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> I’m concerned that whatever implementation of single payer we came up with would be far worse and more expensive than what European countries have implemented, even if structured similarly.

It's hard to compare the US to other developed countries, because the systems that exist in other developed countries could not exist as they do today without the US. While there are high barriers to trade (both artificial and natural - you can't fly across the Atlantic for emergency treatment, for example), you have to look at the global market to get a sense of how it works.

For example: today, companies that engage in medical and pharmaceutical R&D receive most of their revenues from the US. This is true even of pharmaceutical companies based in Europe: the US is their primary source of funding for R&D. (Similarly, 50% of all R&D in the entire world takes place in the US).

Any attempt to bring costs down in the US - whether single-payer or market-based - would result in higher costs for drugs and other supplies to the rest of the developed world[0]. Put another way, countries like Denmark and Canada and the UK have the appearance of negotiating leverage only because they're such a tiny market[1] compared to the US - and, crucially, a completely segregated market as well. So even if pharmaceutical companies end up selling drugs at very low rates there, they can easily make up the difference in revenue by increasing prices in the US[2].

The US doesn't even have to impose its own price controls to bring costs down - all they have to do is permit drug reimportation from other countries which honor US drug patents (like Canada). This would immediately cause drug prices in the US to drop (and, at equilibrium, drug prices in other countries to rise). There actually was a bill introduced in the Senate last year to do this, but it was voted down.

[0] It wouldn't affect countries like India or China, because they already don't honor most relevant pharmaceutical patents.

[1] Again, by revenue, not necessarily by population

[2] This doesn't actually affect their sales much, because sales are relatively inelastic, thanks to insurance - the costs are borne collectively by the population.




Nope, drugs sales in the EU alone are enough to cover pharmaceutical R&D costs worldwide. What they aren't enough to cover is Marketing costs, but that's OK since most EU countries don't allow direct marketing of drugs.

That's what the US covers. Not quite so noble sounding that you're covering the cost of advertising though, is it?


> Nope, drugs sales in the EU alone are enough to cover pharmaceutical R&D costs worldwide. What they aren't enough to cover is Marketing costs, but that's OK since most EU countries don't allow direct marketing of drugs. That's what the US covers. Not quite so noble sounding that you're covering the cost of advertising though, is it?

I usually avoid responding to comments that are this snarky, because it's generally a strong indicator that the person isn't actually having a discussion in good faith. But I'll bend my own rule to say:

1) EU sales of pharmaceuticals are nowhere near enough to sustain the level of R&D we see globally.

2) Direct-to-consumer advertising is only one part of "marketing". Even in the US, it's not the majority of money spent on marketing. Marketing absolutely does happen in the EU, and it's a necessary part of the entire R&D lifecycle.


1) Yes they are

Pharmaceutical R&D spending in 2015: USA $47B, Europe: $33B.

Total drug sales Europe 2015: $190B


It doesn't make any sense to look at marketing as a discrete component you can separate from everything else. Drug companies don't want to spend money on marketing, obviously. They do it because it increases sales by more than what they spend on marketing. That's typically good for the consumer, because that means the fixed development cost can be amortized over a larger number of buyers.

It's worth noting that most technology companies spend more on sales and overhead than R&D. For 2014-2015, the ratio between R&D spending and SG&A spending was 0.59 at Pfizer, 0.75 at Google, 0.56 at AstraZeneca, 0.43 at Apple, and 0.58 at Microsoft. Apple wouldn't be able to sell cheaper iPhones by reducing its advertising expenditures...


Marketing is mostly a zero sum game. To be successful, you have to spend more than the next company.

If all companies reduced their marketing spend equally by 50%, nothing of value will be lost.


No, not all of marketing spend is zero-sum --- even in our own industry. The alternative to many purchases isn't some other product or service, but rather nothing (and, in theory, a poorer outcome).


> No, not all of marketing spend is zero-sum...

That's why I said "mostly". The first 10% of marketing spend may well be useful. The last 10% is the case of being louder than competitors, and is zero sum. Where the line is in a particular market varies and is subjective.


A lot of these products don't have "competitors" in the conventional sense. Their competition is an objectively inferior last-generation treatment, or in some cases no treatment at all. In other cases, there are many "competing" drugs, but they're not all efficacious on every patient, and doctors need to try different things to see which works.

Obviously there are abusive cases where pharma companies are spending marketing dollars to promote products that aren't even marginally better than the alternatives. But it seems to me like there are broad cases in the industry where --- whatever other criticism you might want to level about marketing spending --- marketing simply isn't ever zero-sum.


I agree that marketing is not a zero sum game, but I mostly disagree with your first paragraph above, at least as it happens in the US.

You're probably aware of the egregious cases of Daraprim[0], Acthar[1] (there are at least 5 cases from the last 10 years that I've read about, these two come to mind). They are only unique in the sense that there was no "slow boiling process", but rather an immediate extreme hike. Many other out-of-patent medicines experienced slower but significant hikes, such as the Epipen[2] are happening all over the place.

You should also read the Epipen article paragraph about the public-facing marketing, which is deceiving and life endangering, and about the policy-facing marketing, which is also not in any way compatible with your description.

It is my impression that your first paragraph is fantasy.

[0] https://www.washingtonpost.com/news/wonk/wp/2017/08/01/what-...

[1] http://www.nytimes.com/2012/12/30/business/questcor-finds-pr...

[2] https://www.nytimes.com/2017/06/04/business/angry-about-epip...


I'm not sure what companies jacking up the price of their products because there are no substitutables and the market clearing price is nosebleed high has to do with marketing expenses.


Per my first paragraph, I was commenting on your first paragraph about "competition" (or lack of it), I agreed about marketing not being a zero sum game.

My point is that marketing expenses are far from just informative - e.g., in the case of Acthar and Epipen, they go towards convincing doctors and policy makers that a specific brand is superior or magical, when no such evidence exists; and it is my opinion (which would take me forever to find the facts for, I admit) is that a significant part of the marketing budget, perhaps upward of 50%, goes to such deceitful practices; another one that comes to mind is Oxycontin[0], which was marketed deceitfully, and is a major contributor to the opioid epidemic.

[0] https://www.theverge.com/2018/2/11/17001926/oxycontin-purdue...


The examples you're citing are all cases of abuses that occurred due to lack of competition, so I am completely lost as to what you're trying to argue here.

I just have a very simple point to make about pharma marketing costs. It was not my argument that there aren't abusive pharma companies; clearly, there are.


acthar, epipen and even oxycontin have $10 competitors which have been shown to be at least as good for their use cases. The belief that they do not (which is encoded into some medical recommendations and public policy) is a testament to how effective that marketing is.

In fact, oxycontins claim to fame is its uniqueness in how long it acts for and therefore reduced addiction potential, which does not actually work this way.

The “non competition” belief is itself a marketed reality for many drugs.


My healthcare provider always opts for the generic drugs. When that's not an option they negotiate hard with big pharma.

It amuses me how in the ostensibly capitalist US nobody cares about efficiency. You would think that the insurance companies in the US would care about profits, instead billions are being wasted every year. It wouldn't even be so bad if healthcare was actually the best in the world so people would get what they pay for but it is not even close...


It's hard to compare the US to other developed countries, because the systems that exist in other developed countries could not exist as they do today without the US.

Prescribing costs for the NHS are only about 10% of total costs, I don't think the effect is as big as your post implies.


> Prescribing costs for the NHS are only about 10% of total costs, I don't think the effect is as big as your post implies.

You're saying that like it contradicts my point, but it actually corroborates what I'm saying. The US spends two and a half times as much per capita as the UK does, in addition to being five times larger.

As I said, this is just one example - pharmaceuticals aren't the only way that the effects of a global market are visible, but it's a good example because it's one that's very easy for people to grasp.


Well your statement was that other systems could not exist. When looking at the figures it doesn't make much difference, even if drug costs doubled it would only mean a 10% increase in NHS costs.


Yes, the pharma companies get a great deal of revenue from the US, but the great majority of it is spent on marketing, not R&D: https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p...


> Yes, the pharma companies get a great deal of revenue from the US, but the great majority of it is spent on marketing, not R&D:

What point are you trying to make? It's not really relevant how much is spent on marketing in the US, because:

1) European sales are nowhere close to sufficient to sustain the levels of R&D conducted in the US or funded by the US market.

2) The US still funds the outright majority of R&D in the entire world, including R&D for pharmaceutical companies based in Europe.


"We can find no convincing evidence to support the view that the lower prices in affluent countries outside the United States do not pay for research and development costs. The latest report from the UK Pharmaceutical Price Regulation Scheme documents that drug companies in the United Kingdom invest proportionately more of their revenues from domestic sales in research and development than do companies in the US. Prices in the UK are much lower than those in the US yet profits remain robust. Companies in other countries also fully recover their research and development costs, maintain high profits, and sell drugs at substantially lower prices than in the US. For example, in Canada the 35 companies that are members of the brand name industry association report that income from domestic sales is, on average, about 10 times greater than research and development costs. They have profits higher than makers of computer equipment and telecommunications carriers despite prices being about 40% lower than in the US."

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1261198/

"It is widely claimed that research to discover and develop new pharmaceuticals entails high costs and high risks. High research and development (R&D) costs influence many decisions and policy discussions about how to reduce global health disparities, how much companies can afford to discount prices for lower- and middle-income countries, and how to design innovative incentives to advance research on diseases of the poor. High estimated costs also affect strategies for getting new medicines to the world’s poor, such as the advanced market commitment, which built high estimates into its inflated size and prices. This article takes apart the most detailed and authoritative study of R&D costs in order to show how high estimates have been constructed by industry-supported economists, and to show how much lower actual costs may be. Besides serving as an object lesson in the construction of ‘facts’, this analysis provides reason to believe that R&D costs need not be such an insuperable obstacle to the development of better medicines. The deeper problem is that current incentives reward companies to develop mainly new medicines of little advantage and compete for market share at high prices, rather than to develop clinically superior medicines with public funding so that prices could be much lower and risks to companies lower as well."

"The deeper problem is that current incentives reward companies for developing mainly new medicines of little advantage, and then competing for market share at high prices; rather than rewarding development of clinically superior medicines with public funding, so that prices could be much lower. One or two out of every 20 newly approved medicines offer real advances, and over time they have accumulated into a highly beneficial medicine chest for humanity. Approving new medicines using non-inferiority or superiority trials against a placebo, and using substitute or surrogate end points, has resulted for years in about 85 per cent of new drugs being little or no better than existing ones. These then become the medicines the rest of the world wants, because the rich have them and presumably benefit from them. But in fact, they have spawned an epidemic of serious adverse reactions that rank behind stroke as a leading cause of death and cause about 4.4 million avoidable hospitalizations worldwide. Thus the mythic costs of R&D are but one part of a larger, dysfunctional system that supports a wealthy, high-tech industry, gives us mostly new medicines with few or no advantages (and serious adverse reactions that have become a leading cause of hospitalization and death), and then persuades doctors that we need these new medicines. It compromises science in the process, and consumes a growing proportion of our money."

https://link.springer.com/article/10.1057/biosoc.2010.40


> There actually was a bill introduced in the Senate last year to do this, but it was voted down.

Can you share additional info on this or some keywords so I can do my lookup? I'd like to learn more about this, and why it was voted down.


> Can you share additional info on this or some keywords so I can do my lookup? I'd like to learn more about this, and why it was voted down.

It was an amendment, not a bill, but either way, it was voted down last January. I believe it only would have applied to reimporting drugs from Canada, which limits how effective it would have been, but it would have been a start.

Booker's excuse for voting against it was to allude to FUD about "safety standards". It's probably effective at inspiring fear, uncertainty, and doubt in people's minds, but it's a really weak excuse, because we're talking about brand-name drugs that are already sold to the US and Canada from the same manufacturer, just at different prices, and so we already have established processes for tracking batches and issuing recalls when needed.

https://www.rollcall.com/news/politics/pharma-booker-canada


>Any attempt to bring costs down in the US - whether single-payer or market-based - would result in higher costs for drugs and other supplies to the rest of the developed world[0]. Put another way, countries like Denmark and Canada and the UK have the appearance of negotiating leverage only because they're such a tiny market[1] compared to the US - and, crucially, a completely segregated market as well. So even if pharmaceutical companies end up selling drugs at very low rates there, they can easily make up the difference in revenue by increasing prices in the US[2].

I see this economic fallacy so often and crop up in so many different places that I'm thinking that it might actually need a name - maybe the "fallacy of immutable profits". For example, elsewhere:

* If you raise the minimum wage, the inevitable outcome is that people will be fired and prices will rise so that the "natural" state of the company's profit remains unchanged.

* If you raise land taxes then landlords will just raise rents so that their return on investment remains static.

As a profit making entity, this is naturally what you'd want to bluff people into thinking would happen. It's not what actually would happen though, except in one very specific scenario (the profit making entity has all the power and the other parties have no leverage).

The reality is that if you put economic pressure on one valve and there are three potential exit points, the pressure will be distributed across them relative to the leverage on each side. Has Walmart employed way more people than they need or are they barely getting by with what they have? The answer to that determines whether how much their profits get cut and whether employees get fired. Can customers just get their stuff off Amazon if walmart raises prices? If yes, then Walmart has to eat a shit sandwich of lower profits.

If the power of the drug companies relative to the power of Denmark is very high then Denmark will eat the losses. If the reverse is true, well, then Pfizer will eat shit.

Pfizer, of course, hate negotiating with large parties - especially whole countries because their relative leverage is much lower. They will lobby furiously to try and break the country down so that they can lobby on a more local level. This is also partly why Congress barred medicaid from negotiating with drug companies - it was hitting drug companies in the profit margins. Can't have that.

And, I think Pfizer's power on the global drug market is consistently overestimated, though most proposed "free trade" deals coming out of the US (e.g. TPP) seem focused on increasing the leverage of companies like Pfizer - e.g. with the ISDS and stronger intellectual property provisions.


Prices in Denmark would go down, or Pfizer profits would go down, both would be bad. Of course drug companies "hate negotiating with large parties"--because countries can exercise monopsony power: https://en.wikipedia.org/wiki/Monopsony. It's the same reason suppliers hate negotiating with Wal-Mart. Monopsony is not a good thing. It causes economic inefficiency, just like the exercise of seller-side market power (monopoly).


>Prices in Denmark would go down, or Pfizer profits would go down, both would be bad.

I'm struggling to see what's so bad about reduced drug prices and reduced profits for a large corporation which doesn't, to put it lightly, always play fair.

> Of course drug companies "hate negotiating with large parties"--because countries can exercise monopsony power: https://en.wikipedia.org/wiki/Monopsony.

Monopsony means single customer - hence mono. As in 1. If Pfizer wants to not sell to Denmark and sell to every other country in the world - of which there are several - it is completely free to do that.




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