The Buffett Rule

[justplugit]

Originally Posted by spence

We let Pharma companies charge what ever they want for patentable drugs without any negotiation.



-spence

Spence, are you for price control???

You are wrong about negotiations, every hospital in the country, community,
county, state and fed has a formulary and belongs to a buying group who put out bids for all compatiable drugs.

As for the price of exclusive drugs, their price is not set on the active
ingredients but on all the costs from finding a compound to bringing it
to market. It costs many millions of dollars to find a compound, test it,
do clinical trials under FDA regulations and getting approval takes years
under stringent government regulations.

Drugs represent 10.5 cents of medical costs and saves millions in
keeping patients out of hospitals. Diseases like pneumoniae, heart failure,
diabetes, depression etc. can now be treated at home.

Pharma is a big political football because people don't want to be sick and
have to pay for it. Of course they won't think twice about buying a six pack,
$5 a day cigs or a bottle of Jim Bean but moan about paying $5 a day
for a drug that gives them quality of life, keeps them out of the hospital
and prolongs their life. Politicians know it and slam Pharma knowing they can
make points because it is popular to do so by the folks.

[spence]

Originally Posted by justplugit

Spence, are you for price control???

You are wrong about negotiations, every hospital in the country, community,
county, state and fed has a formulary and belongs to a buying group who put out bids for all compatiable drugs.

As for the price of exclusive drugs, their price is not set on the active
ingredients but on all the costs from finding a compound to bringing it
to market. It costs many millions of dollars to find a compound, test it,
do clinical trials under FDA regulations and getting approval takes years
under stringent government regulations.

Drugs represent 10.5 cents of medical costs and saves millions in
keeping patients out of hospitals. Diseases like pneumoniae, heart failure,
diabetes, depression etc. can now be treated at home.

Pharma is a big political football because people don't want to be sick and
have to pay for it. Of course they won't think twice about buying a six pack,
$5 a day cigs or a bottle of Jim Bean but moan about paying $5 a day
for a drug that gives them quality of life, keeps them out of the hospital
and prolongs their life. Politicians know it and slam Pharma knowing they can
make points because it is popular to do so by the folks.

I'm well aware of the business process regarding FDA regulated product development.

Here's the issue. There's competition for drug prices inside the US but the development is done for a global market. All that R&D funding to create the next category killer drug is being subsidized by US consumers because drugs are sold at lower costs (often via price controls) in pretty much every other nation. There really isn't a lot of real negotiation. This is government regulation that the industry is highly dependent on.

Hence my comment being in context of "market forces".

-spence

[justplugit]

Originally Posted by spence

All that R&D funding to create the next category killer drug is being subsidized by US consumers because drugs are sold at lower costs (often via price controls) in pretty much every other nation.

-spence

So as per my first question you are for price control ?

[spence]

Originally Posted by justplugit

So as per my first question you are for price control ?

I don't think the government should set prices arbitrarily but can see scenarios where regulations impacting price could be justified.

Take Canada for instance, they have price controls and as a result cheaper drugs. They also have a government system that provides healthcare for everyone, which creates almost a guaranteed customer base. So in this case the price control is balanced (to some degree) with a sure customer. Without price controls they'd risk having to ration some drugs if the manufactures decided to price them above value.

The drug companies don't have to sell to Canada, but they do anyway because the incremental production cost of the drugs is usually small compared to the development, approval and tooling processes...not to mention the tens of billions of dollars it takes to scare us all into demanding drugs for ailments we didn't even know we had.

So price controls in Canada seem to be a win/win for both the consumer and industry, but if you applied the same policy here you'd kill (or perhaps injure) the golden goose.

There is government regulation that helps pharmaceutical companies maintain higher prices across a very large market as well as regulation to ensure quality and safety which adds cost.

I don't think the pharma companies are bad, but when you do hear stories about Americans unable to afford some drugs here that are available across the border 10X cheaper it raises some questions. The pharmaceutical industry is one of the most profitable in the world. Regardless of what happens I'm sure they'll find a way to make a buck.

-spence

[justplugit]

[QUOTE=spence;889454]I don't think the government should set prices arbitrarily but can see scenarios where regulations impacting price could be justified.

Take Canada for instance, they have price controls and as a result cheaper drugs. They also have a government system that provides healthcare for everyone, which creates almost a guaranteed customer base. So in this case the price control is balanced (to some degree) with a sure customer. Without price controls they'd risk having to ration some drugs if the manufactures decided to price them above value.
_[QUOTE]

Spence, I would love to see Canada's national formulary. Guarantee it is limited
to one drug per class which means you won't have a choice when it comes
to efficacy or side effect profile. For instance there are many statin drugs
on the market for lowering cholesterol. They are all variations of statins
but each works a little differently. When there is only one,that will be based on the cheapest, and you can't tolerate it or it's not efficacious for you, too bad.
That is One of the biggest problems with government health care, no choice AND
mediocore medicine.

Rationing drugs based on age becomes another problem as expensive chemo
drugs etc. will be too costly to add another 5 years to say maybe a 75 yr old.

Good point on killing the Golden Goose. It is already happening. Companies
will not go out on a limb in R+D if they find a compound that has a limited
use. For instance, Amphotericin B was developed years ago to treat fatal
San Juakien (sp?) Valley ,a disease limited to the valley. They won't
be willing to spend millions and years of development when there will be
no return on investment. They will stay with the large markets for cardiovasculars
and anti effectives.

Same old story, you get what you pay for.

[spence]

[

Originally Posted by justplugit

Spence, I would love to see Canada's national formulary. Guarantee it is limited to one drug per class which means you won't have a choice when it comes to efficacy or side effect profile. For instance there are many statin drugs on the market for lowering cholesterol. They are all variations of statins
but each works a little differently. When there is only one,that will be based on the cheapest, and you can't tolerate it or it's not efficacious for you, too bad. That is One of the biggest problems with government health care, no choice AND mediocore medicine.

Well, Canadians would beg to differ...they love their health care. I think polls are usually 85-90% in favor.

As for prescription drugs, you can still get private insurance to cover prescriptions there...though as was mentioned above, the governments will negotiate costs which Medicare/Medicaid here isn't allowed to do by law.

I'm not sure the claim that only one drug per class is allowed is accurate. For instance, I found one report that listed % market share of the various statin drugs there.

Rationing drugs based on age becomes another problem as expensive chemo drugs etc. will be too costly to add another 5 years to say maybe a 75 yr old.

No different than in the USA.

Good point on killing the Golden Goose. It is already happening. Companies will not go out on a limb in R+D if they find a compound that has a limited use. For instance, Amphotericin B was developed years ago to treat fatal San Juakien (sp?) Valley ,a disease limited to the valley. They won't be willing to spend millions and years of development when there will be no return on investment. They will stay with the large markets for cardiovasculars and anti effectives.

I think a bigger issue is simply that the big companies are making more profit based decisions than just counting how much money is going into R&D. R&D spending is going down as they focus on better returns.

For a large organization it's probably just not practical to go after niche drugs unless you have a business model built around it. This should encourage growth in small companies to meet low volume needs.

There are a TON of companies like this in the Boston area alone.

-spence

[justplugit]

Originally Posted by spence

[
Well, Canadians would beg to differ...they love their health care. I think polls are usually 85-90% in favor.



I'm not sure the claim that only one drug per class is allowed is accurate. For instance, I found one report that listed % market share of the various statin drugs there.


No different than in the USA.


I think a bigger issue is simply that the big companies are making more profit based decisions than just counting how much money is going into R&D. R&D spending is going down as they focus on better returns.

For a large organization it's probably just not practical to go after niche drugs unless you have a business model built around it. This should encourage growth in small companies to meet low volume needs.

There are a TON of companies like this in the Boston area alone.

-spence

Sources please.

If your insurance company won't cover chemo at age 75 for you, ya
betta get another company,you'll be there before ya know it.

BTW, Govt. announced today they want everyones medical records computerized
for Obamacare. Like they will remain private.
BIG BROTHER at it's best.
Whats next ?????

[detbuch]

Originally Posted by spence

I'm well aware of the business process regarding FDA regulated product development.

Here's the issue. There's competition for drug prices inside the US but the development is done for a global market. All that R&D funding to create the next category killer drug is being subsidized by US consumers because drugs are sold at lower costs (often via price controls) in pretty much every other nation. There really isn't a lot of real negotiation. This is government regulation that the industry is highly dependent on.

Hence my comment being in context of "market forces".

-spence

When you said that pharma charging "what ever they want" without any negotiation is not yoiur "idea of market forces at work . . ." it seemed on the one hand a contradiction since market forces do not negate charging what you desire so long as the buyer needs your product and is willing and able to pay your price. But pharma's prices are obviously not a result of market forces, so your comment was gratuitus.

Perhaps you are mixing market "forces" with market "economy"? Market "forces" are thos economic factors strictly peculiar to the market without government input, such as supply and demand. Market "economies" are largely driven by market "forces" but may have varying degrees of government intervention. As government control becomes greater, it becomes a mixed economy, and if that control is great or absolute, it is a centrally planned economy where market "forces" play little or no part.

As far as pharma's prices go, they seem to be a product not of market forces, but of more centrally planned forces--both in the U.S. and abroad.

In a "free" market, driven basically by market forces with little to no government intervention, prices would have to go down in the U.S. and up abroad. This would be so even with basic safety regulations, not with the super cautious, draconian ones of present which have massively ballooned since the thalidomide scandal of 1961-62 and have created a cozy, corrupt partnership between pharma and the FDA at the expense of free market competition and "affordable" drugs.

[spence]

Originally Posted by detbuch

When you said that pharma charging "what ever they want" without any negotiation is not yoiur "idea of market forces at work . . ." it seemed on the one hand a contradiction since market forces do not negate charging what you desire so long as the buyer needs your product and is willing and able to pay your price. But pharma's prices are obviously not a result of market forces, so your comment was gratuitus.

Perhaps you are mixing market "forces" with market "economy"? Market "forces" are thos economic factors strictly peculiar to the market without government input, such as supply and demand. Market "economies" are largely driven by market "forces" but may have varying degrees of government intervention. As government control becomes greater, it becomes a mixed economy, and if that control is great or absolute, it is a centrally planned economy where market "forces" play little or no part.

I'd think that government influence (here and abroad) as part of a free market economy would have a large impact on both supply and demand.

As far as pharma's prices go, they seem to be a product not of market forces, but of more centrally planned forces--both in the U.S. and abroad.

In a "free" market, driven basically by market forces with little to no government intervention, prices would have to go down in the U.S. and up abroad.

Today we have regulation that impacts both profit and loss, take away it all away and the results would be unpredictable. Perhaps lower prices from competition but also increased costs if quality standards are not maintained. Undoing a heavily regulated industry is a lot different than pretending it never existed in the first place.

This would be so even with basic safety regulations, not with the super cautious, draconian ones of present which have massively ballooned since the thalidomide scandal of 1961-62 and have created a cozy, corrupt partnership between pharma and the FDA at the expense of free market competition and "affordable" drugs.

I wouldn't say that proving a drug is safe and effective, or that it actually does what you claim it does...is "draconian". This relationship must be pretty unbearable what with all the private sector profit it creates.

-spence

[detbuch]

Originally Posted by spence

I'd think that government influence (here and abroad) as part of a free market economy would have a large impact on both supply and demand.

You're creating a different context here. The original context was pharma charging whatever it wants not being your idea of market "forces." Government influence does not play a part in the traditional usage of the term "market forces". Now your also being loose with "free market." If government regulation on a market is LARGE, it is not, strictly, a "free" market, but a controlled market in either a mixed economy or a centrally planned economy. Hence, your unnecessary remark about pharma's pricing not being your idea of market forces at work. Of course, THEIR PRICING IS NOT A RESULT OF MARKET FORCES, BUT A RESULT GOVERNMENT REGULATION, that is, a result of central planning.

Today we have regulation that impacts both profit and loss, take away it all away and the results would be unpredictable. Perhaps lower prices from competition but also increased costs if quality standards are not maintained. Undoing a heavily regulated industry is a lot different than pretending it never existed in the first place.

The results can be fairly predictable if done right. The result of current conditions is obviously unsustainable. Safe quality standards can be maintained with far less government regulation and, thus, at far less cost, by allowing good manufacturing practice (GMP) certified facilities to produce generic drugs with a warning label that they are not produced under the same standards required for FDA approved generic drugs, etc. This would also help to eliminate the big problem of drug counterfeiting that exists now since it would not be as profitable to produce fakes of cheaper drugs. And it would help to reduce the problem of defective generic drugs produced in China or India. Another way to lower costs is not to ban all other forms of a drug that is granted orphan drug status. These drugs are for rare diseases, and not profitable to produce unless exorbitant prices can be charged.

I wouldn't say that proving a drug is safe and effective, or that it actually does what you claim it does...is "draconian". This relationship must be pretty unbearable what with all the private sector profit it creates.

-spence

When regulation is so expensive that it can bankrupt a country, I would say that it is draconian. Medicare has an unfunded liability of $24.6 trillion (downgraded from $37 trillion in 2009 by fictitious "assumptions" to hide the true liability). That's just Medicare. Not Social Security, the national debt, the military, etc., just Medicare. Subsidizing drugs are a major portion of that liability. And, as you have implied several times, the "relationship" (between the government and pharma) is what sustains the profits that bother you.