[HN Gopher] Pharma is a small component of US health care spending
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Pharma is a small component of US health care spending
Author : cupola2030
Score : 63 points
Date : 2025-10-02 15:07 UTC (7 hours ago)
(HTM) web link (www.economist.com)
(TXT) w3m dump (www.economist.com)
| blindriver wrote:
| My friend's daughter needs an eczema creme and was told the price
| was $1000 per tube and wasn't covered under insurance.
|
| The price in Canada is around $100. Yes, Big Pharma gouges
| Americans.
| alephnerd wrote:
| That's your insurance provider that told you no - not "Big
| Pharma".
|
| Which is what TFA points out as well:
|
| "The bulk of the rents is captured instead by providers of
| health-care services such as hospitals and the system's true
| money-makers: insurers, pharmacy-benefit managers and other
| middlemen taking advantage of its opacity. They have higher
| costs of capital than drugmakers, but they also clear our 10%
| hurdle much more comfortably (chart 3)"
| tptacek wrote:
| Both are counterparties to negotiations that set price and
| availability, so it probably doesn't make sense to separate
| their role.
| Analemma_ wrote:
| Everyone is guilty here, because once one sector forms a
| monopoly, they have monopoly pricing power, and so their
| counterparty sectors have to form a monopoly as well to keep
| leverage in negotiations.
|
| 50 years ago, there were many more pharma companies, many
| more insurance companies, and many more hospitals under
| individual ownership. First the pharma companies
| consolidated, which give them monopoly pricing power over
| insurers. So then the insurance companies consolidated to
| they could negotiate on equal footing, but then they had
| monopoly pricing power over the hospitals. So then hospitals
| consolidated so _they_ could negotiate. And now after decades
| of this, we 're right back we're started, except for
| consumers, who can't consolidate and hence get fucked.
|
| The two solutions here are either breaking up _all_ the
| monopolies at the same time-- pharma, insurance, and
| hospitals-- so that everyone has market competition again, or
| letting health care consumers consolidate so they have
| pricing leverage-- i.e., forming a single-payer health-care
| system where the government negotiates deals on behalf of a
| 330+-million payer pool.
|
| It does not make sense to either blame or spare one single
| sector: the pharmas, insurers and hospitals are all guilty,
| though in a sense all of their hands were forced by their
| counterparties. It's a coordination problem of exactly the
| kind government is supposed to solve, hence why government-
| run health care eventually seems like the only option.
| SJC_Hacker wrote:
| > So then hospitals consolidated so they could negotiate.
| And now after decades of this, we're right back we're
| started, except for consumers, who can't consolidate and
| hence get fucked.
|
| Consumer consolidation is called voting. Its too bad most
| consumers have voted in politicians who don't represent
| their best interests
| thmsths wrote:
| I feel like you explained how we got there and our options
| to fix it perfectly. As you point out we have monopolies
| (or close to) at every single step. Whatever bandaid people
| and politician can come up with will quickly be neutralized
| by these conglomerates, at this point, any half measure is
| basically useless or has severe tradeoffs.
| pixl97 wrote:
| >As you point out we have monopolies (or close to) at
| every single step.
|
| This is happening to a huge number of industries in the
| US, not just healthcare.
| potato3732842 wrote:
| 17% of the US GDP is healthcare so that's probably about
| 20% of the country that will scream bloody murder if you
| try and touch it in any way that makes it cost the other
| 80% less.
| FireBeyond wrote:
| You're also neglecting the insurers and PBMs.
|
| Health insurers are limited by law as to profit margins. So
| how to make more money? Raise prices, or signal to
| providers that you'll pay higher. Because if your incoming
| premiums have to rise, then that percentage that can be
| captured as profit rises.
|
| But wait... what if you (an insurer) build/buy a middle-man
| to route prescription money through? That isn't covered by
| those profit margin constraints. So you can just up the
| prices of prescriptions and siphon profits that way.
|
| Even better, you can do entirely sketchy BS (looking at
| you, Aetna, but also others): "Sure, you can get your
| scripts filled at your local pharmacy... but only for <=30
| day supplies. We'll reject any script authorization for a
| supply of 31+ days, like those extremely convenient 90 day
| refills... unless you use the mail-order pharmacy that is
| wholly owned by us", thus making people choose between
| convenience and pricing.
| maxerickson wrote:
| A lot of corporate insurance is self funded by the
| company, with the insurance company being paid for
| administration of the plan rather than underwriting.
|
| I suppose it is possible that the buyers of these plans
| agree to link the payments to the cost of the care
| provided, but I doubt it.
| FireBeyond wrote:
| I used to work for a company that built claims benefit
| management systems, for both direct insurers, and then
| TPAs (third party administrators).
|
| The flip side of what you say is this - employers are not
| actuaries in the world of healthcare. So, while an
| employer can say "hey, whatever else we're doing, we want
| to give every employee a massage a week, covered 100%, no
| copay" and the TPA will facilitate the pricing of that,
| for the general spectrum of care, they will say "We want
| basically this level of care" and really just choose a
| plan already provided by the insurer, because all the
| actuarial effort has been done and the employer has
| _less_ risk of getting slammed with a multi-million bill
| because of unexpected incidences.
| tracker1 wrote:
| I don't think govt run healthcare is the only option... but
| _could_ serve as a baseline competition if Federal
| Employees, VA Medical, Medicare /Medicaid were all serviced
| by an NPO that is govt funded in terms of providing for
| those federal groups _AND_ allow anyone to buy into a
| policy as an individual or employer. As an NPO it would
| provide a baseline for competition and a minimal cost floor
| with greater negotiating power, that has been artificially
| limited by the current implementations.
|
| On the Pharma and Devices side, there should be hard FDA
| requirements for dual sourcing (completely separate
| ownership structures) and 50% domestic production (for
| security) as a requirement to even offer
| medications/devices requiring a prescription in the US.
|
| It could still allow for private competition for better
| servicing and support without federalizing everything.
| darth_avocado wrote:
| The more the middle men, the more the cost. It's not rocket
| science that big pharma aren't the only reason why the costs
| are high.
|
| Proof:
|
| - I can get plenty of drugs cheaper if I don't use my
| insurance - I can get hospital services cheaper if I don't
| use my insurance. There have been times where my copay after
| meeting the deductible and the insurance coverage is higher
| than my entire out of pocket cost if I don't use my
| insurance.
| blindriver wrote:
| The $1000 price is without insurance so what you're saying
| doesn't apply.
| deadbabe wrote:
| So it should cost $550 in America and $550 in Canada.
| tptacek wrote:
| It depends on your moral system. Equalizing costs across
| markets almost certainly reduces the number of people who can
| be served by a medication.
| cpfohl wrote:
| I'd be really interested to see these costs averaged (like
| parent post) but then re-distributed by average income...
| deadbabe wrote:
| Um it also increases the number of Americans who can now
| access those drugs? So whose healthcare is more important
| to you?
| tptacek wrote:
| It decreases the _total_ number of people with access.
| Like I said: it depends on your moral system.
| testing22321 wrote:
| How do you know what their profit margins are in each
| country?
|
| How much profit is enough?
| megaman821 wrote:
| Since most non-biological medicines don't cost very much to
| manufacture at all; enough profit is enough to cover that
| drug's R&D and the R&D of the 9 other drugs that didn't pan
| out. If the US market can cover all those costs, then
| whatever you get out of other countries is gravy. If that
| ceases to be true, then other countries will have to pony
| up more money or go without.
| bradfa wrote:
| Population of the USA is about 340 million, population of
| Canada is about 42 million. Assuming similar statistics of
| people needing a given medicine, proper cost sharing to
| result in the same profits would put it much closer to the
| USA cost than the Canada cost.
| sfn42 wrote:
| Yeah man that's what they do. They sell it at a loss in
| Canada and then profit in the US to make up the loss. That's
| definitely how it works.
|
| Let's hope they never discover that they could just not sell
| it in Canada at all and make even more money.
| munk-a wrote:
| I'm not certain if there's a specific example you have in
| mind but as a Canadian familiar with the pharma market you
| can rest assured that Canada (sometimes through the hidden
| mechanism of government subsidies) pays well above cost for
| every medication and medical device I'm familiar with.
|
| Sure, companies are gouging the US worse - but they still
| make a tidy profit in the Canadian market.
| sfn42 wrote:
| I was being sarcastic
| munk-a wrote:
| Oh my apologies - the internet and my habit to take
| things literally got the best of me.
| goobatrooba wrote:
| This theory that American prices subsidise the rest of the
| world has really caught on in the US but I have never seen
| any evidence for it.
|
| Most common drugs are out of patent anyway, so there should
| be no barrier to low cost production anywhere.
|
| Moreover the EU and China give huge funding to basic and
| specific research, which forms the basis of many drugs. For
| instance the RNA research that gave us COVID vaccines was
| completely European from start to finish, only production
| then involved American companies due to scale benefits and
| market access.
|
| On the contrary where the evidence is obvious is that the
| US pharma companies have amazing profits (such as the few
| Europeans that sell at scale in the US).
|
| My personal, unscientific, take is that the entire
| narrative that the US prices fund global low prices is
| completely unfounded and just an attempt by big pharma to
| get the US government on their side to break fair pricing
| mechanisms in other countries.
| bigyabai wrote:
| This is flamebait. Nobody with a cursory understanding of a
| market economy thinks in these terms.
| newyankee wrote:
| Issue is more like 'the cure for high prices is high prices'
| does not seem to work in healthcare
| tptacek wrote:
| https://archive.is/FFvWh
| CapmCrackaWaka wrote:
| My wife and I recently decided to do IVF. The doctor specifically
| told us that we needed to order the medicine (menopur, Gonal F,
| etc) from an American pharmacy. That alone made me suspicious, so
| I looked at foreign options. Altogether, the medication required
| would have cost us about $5000 from American pharmacies. We found
| out that we can just buy the exact same stuff from a German
| pharmacy for about $1000. So yes, Americans get wrecked by drug
| prices.
| JumpCrisscross wrote:
| > _doctor specifically told us that we needed to order the
| medicine (menopur, Gonal F, etc) from an American pharmacy_
|
| Why do they care? Referral bonus?
|
| Did you report them?
| apwell23 wrote:
| what do you mean? you expect american doctors to prescribe
| you medicines from german pharmacies?
| antisthenes wrote:
| I actually do expect doctors to have even a tiny concern
| for not making their patients go bankrupt, yes.
|
| Is that really such a high bar?
| digdugdirk wrote:
| You need to understand that the system is deliberately so
| opaque that doctors don't even know what your costs would
| be. Sure there's a sticker price, but for most
| medications that's so high as to be absurd. From there,
| it's entirely dependent on your insurance, coinsurance,
| pharma benefits, etc, etc.
|
| They try, but they're not in a position to do anything
| about it.
| jacobgkau wrote:
| > They try, but they're not in a position to do anything
| about it.
|
| Well, somebody's got to be, and the doctors seem like the
| ones with the most leverage to get those people to do
| something about it, right? Customer/patient pressure
| obviously isn't working.
| antisthenes wrote:
| > the system is deliberately so opaque that doctors don't
| even know what your costs would be.
|
| You're telling me professionals who make $300k after 20
| years of education have 0 clue about what their patients
| might pay, or have never had patients who expressed
| concern over costs? Or don't have friends or relatives
| who expressed dissatisfaction with a high-deductible
| plan? Or aren't complicit in getting kickbacks for
| prescribing opioids?
|
| We gotta stop absolving people of accountability. And
| that includes EVERYONE in the chain who benefits. Yes,
| this includes doctors.
|
| Btw, I have had doctors who do try, and many more now
| will accept reasonable cash prices for their services.
| That should be encouraged and commended.
| zaphar wrote:
| They often don't. There are a lot of variables that
| affect the price. The doctor is not going to know all of
| them.
| jrockway wrote:
| Indeed. At the end of the day, the entity underwriting
| the insurance plan decides the price. This is often the
| individual's employer. Your doctor does not know what
| your HR team decided to ask for when designing their
| health plan.
| OGWhales wrote:
| I'd assume it was their telling them specifically not to
| get it from a foreign country that was the odd part, as
| opposed to simply prescribing it from a US pharmacy since
| ofc that is what a US doctor will do. Maybe enough patients
| tried this, to save costs, that it resulted in some kind of
| issue for the doctor and that is why they brought it up.
| WalterSear wrote:
| Fear of counterfeit/low quality drugs?
| dahinds wrote:
| It is often illegal to purchase drugs from other sources?
|
| The named drugs are injectable and require cold storage so it
| is not trivial to safely source them from overseas.
| nerdsniper wrote:
| Well, for one ... it's illegal to import drugs that aren't
| FDA approved. You can import a few months personal supply of
| a prescribed drug that is FDA-approved but doesn't just mean
| that the active-ingredient is FDA-approved. It has to be the
| same exact product, manufactured in the same FDA-approved
| facility with the same packaging/labeling/etc to be
| considered "FDA-approved". The most expensive FDA-approved
| drugs are sold at US prices globally, so there's no
| geographic arbitration. Then other non-FDA approved brands
| are sold at lower prices - importing these is a smuggling
| offense, though enforcement was pretty low (but now with
| CBP's upcoming budget increases, who knows if this will
| continue to be practical or ultra-risky).
|
| More practically - HMG is a very difficult drug to assay for
| purity. It's too complex to interpret with qNMR, HPLC testing
| is also very hard to interpret. The testing that exists
| evidently either has a very high margin of error or involves
| lots of rats and dissections.
|
| Even testing for hCG, while it can be done reliably with
| HPLC, results between different labs are not comparable
| because the primary assay is also to test bioactivity on
| rodents, so they're not normalized to the same standard.
|
| The lack of any independent testing for HMG means that some
| of the more accessible international manufacturers don't
| actually test their own product. Combined with its high
| price, that all makes it a very common target for
| counterfeit.
|
| Yes, the American pharmaceutical system _absolutely_ has
| quality-control issues. 80% of our generic pharmaceuticals
| come from overseas production. The pentagon wanted to
| independently test the drugs it was purchasing for the VA, so
| it worked with a company named Valisure who determined that
| about 10% of the drugs had issues with contamination or a
| lack of the active ingredient[0]. The FDA responded by
| shutting down Valisure 's third-party testing.
|
| But even with the problems we have here in the USA, HMG is
| the one drug I would _particularly_ not trust from gray-
| market supply chains. It 's conjecture, but I wouldn't be
| surprised if the doctor said that because other patients had
| tried it and had poor results.
|
| 0: https://archive.ph/ubLmg
| thuridas wrote:
| Not only the drug has to be approved but the production
| process and laboratory.
|
| There is a lot of bureaucracy and audits. It is but as if a
| European laboratory is allowed to sell a generic drug
| without at huge costs for certifications ( and viceversa)
|
| I am not saying that buying your medicines to questionable
| online web is a good idea. Just that other countries have
| their own controls depending on their policies
| nerdsniper wrote:
| Yes. There are a lot of good non-FDA drugs that have been
| available for online purchase by US citizens. It's
| illegal to get them shipped to you, but enforcement has
| historically been nearly non-existent and given that 75
| million Americans are under-insured ... it probably has
| been the rational option for many. India, China, and
| Turkey are perfectly capable of making high quality
| pharmaceuticals when the business owner actually cares
| about quality.
|
| Also, compounding pharmacies in the USA sometimes get
| their raw active ingredients from even the shadiest
| suppliers in China and India. It's not always perfectly
| legal, things aren't always QA/QC'd at any point in the
| process the way they should be, but it happens. So again,
| "buying American" isn't exactly a golden ticket.
|
| European HMG from reputable pharmacies is probably great
| quality - but it's still rather expensive compared to
| Chinese HMG and there's really no way to trust anyone
| selling it online, you'd basically have to fly to Europe
| yourself. And taking it back on the airplane would still
| be illegal, and you'd be rather more likely to be caught
| by customs than a mailed package.
| viccis wrote:
| When my wife needed a rabies post-exposure shot course, it
| would have been around $25000 range for the shots without
| coverage. Our (expensive high end) insurance brought it down to
| "only" $2500 out of pocket for us. The alternative is to take
| the gamble of a possible horrible death.
|
| In the UK? Around PS150-PS300 total.
| jen20 wrote:
| > In the UK? Around PS150-PS300 total.
|
| For whom? I can't imagine this in particular would not be
| free at the point of use like almost everything else. That
| said, the UK has famously been free of (classical) rabies
| since the 1920s, so it's unclear if it would be easily
| available if there aren't other uses.
| viccis wrote:
| Was talking about from a private clinic [1]. Obviously it's
| free via NHS. It's a good example of a system in which the
| government in incentivized to not tolerate drug price
| gouging.
|
| https://www.citydoc.org.uk/conditions/rabies
| ed_elliott_asc wrote:
| Not quite free for most people, we have to pay the
| prescription charge of about PS12
| giantg2 wrote:
| Is it a good example of _drug_ price gouging? I would bet
| the major part of the price is that provider.
| liquid_thyme wrote:
| YouTube Premium is also cheaper in Bangladesh.
| hshdhdhj4444 wrote:
| Is it cheaper in the UK, Canada, Germany, etc?
| liquid_thyme wrote:
| Pricing in healthcare is very tightly regulated and there
| isn't a simple one line answer for why certain prices are
| they way they are. Its easy to scapegoat bigpharma for
| being greedy, but they're just as greedy as any other US
| corporation.
|
| https://en.wikipedia.org/wiki/External_reference_pricing
|
| I only brought up YouTube because when a company is free to
| set their price, you will still end up with a pricing model
| where the pricing is different based on region.
| hshdhdhj4444 wrote:
| The only reason Americans complain about drug prices is because
| that's the one they usually pay directly.
|
| The other parts of the healthcare system are hidden behind
| taxes and insurance.
| bruce511 wrote:
| Not to be unnecessarily sparky here, but are we limiting this
| discussion to legal drugs?
|
| Drugs like Oxy are both "legal" yet also consumed illegally.
| Made by a perfectly legit pharma company.
|
| And that's before we discuss the river of fentanyl apparently
| flowing across the Canadian border...
| tptacek wrote:
| The headline is terrible given the thesis of the short article.
|
| The Economist's analysis creates a model that shows Pharma
| companies making "excess profits" (greater than 10% return on
| capital) second only to technology companies. In that sense, by
| the Economist's terms, they are in fact gouging.
|
| But that's not really the point the Economist wants to make;
| rather, regardless of whatever profits Pharma is raking in,
| they're in fact a small component of overall health care
| spending. You could zero out Pharma profits (this is my point and
| not theirs) and not materially change US health spending.
|
| In all these discussions about American health care, my first
| take is that everybody should go download the CMS National Health
| Expenditures, and make a beeline for "Expenditures by Type of
| Expenditure and Program" (it's just an Excel spreadsheet). It's
| an extremely intuitive breakdown of where all US health care
| spending goes, and who's paying for it, all on one sheet.
|
| There are a lot of narratives about health care spending that do
| not survive first contact with that spreadsheet.
| kspacewalk2 wrote:
| Are you specifically referring to `Table 19 National Health
| Expenditures by Type of Expenditure and Program.xlsx` in the
| ZIP archive which can be downloaded at
| https://www.cms.gov/files/zip/nhe-tables.zip ?
| tptacek wrote:
| Yeah the one I have hotlinked in Google Sheets is a "Table
| 19" but I didn't want to presume it's Table 19 every year.
| dboreham wrote:
| Drug costs are contentious because they're easily visible and
| often no covered by insurance. The other costs are obfuscated
| in complex billing and hidden under principle/agent veils.
|
| E.g. my son has a peanut allergy and so we need to buy EpiPens.
| They were hundreds of dollars, and the vendor played MBA-
| nonsense games like requiring two to be purchased at a time.
| Meanwhile I was able to drive to Canada and buy the exact same
| thing (and as many or as few as I needed) for tens of dollars.
| tptacek wrote:
| We know where all the health spending in the system ends up,
| and while Pharma pricing is quite high and those companies
| are quite profitable, most of our health spending doesn't go
| to either Pharma or insurers.
| megaman821 wrote:
| That is annoying, but not a huge cost driver. If you son
| ended up in the ER it would cost multiple lifetimes of
| epipens (even at an inflated price).
| pixl97 wrote:
| I mean, this is a bit of circular logic isn't it...
|
| "Medicine being expensive doesn't impact care being
| expensive"
|
| Which is almost exactly the opposite. If people could get
| cheap general doctor visits and be able to afford their
| medicines then this would reduce the number of emergency
| visits allowing less beds/doctors/hospitals.
| cyberax wrote:
| Similar story. I suffer from dry eyes, and I like
| perfluorohexyloctane eye drops. They require a prescription
| and cost $800 here in the US.
|
| I am now ordering them from an Irish pharmacy. They are over
| the counter there, and cost $20.
|
| They are literally exactly the same, you can tell by the lot
| numbers on the bottles.
| FireBeyond wrote:
| > and the vendor played MBA-nonsense games like requiring two
| to be purchased at a time
|
| Washington State, the vendors lobbied on the back of a tragic
| incident to require a variety of people and places to have
| EpiPens physically present at all times...
|
| ... including in the back of ambulances, when we (I am, or
| was, a paramedic) we had epinephrine already available.
|
| Which resulted in a huge amount of waste, throwing out
| expired EpiPens, etc. The number of hoops we had to jump
| through with the DOH to eventually allow us to have a
| specific "epi jump kit" (a small tackle box with syringes and
| a vial, alcohol, etc.) was enormous, but the net result was a
| replacement cost of $28 for the kit (actually less, because
| the $28 included the tackle box) versus the $600+ for
| EpiPens.
| abeppu wrote:
| I don't think the spending story alone is helpful because it
| doesn't acknowledge where there's room for actual improvement.
| Of the $1.5T spent on "Hospital Care", if almost all of it went
| to medical staff, facilities, equipment etc, and if good data
| suggested that people aren't in hospital unnecessarily, maybe
| that number isn't a problem. But if private hospitals have very
| fat margins, and some significant share of patients could be
| served just as well through less expensive clinical services,
| maybe that's too much.
|
| In the context of the cost of medication, the $449B on
| "prescription drugs" doesn't break out what goes to drug makers
| vs PBMs or anyone else. We can easily imagine a world without
| PBMs that still delivers drugs to patients, but someone has to
| actually make the drugs. We can also ask, are people on
| medications they don't actually need? Are we sometimes
| _causing_ later health issues when medicating (e.g. fueling a
| giant opioid crisis)? None of this is apparent in the top-line
| spending figures.
| tptacek wrote:
| Whoah, that smuggles in an enormous assumption: that a dollar
| directed to a medical professional is automatically well
| spent. In reality, medical professionals in the US make
| drastically more money than they do in Europe and deliver way
| more procedures (they're often working on "RVU" scales that
| incentivize delivery of more procedures).
|
| This is something that makes health care economics really
| difficult to discuss: everybody trusts their doctor and
| factors them out of the equation; the problem is every penny
| that _doesn 't_ go to their doctors and specialists. But
| that's not a valid analysis and your doctor and their support
| system is (after elder care) at the heart of US health
| spending.
| abeppu wrote:
| I did _not_ make that assumption. I specifically called out
| the possibility that some hospital care may not be
| necessary. Regarding hospital care, the two sentences
| describing hypotheticals where spending is or is not
| improvable specifically included clauses:
|
| > and if good data suggested that people aren't in hospital
| unnecessarily
|
| > if ... some significant share of patients could be served
| just as well through less expensive clinical services,
| maybe that's too much
| knowaveragejoe wrote:
| I don't think they were insinuating that _you_ were
| making that assumption, but rather that your line of
| reasoning must necessarily make that assumption if
| brought to fruition
| lostlogin wrote:
| > medical professionals in the US make drastically more
| money than they do in Europe and deliver way more
| procedures
|
| Do you have a source on that? I ant to understand how that
| works. The US is ludicrously inefficient per dollar spent,
| so how does that work?
| tptacek wrote:
| By us compensating medical professionals more and
| allowing them to perform more procedures.
|
| It's weird to see people startled by this claim because
| it's a pretty basic and accepted one!
| elcritch wrote:
| It's not purely a bad thing per se if it attracts doctors
| who excel and are the best.
|
| However, it seems now more like straight-up profiteering
| the past decade or two by doctors as a whole but it's
| harder to point a finger at. In contrast with "Big
| Pharma" the profits are fairly centralized and easy to
| point a finger at.
|
| Personally I've for a while believed the biggest issue
| with wealth inequality in the US isn't primarily due to
| billionaire class, but rather the millionaire class and
| "managerial class", though I'd include doctors in that
| list. Most CEOs would also be in that list.
|
| Doctors via the AMA keep salaries artificially high, just
| the same as similar tactics used by land lords using
| software to jack up rent prices.
| tptacek wrote:
| Your claim here, were you to try to make it, would have
| to be that American doctors are across the board 2-3x
| better than European doctors, and that European pts are
| getting drastically fewer procedures than they need.
|
| (I think we agree though).
| elcritch wrote:
| Specifically for doctors, that seems a reasonable point
| or question. I know intimately from my PhD studies that
| some procedures performed widely in the US aren't that
| effective (meniscectomies in particular). Though that's
| gotta be balanced with procedures that are helpful that
| Europeans don't do enough.
|
| More broadly though, I believe what's occurring with
| doctors is also happening across the board in other
| professions. Landlords as an aggregate are charging more
| than if fair, and the median landlord isn't a billionaire
| or Blackrock but probably part of the professional
| managerial class (PMC) [1]. No idea if landlords as a
| whole are charging 25% or 250% more for rent, but rent
| seems to have outpaced inflation by a fair bit.
|
| Similarly others here mention doctors owning portions of
| diagnostic imaging companies who go on to request
| unnecessary imaging. That's the PMC enrich-yourself-first
| mindset. Historically it was the local landed nobles.
|
| Repeat that across more fields and professions and you
| see that the middle and lower classes will be squeezed
| much more by PMCs than by billionaires, IMO. For example,
| it'll be some VP at Google who's pushing to raise the
| cost of YouTube premium rather than Sergey Brin or the
| Youtube CEO. Another VP who's figuring out how to move
| software to a never-ending subscription, etc. Though it'd
| be hard to split out the effect of say PMC's vs corporate
| profiteering. Perhaps they are part of the same effect.
|
| 1: https://en.wikipedia.org/wiki/Professional%E2%80%93man
| ageria...
| tptacek wrote:
| I mean, if the argument is that exogenous supply
| constraints are the root of most of our economic
| problems, and that the economy is rigged for the upper-
| middle class and the billionaires are just along for the
| ride, we probably share a lot of politics, but either
| way: my point on this thread is just: start with the
| total picture of where money in our system goes.
|
| A _lot_ of people think most of it is going to insurers
| and pharma companies, which is the literal opposite of
| what 's happening.
| bhelkey wrote:
| Physicians in the US are paid, on average, more than 2x
| what Physicians in Germany make and more than 3.5x what
| Physicians in France are paid [1].
|
| [1]
| https://www.statista.com/statistics/1094939/physician-
| earnin...?
| FireBeyond wrote:
| > and deliver way more procedures
|
| Diagnostic imaging companies - each of the big ones
| (Siemens, GE, Philips) offer in-house financing for MRI,
| CT, etc., that they advertise to physicians. They also all
| offer specialist consulting help to facilitate you getting
| a CoN (Certificate of Need) for your facility. Hell, they
| also will help you find other physicians in your area who'd
| like to go in on setting up a DI facility (and will assist
| with spinning up the practice).
|
| We then find that physicians who own a DI practice (or a
| share in one) refer their patients to diagnostic imaging at
| rates several standard deviations above other physicians
| and at rates that are "statistically improbable" when
| correlated to underlying ICD-10 diagnostic codes.
|
| Upton Sinclair comes to mind ("It is difficult to get a man
| to understand something, when his salary depends on his not
| understanding it").
| tptacek wrote:
| My favorite statistic is that there are more MRI machines
| in Massachusetts than there are in all of Canada.
| nradov wrote:
| Is that a good thing or a bad thing? MRI machines are
| expensive, but very useful for certain conditions and
| with zero radiation exposure. We see a lot of affluent
| Canadians coming to the USA as medical tourists for
| imaging procedures and elective surgery due to long
| queues at home.
| tptacek wrote:
| It's an indicator. By many accounts, the US drastically
| overuses imaging. For instance: it's not unlikely that a
| patient presenting with persistent back pain will be
| imaged quickly in the US. That imaging service is itself
| expensive and a cost driver, but far worse are the
| procedures the imaging results drive, most of which
| wouldn't be prescribed over the border in Canada. We do
| not on the whole get better results for back pain here!
|
| Another example, though with a less comical indicator
| than the MRI thing: at least up until recently, hernia
| repairs in Europe were all inpatient procedures. The US
| innovated on laparoscopic hernia repair that's done
| outpatient. This is by itself a very good thing! But the
| knock-on result is that the US now delivers _way_ more
| hernia repairs; we do medically unnecessary hernia repair
| because we made it so easy to do.
|
| None of these are my insights; they're just things you
| learn about if you read and listen to podcasts about the
| problems with our health care economics.
| cogman10 wrote:
| What makes it hard to discuss is everyone at every level is
| gouging for various reasons.
|
| Like, for example, doctors are going to be paid more than
| foreign counter parts, but they also end up needing very
| expensive schooling. (Similar thing happens to dentists).
|
| Go into the hospital, and you end up paying 10x the amount
| for any medication (Tylenol being a good example) because
| either the hospital has an agreement with a medical
| supplier for exclusive supplies or they are trying to make
| up for ER treatments.
|
| Then there's simply the added layer of bloat on top of
| everything. Health insurance ends up hiring a large staff
| of people to try and reject all claims while hospitals hire
| patient advocates to appeal the denials for the patients.
| All that ends up being paid for somehow (usually a large
| chunk is from the patient's insurance principle).
|
| And, much like funerals, slap on "medical" on any piece of
| equipment and you get to raise the price by 10x. A $10
| stethoscope ends up costing $100 from a medical supplier.
| Or one I've personally seen, a "medical" pocket protector
| made from $1 in fabric costing $50.
|
| The reason non-us healthcare ends up being cheaper is
| because the governments are running most everything rather
| than having 3 or 4 private businesses duking it out over
| cost. It eliminates a huge amount of redundancy in the
| system when a government builds the hospitals, pays the
| doctors directly, and is the only one negotiating with
| medical equipment providers.
| tptacek wrote:
| I don't disagree and wouldn't valorize anybody in the
| field+ (though: of all the entities, I come closest to
| respecting Pharma's role and, if those companies were
| well-behaved, could make a pretty coherent argument for
| why they should be making _much more_ money given what
| they produce).
|
| But it remains important to get a picture of where the
| money is going, and the real picture disrupts a bunch of
| narratives.
|
| Even in your comment: you're handwaving past physician
| comp and overdelivery!
|
| + _writ-large, I mean; I know some awesome doctors_
| cogman10 wrote:
| > Even in your comment: you're handwaving past physician
| comp and overdelivery!
|
| I'm really not. I'm simply pointing out exactly why they
| have such an oversized salary. It costs a ton of money to
| become a physician. In order to survive, they initially
| need a pretty sizable salary.
|
| After the loans are paid off, that salary can't go down,
| there would be a revolt if it did.
|
| Over delivery is really just a general attitude of
| wanting to test everything to make sure nothing is
| missed. I have a hard time faulting them over that.
|
| IMO, the way to address this problem is addressing the
| cost of education for physicians. There's no reason
| getting an MD should cost $500,000, and yet it does.
|
| And, of course, the best way to do this is to make
| medical school publicly funded and tuition free. A lot of
| small hospitals close down because they can't afford
| regular doctors. It's also next to impossible for a
| doctor to setup a private clinic.
|
| That won't fully solve the current salary bloat, the only
| way to really address that is expanding the number of
| doctors being trained.
| tptacek wrote:
| Sure it could. Physician compensation, RVU billing,
| upcoding, and overdelivery aren't facts of nature. In
| fact, a lot of these problems are caused by Medicare
| regulation; we deliberately restrict the supply of
| physicians by underfunding residency slots, which is
| something the AMA lobbied to do.
|
| But when institutions try to take these problems on, like
| when Blue Cross (IIRC) went after anaesthesiology
| upcoding abuses, industry lobbyists spin people up to
| think that insurers are demanding surgeons wake people up
| in the middle of operations. It's a real problem. People
| understand so little about how our system works that they
| will vociferously take the side of practitioners who are
| screwing them over.
|
| (Everybody is screwing everybody over; I'm not taking a
| side, except to point out that Table 19 of the NHE makes
| a pretty stark statement about where the money is going.)
| dredmorbius wrote:
| RVU is presumably "relative value units":
| <https://medicalbillingservicereview.com/rvu-explained/>.
| gruez wrote:
| > But if private hospitals have very fat margins, and some
| significant share of patients could be served just as well
| through less expensive clinical services, maybe that's too
| much.
|
| The second chart shows how many companies have return on
| capital greater than 10%, which basically covers the "very
| fat margins" you're looking for.
| abeppu wrote:
| I saw the economist chart, and am responding to tptacek
| advocating for a specific _spending_ based spreadsheet.
|
| But _no_, the Economist category of "Healthcare Services"
| includes hospitals, insurers and PBMs and other "middlemen"
| (see the last paragraph of the article), and so based on
| their analysis we cannot separate out hospital margins.
| tptacek wrote:
| The Economist charts are a rhetorical tool designed to
| highlight a point they're making (I think the points are
| valid and the charts are good and interesting).
|
| The spreadsheet I'm "advocating" is less like that, and
| more like the tables in a 10K filing. It's simply an
| accounting of where US health dollars go, and where the
| money comes from.
|
| I'm not saying that spreadsheet rebuts any claim this
| article makes (though it might). I'm saying it's a
| remarkably simple and comprehensive piece of data to fit
| onto a single screen, and when we discuss health care
| economics, it's extraordinarily helpful to have that data
| available.
| dang wrote:
| Thanks - I've adapted your phrase for the title above. If
| anyone can suggest a better (i.e. more accurate and neutral),
| we can change it again.
| PaulHoule wrote:
| My understanding also is that pharma is a case where you can
| often show you spend $X on a medicine and it gives $10X or more
| in savings.
|
| For instance inhaled steroids for asthma can cost an eye-
| popping $300 a month but some people with asthma get
| hospitalized once a year at a cost upwards of $8000 so the
| inhaler is really a bargain.
| firstplacelast wrote:
| That's like saying smoke detectors should cost thousands of
| dollars bc they can save a 500K+ building. That's a poor way
| to look at value in these situations. It's cheap and easy to
| make, so it should be cheap to the consumer if there weren't
| all sorts of red-tape and opaque pricing schemes used as an
| excuse to prop of extortion.
| tptacek wrote:
| Why is that a poor way of looking at the situation? The
| reason smoke detectors don't cost thousands of dollars is
| that there are lots of different smoke detectors competing
| the price down.
| diego_moita wrote:
| I'm surprised on the comments here that go: "I had to pay $$$$
| for a medication when I could buy that same medication somewhere
| else for a fraction of it. Therefore Big Pharma gouges America".
|
| That is not evidence that "Big Pharma gouges America". It is
| evidence that Americans pay a lot more than other countries. Only
| that. The conclusion doesn't necessarily follow from the
| premises.
|
| Want to understand why? Read the article's last paragraph:
|
| > The bulk of the rents is captured instead by providers of
| health-care services such as hospitals and the system's true
| money-makers: insurers, pharmacy-benefit managers and other
| middlemen taking advantage of its opacity.
|
| As always, no one reads anything.
| tptacek wrote:
| Insurers make even less money than Pharma companies do. To a
| first approximation essentially all health care spending goes
| to companies that deliver health services directly.
| diego_moita wrote:
| > Insurers make even less money than Pharma companies do.
|
| In the whole or in relative terms? Source, even if personal
| or anecdotal?
|
| I am willing to consider your point because, to be fair, the
| article doesn't show any data that indicts the insurers. They
| just blame them at the end without any evidence.
|
| > all health care spending goes to companies that deliver
| health services directly.
|
| Well, that wouldn't explain why medication alone is more
| expensive in America, right?
|
| But accepting your argument: is it because of greed and
| oligopolies, incompetence or excess of regulation?
| tptacek wrote:
| Hah, I wouldn't need "personal" or "anecdotal" evidence for
| this; it's right there in black and white in the NHE data;
| literally in the first row of the sheet. I posted about
| this across the thread.
| mothballed wrote:
| No, he's right. Insurance profits are legally capped, and
| this keeps them from representing an outsized fraction of
| spending even in cases when they might partially be the
| driver behind it. They have to spend N% of their income on
| actual health care benefits. They're not absurdly high, you
| could look them up, but I don't think it's possible to
| exceed something like 10% profit.
|
| This means the only way for insurance companies to increase
| profits is to increase the price of healthcare, and they
| have zero incentive to try and lower the amount of money
| they pay out for healthcare which might otherwise have been
| split between profits and lower premiums.
| tptacek wrote:
| My guess is that if you found NHE data from before the
| ACA cap insurance would remain a small component of
| overall health spending (the ACA was very important and I
| am in no way downplaying it).
|
| Mostly I'm saying: you don't have to axiomatically derive
| why this is. Medicare collects and synthesizes this data.
| mothballed wrote:
| How would you derive it from medicare? Isn't medicare
| supposed to be non-profit? They should occupy 0% of
| health care spending once you remove the pass-through
| transfer payments that go back into medical care, minus
| some administration overhead.
| tptacek wrote:
| The CMS collects these statistics in the same way that
| the BLS collects labor statistics. It has nothing
| specifically to do with the part of CMS that directly
| administers Medicare. The point is that we have very high
| quality data on this stuff.
| mikeyouse wrote:
| I'd like to see a deeper analysis here though. Insurers
| don't make that much money on a percentage profit basis,
| but profit's derived after expenses. Hypothetically,
| their sheer existence could be a huge burden to everyone
| involved, their costs to employ legions of make-work
| employees processing/rejecting/questioning claims could
| result in low profits even if the work isn't necessary,
| they could take advantage of transfer pricing to hide
| profits in their wholly owned but separately reported
| PBMs...
| tptacek wrote:
| I'm not even looking at profit; you don't have to,
| because insurance is such a small component of US health
| spending. This is the value of having the NHE data in
| front of you in discussions like this; we don't even have
| to debate how much of US health insurance is administered
| by nonprofit firms, or whether for-profit firms are
| gouging, because the whole thing is too small a component
| to matter.
| mothballed wrote:
| Not sure you're understanding. The insurance companies
| can't gouge by jacking up profits because that's illegal.
| They can't ever become a big component of healthcare
| spending nominally, but they can be the actor that causes
| a big component of health care costs to baloon.
|
| The way insurance companies might gouge is by jacking up
| healthcare prices, since they act as a government-
| captured oligopoly block and thus don't have normal free
| market forces. That is how they could increase nominal
| profits without increasing % profits.
|
| They could jack up health care prices massively while
| only being measured as a small % of the total. Whether
| this is actually the case or not, I'm not sure, but the
| incentives demand that they do it if they can. It should
| be impossible to pull off such a cartel in any
| unregulated market, but due to the way healthcare works
| it seems more likely it could be true.
| tptacek wrote:
| The overwhelming majority of the money they'd be
| diverting by doing that would be going to health
| providers, not to payers and underwriters. Therefore, the
| hypo you're offering isn't interesting to me. I'd still
| be starting by looking at the institutions that actually
| end up with the money.
| mothballed wrote:
| >The overwhelming majority of the money they'd be
| diverting by doing that would be going to health
| providers, not to payers and underwriters.
|
| Yes exactly. Imagine for a moment you have a market where
| every payer has to pay every healthcare provider, and a
| free market of health care providers. It would be
| impossible to create a cartel of buyers raising the
| price.
|
| Then imagine, say you have universal healthcare
| insurance. The insurance provider is capped at say, 1%
| profit. Since they have a monopoly, they can walk up to
| the healthcare providers and say "hey, please jack your
| costs 3x" so we can get 3x the profit. And then you can
| turn around and do a study and say, well insurance
| profits haven't changed -- and then wrongly conclude the
| insurance companies aren't to blame for the inflated
| prices, as they are only capturing 1% of the health care
| industry despite being responsible for 200% price
| increase.
|
| I believe the nature of health insurance industry
| probably leaves them somewhere in a gray area in-between
| these two extremes, especially when you consider the
| insurance companies also often own under an umbrella
| company health care providers.
| tptacek wrote:
| Seems like motivated reasoning. I'm looking at a single-
| page spreadsheet that tells a very different story, and
| I'm going to stick with that rather than the hypo.
| mothballed wrote:
| Based on what you've told me so far I'm not understanding
| how you can be sure of that. After the ACA caps was
| passed (limiting % profit) nominal health care spending
| went up significantly.
| coredog64 wrote:
| Medicare doesn't really do administration in the way that
| you think. There are something like 10-12 regions within
| the US, and for each region, Medicare contracts with a
| private health insurer to manage insurance administration
| within that region. Medicare just moves the money around
| to cover the admin contracts and to backstop the claims.
|
| And this is before you get to Medicare Advantage, which
| is where Medicare just pays for private insurance
| premiums for people who think vanilla Medicare sucks.
| mothballed wrote:
| OK, but if that's the case the medicare data should show
| the spending went significantly up after the ACA caps,
| which doesn't prove the thesis but is necessary condition
| for it.
|
| https://paragoninstitute.org/wp-
| content/uploads/2024/03/9DG_...
|
| https://truthout.org/app/uploads/2024/12/insurers-
| profits-bi...
| delfinom wrote:
| Yea in fact the ACA law caps insurers to a maximum of 15%
| profit. Anything extra must be rebated back to the customers.
|
| The debatable part is the rebate is back to the employer who
| is allowed to simply pocket the money, though one could argue
| its returning the amount the employer is covering, often more
| than the employee. :shrug:
|
| Believe or not, I get yearly notices from UHC about rebates
| for the prior year.
| tptacek wrote:
| Whatever the reasons are, I don't need first principles to
| make this claim, because Medicare presents this particular
| data quite clearly.
| rockercoaster wrote:
| > Yea in fact the ACA law caps insurers to a maximum of 15%
| profit.
|
| These are plan-by-plan, not on the company overall, and
| notably this doesn't apply to:
|
| 1) Self-funded plans. Name-brand insurance companies manage
| these, but big companies fund them and take on the risk
| (with re-insurance and all that good stuff in the mix, of
| course). A large proportion of the US population is on
| these kinds of plans, and that limit does not apply to
| them.
|
| 2) New plans in their first (IIRC) two years. I've not
| looked into whether insurance companies are playing games
| with this such that a larger set of their plans are "new"
| ones than would be if this rule didn't exist, but if it's
| at all possible for them to do that, I guarantee they are.
| gertlex wrote:
| >> The bulk of the rents is captured instead by providers of
| health-care services such as hospitals and the system's true
| money-makers: insurers, pharmacy-benefit managers and other
| middlemen taking advantage of its opacity.
|
| > As always, no one reads anything.
|
| The implication of the article was the "bulk of the rents"
| applies to healthcare costs in total, not just to drug costs.
| I.e. drug costs are not a huge part of the healthcare costs.
|
| _That_ by itself doesn 't guarantee an understanding of why
| specific medication costs are sometimes 10x or whatever of
| other 1st world countries.
|
| (but I didn't read the article; just the rest of the comments)
| gruez wrote:
| For people who only read the title, note that the article is
| actually about a slightly different point:
|
| >America is a lucrative market for the world's drug giants. Many
| pharma bosses admit that is where they make most of their
| profits. But are these profits really responsible for America's
| ballooning health-care bill? The short answer is no.
|
| I don't think the article is disputing that Americans pay more
| for drugs than other countries, only that the pharma industry
| isn't the top gouger (or even above average) in the healthcare
| industry.
| tiahura wrote:
| https://www.ama-assn.org/sites/ama-assn.org/files/2025-04/20...
| cryzinger wrote:
| > The bulk of the rents is captured instead by providers of
| health-care services such as hospitals and the system's true
| money-makers: insurers, pharmacy-benefit managers and other
| middlemen taking advantage of its opacity.
|
| Did a ctrl+F for "PBM," and when that failed, "pharmacy" :P And
| yeah, the thing about drug manufacturers is that they _are_
| ripping us off, but at least they do actually provide a useful
| service. PBMs, by contrast, inflate costs without any real
| benefit to consumers.
| bearjaws wrote:
| I work for a large mail order pharmacy and I will tell you we
| make no money on over 90% of our prescriptions. Our margin is
| less than 4%. The space is hyper competitive and obviously
| consumers are price sensitive. We are incredibly lean - less than
| 50 staff to run the pharmacy and a fully robotic dispensing line
| doing the vast majority of the dispensing.
|
| The drug manufacturers are making massive profits, and nobody is
| stopping them.
|
| Hilariously the whole TrumpRx card is kind of a step in the right
| direction, I've screamed for years that manufacturers blatantly
| rip everyone off and if just use a made up discount card system
| all of a sudden the drug is 30-90% off.
|
| Ideally the government just says the global price is the US
| price, and eliminates discount cards entirely.
| tptacek wrote:
| You only get access to the government-negotiated discount,
| which is from the pharma company list price, if you buy without
| insurance. But your insurance company already negotiated a
| discount from that list price (they're not dumb, and any excess
| dollar they give to Pfizer is a dollar they don't get to deploy
| elsewhere). From what little we know of the government
| discount, it is likely in most cases to be a worse price than
| what you already have access to.
| pfisherman wrote:
| The list price is mostly a starting point for negotiations with
| PBMs and payers. Drugs are also often aggregated and bundled.
| So in a lot of cases is unclear what a drug actually costs.
| Der_Einzige wrote:
| Just gonna leave this here...
|
| https://en.m.wikipedia.org/wiki/Betteridge's_law_of_headline...
| abeppu wrote:
| > The bulk of the rents is captured instead by providers of
| health-care services such as hospitals and the system's true
| money-makers: insurers, pharmacy-benefit managers and other
| middlemen taking advantage of its opacity.
|
| This category of "providers of health-care services" is rather
| over-broad, and I wish they had split it up more. Shouldn't
| hospitals (which actually _provide health care_ and are necessary
| parts of the healthcare system) be in a separate bucket from the
| "middlemen"?
|
| And within the hospital category, don't we need to draw some
| distinctions? Currently in the US there's been press about how
| recent funding changes are causing a bunch of rural hospitals to
| shut down. It seems that some hospitals are major money losers,
| though we as a society may want them to continue to exist (or
| else a rural person in a medical emergency has no chance of
| getting care in time). But what's happening at the hospitals that
| _are_ collecting "rents", esp since in more urban contexts there
| are often multiple hospitals and one might expect more
| competition?
| tboyd47 wrote:
| The answer: Well, that depends on how you define "Big Pharma."
| tiahura wrote:
| Where does healthcare spending go?
|
| https://www.ama-assn.org/sites/ama-assn.org/files/2025-04/20...
| nineplay wrote:
| I'm intrigued by the premise - I have my own large burden of
| health care costs and my own suspicions about where it is going -
| but does anyone else find their charts unreadable? I'm trying to
| parse the first one and I keep trying to put the pieces together.
| "Health care services" is 60 out of 101bn ... excess profits?
|
| The second one I can hardly start on, "health care services" is a
| medium circle ( circle size = combined market capitalization )
| with the second highest "Aggregate return on invested capital"
| and in the middle of "median weighted-average cost of capital".
|
| I know its called "the economist" but they usually make their
| articles readable by people without a econ degree. If I had a
| suspicious mind ( I do ) I'd think this was deliberate
| obfuscation.
|
| Also "health care services ... such as hospitals and the system's
| true money-makers: insurers, pharmacy-benefit managers and other
| middlemen taking advantage of its opacity"
|
| That is a lot of different interests bundled together. How can
| they say insurers are the true money makers when they are not
| even broken out?
| xnx wrote:
| Seems like net income margin for an average US company is about
| ~10% and for big pharm it's ~14%. Regulations are probably what
| keeps pharma unusually profitable.
| lotsofpulp wrote:
| 10% consistent profit margin is above average for publicly
| listed US companies.
|
| https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile...
|
| >Total Market 8.67%
| ktosobcy wrote:
| Americans created "big-pharma", "big-medical" and "big-insurance"
| for themselves and now they are living the consequences...
| TheCoelacanth wrote:
| Every individual component of health care is a small portion of
| spending.
| potato3732842 wrote:
| Everything in healthcare is a "small component" if you squint or
| ask those benefitting but this death by a thousand cuts adds up
| to a hair under 1/5th of the US GDP. Go single payer or
| deregulate the living crap out of it, I don't care. I just want
| this leech of my back.
| coredog64 wrote:
| Single payer doesn't do anything though. Doctors and nurses
| have significantly better social standing than politicians, so
| when push comes to shove, the politicians won't be able to make
| the required structural changes that reduce the labor
| components of healthcare costs.
| PhotonHunter wrote:
| For drugmakers, we treat research and development as an asset
| that is depreciated over 15 years, which is more or less the
| lifetime of their patents.
|
| This is not a good assumption. It's a super complicated subject,
| but what really matters is _market exclusivity_ and I think most
| industry people would use 8-12 years as a realistic range for
| small molecule market exclusivity.+
|
| I'm unsure how this revised assumption would alter the
| conclusions.
|
| +one reference of many in support:
| https://pmc.ncbi.nlm.nih.gov/articles/PMC10242760/
| cs702 wrote:
| The Economist's analysis concludes that the bulk of exorbitant
| rents in the US is captured by providers of health-care services
| who take advantage of the healthcare system's opacity:
|
| * hospitals,
|
| * insurers,
|
| * pharmacy-benefit managers, and
|
| * other middlemen.
| kazinator wrote:
| Everything else being horrendously expensive does exert an upward
| lift on pharma prices. Yes, pharma does gouge Americans, no doubt
| about it.
|
| This is not easy to analyze with complements vs substitutes.
| Sometimes drugs can be substitutes for other treatments, and
| sometimes they are complements.
|
| Also, people may be desperately needing one or the other or both.
| It's not like quitting coffee when the prices are high.
|
| Say that for a certain drug and certain set of medical
| treatments, they are complementary. If the treatment is jacked up
| to be expensive, less of it will be performed, and that will
| create less demand for the drug. So you would think the drug
| would go cheaper. But the drug vendors can simply use their
| market power (say it is a patented drug with no generic version
| available) to stick to their guns and jack their prices too. Then
| they exert the reverse effect; the more expensive drug will put
| downward pressure on the complementary treatment.
|
| In this manner, both the drug and the procedures can gradually
| become expensive together. Though each one is not as expensive as
| it would be if the other didn't move.
| tracker1 wrote:
| I think the problem is the article detaches "Pharmacy-Benefit
| Managers" from Pharma costs and into "Services" as a separate
| category... they're definitely closer to Pharma in terms of the
| structure, where that money goes is up for debate.
|
| There should probably be trade (FTC) violation of some kind from
| this layer of man in the middle gouging, which is on top of the
| higher direct prices of the medications to begin with in the US.
| kalap_ur wrote:
| I did a calculation once. US spends $4.9T on healthcare: $2T on
| personnel, $500B on non-acute drugs (ie OTC + prescribed) and
| $2.4T on something else. Germany spends $550B on healthcare:
| $430B on personnel, $80B on non-acute drugs and $31B on something
| else. My guess is that the "something else", which is non
| transparent, is actually private insurance jacking prices up.
| giantg2 wrote:
| Can you adjust those to for a per capita and CoL basis?
|
| That something else could also be stuff like malpractice
| insurance, legal settlements, etc.
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