[HN Gopher] The Mafia of Pharma Pricing
___________________________________________________________________
The Mafia of Pharma Pricing
Author : foolswisdom
Score : 260 points
Date : 2024-07-15 21:20 UTC (1 days ago)
(HTM) web link (www.thebignewsletter.com)
(TXT) w3m dump (www.thebignewsletter.com)
| drewda wrote:
| While I have mixed feelings about The New York Times's coverage
| of certain topics these days, this is one topic where their
| reporting has (positively) shaped events. They had a big
| investigative piece earlier in the summer about pharmacy benefit
| managers:
| https://www.nytimes.com/2024/06/21/business/prescription-dru...
| And that likely led to the recent FTC announcements.
| conductr wrote:
| On this timeline, it seems to me much more likely they caught
| wind of the FTC's attention being put on this topic.
| WilTimSon wrote:
| NYT is still good at coverage, I'd just argue that the optics
| of their coverage can be removed from their original, erm,
| style, at times. (I don't want to say "politics" but we all
| know I mean politics.)
|
| Still, they do excellent work to this day, just with
| questionable detours.
| its_ethan wrote:
| Setting aside what happens for the uninsured (which is important,
| I'm just trying to simplify for my own understanding), isn't this
| mostly the levying of costs of _very_ expensive drugs onto the
| insurance providers, rather than the patient? Meaning the
| "victim" of the price gouging is the insurance company?
|
| If you have insurance with a yearly out of pocket max of say
| $8,000 and the drug you're taking has a very veiled and seemingly
| dubious cost of $80,000 - does that effect the patient?
|
| I assume it does somewhat directly in the form of higher monthly
| payments (for the patient and other customers of the insurance)?
| Can the insurance company deny access due to the high cost?
|
| If this is somewhat the case, I would sort of expect insurance
| companies to be lobbying for the system to be changed, and they
| seem to have the capital to actually make a difference in that
| "fight"?
|
| Maybe I'm misunderstanding something though.. it was an
| interesting article but it really just gave me even more insight
| into how confusing the US healthcare system is, even beyond what
| patients actually interact with.
| dahinds wrote:
| The PBMs have mostly been captured by the insurance companies,
| so they're charging themselves and pocketing the profits
| themselves. Insurance companies just pass on the costs by
| charging higher premiums.
| FireBeyond wrote:
| > isn't this mostly the levying of costs of very expensive
| drugs onto the insurance providers, rather than the patient?
| Meaning the "victim" of the price gouging is the insurance
| company?
|
| I feel there's the obligatory remark here of "and how exactly
| is the insurance company paying for it?".
|
| > I assume it does somewhat directly in the form of higher
| monthly payments (for the patient and other customers of the
| insurance)?
|
| Absolutely directly.
|
| > Can the insurance company deny access due to the high cost?
|
| They have little motivation to do so. They just up the
| premiums. They're limited by law on administrative overhead
| costs, and are mandated to return unspent premiums (or roll
| them over), so the only way to make more money is "increase
| premiums, so we're allowed higher administrative overheads".
|
| This was a hallmark of Martin Shkreli. He liked to paint a
| picture of "I'll ensure you're only paying a low copay while
| the insurance companies take the hit for this drug I'm charging
| exorbitant pricing[1] for", as if customers thought that
| insurance had a magical money fairy, rather than that money was
| coming from them (albeit usually indirectly through their
| employer). Sadly, he was often right - a non-negligible amount
| of people saw him as an everyday hero, sticking it to the man.
|
| [1] Yes, pharma has R&D costs. Shkreli's company didn't do much
| R&D though, mostly patent acquisition[2].
|
| [2] "Fun" story about that. New drug comes before the FDA for
| approval, and it is opened up for comment. Shkreli lodges an
| objection to approval of this drug.
|
| Why? Because it's unsafe? No - trials thus far have shown it to
| be safer than the existing drug options.
|
| Why? Because it's less effective? No - it's also been shown to
| be more effective than existing drugs.
|
| Perhaps it's more expensive? No - cost of R&D and production,
| and estimated retail costs are expected to be lower than
| existing drugs.
|
| Huh, odd. So why in this case would Shkreli oppose this drug
| getting to the market?
|
| The only reason he lodged an appeal with the FDA had nothing to
| do with the drug, butbecause he and his company had just bought
| the patent to one of those 'existing drugs' referenced, and
| this new drug coming to market would crater the demand for his
| drug, and as a result torpedo the profitability of his
| investment/gamble.
|
| Fuck Martin Shkreli.
| colechristensen wrote:
| >If this is somewhat the case, I would sort of expect insurance
| companies to be lobbying for the system to be changed, and they
| seem to have the capital to actually make a difference in that
| "fight"?
|
| Insurance companies have the opposite incentive. Their profit
| is, to simplify, a percentage cut of the total amount spent on
| medical care. If the cost of medical care goes up, they raise
| rates and the market pays for it (what else is it going to do?)
| the poor or underemployed or non-traditionally-employed suffer.
|
| They will fight a small amount to keep costs low, but only in a
| relative sense in that they want to beat their competitors or
| not pay for one off extremely expensive things.
|
| The middleman to which you give a fixed percentage isn't really
| all that motivated to get you your best price.
| aidenn0 wrote:
| > Setting aside what happens for the uninsured (which is
| important, I'm just trying to simplify for my own
| understanding), isn't this mostly the levying of costs of very
| expensive drugs onto the insurance providers, rather than the
| patient? Meaning the "victim" of the price gouging is the
| insurance company?
|
| The article touches on this, but perhaps doesn't spell it out
| sufficiently:
|
| 1. Insurance companies have their profits legally capped
|
| 2. To get around this: somehow (merger, purchase &c.) end up
| with Company X that owns both an insurance company and a PBM
|
| 3. The PBM price gouges the insurance company, increasing PBM
| profits (which is legal, unlike increasing the insurance
| company profits)
|
| 4. The Insurance company passes the price-gouging on in the
| form of increased premiums.
|
| 5. Company X makes more money by charging higher premiums, just
| like it would if it had (illegally) increased the profit
| margins of the insurance company.
| BenFranklin100 wrote:
| I work in biotech. It's a long, difficult, and expensive process
| to develop a new therapeutic. It is immensely discouraging to see
| middlemen riding on the back of biomedical innovation and
| enriching themselves at the expense of the scientist toiling in
| the lab all the way to the patient in the hospital.
| daft_pink wrote:
| I don't really understand why this is possible or if the
| information in this article is fully true. It doesn't make sense
| why we can't just go around the pbms.
| ProjectArcturis wrote:
| No one else has the scale to even begin negotiating with the
| Pfizers of the world. Try to buy something from them directly,
| and the price would be "Fuck you".
| elhudy wrote:
| GPOs are reasonably large and capable
| daft_pink wrote:
| i thought the point of this article was that generic drug
| prices aren't going down.
| CPLX wrote:
| Go around how? The point is it's a consolidated monopoly. The
| same people own every step in the chain. They use this
| particular step to extract monopoly profits.
| BobaFloutist wrote:
| Cost plus pharmacies do still exist. The problem is, some drugs
| really are just way more expensive, so if you already have
| "free" (or heavily discounted) insurance from your workplace,
| it's a bit of a waste not to use it, especially since expensive
| drugs do also contribute to your deductible.
|
| Also, wholesalers also negotiate with PBMs, so the cost plus
| pharmacies might not be able to get the drugs at the same rate
| PBM-friendly pharmacies do.
| ProjectArcturis wrote:
| Several years ago, I worked as a data scientist for Express
| Scripts, before it was acquired by Cigna. I can't much speak to
| the macroeconomics of PBMs, but I can say that they were the
| worst technical organization I ever worked for. They were built
| out of mergers on top of mergers on top of acquisitions, so their
| IT systems were what you get when you duct tape a dozen legacy
| systems together.
|
| I worked in the "Innovation Lab", which had been designed to look
| like an ad agency's idea of Innovation -- brushed metal, Edison
| lightbulbs, that kind of thing. They'd bring clients through on
| tours to show off how much Innovation was going on. Meanwhile, I
| didn't really have that much to do, and no one seemed very
| concerned about that. Soon I realized I was _also_ part of the
| decoration - a genuine Data Scientist, hard at work Innovating.
|
| Our group produced approximately nothing. Our boss's boss was
| evaluated mostly based on how much he was able to sell people's
| medical data for.
| albroland wrote:
| Not sure if you'll take it as reassuring, or alarming, but
| having worked with a few PBMs on the insurer side ES was the
| most tech-competent. Worst probably being CVS Caremark.
| rancar2 wrote:
| My experience with ES in the 2010s is that they ran a very
| barebones staff so the people keeping the lights on were
| quite good and some of the best among my Fortune 500 clients.
| I had the pleasure of training their staff on my stack
| expertise as they did not want me to just do the work, they
| wanted to make sure they were experts at the end as well so
| they could support and evolve the stack overtime.
| lifestyleguru wrote:
| Last time I made blood test it really pissed me off why their
| forms require national ID and phone number. The nurse in turn
| was pissed at me why I'm reluctant to write down phone number.
| sofixa wrote:
| Idk how it works where you are, but blood tests I've done in
| France require your phone number or email address for a
| notification and MFA when logging into the blood testing
| laboratory's platform to get your results.
|
| The National ID I'd presume is to put the test results in the
| relevant healthcare systems so that your doctors (and only
| them) can have access to them.
| lifestyleguru wrote:
| Exactly, also phone numbers are coupled with national ID
| and medical IT systems are leaky and outsourced into
| oblivion. In that case they didn't provide alternative to
| send link over email. Later on test results with full
| personal info can be acquired in darknet and Russian
| speaking internet [1]. Are there any consequences? The
| authorities advice to "be careful" and the service provider
| says "they're sorry".
|
| [1] - https://www.gov.pl/web/baza-wiedzy/hakerzy-ujawnili-
| kolejna-...
| the_other wrote:
| > sell people's medical data for
|
| Why isn't this illegal?
| colejohnson66 wrote:
| HIPAA can be "waived" by signing the medical release forms
| you didn't read.
| giancarlostoro wrote:
| Last I ever read something on a form that concerned me it
| seemed worded like "your insurance might not cover your
| stay if you dont disclose this information" and I ignored
| that and just let it be. I wonder if thats how they trick
| people into it. It should be illegal for anyone to sign
| anything that has the possibility of their data being sold
| without being made aware of this in plain English "WARNING
| YOUR DATA COULD BE SOLD IF YOU SIGN THIS". I dont trust ad
| companies not to screw up my PII.
| ProjectArcturis wrote:
| Because there is a large industry based around sharing
| medical data, and that industry has lobbyists.
| refurb wrote:
| Like most mainstream media reports it misses a lot. I worked in
| the industry and The NY Times article misses key points.
|
| There is no "price" for a drug, there are several prices - list,
| net, Medicaid, AMP, ASP.
|
| So yes, while the list price for Gleevec has gone up, the actual
| price paid is very different.
|
| It's the same for insulin - the price that manufacturers have
| received has gone down 41% from 2014-2020, while the list price
| has gone up 140%.
|
| https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh...
|
| If people want to really understand how it all works, I recommend
| the Drug Channel blog by Adam Fein. He does a great job of
| digging into details, pulling data and showing what prices are
| actually doing.
|
| https://www.drugchannels.net/?m=1
| elevatedastalt wrote:
| > So yes, while the list price for Gleevec has gone up, the
| actual price paid is very different.
|
| You say it like it's a good thing. It's part of the problem.
|
| The fact that there is no clear no-nonsense to get a drug at a
| reasonable price without jumping through a bunch of hoops which
| aren't even clearly documented is not a good thing.
|
| We are talking of life-saving drugs here, not hacking frequent
| flier miles or credit card rewards.
| refurb wrote:
| There is a good system - that works for insured patients.
| It's the uninsured that get hosed
|
| NY Times talks about list prices but that price isn't even
| used by insurance companies.
| sofixa wrote:
| > There is a good system - that works for insured patients
|
| Does it? I've read plenty of horror stories of people
| getting denied treatment by insurance, or paying tons of
| money for insurance barely covering anything.
|
| And more broadly, how much money is wasted on multiple
| layers of beyond useless middlemen? How much money do
| hospitals spend on admin and billing departments dealing
| with this bullshit?
|
| Strong "No Way to Prevent This, Says Only Nation Where This
| Regularly Happens" vibes.
| ffgjgf1 wrote:
| How is it good? How do the insured benefit from the
| complete lack of price transparency besides having to pay
| significantly higher premiums than they would otherwise?
| refurb wrote:
| Because the insurance company don't pay list price, they
| pay the negotiated rate.
|
| The patient doesn't pay list or net price they pay the
| co-pay. There doesn't need to be price transparency. It's
| like auto-insurance - do you need to know the negotiated
| rate for your collision repair?
|
| No, you just pay your deductible and move on.
|
| The list price is irrelevant to the insurer and the
| patient.
| worik wrote:
| > no clear no-nonsense to get a drug at a reasonable price
| without jumping through a bunch of hoops
|
| Yes
|
| Is possible
|
| I have a friend who imported the drugs she needed to treat
| type C hepatitis from India
|
| Proceeded to set up a buyer's club that transformed the lives
| of dozens of people
|
| What a stupid system, and how the most vulnerable suffer to
| benefit the most powerful
| chasil wrote:
| I had heard that a treatment had been developed that cost ~
| $100k.
|
| Looking at the wiki, was it solvadi/sofosbuvir or
| olysio/simeprevir?
|
| "While access to the newer treatments was expensive, by
| 2022 prices had dropped dramatically in many countries
| (primarily low-income and lower-middle-income countries)
| due to the introduction of generic versions of medicines."
|
| https://en.wikipedia.org/wiki/Hepatitis_C
| Cupertino95014 wrote:
| You've described the problem:
|
| > here is no "price" for a drug
|
| Yes, there is. If we look on their 10-K statements, they will
| have a fixed cost and a variable cost assigned to each drug.
| The variable cost will be just the manufacturing, and the fixed
| will be research and overhead allocated to this drug.
|
| Total cost = fixed + variable. The rest is profit. We can
| decide what a "reasonable" profit is, and Total Cost + Profit
| is the notional "price."
|
| That doesn't mean treating them like a state monopoly and the
| final price is fixed by law, but it does tell us a "price." All
| those things you mentioned (list, net, Medicaid, AMP, ASP) are
| kinda irrelevant.
| refurb wrote:
| Cost-plus pricing creates all sorts of perverted incentives
| in and of itself.
|
| And I'm not sure we want to go with "government mandated
| profit margins".
|
| Do all drugs have the same margin? Even if the benefit is the
| same? That creates perverted incentives.
|
| It's not a simple problem to solve at all.
| Cupertino95014 wrote:
| I don't think you read the whole thing. I specifically said
| "no cost-plus pricing." It's just a notional price for
| comparison with the real ones.
| refurb wrote:
| Looking at cost and setting a price is cost-plus pricing.
| Cupertino95014 wrote:
| Hello? Do you understand the word "notional"?
| Scoundreller wrote:
| I like to say the first dose of a drug costs a billion
| dollars and all the rest ever after cost a few cents.
| Projectiboga wrote:
| So when a diabetic goes to get lifesaving insulin and some
| mistake happens w insurance they are paying the inflated price.
| Not rare, since insulin comes in bottles which can and do
| break.
| foolswisdom wrote:
| It sounds like you're saying exactly what TFA says? Bit odd to
| criticize an NYT article (and without linking) as a comment on
| an article that does get into these details?
| jimt1234 wrote:
| I worked at a PBM back in the late-90s/early-2000s. It was where
| I was introduced to the value of customer data and the strange
| world of lawyers, all in a single corporate meeting:
|
| - The company is launching a new service. We already sell
| customer drug-prescription data to drug companies, and the drug
| companies analyze this data to understand where/when/why/to-whom
| their drugs are being prescribed. Now we're going to help the
| drug companies advise doctors on where/when/why/to-whom they
| prescribe drugs.
|
| - Sounds great. Where do we come in?
|
| - The new service will act as a middleman, processing payments
| from drug companies to doctors.
|
| - So, a service to manage kickbacks?
|
| [Meeting room full of suits goes silent.]
|
| - The payments aren't "kickbacks". They're "rebates".
|
| - Is there a difference?
|
| - Absolutely. [silence]
|
| - So...what's the difference?
|
| - Please be sure to only use the term "rebate" in all
| communications, especially email. Never use the term "kickback".
|
| And that was pretty much it. The company processed prescriptions
| for pharmacies, then sold that data to drug companies, who in
| turn used that data to provide kickbacks to doctors for pushing
| their drugs over a competitor. And it was all legal, thanks to
| the lawyers and their select word usage. Oh, and I think we
| weren't supposed to use the term "middleman", either.
| Aurornis wrote:
| You can actually look up payments from certain companies to
| doctors now: https://openpaymentsdata.cms.gov/
|
| I've checked several doctors that I've visited over the years.
| None of them show up, with one exception: The doctor who
| immediately set off my scam alarms when she tried really,
| really hard to get me diagnosed with sleep apnea, despite not
| one but two very clearly negative sleep studies.
|
| I could never understand why she was pushing so hard, until I
| looked her up in this system. She takes an incredible amount of
| money from drug companies and device manufacturers.
|
| I don't know if a scheme like you described would even be
| allowed today. If it is, the bigger medical systems are
| actually quite strict with doctors taking anything resembling a
| payment like this, from what my friends in the industry tell
| me.
| lifestyleguru wrote:
| Doctors remunerated or having an incentive to diagnose
| specific disease (diabetes, covid, boreliosis, etc) really
| terrify me. Developed world needs a ruthless transparency in
| this.
| sofixa wrote:
| > Developed world needs a ruthless transparency in this.
|
| Do you have sources in this happening somewhere other than
| the US in the developed word?
|
| And I'd say such transparency is needed all around the
| world. Developing nations can fall in the same traps
| developed ones did.
| bookofjoe wrote:
| https://www.the-fence.com/the-drugs-dont-work/
| penguin_booze wrote:
| > she tried really, really hard to get me diagnosed with
| sleep apnea, despite not one but two very clearly negative
| sleep studies
|
| This is highly unethical.
|
| People should report such instances to relevant regulators,
| at least as a matter of record. A single such report won't
| have much teeth, many of similar nature might catch someone's
| attention.
| mft_ wrote:
| Thanks for sharing this - very interesting.
|
| It looks like it's a register of payments from Pharma either
| for legitimate services rendered (e.g. consultancy, with
| travel costs) or hospitality (e.g. food and drink).
|
| Does it also capture other payments - like the 'kickbacks'
| discussed above? (It's difficult to check this without
| exhaustively searching for random names!)
| bboygravity wrote:
| Genuine question: what pharmaceutical could your doctor have
| benefitted from to help against sleep apnea?
|
| As far as I know there's no meds for it? Only surgery, CPAP
| devices, mandibular advancement devices, etc.
|
| Would she get kickbacks from those medical device companies
| as well?
| RALaBarge wrote:
| When you get a CPAP machine, the medical supplier then will
| try to give you replacement pieces super frequently. Things
| like the mask annd the tube each cost more than $100, so
| yeah, I'm sure it's still kind of the same deal even
| without pharmaceuticals.
| starrleight wrote:
| Keep it together
|
| And move away silently from them all
|
| Silently.
|
| Mom
|
| New town
|
| I'll.find you
| NickC25 wrote:
| I broke part of my hand last October after slipping and
| falling.
|
| At the request of my new insurer, I went to my local urgent
| care. The rep for my insurer swore up and down that they had
| an X-ray machine and could diagnose my problem quickly, as
| well as immediately after refer me to a local hand specialist
| at the local University's hospital. After my experience, I
| realized that nothing the rep said was true.
|
| The nurse practitioner at the urgent care facility said
| nothing was wrong with my hand (despite it being black &
| blue, and having all the hallmarks of a broken hand). He
| refused to refer me to a specialist or for an X-ray unless I
| took an HIV/AIDS test. He started asking me several questions
| about my sexuality and relationship status - I am not
| sexually active (sadly) nor am I in the demographic with a
| higher likelihood of coming into contact with the HIV virus,
| so I told him as much and declined the test. _I was there
| because I broke my fucking hand._ He kept insisting that I
| needed to take the tests. I walked out of the facility pissed
| off and without any progress on my hand. Several hours
| wasted. The guy 's assistant called me the next day pleading
| me to come in for tests, and I reiterated that all I wanted
| was to get an X-ray like I was promised by my insurer, and to
| see someone who knew what they were talking about.*
|
| If your tire pops, your mechanic shouldn't say "nothing wrong
| with your tires, it's your exhaust you need to worry about"
| while he's wearing a shirt with an exhaust maker's logo on
| it.
|
| I clicked on the link you posted. I entered the nurse
| practitioner's name, and surprise surprise, he's gotten over
| $3k in the last year from ViiV Healthcare, a company
| specializing in the research and development of HIV/AIDS
| testing equipment and drug development. Not an exorbitant
| amount of money at all, but the dude is ethically
| compromised.
|
| That needs to be straight up illegal with serious
| repercussions - for both those who offer the kickback, and
| those who accept it.
|
| *FWIW, I spoke with a physical therapist not too long later,
| a guy who specializes in sports injuries (particularly from
| basketball as he's a former pro hooper himself), and within
| about 10 seconds of examining the area of injury said "yeah,
| you broke your hand. I see this frequently. Do this every day
| with your hand, and come see me in 2 months if nothing
| works".
| dralley wrote:
| Make sure to leave a review
| NickC25 wrote:
| I did, and nobody seemed to care.
| phonon wrote:
| Make an ethics complaint to the state board.
| NickC25 wrote:
| Is there a statute of limitations for ethical complaints
| in the medical field?
| willcipriano wrote:
| Not one that is less than a year.
| BobaFloutist wrote:
| I remember looking up my psychiatrist, who, it turns out,
| periodically gets an ~$25 meal from various drug reps.
|
| I suspect this does little to influence his prescribing
| decisions.
| refurb wrote:
| Kickbacks have a specific meaning - a payment made in order to
| get business.
|
| Data rebates aren't kick backs, they pay for something they
| wouldn't otherwise get - patient level data.
|
| The PBMs get paid a double digit percentage of purchases as a
| rebate when quality data is sent back. It's optional and PBMs
| can decide not to do it.
| thaumasiotes wrote:
| Buying something you don't want is an extremely traditional
| way to launder illegal payments to the person you're buying
| from.
| bryanrasmussen wrote:
| that's true - on the other hand why wouldn't you want to
| gather high quality data about patients using your drugs?
| thaumasiotes wrote:
| Most obviously, because the data isn't valuable to you.
| Why wouldn't you want to gather high quality data about
| recent Little League games?
|
| But in the case where it is valuable, and the purchasing
| party would really like to give some free money to the
| other party, we can be sure that the purchasing party is
| overpaying for the data anyway.
| refurb wrote:
| You'd be confidently incorrect.
|
| I've been involved in the negotiations. Pharma companies
| pay a couple basis points for it and are happy to walk
| away otherwise.
|
| It's not a kickback, it's fee for service. In fact there
| are specific Safe Harbor rules for this type of payment
| to _avoid_ kickbacks.
| IG_Semmelweiss wrote:
| This is illegal nowadays, but rebates endure between
| manufacturers and PBMs.
|
| It works like this:
|
| Nanufacturer sells abc drug to PBM for x price. There is an
| agreement between them, that if pbm sells y number of abc, then
| pbm gets a rebate.
|
| However, this gets the PBM in a jam. Now they have to somehow
| sell this crazy overoriced brand drug to the insurer. So they
| do a sleight of hand. So the PBM agrees with manufacturer to. .
| increase price! Why? For an edge in the conversation with
| insurer/employer:
|
| PBM: here's brand drug abc. Price is x^2. I am soooo good at
| negotiating your prices, that I was able to get it for z
| instead. You see! Thats a 50% price reduction. Am I not
| awesome.
|
| Insurer/employer: thats great. I'll be able to sell this 50%
| reduction off sticker to my manager. Thanks!
|
| PMB keeps gwneric competition out of formulary, ensuring no
| competition
|
| And eventually, PBM receives a rebate check for their troubles.
|
| And its totally legal.
| lifestyleguru wrote:
| Don't even have to work with them to notice this. Over here all
| dentists tell you to use Elmex products, noted on Elmex branded
| post it. Elmex's "rebates" and "symposiums" must be glamorous.
| 1vuio0pswjnm7 wrote:
| "And it was all legal."
|
| In some states.
|
| It sounds like you thought there was nothing wrong with
| kickbacks. That's concerning. The dictionary definition of a
| kickback is a concealed, usually illegal payment, a form of
| bribe. Whereas the dictionary definition of a rebate is a
| portion of the sum paid returned to the purchaser. If you knew
| you would be helping these people to process kickbacks then why
| work for them.
|
| Honest question.
| ggm wrote:
| And people say that public ownership is "less efficient" than
| private industry, and less efficient than regulated private
| industry.
|
| Well.. I don't buy it. Access to drugs and efficient pricing and
| rationing (because that is what it is) is not working well. It's
| a massively distorted market.
|
| The public good here would be better served by another model.
|
| Even the "we need these prices to recover our massive sunk costs"
| part of the argument is bogus. Much good drug design and research
| is done on the tertiary education and research budget worldwide.
|
| There is absolutely no single-process need to do drug IPR based
| models, the profit motive is not the only model.
|
| I look to the modern mRNA drug emergence to lead to radical shake
| up in the cost of production of novel treatments. We're seeing
| some signs of this, along with other changes in drug models:
| injectable hypertension treatment is in test. Imagine the impact
| on the cost basis of a pill-per-day model!
| refurb wrote:
| I think the point you're missing is that many parts of pricing
| _are government regulations_.
|
| And the way that the myriad of regulations drive some of this
| behavior.
|
| A great example is the 340B program. A government regulation
| requiring manufacturers to offer steep discounts to hospitals.
|
| It's created all sorts of distortions including the purchasing
| of pharmacies by hospitals so they can access the discount but
| charge the full price for the insured.
|
| The US healthcare system is terrible in big part because of
| regulations.
| kevingadd wrote:
| Is there a successful healthcare system you'd point to that
| was achieved via deregulation?
| shiroiushi wrote:
| I'm not sure OP was implying any claim that removing
| regulation would lead to a great healthcare system, just
| that the US regulations are bad and causing many of the
| system's problems.
|
| In better-run nations, the healthcare systems are highly
| regulated, but the regulation is actually (mostly)
| intelligent and implemented to have a positive effect. For
| some reason, when the US tries to do regulation, it somehow
| manages to do a uniquely bad job at it, causing a negative
| effect.
| soco wrote:
| Maybe it depends who you want to benefit with your
| regulation - the patient or the provider? Because I'd
| argue providers seem to make good money within the US
| regulation.
| shiroiushi wrote:
| I'm not so sure about that actually. I think the real
| winner in the US system is the insurance companies.
| ggm wrote:
| > The US healthcare system is terrible in big part because of
| regulations.
|
| The US regulatory landscape is crippled by lobbying and fear
| of "socialism" -This is completely fixable by a competent
| regulator.
| specialist wrote:
| True. Alas, SCOTUS just overturned The Chevron Doctrine.
| (Along with their other attacks on the administrative
| state.) Hard to predict the aftermath.
| edm0nd wrote:
| and that imo is a good thing.
|
| A recent example is the ATF's expansion of the NFA by
| redefining a dealer from "Someone who makes selling
| firearms their primary income" to "Makes a profit on a
| sale"
|
| They effectively made everyone who ever sells a gun
| privately a felon.
|
| And the ATF is headed by a guy who has zero firearm
| experience and couldn't even separate the slide off a
| glock.
|
| Its a perfect example of a bad faith action and we only
| barely blocked its enforcement. Agencies with chevron
| were able to railroad whatever politicians wanted with
| zero accountability.
| specialist wrote:
| Since the Bipartisan Safer Communities Act necessitated
| this rule change, shouldn't you be mad at Congress?
|
| Further (emphasis mine):
|
| "Despite that concern, there have been at least a few
| overreactions to this rule online, with some commentators
| making dire proclamations about the criminalization of
| all private gun sales coming from this rule. That is not
| exactly what this rule does. Many of _these changes apply
| to administrative and civil actions by ATF, rather than
| criminal actions_. Being sued by the ATF and facing civil
| or administrative fines would not be pleasant, but it
| would be less terrible than being in federal prison. "
|
| New ATF "Engaged In The Business" Rule (Kinda) Blocked By
| Judge
|
| https://www.thefirearmblog.com/blog/2024/05/22/new-atf-
| engag...
|
| I don't have a dog in this fight, so I had no idea what
| you're upset about. This article was the third hit in my
| noob search. Apparently you oppose informing the state
| (CLEO) about private transactions.
|
| Okay.
|
| There are ~430m guns owned privately in the USA. With
| ~15.5m/year sold (new and used). The updated rule covers,
| what, ~30,000/year transactions, less than 0.2%.
|
| That's what this whole fight is about? Really? A decades
| long slap fight over 0.2% of sales?
|
| I'm struggling to think of a hill that I'd personally die
| on (rhetorically) where the stakes were less than a
| round-off error.
| specialist wrote:
| Regulations is just a scary word for rules.
|
| There's always rules.
|
| The trick is to fashion a ruleset (game, marketplace) that
| maximizes for public good (long term).
| lotsofpulp wrote:
| 340B legislation is one of the clearest examples of
| corruption. I cannot believe anyone can be so stupid, much
| less two branches of government, to pass something that does
| nothing but allow for corruption.
|
| Goal: provide poorer people with more access to healthcare
| and medicine
|
| Step 1: require medicine manufacturers to sell medicines at
| low cost to medicine retailers if they want the government to
| buy the medicines via Medicare/Medicaid
|
| Step 2: there is no step 2. There is no requirement for
| medicine retailers to sell the medicine to end users at low
| cost.
|
| Result: Medicine retailers arbitrage this by obtaining
| medicine for cheap and selling it to high prices to
| insurance, paid for by premium payers. Meaning people with
| health insurance paying extra so that medicine retailers can
| earn money...to do nothing.
| refurb wrote:
| Great summary.
|
| It's the perfect example of good intentions and regulations
| that actually make the system worse, not better.
|
| It's driven a bunch of community oncologists out of
| business because they can't compete with 340B hospitals who
| can get drug much, much cheaper.
|
| But do patients see any of the savings? No.
| Scoundreller wrote:
| > We're seeing some signs of this, along with other changes in
| drug models: injectable hypertension treatment is in test.
| Imagine the impact on the cost basis of a pill-per-day model!
|
| Tablets are generally dirt cheap to produce. Sterile
| injectables adds a lot of variables and requirements, both in
| production and sometimes also in distribution (cold chain?) and
| administration (directly and sometimes requiring
| reconstitution).
|
| Maybe if you have an API that's expensive to produce and has
| poor bioavailability an injectable might be cheaper.
|
| A long acting injectable antihypertensive will have a place for
| some, but creates other issues: can't stop it quickly and
| hypertension often requires multiple agents to treat.
|
| I wish poly-pills took off :(
| bobthepanda wrote:
| honestly what looks to be more promising is the twice a year
| HIV shot. Truvada and Descovy are not cheap.
| t-writescode wrote:
| in the United States, at least, (and until very, very
| recently, I believe), PrEP is required to be covered under
| healthcare; and, services like good rx make Truvada
| specifically very accessible in price, even free.
|
| In the United States, please look into these services and
| what your insurance provider does cover because, at least
| for now, it should be *very* affordable. (between free
| w/insurance to $30/mo with GoodRX).
|
| I do think that price is higher than I saw the last time I
| looked it up, but I don't have that search on hand to
| confirm.
| mft_ wrote:
| 1. Development of a single new drug costs several billion.[0]
| There are outliers which cost less, but billion _s_ is a decent
| estimate on average.
|
| 2. There is continuing need for new drugs: in 2023, FDA
| approved 55 new drugs [1] not including new indications for
| existing drugs (which also cost money to achieve).
|
| 3. It therefore follows that (in the current regulatory
| environment) just _maintaining_ the current level of
| development and approval of new drugs would probably cost _over
| 100 billion per year_ (possibly not including manufacturing and
| supply).
|
| 4. Drug development is therefore hellaciously expensive, while
| being high risk (i.e. high risk of failure) and a long-term
| endeavor.
|
| 5. In our current world, the model that has evolved is that
| this money is raised from investors, entrusted to experts, and
| if everything goes well, capital plus profit are recouped via
| drug prices. Payors swap huge up-front costs with an uncertain
| outcome, for later huge costs with a known outcome.
|
| 6. Replacing this model would therefore likely take global
| collaboration between governments, funding expensive high-risk
| long-term projects, with the end-goal of (much) cheaper drugs -
| an end-goal that would likely take a decade to meaningfully
| realise (importantly, much more than a single electoral term).
| It would be politically momentous, as it would effectively
| destroy a significant and established sector of the economy.
|
| 7. As much as I like this concept, I simply don't see any
| evidence that we're even close to ready for such a model of
| global collaboration and funding. Even when the challenge was
| urgent and potentially existential (e.g. a global pandemic) the
| response was often the opposite of collaborative.
|
| 8. Interestingly, though, it wouldn't even be very expensive on
| a world scale. The GDP of (just) the top 20 nations is roughly
| 88 trillion.[2] 100 billion is barely over 0.1% of that. If you
| shared the cost by GDP amongst the top 20, US and China would
| pay a lot, but involved European nations would pay in the
| region of 2-5 Bn/year.
|
| 9. This obviously doesn't deal with the issue of ongoing costs
| for already-approved drugs...
|
| ===
|
| [0] https://www.forbes.com/sites/matthewherper/2017/10/16/the-
| co... [1] https://www.fda.gov/drugs/novel-drug-approvals-
| fda/novel-dru... [2]
| https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...
| the_other wrote:
| > Drug development is therefore hellaciously expensive,
|
| And yet, drug companies still have outrageous profit margin.
| tlb wrote:
| "Profit margin" doesn't subtract the initial development
| costs, just current costs. So drug profit margins should be
| large to repay the billions previously spent in
| development.
| mft_ wrote:
| Hmm, if for the sake of argument we assume that spend on
| R&D is kept constant, then profit margin (being money
| left over after spending on stuff) does indeed account
| for development costs.
|
| In reality (I think this is your point) there's a big
| time shift, in that profit earned in 2024 is thanks to
| R&D spend over the past decade or so. However, the 2024
| profit margin would incorporate the 2024 R&D spend
| contributing towards new drugs and indications over the
| next decade or so, and with a with a constant R&D spend
| these would effectively cancel out.
|
| (In reality, of course, R&D budgets do fluctuate.)
| aidenn0 wrote:
| The term is insufficiently specified; there is "Gross
| Profit Margin" which considers only COGS, so works
| roughly as you suggest.
|
| There is also "Operating Profit Margin," which would
| include current R&D costs, which (assuming they are non-
| declining over time) would account for development costs.
|
| If the company took on debt to develop the drugs, then
| "Net Profit Margin" would also include the cost of
| servicing that debt.
| COGlory wrote:
| Not really, their margins typically wind up comparably with
| other manufacturing. They just have way way higher costs.
| Modern drugs are expensive, for a ton of reasons.
|
| See this talk about pharmaceutical finances:
| https://www.youtube.com/watch?v=3LGqQJFdoWM
| waffletower wrote:
| This is understatement. Inefficiency is certainly a factor in
| the performance of the amalgamated U.S. health care system. But
| the fact that it is essentially a multi-tier private system,
| additional avenues for abuse and corruption are widespread --
| particularly when compared against the health care systems of
| other industrialized countries. The system honestly is only
| good for the wealthy -- who enjoy 1% preferred treatment,
| exploit the structure of the system for financial gain, and
| solidify its presence through aggressive lobbying.
| jmyeet wrote:
| You cannot talk about the problems with pharma pricing without
| talking about enclosures [1]. Consider:
|
| 1. Health care providers are largely banned from importing drugs
| [2];
|
| 2. Medicare is largely banned from _negotiating drug prices_ [3]
|
| 3. The VA was allowed under Obama to negotiate drug prices,
| something which was promised but never delivered for Medicare.
| The GAO shows this has reduced costs [4];
|
| 4. Pharma companies will tell you R&D is expensive. It is but
| it's the government paying for it. Basically all new novel drugs
| relied on public research funds [5];
|
| 5. Pharma companies generally spend more on marketing than R&D
| [6];
|
| 6. What R&D pharma companies actually do is typically patent
| extension [7].
|
| The true "innovation" of capitalism is simply building layers and
| layers of enclosures.
|
| [1]: https://en.wikipedia.org/wiki/Enclosure
|
| [2]: https://journalofethics.ama-assn.org/article/what-should-
| pre...
|
| [3]: https://www.healthaffairs.org/content/forefront/politics-
| med...
|
| [4]: https://www.gao.gov/products/gao-21-111
|
| [5]: https://www.cbc.ca/news/health/drugs-government-funded-
| scien...
|
| [6]: https://marylandmatters.org/2024/01/19/report-finds-some-
| dru...
|
| [7]: https://prospect.org/health/2023-06-06-how-big-pharma-
| rigged...
| max_ wrote:
| What you have described here is the phenomenon that Stigler
| describes as "Regulatory Capture". [0]
|
| Regulatory capture is the use of state resources (mostly
| regulation). To tilt the ground of business in thier favour at
| the expense of the public and other competitors.
|
| People beg for "regulation" from the government but the problem
| is that the politicians are often puppets of the very
| corporations they are meant to regulate. That's how we end up
| with regulatory capture scams.
|
| Is that "capitalism"? I don't think so. Does it contain traces
| of capitalism? Yes.
|
| But I think what Americans have is more of corny-capitalism,
| state-capitalism & regulatory capture.
|
| It is very different from Hayekian capitalism which is actually
| anti-crony capitalism & anti regulatory capture.
|
| [0]: https://en.m.wikipedia.org/wiki/Regulatory_capture
| tsimionescu wrote:
| All of the phenomena described above would happen with
| minimal necessary regulations as well (preventing imports for
| fear of quality and safety reasons, which must be regulated
| in pharma). In general, the problem with US capitalism is
| insufficient regulation to force a free market between
| corporations, allowing massive consolidation and discouraging
| competition on price. Any free market principles will never
| work if you have less than a few tens or even hundreds of
| companies competing, for a market as huge as pharma.
| max_ wrote:
| Making importers legally liable for damages that be linked
| to to bad quality & other safety concerns is more effective
| than a central body trying to tell people what is "safe" or
| "good quality".
|
| This strategy is still regulation but it is not based on
| interfering it is based on disincentives.
|
| Limitation of imports is usually just a scheme to
| facilitate cartels & protectionism.
|
| >Any free market principles will never work if you have
| less than a few tens or even hundreds of companies
| competing, for a market as huge as pharma.
|
| It is often "regulation" that makes it very difficult for
| new entrants to compete.
|
| It is said that it costs about $3B for a corporation to
| bring a new drug into the market today. Fees people can
| afford that. And most of that money is just to satisfy
| obscure regulatory requirements. Not many people can cough
| up $3B per drug.
| tsimionescu wrote:
| > Making importers legally liable for damages that be
| linked to to bad quality & other safety concerns is more
| effective than a central body trying to tell people what
| is "safe" or "good quality".
|
| No, after-the-fact compensation is not at all an
| effective way to regulate something as critical to health
| and as hard to measure as pharmaceuticals. Access to the
| justice system is already extremely limited for regular
| people, making it even more critical to the functioning
| of society would be crazy.
|
| Not to mention, this type of liability opens things up
| for trolling at a massive level: people often die or have
| severe problems while on drugs, particularly the most
| important drugs. Every cancer patient dying while on any
| of a cocktail of 15 drugs is 15+ lawsuits from an
| unscrupulous lawyer, even if the drugs were perfectly
| safe.
|
| Plus, drugs have to be not only safe, but effective. I
| can't sell homeopathic remedies as drugs, not because
| they are unsafe, but because they don't do anything. How
| would liability work for drugs that aren't effective?
|
| In practice, if you attempted this sort of "regulation",
| what would quickly happen is that overwhelmed judges
| would quickly accept some non-solution like drug makers
| labeling every possible side effect imaginable on every
| drug and then, caveat emptor, we told you our vitamin C
| might kill you and our homeopathic pill might not cure
| your lung cancer, we're not liable if you chose to pay us
| for them anyway. And, in fact, this is _exactly_ what
| medicine was like before the FDA was established to
| regulate things correctly.
|
| And the costs of putting a new drug on the market are
| that high only because we, sanely, require extensive
| testing that also safeguards patients' lives and rights,
| before accepting a new drug.
|
| Not to mention, the more the new drug improves over the
| status quo, the less testing is actually required. A lot
| of the most famous drugs that have these huge go-to-
| market costs have these problems because they are
| extremely minor improvements over existing drugs/drug
| cocktails, so they need large sample sizes to find any
| effect at all, and have to conclusively show side-effects
| are not worse than the state of the art. If someone came
| up with a molecule tomorrow that, say, stopped
| progression of Alzheimers dead in its tracks the moment
| you started taking it, I can assure you that it would
| cost much less than 3B dollars to get that approved and
| on the market (the current drugs barely show slight
| slowing down over months after therapy is started).
| ffgjgf1 wrote:
| > It is but it's the government paying for it. Basically all
| new novel drugs relied on public research funds [5
|
| The fact that it was partially government funded doesn't mean
| that the drug companies didn't have to put it in a significant
| % of their own money. Of course it varies but it's a bit like
| saying that e.g. Tesla is/was government funded (well kind of
| but not really)
| thadk wrote:
| Reading this 4% Pharma conglomerate flow figure, I'm indirectly
| struck that increasing all-cause cancer likely raises GDP,
| particularly this segment of GDP. My main consolation in this
| moment is that lead exposure probably doesn't.
| Terr_ wrote:
| See also: Bastiat's "broken window" fallacy.
|
| https://www.investopedia.com/ask/answers/08/broken-window-fa...
| Terr_ wrote:
| General philosophizing: Is it possible there's an important
| economic difference between _public_ price discrimination versus
| _secret_ price discrimination?
|
| I mean there's a spectrum between "acceptable" price
| discrimination and "abusive". Nobody bats an eye at lower rates
| for bulk purchases or movie theaters offerering half price for
| kids.
|
| It may not be a panacea, but sunlight is still a pretty good
| [civic] disinfectant.
| thaumasiotes wrote:
| Here's a pretty simple, accurate description of price
| discrimination:
|
| - The purpose of price discrimination is to reduce the share of
| gains-from-trade received by consumers to zero.
|
| The concept is that you should never feel that you're getting
| more value out of a purchase than you would otherwise have
| gotten from the money you spent on that purchase.
|
| It's true that, as the article mentions, this means that
| impoverished people might buy things that, absent the price
| discrimination, they wouldn't have bought at all. But this
| "benefit" can't be worth much, because -- even though they paid
| a small price for whatever it was -- we know that they valued
| it only slightly more than that.
|
| Given this, it's not really clear why price discrimination is
| supposed to be beneficial.
|
| > I mean there's a spectrum between "acceptable" price
| discrimination and "abusive". Nobody bats an eye at lower rates
| for bulk purchases or movie theaters offerering half price for
| kids.
|
| Lower rates for bulk purchases is not an example of price
| discrimination. Half price for children's movie tickets might
| or might not be - if your theory of the discount is that people
| will pay more to go on a date than they will to entertain their
| children, that would be a valid example of price
| discrimination. If your theory is that children have less money
| than adults, that doesn't really work - kids young enough to
| get cheaper movie tickets don't pay for their own tickets.
| coretx wrote:
| "Intellectual property", specifically patents are the elephant in
| the room. Even if the mafia would want to have a healthy market,
| there won't be one because you can't when there is monopolies in
| place.
|
| Societies can research, speculate, mitigate and regulate until
| the end of times for as long as the underlying fundamentals of
| the problems are never addressed.
| edg5000 wrote:
| "If you went to Costco, he went on to say, the cost was $97, so
| the plan didn't recommend patients go there. If a patient went to
| Walgreens, which the plan did recommend, it was $9000. And if a
| patient chose home delivery via the PBMs own mail order pharmacy,
| it was $19,200."
|
| They must be joking right?
| JumpCrisscross wrote:
| "PBMs consolidated both horizontally and vertically, so each big
| PBM is now owned by a major healthcare conglomerate.
|
| ...
|
| In 1987, Congress passed an exemption to a Medicare Anti-Kickback
| statute, which created a safe harbor for group buying entities to
| accept payment from drug manufacturers in the form of rebates,
| with certain guardrails in place.
|
| ...
|
| PBMs get large secret rebates in return for allocating market
| shares...it's virtually impossible to get any clear pricing on
| most drugs, because there is no one price."
|
| For a change the solutions seem simple:
|
| 1. Prohibit integration between doctors and insurers, on one
| hand, and pharmacies and pharmacy-benefit managers, on the other
| hand;
|
| 2. Repeal SSSS d and f from the kickback exemptions [1]; and
|
| 3. Require public filing of insurers', PBMs' and pharmacies'
| price lists. (Not disclosure: the binding price list is the
| public one.)
|
| [1] https://www.law.cornell.edu/cfr/text/42/1001.952
| aidenn0 wrote:
| We have spent most of the last 50 years under an antitrust
| enforcement regime that considers vertical integration to be
| harmless, so #1 might be simple, but it's definitely not easy.
| ThinkBeat wrote:
| This is a great article, weel researched. Filled with information
| as many links to sources. I'd like to extend a big thank you to
| the author for writing this.
|
| When it comes to remedies One solution is for our legislature to
| create laws that specific species some of those practices as
| illegal. It would probaby be hard to get it passed due to all the
| corruption in our legislative and executive branches.
| waffletower wrote:
| Wouldn't the equivalent of pharmacy benefit managers in China,
| should they be caught devising such extreme pricing shenanigans,
| be executed?
| 1vuio0pswjnm7 wrote:
| "Most people think of high pharmaceutical prices, and blame the
| companies you'd expect in Big Pharma. These firms, with storied
| names like Merck, Pfizer, Novartis, Genentech, etc, are powerful,
| and they are in the business of developing and selling drugs. But
| this other group, corporations you haven't heard of, composed
| entirely of middlemen, price and handle payment for
| pharmaceuticals between doctors, pharmacies, and patients, are
| perhaps equally important, if not more so. And unlike
| pharmaceutical companies, who actually employ doctors and
| scientists, PBMs don't do anything difficult. They keep lists."
|
| Big Pharma has been permitted to own PBMs.
|
| https://www.ftc.gov/news-events/news/press-releases/1998/08/...
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