

U.S. Consumers Foot the Bill for Cheap Drugs in Europe and Canada - sunsure
http://www.bloomberg.com/news/2013-10-14/u-s-consumers-foot-the-bill-for-cheap-drugs-in-europe-and-canada.html

======
reillyse
Wait a second.

There are two strange assumptions in this article. One that paying more for
something makes it better. And secondly profits gained are always reinvested
in research and development.

Paying more for something does not make it better especially in the realm of
healthcare. There are lots of reports and studies that show that American
spending on healthcare is one of the highest in the world and among comparable
nations it's health outcomes are the lowest (basically american consumers are
getting fleeced). Here is an article from our friends at Fox News
[http://www.foxnews.com/health/2013/07/10/united-states-
healt...](http://www.foxnews.com/health/2013/07/10/united-states-health-
outcomes-far-worse-than-other-comparable-nations/)

So paying more for healthcare does not mean better outcomes.

To bring it back to the drugs debate, perhaps it is the American consumers
that are getting ripped off and paying higher amounts for drugs doesn't result
in better drugs being developed but instead just results in higher profits for
drug companies.

Drug companies are private enterprises. They don't exist for the public good,
but they exist to make money. So higher profits WILL result in more money
being removed and not invested in R&D. If the companies weren't doing this
they wouldn't be living up to their responsibilities as corporations.

~~~
Symmetry
_So higher profits WILL result in more money being removed and not invested in
R &D. If the companies weren't doing this they wouldn't be living up to their
responsibilities as corporations._

That's true at some level, but not in general. Remember that the people who
invested the money that paid for the research that caused the drugs to be
developed could very well have just sat on their money and not invested it in
the first place. Those capitalists had a choice as to how much money to invest
in drug discovery, and since they're greedy capitalists they invested the
amount of money that they thought would make them the most money. There's a
diminishing returns thing going on where there are a whole bunch of possible
research avenues open, so the more money they put in the lower percentage
return they get. When the percentage return drops below what they could get
from other investments, they put money in those investments instead.

To the extent that drugs start to have higher profits then the greedy
executives will see that they can make even more money by investing more money
in drug research, possibly much more than the increased profits but also
possibly much less. It all depends on how fast the investors think that the
diminishing returns on investment kick in.

------
paulgb
"Abroad, where the “negotiation” consists of governments telling you what they
are willing to pay, even as you know that they can always change the law to
shorten your patent term so that other countries can manufacture your product,
using your research for free."

The author doesn't mention any examples of this actually happening, which
makes me wonder if it's just theoretical. Does it happen?

Also, how much of big pharma's costs goes to marketing? They don't have
consumer marketing expenses outside the USA.

~~~
mikeyouse
As of 2008, somewhere near $58 billion/year.

"From this new estimate, it appears that pharmaceutical companies spend almost
twice as much on promotion as they do on R&D."

[1]
[http://www.plosmedicine.org/article/info:doi/10.1371/journal...](http://www.plosmedicine.org/article/info:doi/10.1371/journal.pmed.0050001#s4)

~~~
reillyse
There's your problem right there. Outside the US there just isn't a huge spend
on marketing (they definitely try to influence doctors though). And honestly,
I find it really weird that pharmaceutical companies actually advertise to
patients. Part of the reason I spend so much money on a medical doctor is so
that I don't need to decide what medicine I need to take. In fact I don't
think I should be involved in the conversation. The doctor should just do his
or her job without me weighing in one way or the other because I've seen some
advertisement on television.

~~~
Symmetry
The vast majority of what drug companies spend isn't on advertising to
patients but advertising to doctors, having people on staff devoted to
answering doctor's questions, and sending free samples to doctors.

It's sort of screwed up that drug companies are expected to educate doctors
about their drugs since there's a huge conflict of interest there. But nobody
else is paying to train doctors in this.

EDIT: From the article that mikeyouse linked, pharma companies spent $20B on
R&D, $16B on free samples for doctors, $20B on doctor education, and $4B on
consumer advertising.

~~~
dragonwriter
> It's sort of screwed up that drug companies are expected to educate doctors
> about their drugs since there's a huge conflict of interest there. But
> nobody else is paying to train doctors in this.

The medical profession has continuing education requirements, much like other
regulated professions, and a lot of that is about keeping up with new
developments in each practitioner's area of practice. To the extent that
continuing education isn't directly subsidized by employers, the need to do it
is part of what justifies the high salaries doctors receive. So, yes, people
-- other than pharmaceutical vendors -- are paying to train doctors to keep up
with relevant developments in their field.

Pharma companies aren't spending vast sums of money marketing to doctors
because there is an education gap, they are doing it because the sales of
prescription drugs aren't at the sole discretion of the consumer -- that's the
whole point of the prescription requirement -- so doctors are the key
decisionmakers that they need to sell to.

------
brohoolio
Kind of a crappy article. It focuses on new drug innovation when most of the
markup we are seeing in the US is for old drugs. As an individual you can't
negotiate when you need a drug.

It's up to a regulatory body to make sure the manufacturers aren't exploiting
their position in the market.

------
moocowduckquack
_" The most hopeful thing I can say, in fact, is that we may naturally be
running out of feasible drug candidates, so maybe it doesn’t matter much."_

I'd hate to have the mental-state that regarded such a situation as 'the most
hopeful thing I can say'. Is almost as though the author has been briefed that
higher prices are the aim here.

Also, if you look at research money on the diseases that affect the most
people, it is mostly not coming from big-pharma anyway, but rather from state
backed research, much of it from the countries that the author reckons are
raising US drug prices. Personally, I suspect that the main reason for high
drug prices in the US is actually having such a massive army of middlemen who
do not have interests aligned with the patient, but that is only a guess.

~~~
dnautics
I promise you the level of state-backed research for pharmaceuticals is much
higher in the US than it is from "the countries that the author reckons are
raising US drug prices." I would, however, be the first to tell you that
throwing money at drug development is not a solution to good drug development,
and may be counterproductive beyond a certain point.

~~~
moocowduckquack
Fair. I just had a look at the numbers. Is less clear when you drill down to
individual countries and if you only look at the most virulent diseases, also
with a lot of the funding, like the global fund for instance, many of the EC
countries donate twice, once as part of their EC obligation, and again as a
national donation, so you may miss a lot if you just look at EC funds. But you
are definitely right overall, the US state spending seems massive in
comparison.

Mind you, this got me thinking, if you were going to expect any of that to
affect the pricing of essential drugs, you would expect it to push prices down
in the US, given there is what amounts to the worlds largest drugs industry
subsidy. Also, I notice that big pharma is not generally skint, so if there is
a shortage of new drugs (is this actually true in general, or is it just
truthiness?), I would agree with you that it is not down to a shortage of
money.

~~~
dnautics
it should have no effect on pricing. Basic capitalism 101: The price of a good
is very limitedly affected by what it costs to produce it.

------
msandford
That's one of the things that sucks about IP law. It'll never be standardized
internationally so those places where it's strict, prices are high. In nations
where it's looser, prices are low. We pay the government to enforce laws that
keep our prices up. It's kind of a bummer.

~~~
soneil
It's nothing to do with IP; Simply what the market is willing to pay. We're
not buying knockoffs, or violating anyone's IP (I'm european). In fact, the
article claims the US buys more generics than we do.

We just have a completely different market, and the prices reflect that. With
state-sponsored healthcare, you have one buyer who represents a vast
proportion of a nation's market. The economics become reaching most the market
on a narrow margin, vs reaching a tiny market on a more favourable margin.

Apparently the narrow margin scales to beat the private margin, based on those
sales being made.

~~~
msandford
It does have to do with IP. If there was a worldwide IP regime in place,
EVERYONE would have to pay what the drug companies demanded, or let their
citizens die without the drugs (in countries with single-payer).

Since the drug companies know that Canada or countries in Europe could -- if
they so chose -- make new laws that strike down the validity of their patents.
But that would take time to do and require specialized laws that only
dissolved drug patents or whatever. So they sell the drugs cheaply.

There's no negotiating like that here in the US because this is where the
major pharma companies are headquartered and where they spend a lot of money
lobbying for excellent protections. As a result their patents are safe here.

But their patents are not safe overseas which is why those countries tend to
get a better deal on their drugs on the whole. It's different because those
involved in the buying can alter the regulatory environment. Those involved in
the buying here can't make such a credible threat and as a result, higher
prices.

