The linked ruling is quite interesting. It outlines how drug plans dupe consumers into paying significantly higher percentages of drug costs than they are supposed to. An example provided shows how a consumer with a 25% copay ends up paying 35% of the cost of the drug, because the 25% copay is calculated on the "list price" rather than the price their insurance plan actually pays (which may be considerably later).
Good read, and a good example of why regulation is just necessary.
It all depends on what the definition of the word "copay" is, doesn't it?
This doesn't make any sense. If you are the sole provider of a drug that is the only drug that can cure a certain illness then it makes sense to charge every single customer exactly as much as they can afford. (probably enough to bankrupt them) You'd expect extreme price discrepancy in those cases.
This applies even if the drug is just the best one for what it does.
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Unless you mean that regulation in the form of patent protections.
Under drug IPR rules no market price can exist for many drugs because they are single source. If you want to admit a market permit Indian generics into the USA and watch prices tumble.
> Under drug IPR rules no market price can exist for many drugs because they are single source. If you want to admit a market permit Indian generics into the USA and watch prices tumble.
There is still a market price because the customer has an alternative. There is a second best drug. In the worst case (e.g. the only alternative is death), there is still a price because the drug company can't demand a billion dollars if the customer doesn't have a billion dollars.
The fact that we get into this position of no alternative but death is problematic, but it's also how the patent system is designed to work. If the drug didn't exist, you would die. If it does exist, you have the choice between death or bankruptcy. This is still not ideal, but it's better than the original situation, and eventually the drug patent expires.
There are a number of implementation failures with this, like public funding going to drug research that is subsequently patented, and a regulatory system that gives no one an incentive to do clinical trials for promising treatments they don't hold a patent on, and so on.
But the basic idea is not without merit. It costs a mint to do research and trials. If there isn't money in it then companies wouldn't do it. So if there is a patented drug which is the only thing that can save your life, would you rather have to file for bankruptcy paying for it, or have it not exist because we said they're not allowed to make enough money to get them to do the R&D to begin with? In some cases there isn't really a third option.
In principle you can have the government fund the research instead of depending on the market, and then not patent it so patients don't have to pay a lot. Which works fine when that finds the cure. But if it doesn't, do you still want the system that allows the market to find it as a backup, or not?
> In the worst case (e.g. the only alternative is death), there is still a price because the drug company can't demand a billion dollars if the customer doesn't have a billion dollars.
There's a much stricter limit than that. I keep seeing people say that you can charge as much money for lifesaving medical care as the patient has, and it's nonsense. That hypothetical patient is choosing between whatever remains of their life and leaving an inheritance of $1 billion. I guarantee you that the world is chock full of people who would kill themselves for $1 billion. Life insurance policies exclude suicide for a reason, and they pay tens of thousands of times less than that.
Quite. Fortunately we can have our cake and eat it. We can, and do, have for-profit companies invest capital in expensive drug development. We can and do protect their investments for them with patents, and by shielding them from competition from generics for a period. In return we regulate the prices they can charge.
That all seems fair and reasonable to me. The companies both benefit from and are constrained by regulation. They wouldn't exist without regulatory protection, so it's fair that it comes with a cost. In reality the question is what constitutes fair regulation, and that's something reasonable people can disagree on.
> In return we regulate the prices they can charge.
And then you don't get the expensive drugs.
Suppose there are 50,000 people with a fatal condition. Researching a cure and getting it approved would cost $5B. Therefore each person needs to pay at least $100,000, or there isn't enough money to fund the research. If you say they can only charge $10,000/patient, no cure.
Whatever price you set as the max they can charge, that's the value you're assigning to a human life.
> In return we regulate the prices they can charge.
And then you don't get the expensive drugs.
Suppose there are 50,000 people with a fatal condition. Researching a cure and getting it approved would cost $5B. Therefore each person needs to pay at least $100,000, or there isn't enough money to fund the research. If you say they can only charge $10,000/patient, no cure.
Whatever price you set as the max they can charge, that's the value you're assigning to a human life.
With just a few minor word substitutions, what you just said could as easily be the speech a bank robber, trapped in the bank with a dozen hostages. If that $10,000 reflects the profit motive taken to an extreme rather than anything related to the cost of the drug, then it’s the company placing a number on human life. Specifically they’re saying, “It’s only worth our time if you pay us enough for us to 100x+ our margins.”
Can you point to any major pharmaceutical research company with 99% net margins?
In order for that to happen, you would need something that affects a nontrivial number of people for which it's possible to inexpensively find a treatment and yet only one company and no government has bothered to do so.
Remember our friend Shkreli? How about insulin formulation, and Truvada (PREP) that’s $200 a year generic, and $1300 a month in the US. There are many more, and to their credit pharma companies have accountants thst would make Hollywood blush, so it takes some digging past the claims of R&D (dwarfed by marketing budgets in many cases) being the cost driver, and not record profits.
Unless... you put “research” in there as a confounding factor to be cute?
> Remember our friend Shkreli? How about insulin formulation, and Truvada (PREP) that’s $200 a year generic, and $1300 a month in the US.
Those are prices, not net margins. How much did the research cost, including the failed attempts before they found one that worked?
This is why "research" is a necessary qualifier. If you just find the occasional schmuck who got a good deal on a patent that was worth more than the seller anticipated, that isn't telling you much. The likes of Pfizer and Merck are public companies, you can go find their net margins from their financial statements. They're not 99%.
> There are many more, their credit pharma companies have accountants thst would make Hollywood blush, so it takes some digging past the claims of R&D (dwarfed by marketing budgets in many cases) being the cost driver, and not record profits.
The marketing budgets are a byproduct of insurance. Typically to make $100 in revenue you have to convince a customer to pay $100 for something that provides $110 in value to them. Throw in insurance and you make $1000 in revenue because the patient pays $100 for $110 in value while the insurance pays $900 more, which makes it much more valuable to advertise, so they advertise much more.
Insurance and patents are basically incompatible. The idea of patents is that you give someone a temporary monopoly and the market (i.e. the customer) decides how much the product is worth before they refuse to buy. The idea of insurance is that there is a low probability high cost event that the insurance pays whatever is necessary for if it comes to pass. But if the insurance pays whatever is necessary, and the seller has a monopoly, the seller can charge arbitrarily high prices. Or the price is limited by the patient's copay percentage, i.e. the insurance does nothing but raise the price by the exact amount the insurance covers, because the patient discounts the price by that amount when choosing whether to purchase.
People would pay a lot less in total, i.e. about the same amount for drugs and far less in premiums, if insurance companies would stop covering patented drugs whatsoever.
Sure, there are some treatments that may well be too expensive to develop, at least until the technology improves. Our current health systems all over the world put a price on human life all the time. There's plenty of medical research out there that we could be doing, but aren't because of budgetary constraints.
So basically on top of dealing with the stress of a life threatening disease, you're suggesting that a family must either decide to watch a parent die, and maintain financial stability, or attempt to live and set the whole family back?
The drugs are protected by intellectual property laws, which are in my opinion hugely problematic for medications. I’d welcome genetics. That might finally force us to fund research collectively.
The main reason markets existed historically was to ensure transactions were done in public. Prices were publicly observable, stolen goods were difficult so sell, etc.
Having a single market everyone trades in does have efficiency advantages, but the main reason we have had organised markets in jurisdictions all over the world, for thousands of years, is because the people making the rules wanted transactions to be done out in the open to keep the people doing the transactions honest.
I can't help but think that if your point is to communicate a point and/or change someone's mind, a more approachable, conversational strategy might yield more benefit.
In other words, just because something can be expressed some way doesn't mean it's useful to do so.
The problem this solves is to shine a light on the inverse price wars going on in drug pricing. List prices increase dramatically while rebates are offers to lower the net price. Pharmacy benefits managers who do the negotiation like this because they earn money on the rebates(which are also shared with insurance companies) and insurance likes this because copay is a fixed rate on list price and not net price. And both of these actors who cooperate to increase list prices get to blame the increases on drug producers who year after year earn less per sold product because of the rebates.
This will however not solve anything only make it visible. Copay should be changed to work on net price after rebates, and some serius investigation of the middlemen needs to be instigated.
You have an extraordinarily complex web of payers and providers that takes PhD’s in regulation science to unwrap, and the solution proposed is “more regulations”.
Some better, free-market oriented solutions would be to remove patent protection from drugs discovered from tax payer funded research, or auction the right to be the exclusive distributor.
It’s very sad that a large contingent of intelligent tech people, who have made small to large fortunes operating in one of the few unregulated industries in America (software), begging for yet more regulation in biotech and pharmaceuticals. The system is extremely distorted as it stands.
> remove patent protection from drugs discovered from tax payer funded research
That would make government funded research a poison pill nobody would rely on. If you come up with the idea for an app, then someone else spends a bunch of money hiring coders to actually build, test, and commercialize it, does that give you the right to force release of the app as open source?
If the government spends millions to do the fundamental research required to find a molecule with potential, then society should benefit from its investment. It’s a different beast from a mobile app.
I'm not a fan of the current state of affairs, but the cost of clinical trials is very real and absolutely enormous. Any workable solution will have to fully account for that.
"Should" doesn't matter. It's the same basic economic transaction. Nobody will agree to a deal where you demand complete ownership of a finished product based on funding some of the early development. They won't do it with mobile apps, and they won't do it with lifesaving drugs.
Kind of, yeah... Your work doesn't have to be forced open but you can't monopolize the findings of the research your product is based on. In other words, if the research says elements X and Y seem to have some affect on cancer. You shouldn't get to use X and Y in your own patent.
It's a temporary monopoly, which pays for the work of going from "X and Y seem to have some effect on cancer" to "here is a drug that uses X and Y to treat cancer." There is a massive amount of work to get from point A to point B, which the government isn't set-up to do itself.
Good read, and a good example of why regulation is just necessary.
It all depends on what the definition of the word "copay" is, doesn't it?