U.S. Consumers Foot the Bill for Cheap Drugs in Europe and Canada
bloomberg.comWait a second.
There are two strange assumptions in this article. One that paying more for something makes it better. And secondly profits gained are always reinvested in research and development.
Paying more for something does not make it better especially in the realm of healthcare. There are lots of reports and studies that show that American spending on healthcare is one of the highest in the world and among comparable nations it's health outcomes are the lowest (basically american consumers are getting fleeced). Here is an article from our friends at Fox News http://www.foxnews.com/health/2013/07/10/united-states-healt...
So paying more for healthcare does not mean better outcomes.
To bring it back to the drugs debate, perhaps it is the American consumers that are getting ripped off and paying higher amounts for drugs doesn't result in better drugs being developed but instead just results in higher profits for drug companies.
Drug companies are private enterprises. They don't exist for the public good, but they exist to make money. So higher profits WILL result in more money being removed and not invested in R&D. If the companies weren't doing this they wouldn't be living up to their responsibilities as corporations.
So higher profits WILL result in more money being removed and not invested in R&D. If the companies weren't doing this they wouldn't be living up to their responsibilities as corporations.
That's true at some level, but not in general. Remember that the people who invested the money that paid for the research that caused the drugs to be developed could very well have just sat on their money and not invested it in the first place. Those capitalists had a choice as to how much money to invest in drug discovery, and since they're greedy capitalists they invested the amount of money that they thought would make them the most money. There's a diminishing returns thing going on where there are a whole bunch of possible research avenues open, so the more money they put in the lower percentage return they get. When the percentage return drops below what they could get from other investments, they put money in those investments instead.
To the extent that drugs start to have higher profits then the greedy executives will see that they can make even more money by investing more money in drug research, possibly much more than the increased profits but also possibly much less. It all depends on how fast the investors think that the diminishing returns on investment kick in.
I don't agree with the article in general, but the author isn't saying that spending more money on a patient brings a better outcome. She says that the expectation of bigger profits for a successful drug creates an incentive to the creation of successful drugs, and thus more successful drugs - which can help more patients in the long run.
"Abroad, where the “negotiation” consists of governments telling you what they are willing to pay, even as you know that they can always change the law to shorten your patent term so that other countries can manufacture your product, using your research for free."
The author doesn't mention any examples of this actually happening, which makes me wonder if it's just theoretical. Does it happen?
Also, how much of big pharma's costs goes to marketing? They don't have consumer marketing expenses outside the USA.
As of 2008, somewhere near $58 billion/year.
"From this new estimate, it appears that pharmaceutical companies spend almost twice as much on promotion as they do on R&D."
[1] http://www.plosmedicine.org/article/info:doi/10.1371/journal...
There's your problem right there. Outside the US there just isn't a huge spend on marketing (they definitely try to influence doctors though). And honestly, I find it really weird that pharmaceutical companies actually advertise to patients. Part of the reason I spend so much money on a medical doctor is so that I don't need to decide what medicine I need to take. In fact I don't think I should be involved in the conversation. The doctor should just do his or her job without me weighing in one way or the other because I've seen some advertisement on television.
The vast majority of what drug companies spend isn't on advertising to patients but advertising to doctors, having people on staff devoted to answering doctor's questions, and sending free samples to doctors.
It's sort of screwed up that drug companies are expected to educate doctors about their drugs since there's a huge conflict of interest there. But nobody else is paying to train doctors in this.
EDIT: From the article that mikeyouse linked, pharma companies spent $20B on R&D, $16B on free samples for doctors, $20B on doctor education, and $4B on consumer advertising.
> It's sort of screwed up that drug companies are expected to educate doctors about their drugs since there's a huge conflict of interest there. But nobody else is paying to train doctors in this.
The medical profession has continuing education requirements, much like other regulated professions, and a lot of that is about keeping up with new developments in each practitioner's area of practice. To the extent that continuing education isn't directly subsidized by employers, the need to do it is part of what justifies the high salaries doctors receive. So, yes, people -- other than pharmaceutical vendors -- are paying to train doctors to keep up with relevant developments in their field.
Pharma companies aren't spending vast sums of money marketing to doctors because there is an education gap, they are doing it because the sales of prescription drugs aren't at the sole discretion of the consumer -- that's the whole point of the prescription requirement -- so doctors are the key decisionmakers that they need to sell to.
I'm skeptical. On any given ad break on any major network, there is an 80%+ likelihood that there will be an ad for a drug, if not two.
The US is the only country in the world that allows the advertising of prescription drugs - often with ads that would be hilariously vague, if not so dangerous ("Do you sometimes feel tired? Cymbalta could help! Ask your doctor!") - cha-ching, co-pay and insurance, and possibly a script for a drug that's really not needed.
Kind of a crappy article. It focuses on new drug innovation when most of the markup we are seeing in the US is for old drugs. As an individual you can't negotiate when you need a drug.
It's up to a regulatory body to make sure the manufacturers aren't exploiting their position in the market.
"The most hopeful thing I can say, in fact, is that we may naturally be running out of feasible drug candidates, so maybe it doesn’t matter much."
I'd hate to have the mental-state that regarded such a situation as 'the most hopeful thing I can say'. Is almost as though the author has been briefed that higher prices are the aim here.
Also, if you look at research money on the diseases that affect the most people, it is mostly not coming from big-pharma anyway, but rather from state backed research, much of it from the countries that the author reckons are raising US drug prices. Personally, I suspect that the main reason for high drug prices in the US is actually having such a massive army of middlemen who do not have interests aligned with the patient, but that is only a guess.
I promise you the level of state-backed research for pharmaceuticals is much higher in the US than it is from "the countries that the author reckons are raising US drug prices." I would, however, be the first to tell you that throwing money at drug development is not a solution to good drug development, and may be counterproductive beyond a certain point.
Fair. I just had a look at the numbers. Is less clear when you drill down to individual countries and if you only look at the most virulent diseases, also with a lot of the funding, like the global fund for instance, many of the EC countries donate twice, once as part of their EC obligation, and again as a national donation, so you may miss a lot if you just look at EC funds. But you are definitely right overall, the US state spending seems massive in comparison.
Mind you, this got me thinking, if you were going to expect any of that to affect the pricing of essential drugs, you would expect it to push prices down in the US, given there is what amounts to the worlds largest drugs industry subsidy. Also, I notice that big pharma is not generally skint, so if there is a shortage of new drugs (is this actually true in general, or is it just truthiness?), I would agree with you that it is not down to a shortage of money.
it should have no effect on pricing. Basic capitalism 101: The price of a good is very limitedly affected by what it costs to produce it.
That's one of the things that sucks about IP law. It'll never be standardized internationally so those places where it's strict, prices are high. In nations where it's looser, prices are low. We pay the government to enforce laws that keep our prices up. It's kind of a bummer.
It's nothing to do with IP; Simply what the market is willing to pay. We're not buying knockoffs, or violating anyone's IP (I'm european). In fact, the article claims the US buys more generics than we do.
We just have a completely different market, and the prices reflect that. With state-sponsored healthcare, you have one buyer who represents a vast proportion of a nation's market. The economics become reaching most the market on a narrow margin, vs reaching a tiny market on a more favourable margin.
Apparently the narrow margin scales to beat the private margin, based on those sales being made.
It does have to do with IP. If there was a worldwide IP regime in place, EVERYONE would have to pay what the drug companies demanded, or let their citizens die without the drugs (in countries with single-payer).
Since the drug companies know that Canada or countries in Europe could -- if they so chose -- make new laws that strike down the validity of their patents. But that would take time to do and require specialized laws that only dissolved drug patents or whatever. So they sell the drugs cheaply.
There's no negotiating like that here in the US because this is where the major pharma companies are headquartered and where they spend a lot of money lobbying for excellent protections. As a result their patents are safe here.
But their patents are not safe overseas which is why those countries tend to get a better deal on their drugs on the whole. It's different because those involved in the buying can alter the regulatory environment. Those involved in the buying here can't make such a credible threat and as a result, higher prices.
Cheap everything, including drugs, is the value that free markets are supposed to create, to lead to the cheapest - and patents aren't supportive of this. Regarding people who say this research and discoveries wouldn't have happened without ability to patent - there are plenty of researchers, many, if not the majority, who do their work because they want to help people and the field interests them - so if they have their living costs taken care of, and access to the tools they need, they'll be happy and the research would be discovered. The U.S. pushed on the capitalist system to the extremes, and it leads to the acceleration of innovation - though we have enough basic science and technology figured out now, where we should be focusing on taking care of people properly, which we're currently doing a poor job of - doing a good job is where free market value is supposed to lead. Free market capitalism, without protectionism (no longer free market - a popular term hijacked by those in control), leads to the cost of production getting as close to the next unit of production being $0. If something is $0 then everyone can benefit from it. This is why the internet is so valuable, invaluable, and hugely important in the world's progression. If you have an internet connection, then the cost of acquiring the benefit from software created or receiving information is basically $0. Right now though the positive benefits of unchecked capitalism don't outweigh the negative effects that it also generates, fosters. Without patents and the such then the world would benefit in the same way - everyone can very cheaply benefit from software. The problem is many countries have aligned themselves with being in a controlling state, to use leverage for short-term gain - though it is only temporary, and only lasts so long as you maintain control - and control is costly. If the whole world was fitting the bill for new research, the cost to each of us would be practically $0; I won't go deep into the idea that money isn't real either, and that if we were all in service to everyone else, then everyone would be very well taken care of - we're not born into this construct so it's very hard for most people to visualize this experience of living this way, or to feel safe and secure.
loceng - you may be interest in what I'm doing, check my profile.
There's an argument to be made that there will be more innovation and creation of these drugs if there are fortunes to be made.
In theory I agree with you. I think in practice that's not so much the case.
Drug companies fund the vast majority of drug research and they're much happier with already proven drugs (which are already paid for and have zero risk) than new drugs which aren't approved by regulators nor proven profitable yet.
If it were possible to fund the R&D for new drugs the same way tech/VC is done these days I would 100% agree with you. But the cost is so high and the timeline so long that no sane VC would write those checks and as a result it's big institutions only.
So what ends up happening is that we overpay for drugs so that the drug companies have enough money to spend 2x what they do on R&D on advertising, telling us which overpriced drugs we need.
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