
Opaque drug pricing in the U.S. - elberto34
http://www.latimes.com/business/lazarus/la-fi-lazarus-drug-pricing-evzio-20170217-story.html
======
e15ctr0n
> _backroom deals by assorted players in the healthcare food chain_

The articles dances around the details of who these players are and how they
conspire to push up drug prices in America. This article captures the dynamics
very well: [http://www.diabetesforecast.org/2016/mar-apr/rising-costs-
in...](http://www.diabetesforecast.org/2016/mar-apr/rising-costs-insulin.html)

and the accompanying graphic is the picture that is worth a thousand words:
[http://www.diabetesforecast.org/2016/mar-
apr/images/insulin-...](http://www.diabetesforecast.org/2016/mar-
apr/images/insulin-costs-infographic.gif)

A good summary from a more recent article on insulin prices:
[https://medium.com/insulin-report/why-does-insulin-cost-
so-m...](https://medium.com/insulin-report/why-does-insulin-cost-so-much-in-
america-4e6b2f598596)

 _Drug manufacturers make insulin available to insurance companies at a much
lower price via middlemen called pharmacy benefit managers. The difference
between the list price and the lower price negotiated by the pharmacy benefit
managers is called the spread. Part of the spread is pocketed by the pharmacy
benefit managers, leading to a perverse incentive in which the higher the list
price of the drug, the higher the earnings of the pharmacy benefit managers.
The price rise affects the uninsured and under-insured the most, many of whom
can no longer afford to buy insulin at its list price any more._

------
cloakandswagger
Pharmaceuticals are only about 10% of all healthcare costs [1].

The vast majority of healthcare spending goes to hospitals and doctors, yet
the political environment hyper focuses on drugmakers. Why isn't there a
larger focus on reducing the costs of hospitals and healthcare professionals?

[1] [http://www.pfizer.com/files/about/Position-Role-of-
Pharmaceu...](http://www.pfizer.com/files/about/Position-Role-of-
Pharmaceuticals-in-US-Healthcare-Spending.pdf)

~~~
eberkund
I agree, why is it that doctors make such high salaries? Is it because of the
long and relatively difficult education and training that they have to go
through? That is definitely part of it but in my opinion those salaries (which
in many countries are publicly funded) could be reduced drastically by
training more doctors.

Professional societies have a strong interest in artificially keeping the
supply of qualified doctors low in order to keep salaries high. University
admissions for medical school continue to be extraordinarily low in proportion
to the number of applicants yet there are still shortages in many parts of the
country.

~~~
bpodgursky
If you paid doctors less, there's no reward for spending your entire 20's and
early 30s in training, already earning almost nothing. Nobody, especially
nobody talented, will do it.

It's already probably not worth it from a purely financial perspective, when
you consider the options would-be doctors have (they are among the highest
performing students already -- they could easily be lawyers, professors,
engineers, etc).

The real growth in medical costs are from administrative overhead and the vast
new amounts of paperwork that doctors have to spend their time shuffling.

If doctors spent 80% of their time in patient interaction or actual diagnosis,
there would not be a perceived doctor shortage. Instead, it's 70% paperwork
and filling out forms to check the right regulatory boxes. Increasing
productivity by culling the paperwork and regulatory bloat will be vastly more
productive than pumping out more low-quality doctors.

~~~
Chathamization
In plenty of other countries doctors are paid substantially less and the
quality of healthcare is better. I don't think it's impossible for the U.S. to
do what everyone else is already doing.

~~~
ethbro
The statistics in similar free market countries (labor, not health care) are
curious. Interested in any links you have, but this NYT blog post [1] seems to
show that, GDP-per-capita normalized (which seems reasonable; second chart),
there isn't that large of a divergence between what I would assume would be
comparable nations.

Nurses make 0.9-1.4x, GPs 1.7-4.1x, and specialists 1.7-7.6x GDPpc.

Certainly a range, but nothing jumps out at me as "the US is an order of
magnitude outlier."

I'd be fascinated to make a further breakdown of these numbers in terms of
style of country's health care system, to see what correlations drop out
though...

[1] [https://economix.blogs.nytimes.com/2009/07/15/how-much-do-
do...](https://economix.blogs.nytimes.com/2009/07/15/how-much-do-doctors-in-
other-countries-make/)

------
awinter-py
Lack of price transparency is the fatal flaw in nationalized healthcare. I'm
endlessly surprised it's not top on the list at every debate.

Lasik is an out-of-pocket procedure. It has the highest satisfaction rate of
any surgery and the price has gone steadily down since it was introduced.

Should all healthcare be out of pocket? Maybe not. But if most consumers
purchased most health services retail instead of via invisible negotiated
prices, insurance would get cheaper too. (And until that happens, prices will
continue to go up).

Medicare set a cap on the first 30 days post heart-attack care in the 90s and
hospitals respected it -- but day 31 got a lot more expensive.

~~~
georgemcbay
Inelastic demand is the fatal flaw in any non-nationalized non-single payer-
system.

Lasik is great, but it is a very optional surgery. Lots of people opt to just
go with contact lenses or glasses, Lasik is just a more convenient longer term
solution to the problem, but it isn't necessary for anyone.

Where the the screws really get turned in health care costs are for the
treatments that you actually need to have a reasonable chance to continue to
exist should you have certain health issues: Hep-C regimens, EpiPen-type
systems, etc.

(Of course there are other factors that contribute on top of inelastic demand,
like what I would consider too-lengthy intellectual property coverage for
patented treatments, eliminating the possibility of cheaper alternatives
altogether in some cases).

~~~
awinter-py
If there's a single effective treatment for Hep C that's a different question.
This article is about an injector for naloxone. Are we really saying there's
no market for a cheaper syringe?

I hear your point that some treatments are difficult to make subject to market
forces.

~~~
georgemcbay
There's a market for cheaper syringes, but nobody is serving it.. possibly due
to what appears to be blatant and wide-scale price fixing in the
pharmaceutical industry (including the generic manufacturers).

[https://www.nytimes.com/2016/12/15/business/generic-drug-
pri...](https://www.nytimes.com/2016/12/15/business/generic-drug-price-
lawsuit-teva-mylan.html)

[https://www.washingtonpost.com/news/wonk/wp/2016/12/14/feds-...](https://www.washingtonpost.com/news/wonk/wp/2016/12/14/feds-
accuse-former-generic-drug-executives-of-price-fixing/?utm_term=.8490e3810d73)

------
mikeyouse
I think this ACS article describes the situation very well:

[http://cen.acs.org/articles/95/i9/Pushback.html](http://cen.acs.org/articles/95/i9/Pushback.html)

It's long but a very thorough treatment of the problem. The existing pharma
system is very, very profitable and there is a ton of resistance to anything
to rock that boat. Lately profitability has been coming from price increases
instead of innovation but pharma is okay with that as long as it lets them pay
billions in dividends.

------
wmccullough
I feel a lot of people in this thread must not have any chronic health
conditions. I see comments about how this is a free market and that this is
okay. I suspect if Pharma was bankrupting you like it is me, your stance might
change.

~~~
kolinko
If not for the cost, they wouldn't be able to afford further research.

------
justinph
I think the LA Times takes the crown for the most unperformant tracker and
advertising infested legitimate news site. Ghostery counts 88 advertisers /
tracking scripts on this page and it still not done loading. What a disaster.

~~~
kevincox
I got a full window advertisement and immiedately left. I'm glad the HN
comments provide a good summary.

------
tcj_phx
This article talks about absurd pricing for new patented delivery mechanisms
for old generic drugs - the epipen, the evizio naloxone auto-injector (and
presumably the Narcan insufflation device).

Anyone who might need to deliver these drugs -- to their allergic kid, addict
friend, etc -- ought to learn how to use a syringe, and skip the price
gouging. Someone on the opiates subreddit sent me a couple vials of naloxone
and some needles - I sent a donation to cover shipping & handling.

Naloxone is $0.50/mg, when you buy a gram at a time:
[http://www.sigmaaldrich.com/catalog/substance/naloxonehydroc...](http://www.sigmaaldrich.com/catalog/substance/naloxonehydrochloridedihydrate399875148160811?lang=en&region=US)
\- I tried to buy some naloxone powder from a different company, but they
wouldn't sell it to me. I wonder if Sigma Aldrich would...

I think more attention should be drawn to prescription drugs that harm
patients. For example, the caller to a NPR Science Friday segment [1] was
annoyed that her doctor made her "manic and suicidal" with the depo-provera
injection, and that this awful drug is still on the market.

[1] [http://www.sciencefriday.com/segments/looking-beyond-
condoms...](http://www.sciencefriday.com/segments/looking-beyond-condoms-for-
male-contraception/) (The first caller was at 8min30sec)

------
rayiner
The title is misleading. It says "value" but only ever discusses "price" which
is a related by distinct concept. That confusion is actually emblematic of the
wrong-headed approach the media takes to the pharmaceutical industry: it
ignores the value created by innovations in drugs.

Just in my adult life there has been enormous advances in treating HIV, Hep-C,
and various cancers. When I was a kid in the 1990s, HIV was a death sentence
people talked about in hushed tones. With modern anti-retrovirals:

> What did this do to life expectancy? In 1996-97 the life expectancy at age
> 20 of an HIV-positive person was 19 years, in other words they could only
> expect to live, on average, in the absence of any improvement in treatment,
> till they were 39. By 2011, this had improved to 53 years, i.e. death on
> average at 73.

([http://www.aidsmap.com/Life-expectancy-in-HIV-positive-
peopl...](http://www.aidsmap.com/Life-expectancy-in-HIV-positive-people-in-
the-US-still-lags-13-years-behind-HIV-negative-people/page/3040314))

What is the value of living to 73 versus living to 39? Big enough where the
$10-12k annual cost of anti-retrovirals is a bargain in comparison. Probably a
way better bargain than a $700 iPhone.

When you make something that creates a ton of value for people, you are able
to charge a lot for it and make a big profit. There is nothing nefarious about
that, and indeed those outsized profits are essential to making the system
work. Turning drugs into a price-regulated ghetto is going to do nothing more
than drive investors to areas like advertising where nobody will blink when
they see a 30% profit margin. Unless you're willing to replace that private
investment with public investment (as we have done in the defense industry),
that's a terrible idea.

~~~
Ensorceled
In the case you gave, ANY amount is a bargin.

How much would someone pay to get 14 more years of life? Just about anything.

Value can't be calculated like this because you get massive distortions.

"How much is worth to save one child's life? Billions!"

~~~
chii
from the perspective of the individual, their own life is priceless, but from
a societal level, each life certainly has a price. The US Govt uses 10mil as
the price of an average life (for a soldier).

------
gist
> There’s a good reason why U.S. drug prices are so much higher than what
> people pay in other countries. Most other developed nations place limits on
> how much drug companies can charge to prevent them from taking advantage of
> the sick. A fair profit is fine. Price gouging is not.

Ok so what is happening here if it's not clear is this. People in the US are
subsidizing so that people in those countries don't pay as much. Point being
if people in the US paid the same price (in theory) the drug companies
wouldn't make enough money to support their operations. As a result prices
would rise for everyone and drugs in the US would cost less. I guess it's to
simple for our government to enact some kind of 'most favored nation' clause
whereby the discounts given to other countries must be given here. My guess is
that that doesn't happen simply because it works in the favor of the drug
companies (who will lobby) to have the current system.

------
maxxxxx
The Republicans could have shown their seriousness about free market
healthcare and consumer oriented lately if they had required medical pricing
(and quality numbers) to be transparent so patients can make an informed
decision.

Of course they didn't but I think this needs to be pointed out repeatedly.

------
CamperBob2
Complementary headline on Pharma News: "Software really, really doesn't want
you to know the true value of its code"

------
imaginenore
1) An article discussing the prices of drugs that doesn't talk about the costs
of RnD and the FDA approval process is pointless.

2) We're in a free market, companies can charge a billion dollars a pill if
they want to.

~~~
HarryHirsch
How does FDA testing even affect drug prices? They demand proof of safety and
efficacy.

As far as safety goes, the interests of pharma and the FDA coincide. You
really don't want to find out that your compounds causes adverse effects once
it has hit the market, it's a guaranteed win for the lawyers. People in the
field will remember the Vioxx lawsuits. They were expensive to defend and a PR
disaster as well, because it became known that Merck had a list of people it
wanted silenced.

And if the FDA won't confirm efficacy for you you can be sure that your health
insurance will be asking for proof before they pay. The only reason that
Gilead can charge as much for their Hep C drug is that it is still cheaper
than a liver transplant, _and it is proven to work_!

~~~
Anderkent
There's lots of drugs that everyone knows are safe and effective, but no one
wants to shell out the money to get them approved. Just because the FDA says
it provides proof of safety and efficacy doesn't mean that's what actually
happens.

But, even more, your argument as presented is self defeating. If the companies
already have to do enough research into the drug to make it safe (because 'You
really don't want to find out that your compounds causes adverse effects once
it has hit the market, it's a guaranteed win for the lawyers'), and that it
works ('your health insurance will be asking for proof before they pay'), then
why do we need _another_ organisation that requires a different set of tests?

~~~
rincebrain
I'd be curious to see even a partial list of those "safe and effective" meds
that nobody wants to pay to run through the approval process.

From my perspective, it seems like a substance that's already through the R&D
pipeline would be relatively cheap to turn into something for sale, compared
to developing new drugs "from scratch".

~~~
Anderkent
Ok, simplest example - antixilotics
([https://en.wikipedia.org/wiki/Anxiolytic](https://en.wikipedia.org/wiki/Anxiolytic)):

Selank
[https://en.wikipedia.org/wiki/Selank](https://en.wikipedia.org/wiki/Selank)

Afobazole
[https://en.wikipedia.org/wiki/Fabomotizole](https://en.wikipedia.org/wiki/Fabomotizole)

Emoxypine
[https://en.wikipedia.org/wiki/Emoxypine](https://en.wikipedia.org/wiki/Emoxypine)

Picamilon
[https://en.wikipedia.org/wiki/Picamilon](https://en.wikipedia.org/wiki/Picamilon)

There's an entire _category_ of anti-anxiety drugs developed in Russia that
are not licensed in the US, because it's not worth the price for anyone.

Also: melatonin. Your doctor CAN NOT PRESCRIBE MELATONIN.
[https://slatestarcodex.com/2013/09/28/sleep-now-by-
prescript...](https://slatestarcodex.com/2013/09/28/sleep-now-by-
prescription/)

And you can't prescribe fish oil, but at least there's LOVAZA™®©.

------
randyrand
edit: The post title changed, it used to reference drug value

the value of a drug is the amount someone is willing to pay for it. different
for everyone.

while im a big proponent of lower drug costs and agree drugs cost more than
they should/could,

drugs are typically very underpriced compared to their actual value. a drugs
actual value to the a person can be _tremendous_. if we charged people the
same amount as the value it brings them, they would not buy it! it would be a
wash! since lots a people are buying lots of drugs, we know drugs are
typically priced under their real value; that's a good thing!!

in other words, talking about the value of a drug if you're arguing to lower
their cost is the _last_ thing you want to do!

~~~
dragonwriter
> Drugs are typically underpriced compared to their value.

For drugs under patent, which are monopolies, that's unlikely.

For drugs for which there is relatively unrestrained competition in supply,
that's expected, since competition drives prices down toward costs even if
value is much higher.

~~~
HarryHirsch
_since competition drives prices down toward costs even if value is much
higher_

Indeed. In fact, for many drugs volumes and prices are such that the market
will support just one supplier in the market, and then funny things happen.

There is exactly one supplier of benznidazole, which is one of the few things
that actually work against _T. cruzi_. The other thing that works is
nifurtimox, and that is in short supply as well.

