are different concepts?

~~~
robbiep
I. I think you have missed the point antr was trying to make by stating the
nationalities (ie, the US does not have a stranglehold on pharmaceutical
innovation and development)

ii. Lets for a second do a fermi equation on those us and European revenue
figures.

We have roughly the same revenue figures We have roughly the same population
(give or take 20-30 million) between Europe and the is

Now if there is no profit to be made in Europe either the Europeans consume
vastly more pharmaceuticals (possible but unlikely) OR there is profit to be
made in the European market

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kunle
Seeing that US patients pay 20x for Lipitor as New Zealand is a pretty
troubling stat. Even though it's clearly optimized for shock value, paying
$124/unit can mean a patient is choosing between solvency and health. Pretty
sad.

~~~
hga
Echoing the comment that w1ntermute's made after your's, Lipitor/atorvastatin
wouldn't freaking exist as a drug without the system where it costs so much in
the US during the period of patent protection. According to Wikipedia, it was
first synthesized in 1985 and approved by the FDA in 1996; that period is well
into the "you won't recover your drug development money without the US market"
phase.

But don't worry, if the usual suspects are successful, we'll all be paying
peanuts for drugs in due course. Pity there will be no effective antibiotics
against many resistant drug bacteria strains....

(The thing that really gets me is how many of these advocates for an end of
medical innovation as an inevitable outcome of their nostrums will find their
own lives cut short in due course due to it. Ideology trumps self-
preservation.)

~~~
pessimizer
Lipitor is a single terrible drug from a pointless class of drugs that
actually increase average mortality in people who take them.

High cholesterol is associated with higher risk of heart attacks, but lowering
cholesterol isn't associated with a lowering of heart attack risk. In
addition, the side effects are vile and costs are high.

The most depressing thing about the modern pharmaceutical industry is that its
two biggest cash cows, statins and the modern new-school psychotropics, have
very little evidence that they actually help anyone, and involve lobbying
budgets the size of small nation's GDPs to keep the gravy train going.

~~~
hga
You could be right about statins, although I gather for some they appear to be
a good idea. My doctors are pushing them on me, I'm firing the doctors
sequentially hoping to get one who will listen (e.g. absolutely no
cardiovascular disease in a long lived family) ... the major argument for
their being first line treatment is that nothing less works in practice (e.g.
"get more exercise). However that doesn't change the principle WRT to drug
development today.

What "modern new-school psychotropics" are you referring to? That's a field I
know a fair amount about, and I don't see the problem you're citing at all
(which is not to say some aren't over-prescribed, but I believe that is a
different problem). I would probably be very ill or dead without one (low
dose, off label Seroquel to treat anxiety which I have a family disposition
towards; it's the difference between 4 and 7 hours of sleep a night, bright
light treatment gets me the final extra hour I need).

It and the other atypical anti-psychotics seem to be a lot better than the
older "typical" ones, and those were miracle drugs, something witnessed by my
mother when she was a nurse. Similarly, the current Prozac and beyond anti-
depressants are maybe not quite as effective as the previous tricyclics but
their side effect profiles are a whole lot better, e.g. making it more likely
a patient will wait those out long enough for the therapeutic effect to begin,
and I personally benefit from a laser specific SSRI (doesn't touch anything
else), since "wrong" anti-depressants can make me manic.

~~~
robbiep
If you're taking seroquel that is probably a good reason to be on a statin
given the current medical evidence as you have an increased risk of metabolic
syndrome due to being on an antipsychotic.

~~~
hga
Low dose, though, this is an off-label use, it's not for schizophrenia or
bipolar disorder where a bare minimum of 4? times that is needed (and as I
remember its dosing is non-linear).

I haven't followed the current info on atypical anti-psychotics possibly
inducing metabolic syndrome or worse, but I _do_ watch for signs of it. And
that's not why my PCPs are pushing statins, it's because of my lipid levels.
Which, strangely enough, are exactly where they were in 1999, they got a bit
better for a while, and are now back to a level that wasn't considered worthy
of dangerous medical intervention back then.

No doubt there are those who suspect previously not so bad lipid levels are
actually bad; me, having watched the drama of lipids and health since around
when it first became a big thing, and all the revisions in the conventional
wisdom, I'm ... a bit more conservative with all that.

~~~
robbiep
Well sounds like you have a good handle on your health inputs! Good on you.

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chasb
Patients, doctors, and payers: Usually only one of these stakeholders knows
what the cost of a treatment is. It's not hard to see how the incentives
quickly become perverse, especially when a health system gets involved.

I, for one, am hoping that Accountable Care Organizations will prove
financially viable.

------
te_chris
Reading these articles is always mind boggling as a non American. I just
checked what my private health insurance costs me here in NZ: $390 a year.
This plan includes 80% rebates for pretty much anything done privately, plus a
number of other private elective procedures fully covered and reimbursements
on minor stuff like Physio, gp visits etc. if I doubled this I'd get stuff
fully covered and likely get optical and dental too.

Obviously this is cheap because its just augmenting the public system, but I
probably don't pay much more tax than you guys. The difference is just crazy
to me.

~~~
brazzy
> Obviously this is cheap because its just augmenting the public system

I.e. it's not comparable at all without knowing how much the "public system"
costs. A more comparable data point: my German "free" (public) health care
costs almost €6000 per year, of which €3200 is paid by me and the rest by my
employer. There are co-payments, but very low (a maximum of €10 for drugs and
per day of hospital stays).

~~~
phaemon
Yours isn't comparable either since you pay that much because you're highly
paid. If you earned less, you'd pay less. Also, the US has a "public system"
too which you need to account for. It costs more (per-capita) than the UK's
NHS costs.

~~~
digikata
And before you compare per-capita costs of the piecemeal US public system to
those of the entire UK NHS system. The limited public system in the US is
typically caring for a patient in a older demographic (medicare), and some
portion of people on disability, and war vets (if you include the VA). All of
which might be expected to carry a higher need for medical care then the
entire UK demographic. Essentially, it pulls a higher cost slice of patients
in the US off the private healthcare systems books - and even at that
comparisons that I've looked at seem to point to the private system being some
multiple of 50-300% more expensive than public health system.

~~~
TheCoelacanth
The US spending on Medicare/Medicaid is roughly $2500 for each person in the
US and only provides coverage to a small fraction of those people. The NHS
spends roughly $2900 per person.

So, clearly either the private or public healthcare, possibly both, in the US
is run very inefficiently.

~~~
phaemon
The latest figures I could find from the OECD on public spending gave (in US$
PPP):

United Kingdom: 2857.3 United States: 3966.7

Where did you get your numbers from? If they're more accurate, I'm happy to go
with them.

~~~
TheCoelacanth
They are simply the total spending for each program divided by the total
number of residents in the respective country. The US number only includes
Medicare and Medicaid, so the discrepancy is probably because of additional
public spending that isn't part of those programs. Either way it looks really
bad for the US, since its public spending only covers a small fraction of
people.

