
Why Drug Prices Keep Rising Despite Congress's Efforts - mancerayder
https://www.bloomberg.com/opinion/articles/2019-04-08/why-drug-prices-keep-rising-despite-congress-s-efforts
======
oppositelock
In the US, we have a ban on re-importing cheaper drugs which our companies
produce. Congress did that. We do not admit competitive medications from other
first world countries without full FDA approval. Congress did that. We do not
have visibility into prices due to the structure of our insurance cartel.
Congress did that.

I fail to see how congress' efforts would do anything but increase prices.

~~~
rayiner
Painting the reimport ban (and the Medicare negotiating with drug companies
point below) as a "competition" thing is highly misleading. Other countries
distort the market price of drugs in those countries by leveraging their
monopsony power
([https://en.wikipedia.org/wiki/Monopsony](https://en.wikipedia.org/wiki/Monopsony))
and imposing outright price controls. Keeping those distortions from affecting
the U.S. market doesn't undermine "competition" any more than excluding
highly-subsidized Chinese steel undermines "competition."

~~~
dcolkitt
Disagree, it does distort the market because it increases the monopsony power
of the overseas purchasers.

With zero frictions between the cross-border trade in prescription drugs, a
drug manufacturer would have to set a uniform worldwide price for their drugs.
Otherwise if they sold to France cheaper than they sold to the US, then US
consumers would simply import the drugs from French vendors instead of paying
the US list price.

~~~
dantheman
And that's perfectly fine - we allow that for all sorts of other products.
Will it cause the cost of healthcare in France to go up? Probably, but I don't
see how that's a problem for the US.

------
andjd
I was disappointed by this sentiment by the author

>And really, one can’t blame the drug companies. These are profit-making
companies. We can’t expect drug companies to behave differently.

The notion that corporations should only work for the maximization of
shareholder value is relatively modern, and leads to companies doing
societally destructive things like this all the time, yet the author takes it
as an inviolate truth. I would suggest that this is also part of the problem,
and an area to look to fix it.

~~~
onlyrealcuzzo
Companies are going to, and should, maximize for _something_. The most natural
thing for that to be is profit.

The biggest problems are: we don't properly regulate monopolies, and price
signals are broken because we don't properly price in negative & positive
spillovers.

As a society, we are MUCH better off having healthy and educated citizens. And
as of recently, funding in these areas is being viewed as a cost center,
rather than an economic multiplier. At the same time, we're destroying the
environment with carbon and subsidizing fossil fuels.

Capitalism only works when price signals work. And price signals won't work
without competition, and they'll be inaccurate without spillovers taxed
accordingly.

~~~
r00fus
That’s only because the government removed the _requirement_ of corporations
to have a social benefit in their charter of incorporation.

If we reinstate this it would make that “something” be identified and other
than just money.

~~~
emptysongglass
This is news to me. I thought we created these monsters with their mandates to
make only money from the beginning.

I'd like to see Social Purpose Corporations become the default but sadly it's
non-obvious how to go about creating one. Stripe's Atlas defaults to the
monster. Can we get an anti-Atlas that makes it easy to bootstrap ethical
corps?

------
cc439
There is one bright spot on the pharma horizon and that is the industry's
discovery and pipeline crisis. There has been a marked slowdown in the
discovery of novel drugs over the past decade, a trend that has remained
resilient even in the face of enormous R&D spending. Whether you think big
pharma spends too much on marketing in comparison to R&D doesn't dampen the
importance of the sheer volume of dollars being spent. The pipeline for many
pharma giants is practically dry and only getting drier with each passing
year. Many have tried to offload the risks involved in massive R&D efforts by
letting small companies develop the drug and then obtaining their IP through
mergers and acquisitions but even then, the pace of discovery for novel drugs
has still slowed meaning the number of M&A opportunities are also shrinking.

Maybe the pharma giants simply played themselves, greedily focusing on
exorbitant short term profits and naively assuming R&D would always deliver
something at their existing levels of funding while ignoring the long term
effects this would have on their business model. Maybe we've simply reached
"peak pharma", running out of easy discoveries that are best treated by
applying a chemical and entering a world where biotech and immunotherapy will
drive the future of healthcare. Either way, the patent cliff looms and we are
rapidly approaching the threshold where enough profitable drugs go generic
that the industry can no longer afford to buy out, bribe, and cheat their way
to maintain their position.

~~~
cryoshon
they have a plan for this: reformulating old drugs for new indications. if
drug X was originally made for condition Y but there is some inkling which
suggests it could work for condition Z, they can commission a new round of
trials and eventually remarket X for Z. thus the crusty and middlingly
profitable X gets a new lease on life, treating Z with modest efficacy. they
do this at a very high rate at present.

they can also rehabilitate their older drugs by making facile new combinations
in which drugs A and B which treat condition Z are combined into the same pill
which is now rebranded as drug C. this technique is beneficial because if A
and B were first-line treatments before, C is guaranteed to be a first-line
treatment with a minimal amount of time in the wild.

then there's the old side effect shuffle in which older drugs with acceptable
but unpleasant side effects are reformulated or otherwise tweaked to offer
marginally better patient experiences, most frequently in a single small
patient demographic. marginal improvements win the market if the drug's target
demographic is already suffering a lot from their condition or their
treatments.

in conclusion, the pharmas can create the appearance of innovation and modest
new revenues nearly indefinitely even when their pipelines are in actuality
quite sparse and breakthrough innovation is absent. this ability to churn old
stuff buys them time to create new stuff to put into the pipeline using more
complex therapeutics like immunotherapies, etc.

~~~
cc439
>the pharmas can create the appearance of innovation and modest new revenues
nearly indefinitely even when their pipelines are in actuality quite sparse
and breakthrough innovation is absent. this ability to churn old stuff buys
them time to create new stuff to put into the pipeline using more complex
therapeutics like immunotherapies, etc.

I agree with everything you said in that post but I think we disagree on the
inevitability of the pipelines running dry. The mere fact that such strategies
have become common industry practice points toward a structural decline in
novel drug discovery. While such strategies buy time for new blockbuster drugs
to be discovered, they simply are not being uncovered at a rate commiserate
with the expectations of the existing pharma business model. What you are
describing are what I consider to be patches on the hull of a sinking ship.
When today's big pharma business model relies on $X profits and all the
profitable drugs are going off patent and being replaced by tweaks and new
indications, eventually $X becomes $X-25%+. Once that happens, all these
enormously expensive shenanigans are no longer affordable.

Of course, this all comes at the cost of some potential drugs discoveries that
could have been made if the business model was kept honest but that's the
future we're left dealing with.

------
thorwasdfasdf
The hospitals are getting kickbacks for offering more expensive drugs. This is
fraud, plain and simple. It should prosecuted to the fullest extent of the
law: they really need to start going after these hospitals and doctors that
are colluding with the drug companies.

"The PBMs negotiate discounts from drug companies and then help determine
patient access to drugs. In theory, that is supposed to encourage PBMs to
drive prices down on the drugs. But drug companies have very cleverly turned
the system on its head. Before they give a discount to the PBMs, they raise
the price each year. It is like a department store raising prices before a
sale so that the sale price looks more appealing. Then the PBM can claim to
have negotiated a great deal, and will pocket the rebates. In return, the drug
companies want the PBM to make sure their competitors are disadvantaged."

And once again, the patent system is being abused to no end. The patent
office, swimming in money, just rubber stamps the same old patents over and
over again: "78 percent of the drugs associated with new patents are not new
drugs. They are existing ones. Instead of innovation, we are seeing secondary
protections piled onto old drugs over and over again. They make minor medical
modifications by adjusting the dosage or the delivery system." Someone
seriously needs to sue the patent system for the enormous amount of financial
damage they've caused to this country.

~~~
mindslight
> _The hospitals are getting kickbacks for offering more expensive drugs. This
> is fraud, plain and simple. It should prosecuted to the fullest extent of
> the law_

100x this. Much of the breakdown of trust in our society is due to existing
laws and crimes being enforced extremely unevenly. Simple crimes committed by
lower class individuals are prosecuted relentlessly, even when they are
ultimately victimless or otherwise overly harsh. Meanwhile huge scale crimes
committed en masse by companies are rarely pursued, and in the rare cases they
are it basically results in civil slap-on-the-wrist fine that comes out of one
quarter's profits.

Law in general only works when it proactively _deters_ bad behavior. Corporate
counsel should be pointing out that such setups fit the shape of fraud, and
advising the CEO/board that they'll personally be facing down prison terms.
But rather than discouraging they enable - advising how to complexify the
scheme to prefortify future defenses. The deviance has been so normalized that
wider society just shrugs it off as them maximizing shareholder value.

I have no idea how this can actually be remedied. The screws of demanding
justice keep being turned up based on a desire to punish those who escape, yet
those with the resources continue to insulate themselves just fine. We're
effectively headed towards anarcho-capitalism for those at the top, and
totalitarianism for those at the bottom.

------
duxup
I'm not really sure there is much in the way of "efforts".

The drug companies now control and manipulate the market. One law here or
there won't fix it.

I think the larger question is if congress wants to effectively break the
market and if the politicians want to take on the task of rewriting a lot of
law / taking on the drug companies.

~~~
post_break
Serious question, if laws won't fix it, how does India do it? From my very
limited understanding India doesn't have these high costs?

~~~
b_tterc_p
They manufacture their own drugs piggy-backing off American R&D and then sell
them for much much smaller margins.

America's lucrative drug market funds research which allows the rest of the
world to benefit at no cost to them.

Edit: seem to be getting downvoted because people think I’m saying drug
companies do this out of benevolence. Not my intention. I’m saying that
wrenching maximum dollars out of America but having little ability to capture
returns elsewhere is a mechanism by which new drugs are created and later
manufactured as foreign generics

~~~
otikik
> America's lucrative drug market funds research

That's a nice and heartwarming story. But I don't believe it for a second.
When those companies want to fund research, they raise money from third
parties. Or get it from the government in the form of grants.

No, all that money goes to someone's pocket, and mostly stays there.

~~~
secabeen
They do spend some of their patient revenue on R&D, but they spend more on
consumer and physician marketing.

~~~
jonlucc
Should they not? Ignoring money, if you have a product which has been shown to
improve lives or increase lifespan, shouldn't you aim to make it as available
as possible? In general, pharmaceuticals have to prove some benefit over the
current standard of care to convince payers (insurance companies) to pay for
the drug.

Disclaimer: I work in big pharma, though in discovery research, nowhere near
pricing and business decisions. Of course, in my position, it would be great
if all pharma invested more in R&D

~~~
secabeen
I'm not objecting to all marketing spending, but I do think it's out of line
with the benefit. I would prefer to see prescription marketing be much more
low-touch that it is today.

~~~
jonlucc
Me too. I had a manager once suggest that you could set up a consortium of
pharma companies based around a disease. So, for example, every company that
has a drug targeted at psoriasis would buy in, then the consortium would be
tasked with raising awareness that psoriasis is a treatable condition, so go
talk to your doctor. Of course it has some flaws (what about companies that
are first into an indication), but it might be a step better than what we have
today.

~~~
secabeen
Interesting. Very much like the milk boards and other agricultural councils
that promote specific largely-fungible products.

------
patrickmay
An excellent, detailed discussion of this is in "Overcharged: Why Americans
Pay Too Much For Health Care". Drug prices are only one aspect of the problem.
The root is that government involvement focuses on the demand side and
proactively reduces the supply.

[https://www.cato.org/overcharged](https://www.cato.org/overcharged)

~~~
vkou
The root problem is that it is in the interests of everyone, from the doctor,
to the pill manufacturer, to the hospital, to the insurer, to bilk patients
for everything they are worth.

The insurer makes a profit as a % of money spent on healthcare, the doctor
needs to pay the million-dollar student loan (his education cost a million
dollars because the student loan underwriters know his patients will pay), the
hospital makes a profit as revenues - expenses - it's not like patient can
price-shop.

Pointing fingers at the supply of doctors ignores the other five elephants in
the room.

Markets simply don't work when the person who has to pay can't price shop.
Please, come to your senses, and either make healthcare an actual free market,
or, more sensibly, single-payer.

------
exabrial
Likely because they lack an understand of macroeconomics and keep treating the
symptoms instead of the causes like "Drug prices are too high, lets make price
caps!"

------
skullborg
Efforts? I think they have a different meaning of effort than anyone else :/

~~~
josefresco
The headline is odd - not one mention of Congress in the entire article.

~~~
duxup
Bloomberg articles do that a lot. Many feel like "this is a good title" and
then they sort of fill content that may or may not fit underneath it.

~~~
iicc
[https://www.businessinsider.com/bloomberg-reporters-
compensa...](https://www.businessinsider.com/bloomberg-reporters-
compensation-2013-12)

> Bloomberg News has an unusual practice of paying some of its reporters
> explicitly for publishing "market-moving" stories.

So, yeah.

~~~
duxup
That makes sense.

You get some Bloomberg stuff that just seems like really low effort spam /
blog stuff.

------
lghh
As long as the FDA exists as the arbiter of what can and cannot be sold and
the US government defends the intellectual "property" of these businesses, it
is unlikely that drug prices will drop in a meaningful way.

------
JustSomeNobody
Because:

> RF: It is the way the system operates now. And really, one can’t blame the
> drug companies. These are profit-making companies. We can’t expect drug
> companies to behave differently. Imagine if a CEO went to his board and
> said, “I have decided to lower prices and reduce our profits. It’s the right
> thing to do.” That CEO would be fired.

~~~
tasty_freeze
Of course it wouldn't happen that way. Instead, what if the maker of a drug or
medical device found that they were the only ones making it because patents
had long ago expired on it and it wasn't the new hotness. They could say:
shit, let's increase the price 10x, and if someone else ramps up production,
then we can lower our price again, but in the meantime we've obtained piles of
cash.

But there is a PR price to be paid when the public finds out that the company
is gouging people who have eczema or whatever the drug treats. Some companies
obviously do decide to go that route and either are hoping nobody notices, or
are willing to pay the PR price. Others obviously are willing to accept a
certain return on their boring drug and leave well enough alone.

------
narrator
Too bad the guy who Trump put in charge of lowering drug prices died recently:
[https://www.cleveland.com/metro/2018/11/ohios_daniel_best_wh...](https://www.cleveland.com/metro/2018/11/ohios_daniel_best_who_led_hhs.html)

------
m0zg
The answer to OPs question is simple: because they have gold-plated Cadillac
of a health plan themselves. They aren't much affected by the Obamacare cost
increases either, unlike the rest of us peons. So we get "let them eat cake"
type healthcare legislation.

------
lukeschlather
I really want to see trials with these $200+/week drugs where the control
group gets catered meals managed by a personal nutritionist, weekly massages,
physical trainers, yoga or free housekeeping or whatever. Trouble is you can't
patent the result of such a trial, and it would probably often end badly for
the people pushing the drugs. It seems like our whole medical funding model in
this country is fundamentally broken.

~~~
refurb
I'm pretty sure "catered meals managed by a personal nutritionist, weekly
massages, physical trainers, yoga or free housekeeping" isn't going to matter
much when you're dying of cancer.

~~~
lukeschlather
That's more a value judgement though isn't it? And I think it totally could
matter in some ways. Chemo sounds like hell. It's easy to imagine 1-year
survival rates for most cancers are highest with no intervention, and 5-year
survival rates are highest with chemo. But 1-year survival rates with any of
the things I mentioned might be higher than no intervention whatsoever.

And 5-year survival rates with cancer are pretty bleak regardless so it's not
hard to imagine simply helping people de-stress might be the best intervention
depending on how you value a slightly better chance of full remission vs.
keeping people comfortable.

------
rayiner
I'm sure the book is better, but the soundbite on what's called evergreening
is very misleading:

> RF: Yes, 78 percent of the drugs associated with new patents are not new
> drugs. They are existing ones. Instead of innovation, we are seeing
> secondary protections piled onto old drugs over and over again. They make
> minor medical modifications by adjusting the dosage or the delivery system.

The patent system does not allow you to "extend" the protection of an existing
invention by making minor changes. Once a product is released into the
marketplace, _the product itself_ becomes prior art. You can make improvements
to the product, and patent those changes, but the original product is now in
the public domain.

So evergreening can't work as a unilateral action from the drug company. It
also has to be the case that doctors must be unwilling to prescribe a generic
that doesn't have those improvements. And here is where the article buries a
lot of complexity in a hand-waving dismissal:

> Here’s the most important point: When a drug company makes a secondary
> change to a drug, the R&D investment is minimal compared with what’s
> required for the drug’s initial development. _Also, the change may mean
> little from a therapeutic standpoint._

As a threshold matter, no scientist or engineer (note the author is neither,
she is a lawyer) would say that incremental improvements don't count as
"innovation." And incremental improvement, though cheaper than building a
brand-new drug, is not cheap, just like developing each new iteration of
iPhone is not cheap. So what's really doing all the work here is the assertion
that a "change may mean little from a therapeutic standpoint."

If the change doesn't actually result in a therapeutic benefit, then doctors
shouldn't prescribe the new drug over the generic. For various reasons,
doctors have little incentive to do that. The main thing is that neither the
doctor nor the patient are paying for the drug. When you're not paying, you
have no incentive to prescribe the "older model."

Insulin is a good example of this. The first biosynthetic insulin was released
in 1982. It is long out of patent. If you wanted to release that exact same
product today, you could. But the newer iterations are at least a little bit
better, and who wants to give their kid with Type-1 diabetes anything but the
latest and greatest version?

~~~
ada1981
what seems to happen is the drug is trivially tweaked or a new delivery system
is created, they get a new patent, then dump marketing & lobby dollars to
secure the revenue stream.

The new patent on Ketamine for depression is an example.

Ketamine is already used to treat depression and it’s a cheap generic drug.

The nasal spray being touted is many times more expensive and is really just a
marketing play.

~~~
rayiner
There are lots of marketing plays on existing, well-established technology.
That's like half the things Silicon Valley develops. So what?

With regard to the Ketamine example, what the drug company is selling is a
nasal spray (versus the traditional method of using an IV), and freedom from
the stigma of taking a "party drug":
[https://www.theverge.com/2019/3/11/18260297/esketamine-
fda-a...](https://www.theverge.com/2019/3/11/18260297/esketamine-fda-approval-
depression-ketamine-clinic-science-health).

~~~
cc439
I would consider a change from ingestion via IV to insufflation is a pretty
major development and all around improvement on the existing drug and.method
of administration. If someone managed to create an ingestable pill or nasal
spray for insulin they'd win a Nobel prize. While the scale and importance of
that discovery is greater, the fact that such a switch in delivery method is
that significant leads me to believe this controversy surrounding a nasal
spray is more outrage porn than actual reality.

~~~
_Wintermute
> If someone managed to create an ingestable pill or nasal spray for insulin
> they'd win a Nobel prize.

We already had inhalable insulin in 2006 (Exubera) and again in 2014
(Afrezza), both of these medications were withdrawn from the market for lack
of sales. And yet people still get upset when Pharma spends money on
marketing...

------
clarkmoody
"Government intervention in market produces opposite of intended effect.
Experts baffled."

Economists not surprised.

