
Why drug prices in America are so high - denzil_correa
http://www.economist.com/blogs/economist-explains/2016/09/economist-explains-2?fsrc=gnews
======
supergeek133
It seems we really like to focus on "the evil" company, but it goes two ways.

Example: A family member has serious adult scoliosis, which causes quite a bit
of pain. For years she has taken Fentanyl Nasal Spray that was made by a
compound pharmacist (e.g., they take the raw Fentanyl powder, and mix it with
a liquid solution by hand). The retail cost of this is ~$3k for a 30 day
supply. Her insurance brought that down to sub $100.

2 years ago, she received a letter from her insurance company stating that
because the FDA refuses to guarantee compound (made by hand) drugs, they will
no longer cover her current nasal spray and she must move to one of the
alternatives.

One alternative was a lollipop, which she used to take but caused her teeth to
rot and she now has dentures. Another was different oral delivery system, but
it was discontinued by the mfg less than 6 months after this.

So far her only option is a product called Lazanda, they are individually
packaged and metered glass bottles of Fentanyl nasal spray. Each bottle is
roughly half a day's dose, has it's own box, literature in EACH BOX, and a
month's supply is 60 of these boxes.

The retail value of this? Last time I looked it was >$30,000. And the
insurance just accepts it.

Madness.

~~~
wtbob
> 2 years ago, she received a letter from her insurance company stating that
> because the FDA refuses to guarantee compound (made by hand) drugs, they
> will no longer cover her current nasal spray and she must move to one of the
> alternatives.

I wondered who lobbied for the FDA to make such a refusal, and who lobbied the
insurance companies not to cover such unguaranteed drugs.

~~~
karmelapple
Having a very clear version history of both the laws in place, and the bills
that made those laws, would be super useful in answering this question.

Are the laws / rules for that publicly accessible?

~~~
supergeek133
[http://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInforma...](http://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding/ucm375804.htm)

------
bisRepetita
I very much like free market. But here, the final consumer is not in a
position to bargain prices when getting sick, which is a pre-requisite for a
free market to function. Single-payer system works way better in that very
particular industry, because both parties can now effectively negotiate.

Example: GSK is selling Advair Diskus for $300 in the US, and the same
Seretide Diskus for 30 euros in France. Because on one side, they negotiate,
and on the other, the enact laws to prevent negotiations (see Medicaid). When
you need that disk every month, it's a huge difference.

I understand why this system is better for GSK, their shareholders and
management. But why is it better for American people to persevere with a
system where you pay 10, 100 times the fair price?

And don't blame the lobbyists, they can lobby all they want, the voters are
the boss. If the majority wants to stop paying 100 times what they should, if
the majority is tired to go bankrupt when they get sick, it just takes to
publically support a single-payer system, and to vote for that. Politicians
will listen.

~~~
splintercell
> I very much like free market. But here, the final consumer is not in a
> position to bargain prices when getting sick, which is a pre-requisite for a
> free market to function. Single-payer system works way better in that very
> particular industry, because both parties can now effectively negotiate.

I am sorry but you don't like Free market. That's like saying "I love Hillary
Clinton and I am totally with her, but I think Trump would be a better
President than Hillary in every way because he is not dying".

My friend describes this as a 'Sales Pitch argument' where you claim to
support your opponent's position, but you actually don't. "I am all for Gays
to be able to freely marry, but we gotta make sure that the kids they adopt
aren't going to abusive homes because statistics say that kids raised by gay
and lesbian couples don't do so well".

> the final consumer is not in a position to bargain prices when getting sick,
> which is a pre-requisite for a free market to function.

I don't know from where does this kind of faulty thinking originates. Lemme
show you why it is faulty:

The final consumer of food is not in position to bargain prices when he is
hungry, which is a pre-requisite for free market to function. Therefore a
single payer food system works better than a private food system.

The final consumer of a gun is not in a position to bargain prices when his
home is invaded, which is a pre-requisite for a free market to function.
Therefore a single payer gun system works better than private market for guns.

The problem is, you're not suppose to look for food only when you get hungry,
or buy a gun precisely when you're getting invaded, you're suppose to do these
things BEFORE you actually need them.

And just like food (which you need daily multiple times) you buy in chunk. The
whole system of food acquisition works out perfectly fine.

Your rest of the comment is more to the point, and the way things are in
America are antithetical to a free market in healthcare and pharma industry.

~~~
decaysackparity
> The final consumer of food is not in position to bargain prices when he is
> hungry, which is a pre-requisite for free market to function.

You are ignoring the fact that consumers can pick from a plethora of food
options. When you have sickness A the ONLY option you have is medicine X (take
this medicine or you die), where is the market force to drive down the price?
That isn't free market

~~~
splintercell
> When you have sickness A the ONLY option you have is medicine X (take this
> medicine or you die), where is the market force to drive down the price?
> That isn't free market

Sure, but if a country suffers famine, do people (and you) suggest single
payer food system?

~~~
decaysackparity
> if a country suffers famine, do people (and you) suggest single payer food
> system?

Yes! The government (payer) gets the food it needs to feed its people or...?

------
fivesigma
Not US specific:

* Ridiculously long patent validity periods. Let's put aside the fact that patenting a fucking molecule is even a thing, 20+ years is way too long a term to guarantee profit to a private corporation. Enforced by governments.

* Heavily subsidized (read: price artificially propped up) by insurance laws. This is student loans all over again. Again, created by governments.

* Astronomically high R&D costs, most of which is the cost of obtaining regulatory approval. Enforced by government agencies.

Free market? Yeah, right.

~~~
mtgx
Don't forget to add stuff like banning Canadian drug imports. Medicine
absolutely should be validated before being sold in a country, but other than
that, I see no reason why Canadian companies, or companies from other
countries, couldn't sell a competing drug in the U.S. for whatever price they
want.

Obama played a big role in banning this type of imports. Just saying. And
TPP/TTIP would make this problem much worse, and virtually irreversible,
because then they can just say "well, we wish we could change the monopoly
laws now, but it's in the treaty, you see...so tough luck."

~~~
Houshalter
There are ridiculous levels of regulatory capture. E.g. epi pens are off
patent and there are many competing companies in Europe, but the FDA refuses
to approve any of them. Or cancer drugs that have been used for decades in
Europe very effectively with tons of data there to support them, but the FDA
refuses to allow them. One time they even required a drug to have a trial with
more patients than exist in the US with that disease. They kill way more
people than they save by preventing terminally ill patients from getting life
saving drugs. And raising the cost developing them.

The FDA needs to be shut down. Perhaps replaced with something like a
prediction market, where people can bet on how likely a drug is to pass a
trial or even work in specific patients.

~~~
philh
> epi pens are off patent and there are many competing companies in Europe,
> but the FDA refuses to approve any of them

Not entirely true: there's adrenaclick. But if a doctor writes "epipen", the
pharmacist isn't allowed to give you an adrenaclick, even though that kind of
substitution is usually allowed.
[http://slatestarcodex.com/2016/08/29/reverse-voxsplaining-
dr...](http://slatestarcodex.com/2016/08/29/reverse-voxsplaining-drugs-vs-
chairs/)

~~~
vonmoltke
It's not allowed in this case because the FDA, rightly or wrongly, wants the
patient trained in the use of the specific injector they are being prescribed.
Having never needed one I don't know what the practical differences between
the operation of an Epipen injector and Adrenaclick injector are, but the FDA
seems to think they exist.

------
kikimaru
Every time I see an article explaining why system so-and-so is corrupt, the
answer is always "companies lobby politicians with campaign donations".

Why is it so hard for publications to use the word "bribe" instead?

~~~
abpavel
It would be illegal for the article to call lobbying a bribe, because lobbying
is a legal form of bribery, while bribery is illegal form of the same. However
they can argue that really there is no difference between the two, and that
would be legal. The issue is that the majority thinks that lobbying is ok,
while bribing is not. Once you fix that, then you can call it "bribing".

~~~
afarrell
Part of the problem is that lobbying is explicitly protected by the 1st
amendment.

"Congress shall make no law respecting an establishment of religion, or
prohibiting the free exercise thereof; or abridging the freedom of speech, or
of the press; or the right of the people peaceably to assemble, and to
petition the Government for a redress of grievances"

How would one prohibit lobbying without also prohibiting petitioning for a
redress of grievances?

~~~
noobermin
Many of us don't think lobbying should be illegal or wrong, just that the law
accept that the "free speech" of a corporation and special interest groups
will always overpower that of individuals.

~~~
afarrell
This is a natural result of the fact that:

1) Printing presses are expensive and always have been.

2) It is possible to be more effective at things in general by working in a
group, especially one with division of labor. Can you imagine a world in which
a disorganized mass of individuals without training was more effective at
advocacy than the EFF?

~~~
zaroth
The modern "printing press" is decidedly not expensive!

------
Broken_Hippo
"And it is illegal for Medicare to negotiate with drug companies. Private
insurers do so instead, but the government binds their hands, for example by
requiring them to pay for six broad categories of drugs, without exception.
This suits pharmaceutical firms."

While requiring companies to pay for broad categories of drugs may suit
pharmaceutical firms, I'm going to guess this was more to help folks that are
sick. What they must cover include [1]:

1\. HIV/Aids treatments 2\. Antidepressants 3\. Antipsychotic medication 4\.
Anticonvulsive treatments for seizure disorders 5\. Immunosuppressant
medications 6\. Anticancer drugs (unless covered by Medicare Part B).

These are generally categories that people really do need a drug that works.
Different antidepressants work for different people - the same with
antipsychotic medication. Many of these make a huge difference in quality of
life - or life itself.

The medicare regulations aslo state they must have a range of medications that
are generally needed by the population it serves, insulin (even if available
without prescription), and things only available by prescription (so some
allergy medication won't be covered, for instance).

Yet the article proposes this is too much regulation: To me, these are very
basic things one expects out of drug coverage. This sort of interpretation
makes me question the objectiveness of the article itself.

[1] [https://www.ncoa.org/wp-content/uploads/part-d-drug-
coverage...](https://www.ncoa.org/wp-content/uploads/part-d-drug-coverage-
rules.pdf)

~~~
DanBC
> Yet the article proposes this is too much regulation:

Doesn't the article say it's just the wrong type of regulation, and compares
to the US (weird regulation, expensive meds) to other countries (plenty of
regulation, cheaper meds)?

~~~
Broken_Hippo
It points it out as being an unwise regulation with bad price consequences.

It does state that other governments set price controls in various ways - like
the UK refusing to pay for a drug if it doesn't meet cost-effectiveness..
though I'm not sure how exactly that winds up affecting which drugs are
available and which aren't.

Then the actual reason for the listed example is that it makes sure folks are
covered for some things. Rules for coverage in itself doesn't raise prices.
And when these are the things they highlight as soft spots in the regulation
system instead of focusing more on the non-negotiations, the systems itself,
the money on advertising, and other such things, to me it comes down to having
a weird slant or poorly thought out.

~~~
shermozle
> UK refusing to pay for a drug if it doesn't meet cost-effectiveness.. though
> I'm not sure how exactly that winds up affecting which drugs are available
> and which aren't.

It means the supplier has a choice: meet the cost effectiveness model's price,
or earn almost no money in that market. It's a powerful tool and run quite
transparently. Look up the National Institute for Clinical Excellence.

There is occasionally some political blowback that distorts the purity of it,
but generally it works pretty well.

------
mrweasel
It's not just America, there's a case in the EU right now where a company for
some reason as gotten a 10 year exclusive on a drug that cost basically
nothing. It has now gone up 4000% in price. This is for an out of patent drug.

That company for some reason got an exclusive, by using a law that was suppose
to ensure that companies could recoup development cost. In this case it's a
drug that pharmacies used to make, there's absolutely NO COST to recoup.

~~~
willvarfar
Got any links, or name of the drug?

~~~
mrweasel
Sure, it's Caffeine Citrate:
[https://en.wikipedia.org/wiki/Caffeine_citrate](https://en.wikipedia.org/wiki/Caffeine_citrate)
it's now being sold under the brand Peyona, by a company called Chiesi.

If you feel like learning Danish: [http://www.dr.dk/nyheder/indland/fra-
en-20er-til-800-kroner-...](http://www.dr.dk/nyheder/indland/fra-en-20er-
til-800-kroner-medicinalfirma-haever-prisen-paa-livsvigtig-medicin-til)

Basically the price has jumped from 3.33USD to 121USD.

------
jfoutz
There are many many reasons. IMHO medicare not being able to negotiate prices
is silly and expensive but not the whole story.

If i could wave a magic wand and change any one thing, I'd require drugs and
perhaps devices for clinical trials to be produced by the patent office, from
the text of the patent. I think this would reduce the FDA approval for
generics down to, Can the manufacturer make the drug correctly and
consistently?

I don't have a problem with companies charging whatever they wish for the
shiny new drug. But the transition to generic needs to be as simple, cheap and
smooth as possible.

~~~
ianai
Is there an example for the difficulty of making a generic being a barrier to
entry for competitors?

~~~
jfoutz
The epipen is a glib response. Biologics are pretty notorious for not being
reproducible. Etanercept (Enbril) is the last one i looked at deeply. There
winds up being some 'secret sauce' that doesn't quite make it into the patent.

 _edit_

Enbril is around $2000/month, for what it's worth.

~~~
dnautics
Strictly speaking, epipen is a device, not a drug... The drug inside sells for
pennies.

------
camperman
It's not hard to understand. Pick a medical commodity that costs a few dollars
in Europe or anywhere else in the world but is exorbitant in the US. Could be
insulin, an epipen - whatever. Try and bring some back in to the country with
you. You're breaking the law. Try and bring back a whole box of it and you're
off to jail. Without the government-backed threat of jail, the market would
very quickly find the proper price.

~~~
rayiner
Appeals to the "market" are baseless. There is no competitive "market" for
drugs anywhere. In Europe, drug prices are artificially suppressed by central
governments exercising buyer-side market power.

~~~
malinens
European pharmaceutical companies are still earning billions of dollars.
Suppressed are hikes of prices and not drugs themselves

~~~
vonmoltke
How much of that is coming from the United States?

~~~
refurb
Roughly 2/3 of the global pharmaceutical market is the US. The EU is the other
1/3 and the rest-of-world is a small slice (but growing).

------
Nursie
On a recent vacation in the US a friend and I dropped into a pharmacy to pick
up a relatively mundane and day-to-day pharmaceutical. In the UK this would
cost around £5-£7.

We were told that it was available but we would need a doctor's appointment,a
prescription and then to pay $100-$200 for the exact same product. They had a
similar medication with a different active ingredient for around $20, but the
price difference was astounding!

~~~
maxerickson
Many generic forms of prescription only drugs have a cost of $5-$10. Not after
insurance or anything, the negotiated price.

For people without insurance it may be necessary to whisper magic numbers to
receive a better price (I say that sarcastically because the pharmacy gives
anyone access to better prices, so long as they simply _ask for the better
price_ ):

[http://www.costsofcare.org/drug-discount-cards-liftin-the-
ve...](http://www.costsofcare.org/drug-discount-cards-liftin-the-veil-of-
secrecy/)

So you might have a drug with a PBM negotiated price of $5 for the generic, a
cash price of $40 for the generic and a cash price of $400 for the name brand
drug.

~~~
ryuker16
Even generic can be pretty dang high without insurance at the cheapest
vendors.

~~~
maxerickson
Sure, it depends on the drug. But lots and lots of them are inexpensive, the
system isn't completely broken.

It's also often worthwhile to see what the price is with a discount card or at
Walmart, as it can easily make a 90% difference in the price for someone with
no insurance.

------
endtime
Scott at Slate Star Codex recently discussed this in depth:
[http://slatestarcodex.com/2016/09/07/reverse-voxsplaining-
br...](http://slatestarcodex.com/2016/09/07/reverse-voxsplaining-brand-name-
drugs/)

tl;dr: Regulation is the problem, not the solution.

~~~
pjc50
Unregulated medicine is literally where the phrase "snake oil" comes from,
meaning an oversold but ineffective solution.

~~~
UncleSlacky
Ironically, the original snake oil actually worked:
[http://www.scientificamerican.com/article/snake-oil-
salesmen...](http://www.scientificamerican.com/article/snake-oil-salesmen-
knew-something/)

~~~
GFischer
Really interesting, hadn't read that :) . Might be worth a submission of its
own.

------
mirimir
It's a concise article, and yet tl;dr ...

> The simple answer is because they can.

> Rather than lower prices, rules for Medicare help raise them. ... And it is
> illegal for Medicare to negotiate with drug companies.

> But [negotiating] would be effective only if the government could also
> refuse to pay for some medicines, ... The spectre of so-called government
> “death panels” looms large.

~~~
throwaway049
In the USA, if I have a potentially fatal medical problem and I can't pay for
treatment (myself or via insurance) what are my options? I ask because I
imagine I could not get treated which is the same outcome as 'death panels'
but without the government bureaucracy.

~~~
omegaham
It ends up being a really terrible game. You get treated, and then you get
presented with an outrageously high bill.

You then have two options - negotiate with the billing company, or go
bankrupt. A large number of people take the latter[1]. The result is that the
hospital then has to eat the costs of the procedure... which it then responds
to by jacking up the price even further for everyone else, knowing full well
that most of the uninsured patients who get the even higher price won't be
able to pay that, either. The hospitals then use this increased price to
negotiate better rates with the insurance companies.

So, you do get the treatment you need, but it nukes your finances, and
everyone else ends up paying for it anyway in this ad-hoc, incoherent,
uncoordinated mess.

[1][http://www.cnbc.com/id/100840148](http://www.cnbc.com/id/100840148)

~~~
pnutjam
Well, you get the most basic treatment. If you are dying quickly, you can get
treated. If you have a longer term issue or re-occuring issue, good luck.
Hospitals don't have to treat everyone, they are legally able to stabilize you
and let you die from complications.

More often, you slowly degrade due to lack of treatment. Then you can't work
and end up on medicaid and get the treatments you need. However, now your
disabled. It's a great system.

~~~
refurb
There are plenty of charitable hospitals in the US that will treat people who
have no other options.

------
qaq
It's important to remember that the largest expense item for big pharma is not
R&D but marketing & administrative.

~~~
refurb
You do realize that S&GA is a catch all for the general expenses for running a
company right? Why would you be surprised it's such a high percent?

Also, you may want to do a side-by-side comparison of which industry spends
the most on R&D. It's ~20% in pharma which dwarfs most other industries.

~~~
qaq
There are articles that actually break out Sales & Marketing budgets (2013
numbers I am excluding J&J since they have a lot of consumer products) "Next
in line is Pfizer ($PFE), long known for its marketing muscle. The drugmaker
plowed $11.4 billion into marketing in 2013, $4.8 billion more than it spent
on R&D--a difference of 72%. AstraZeneca ($AZN) is close behind with a 70%
difference. The U.K.-based company put $7.3 billion toward marketing last
year, and $4.3 billion into R&D. AstraZeneca has been pumping up marketing
behind products such as its blood-thinner Brilinta as it preps for the
onslaught of Nexium copycats.

The next 5 range from a 47% difference in favor of R&D on the high end--
Novartis ($NVS), with $14.6 billion in marketing spending--to 27% on the low
end. The latter is Merck ($MRK), with $9.5 billion allocated to marketing and
$7.5 billion to R&D.

Then there's Eli Lilly ($LLY), with a mere $200 million premium to the
marketing side. Its marketing spending clocked in at $5.7 billion, compared
with $5.5 billion for R&D. That's a difference of just 7%.""

------
DanBC
> These high prices support innovation, they argue—not just for America, but
> for the world. But it is unclear if firms’ profits need be so high to
> sustain research.

Thank fuck someone finally says that this isn't mostly about the US
subsidising the rest of the world. (A nonsensical claim when you look at how
much drug companies spend on marketing).

~~~
allendoerfer
I wonder if we should (some day) gradually start to regulate marketing in some
industries. Cannibalizing through marketing only increases prices for
consumers, creates bullshit jobs and destroys the environment.

If it is about commodities, the increasing profits could then be taxed away
until the product is virtually free for society. Not regarding the obvious
opposition from shareholders a big problem seems to be to decide when
something is really a commodity. Drugs are obviously not, we still seem quite
mortal.

~~~
hannob
Consumer marketing for drugs is forbidden in many parts of the world, the US
is more an outlier. However this still leaves marketing to doctors, which is a
problem. There are some initiatives that reject that (e.g. there's a german
group called Mezis).

It also completely makes sense. The decision for or against a drug should be
guided by scientific evidence. So the only form of "marketing" that should be
allowed are high quality scientific studies. And they shouldn't be delivered
to the doctors or patients via marketing brochures, but via scientific
articles and recommendations from independent organizations reviewing
scientific articles.

~~~
jamestnz
> Consumer marketing for drugs is forbidden in many parts of the world, the US
> is more an outlier

Exactly right. Because consumer marketing of prescription drugs is an utterly
crazy idea, both in general theory, and in its present unethical incarnation.

Last time I checked there were exactly two developed nations which allow so-
called DTC (direct-to-consumer) advertising of prescription medications at
all. Namely: USA and New Zealand. Apparently every other country got the memo.
Not us!

Every few years they talk about getting rid of it here in NZ. As you'd expect,
public heath officials tend to support that idea, and industry shills tend not
to.

I mean it took Big Pharma until 2008 to even adopt some basic ethical
guidelines in producing these ads. I'm talking things like not using actors to
play doctors anymore, and making sure that endorsers who said they had used a
particular drug had actually used it. Yep, those kindly old men in white coats
telling you to "Ask _your_ doctor if this drug is right for you" weren't even
real doctors.

Moreover, surveys carried out in NZ and in the USA show that when a patient
asks for a specific drug by name they receive it more often than not. "The
truth is direct-to-consumer advertising is used to drive choice rather than
inform it," says Dr Dee Mangin, associate professor at the Christchurch School
of Medicine. "In an era of shared decision-making, it’s much more likely that
general practitioners will just do what the patient asks."

Professor Les Toop from Otago University says: "Internationally there have
been many reviews of DTCA from health professional groups, academic
institutions, governments and importantly many independent (non industry
funded) consumer and patient groups. Without exception they have come to the
same conclusion: the partial and potentially misleading information and the
accompanying medicalisation caused by DTCA is of net public harm."

The AMA says: "Direct-to-consumer advertising inflates demand for new and more
expensive drugs, even when these drugs may not be appropriate."

End the madness, I say.

~~~
allendoerfer
> Last time I checked there were exactly two developed nations which allow so-
> called DTC (direct-to-consumer) advertising of prescription medications at
> all. Namely: USA and New Zealand. Apparently every other country got the
> memo. Not us!

I think when almost every other country does something different than you and
it is not something you introduced first, you should have to prove why of all
these you are the different one.

For Germany it is a general speed limit, but trying to introduce that would be
like a general gun ban in the US: If you really think about it, probably a
good idea, never going to happen.

~~~
kuschku
> For Germany it is a general speed limit, but trying to introduce that would
> be like a general gun ban in the US: If you really think about it, probably
> a good idea, never going to happen.

And, most importantly, for now the speed limit isn’t even necessary – all the
dangerous areas already have one, and the Autobahn is still one of the safest
highway systems in the world.

(And as liability goes up a low the faster you go, there’s already a kinda
speed limit anyway)

------
Animats
Competition doesn't force prices down unless there are at least four
suppliers. Two are not enough - price collusion, implicit or explicit,
results. With three, some price competition may appear. An EU study indicated
that it takes four before prices really get competitive and fall to near
actual manufacturing cost.

There's a huge price difference between drugs where there are at least four
suppliers (those are really cheap) and ones with fewer suppliers. When there's
one name brand drug and one generic equivalent, the generic drug tends to be
only slightly cheaper than the name brand. (Some of that comes from retail
pharmacies, who tend to price that way. Costco doesn't; they just mark up
everything they sell by about 15% over wholesale.)

~~~
rdslw
almost 20 years old GSM market in Poland confirms that. Up to the moment we
had 3 telcos, prices were stagnant. Introduction of fourth one (major three
were prohibited to own/acquire it) driven prices down really fast. Market
literally entered not-yet-ended downward trend (in terms of prices).

BTW, exactly 14 USD gives you today nolimit voice/text/inet plan. Dodge that
AT&T ;)

------
GrumpyNl
We as a manufacturer, want to make as much money as possible. Its as simple as
that. If nobody stops us, we will maximize profits.

------
Lazare
I'm not sure an article about "drug prices" makes much sense; the reasons why
an EpiPen is expensive have practically nothing to do with the reasons why
Hervoni is expensive. If you lump it all together and start looking for
reasons why _both_ are expensive, I doubt the answers you end up with will get
you very far

I think this was covered in excellent detail here:
[http://slatestarcodex.com/2016/08/29/reverse-voxsplaining-
dr...](http://slatestarcodex.com/2016/08/29/reverse-voxsplaining-drugs-vs-
chairs/)

------
listentojohan
Could a reason also be that there's rarely a lot of competition between firms
supplying the drugs? They basically get a state-sponsored monopoly through
patents - not much of a market-dynamic.

------
Mendenhall
Drug prices are so high because people will almost always pay anything to stay
alive.

What I find interesting is people think they have some sort of right to
someone else keeping them alive. Do you really ?

To me as harsh as it sounds its reverse greed. I want to live therefore other
people should be forced to produce a good for a cost I want/can afford.

Its a harsh truth that is the real issue but the vast majority will never say
it or talk about it. They just want to live.

------
atemerev
The only thing that can drive prices down is competition. No competition — no
price reduction. Economy 101.

~~~
jonlucc
That's true, but it's important to figure out how to increase competition
without destroying expensive innovation and risk. It's arguably the most
important question in any industry when regulation is discussed.

------
AngeloAnolin
Everybody wants to maximize the value of their investment, or product.

To the consumers affected so much by the high price, this comes around as
greedy. While to the business themselves, they see this as good business
incentive.

Of course, there are other factors: \+ economics of how much people are
willing to pay for, the scarcity of the product (and resources used to build
it) \+ the derived (and perceived) value of the people taking the medication
\+ politics and lobbying cost

In the end, it all comes down to the business' bottom line and the consumer's
capacity to pay. It is very probable that the pharmaceutical companies have
done a lot of calculations to ensure that their price point would be at the
stage where they have balanced everything to lean on profit for their side.

------
chatmasta
An acquaintance of mine made quite a bit of money running a "compound
pharmacy" for a few years. With his pharmaceutical degree, he was licensed to
"compound" common combinations of prescription medication into a single dose.
Insurance companies would consider the combination a separate drug (i.e. not
just the sum of its parts). Therefore each new combination he made was a "new"
drug and he was, quite literally, able to name any price. The insurance
company would then pay for it.

He had a nice operation going, even shipping to multiple states. He eventually
shut down the business when regulation tightened after a few compound pharmacy
scares.

------
perseusprime11
Whenever I see such articles, I attribute the cause to collective laziness not
economics. Why are health insurance costs high? Answer: Laziness Why are drug
prices high? Laziness Why is higher education expensive? Laziness

Somebody is lazy and they don't want to do the important job of making these
fundamental things cheaper and accessible. This somebody could be 'we'
collectively or govt or companies or just our greed.

------
themartorana
_" But it is unclear if firms’ profits need be so high to sustain research."_

It's very clear, and they don't. Profits are enormous. Profits are also
calculated _after_ the cost of R&D. So no, profits don't need to be
astronomical for companies to still be profitable after the cost of R&D.

------
tracker1
What they need is government enforced FRAND style patent licensing for
prescribed medications and drugs that are to be covered by government
programs, and all medications prescribed must have at least two sources...
that would increase competition.

------
diogenescynic
Because America refuses to swallow its pride and admit our health care system
is flawed and completely inefficient. All we have to do is follow a health
care system that actually functions, but we refuse and just keep doubling down
on stupid. It's the sunk cost fallacy. It's just like Iraq, Afghanistan,
Vietnam, and gun laws. America is in denial.

------
emodendroket
Is it really mysterious?

------
nomercy400
Answer: Capitalism. And monopoly.

~~~
atom-morgan
I think most would agree that protected monopolies wouldn't exist in a pure
capitalist economy.

------
JohnDoe365
Because it's a largely unregulated market.

~~~
rufusroflpunch
If you read many other posts in this thread, you will see it's the exact
opposite. Unregulated markets nearly always result in lower prices.
Pharmaceuticals are, by far, one of the most register markets.

~~~
antisthenes
Unregulated markets never stay unregulated for long. It's an unstable system.
The biggest players in the market have incentives to create regulatory capture
mechanism through influence on policymakers.

------
ianai
It's called inflation.

~~~
tracker1
The pharma industry, iirc is seeing 40% year over year growth, which should be
unsustainable in a free market.

~~~
ianai
I was referring to industry specific factors that continually push prices up.
In the medical industry insurance companies have market power but individuals
do not. So providers see their prices slashed by insurance Companies. If their
desired price is X and they know he insurance company will cut their price in
half they charge 2X. To do so they also have to charge uninsured patients 2X.
Because the uninsured have no market power they largely get stuck with 2X and
the price sticks. Suddenly the listed price has less to do with the greater
market than the specifics of the medical.

~~~
tracker1
It's still anything but a natural free market... it's far more captive with
motivated players all around. In reality what is needed is a FRAND-like
compulsory licensing requirement for patent licensing as well as a gov't
requirement of two manufacturers/distributors for approval, with limitations
on exclusivity in contracts. That would afford some reduced patent
protections, and ensure competition. That's the only way to drive prices down
in the long term.

------
joering2
Because of a free market. And limited rules against making profit.

A CEO of a new drug company can legally set his salary at $10MM and have it be
a part of the cost of running his business, hence selling drugs for $10MM+.

~~~
fivesigma
If the market were free drugs would be commoditized, like aspirin.

The reality is:

* As a pharma company you can't compete because another player is holding the patent for decades

* Governments around the world will indirectly spend trillions by way of social insurance on your products, so prices will balloon because that money has to go somewhere

* The barrier to entry is so high thanks to regulation

This is a made-up situation of artificially low supply coupled by propped up
demand.

How is this a free market exactly?

------
Steeeve
Research isn't cheap. Testing isn't cheap. Marketing isn't cheap.
Manufacturing, distribution, the list goes on.

There has to be a financial incentive to build an infrastructure around a
product.

Add in that access is highly controlled, meaning that there is significant IT
and non-IT security infrastructure that needs to be in place throughout the
life cycle of a given drug.

There will always be instances that are easy to politicize - pick your
favorite disease and there's a company with an overly expensive drug on the
market. But what happens when the financial incentive to innovate goes away?

There are cheap drugs all over the third world. Not too many of them were
developed there.

A major change in how the industry worked would be a significant event that
I'm not ready for, and I don't think the rest of the world is either. It will
take years for new economic strategies to build - and not all of those
strategies will be consumer friendly.

Today the solution is that access to expensive drugs is subsidized by
insurance which is subsidized by law. It's not the best solution, but it's a
working solution.

The political and economic climate that we have tells me that we'll talk about
change for another decade and look to actually implement some sort of real
change sometime 20-40 years from now as the industry ages and stabilizes.

You have to remember how young "modern medicine" actually is. Rabbit tests for
pregnancy aren't that far back in our history. We're still at the point where
compulsory sterilization is seen as a reasonable resolution to problems. We're
mere decades away from a time when companies like Baxter and Abbot enjoyed an
almost competition free environment and not too long before that, heroin was a
common ingredient in cough remedies and parasites were commonly sold weight
loss solutions.

