Speaking of hypotheticals, what if we don’t declare we won’t pay more than in the EU? The drug company won’t sell anywhere or will they go back and negotiate harder?
In my opinion, the EU regulators can impose artificially low prices because they know the drug companies will surcharge the US market to whatever level of profits they want.
Note the price difference per pill originally $13.50 vs. $0.66! This stuff is only possible if we leave it to markets to self-regulate which is not gonna happen for drugs without a real generic. There’s no reason we cannot adopt a price control regime like in the EU since it’s apparently quite effective at keeping drug prices low.
Hopefully it will happen and work. We’ve already had a law requiring hospitals to post prices but they only had to post the MSRP type price which virtually nobody pays and they’d put it in a XLS sheet somewhere. THe new rules will require it to be more consumer friendly and its supposed to include negotiated prices. Healthcare industry is balking at posting the negotiated prices, since thats deemed sensitive. I mean imagine if your competition knew the dealss you had on all your sales… Thats a big competitive issue to disclose that all to the world. We’ll see.
And theres this :
“While the Trump administration’s new hospital price transparency requirement is quite sweeping, the enforcement of it is quite weak — a maximum fine of $300 per day,” he wrote on Twitter. “The technical term for that is ‘chump change.’ I wonder how many hospitals will just pay the fine.”
Hopefully they all follow the law in good faith… but It would probably cost more for a hospital to maintain the list than to pay the fine.
One of the biggest overlooked crimes was when our own government barred itself from negotiating prices with the drug companies. Medicare is not allowed to get itself a good deal on drugs.
That was a total handout to the drug companies at taxpayer expense.
And we spend $100B on drugs for Medicare part D.
Its like writing a blank check almost for our govt. to not allow itself to haggle that spending.
Is cost of products and SG&A broken out somewhere in more detail? Does cost of products include include some kind of amortization of R&D costs for the product, or is it entirely accounted for in the R&D line item as incurred? Since the R&D is upfront (plus each successful drug has to pay for the cost of failed R&D) while a drug will be patented for ~20 years, it seems like you would need to look at a long-term calculation to accurately assess this. I’m trying to figure out if there’s a somewhat easy way to do this; I’m really curious now.
They are, but even with the PBM discounts the EpiPen (at least; I’m using this because I have personal experience with it) price is still inflated. According to my insurer’s website, they paid about $350 for the Teva generic EpiPen I bought about a month ago.
No SG&A line item is just on-going annual selling and general costs. R&D line item is not for drugs currently sold (unless extra research is done to extend use, change delivery method, etc.), but it is for the R&D costs (of future drugs) for the current year and for all their drug research. That includes exploratory synthesis (although small mol production is now often out-sourced), initial assays, lead ID and optimization, candidates in vitro/in vivo toxicology/safety, preclinical eval, clinical trial, … the whole process. Figure $2-3B normally to develop a new drug. That should be in the R&D line item entirely but it’ll be spread over several years and over several drugs in parallel development.
Thanks. I don’t have time right now but I’m going to try to see if there’s any figure available (or way to calculate it) that breaks out R&D cost by drug. Like, how much did Humira cost in R&D, and I’d also like to figure out some way of accounting for the cost of all the R&D that didn’t work out.
Yeah, I was trying to see what kind of expenses like that were included in those numbers. They actually do break out advertising separately:
But I also want to see if there’s any creative accounting going on. For example, does “cost of products sold” include royalties paid to some offshore IP-holding entity as a tax dodge? Things like that.
Good luck. I doubt you’ll find that proprietary information available readily. The breakdown of costs is also not simple between out-of-pocket costs and capital costs. And finally, even talking to therapeutic leads, you’re only relying on voluntary information release.
As far as R&D that doesn’t work out, it does not work quite like that. They very rarely spend 10 years from small mol screening to phase 3 trials to find out that it doesn’t pan out. You start from say 10k molecules, do IC50s and assays to narrow it down to maybe 1k, go into H2L (in vitro + in vivo testing) to cut it down to maybe 100 leads, after optimization get out it out of pre-clinical. At this point you have serious hope about maybe 2-5 drug candidates for your target and you’ve spent about 5 years getting there. You’ll want to cut it down that much because clinical trials cost so much per candidate. Eventually you’ll likely have only one that goes through 3 phases of clinical trial for regulatory approval (and you spent another 5 years on that). The final cost for the 1 drug (you may have seen $2-3B quoted) that you got FDA approved, that factors in all the ones that failed at various stages along the way. You could picture a scenario where all your candidates fail in clinical, and you get nothing but you’ll have learned stuff along the way. Maybe enough information to start in another direction but not entirely from scratch. You often have to explore only a part of your combinatorial results as your best shot. In cases where you totally failed to get a drug out, you’d probably head back to that stage with several years of research data that you can skip. Or if you got lucky maybe you found candidates for another target (say you were after a new Alzheimer drug but found out that one of your leads could be a darn good anti-depressant).
Bottom line, it’s not a simple estimate per drug. For a failed drug, you not only have the costs associated with all the steps but also the costs of not having spent money on a drug that worked (opportunity cost). Those costs get rolled into the cost to bring 1 drug to market basically.
I don’t think you’re going to find tax dodges going on there. Abbvie paid $2B in taxes. If they’re trying to dodge taxes they’re doing an awful job of it.
Another point about drug companies is that most of the drugs they put out are only replacements for existing drugs and often not really much of an improvement if any.
" When the healthcare journal Prescrire in 2011 ranked new drugs, only 17 of the 984 developed since 2001 were deemed “a real advance” or better."
and
“The way the drug regulatory system is set up, even if you have just a small advance, if you market it right it can be very profitable,”
Part of the system here I think is that the drug companies want a new patent on a drug. Doesn’t matter if its just a 1% improvement (or really none) as long as they can sell it as “new and improved” then they can bank billions on it. And they sell it as “new and improved” by billions of unnecessary Ads and sales teams pushing it to doctors.
But its a waste for drug companies to be pursuing such drugs if they really aren’t meaningful improvements vs existing drugs.
Its also a real risk. I’d take an old drug with a decades long history of success vs a new drug. 1-5 years from now the new drug may be found to have a link to heart attacks.
If we can remove the financial incentives for drug companies to put out drugs that are “not a real advance” then their efforts and R&D money would be focused more on the real advances. WE’d all save money as a result.
It’s not as simple as that unfortunately. Their research totally starts with intention to improve outcomes, lower side effects, etc… sure they would not do it as urgently if their previous exclusivity period did not expire and their revenues on a drug were down to 20% of what they were during exclusivity. But sometimes stuff does not pan out. There is no such thing as a sure thing in clinical trials. Candidate seemed perfect but then turns out it interact badly with another drug patients with the target condition frequently take. At this point, they’d rather release a new drug with very little new activity than just writing off the whole thing. And I don’t blame them for it.
I blame them more for all the ads and doctor bribes (no matter how you call the free lunches and other perks). And the bumping of prices on old drugs they have monopoly over.
But I’d be cautious about removing profit incentives. There is already a pretty alarming drug research trend that does not need amplification. More R&D goes towards drugs that patients are gonna take for years (think high-cholesterol, high-blood pressure, acid reflux, antihistamines, etc…) vs. short-term life-saving drugs (anti tumor agents say) because patient is going to either recover quickly or die quickly but they’re not gonna be hooked for years on it. Same for rare conditions with too few patients. There’s no way to make up R&D costs, let alone profit from treating a target that kills 50 people per year given the length of exclusivity windows which are fixed. All I’m saying is that it’s a fine balance but for me, currently the US market is too permissive of big pharma practices.
Disclaimer: pharma companies are a major customer in my line of work so not totally neutral on this issue.
But I’m sure there are changes that could help. For example lets not give out patents for new drugs that have little improvements vs existing drugs. so if a new blood pressure drug doesn’t have >10% impact then it doesn’t get a patent. That would keep drug companies from wasting further resources developing them if it doesn’t hit the bar. Then they wouldn’t push the marginal drug via ads and charge us through the nose for something thats no beter than the old version.
Not gonna happen at the patent level. USPO (or WIPO) does not prevent people from claiming anything without proof. You could patent a folded paper airplane that can transport people to Mars at the speed of light as long as it does not obviously infringe on another patent. And even, they’ll just grant it and let litigation take care of it. But that aside patent for new molecules are granted constantly without any knowledge of their activity. There is no burden of proof for claims in patents so it’s not gonna happen unless patent law is drastically change across the world. And besides the patent offices are not equipped to verify claims of activity. They just verify claim blatant infringement and let litigation take it from there.
BUT what you suggested would totally be under the FDA’s purview. They could set conditions for new drug approval more easily than the USPO. They could set thresholds of statistically proven improved clinical activity or lower side effects of x% better than the previous drugs. The only difficulty would be to quantify what is enough improvement for various conditions. For some conditions, it’d be easier than others. But if anything is likely to happen, this is where it’d have to come from.
But considering that the folks of the FDA are nominated by politicians who themselves take millions in pharma money (both sides have been on the take for decades), well you know whether to hold your breath or not…
Our analysis finds that in order to fund such a program, it would be necessary for the federal government to impose substantial, broad-based taxes equal to 21.2 percent of all wage and salary income. Those taxes would be in addition to the payroll taxes that most workers already pay for the existing Social Security and Medicare programs, bringing total payroll taxes to 36.5 percent for most workers.
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We also find that nearly two-thirds of American households (65.5 percent, comprising 73.5 percent of the population) would experience reductions in their disposable income, making them financially worse off.
Sure they’re conservative, but at least they used Math instead of Warren’s approach of making stuff up and Hope.
The analysis in this Special Report calculates the net effect on American families’ finances in four basic steps. First, we identify the additional costs to the federal government of a government-run health care program as envisioned in the proposed legislation. Second, we account for the increase to the tax base that would result from the legislation precipitating the conversion of current tax-free, employer-sponsored health benefits into additional taxable wages and salaries. Third, we calculate the increased taxation needed to fund the additional federal spending, relative to the revised larger tax base. Fourth, we calculate the effects on household finances of the changes to their spending on medical care and taxes.
In short, it would be $5-10k net worse for everyone with a job. Welcome to socialism!
That doesn’t sound right. Currently FICA is pre-tax. Employer health insurance and HSAs are pre-tax. Would the healthcare tax for funding M4A also be in pre-tax dollars? At least that would make sense to me to do it that way.
Either way, as far as I’ve read, the main issue is item 1: estimating the cost of running this program. I’ve seen numbers for 10-yr cost going from hers $20.5T to numbers from others more than twice as much. You can play around about sources of funding, pre- or post-tax dollar taxes, average current cost of premiums paid by employees + employers but I think it simply boils down to nailing down how much it’ll really cost.
That said, I don’t think it’s possible to not have increased tax to pay for it. Whether it’ll be more costly than my current health insurance, I don’t know for sure but I’m guessing it will because I assume it’d be a very progressive system (like FICA say) in which higher income workers will pay for benefits for lower income ones.
Now this raised an interesting question. If M4A is so much more expensive than the current system for households, why not scrap Medicare and replace it by a private insurance system? Older folks are generally more sick and costly than younger ones, would the savings be only amplified by scrapping Medicare? And if Medicare is so costly, why do people like it so much? Because someone else is footing the bill? I’m honestly curious about this.
“this family’s total income including employer-paid benefits would remain unchanged”
So they are making the assumption that employees would not see any wage increase or benefit change even though the employers are saving ~$2.6T total after not having to foot the bill for employer provided health insurance.
Warrens plan is to take the money that employers spent on private health insurance and use that to fund the M4A.
I’m not saying Warrens plan is 100% realistic but Heritage just assumes apparently that we’d put 100% of the cost burden on working people in the form of payroll tax which is exactly not Warrens plan.
Dead people are paying for it. Everyone who paid their Medicare wage taxes and didn’t live to 65 chipped in to pay for those who did. It’s like an annuity or life insurance where only the survivors get paid and can be paid more since the risk is pooled across those who turn out (unfortunately for them) not to need it. Also, it involves saving a working lifetime to pay for your expected retirement lifespan of 10-15 years. This is why it can get the numbers to mostly work.
Trying to get each person to pay out of this year’s salary for this year’s Medicare is super expensive, just like trying to pay for an expensive group plan premium on your own and without any employer subsidy (and even then you have to gross that up to pay for all the non-workers and all the people too sick to get into a group plan which cause those group plans to be cheaper than they would otherwise be if they really had to cover “everyone”).
80% of people live past age 65. SO no its not paid for by dead people. Dead people don’t pay payroll taxes either…
Not really. Theres no “saving”. Its paygo. It involves paying taxes while you work to support current retirees medicare costs and then when you go on medicare the next generations of working people pay taxes in turn to pay for your medicare.
General revenue and payroll pay for ~80% of medicare spending and 15% is premiums for enrollees
They did if they worked before they died, and they didn’t collect on those Medicare wage taxes just like they didn’t collect on their FICA taxes paid (unless they got disabled).
Maybe now 80% of newborns now make it to 65, but for cohorts in the past life expectancy wasn’t so rosy. Currently a given crop of 65 year olds represent about 70% of the people born 65 years ago, so 30% of people aren’t there anymore, many of whom lived to middle age and paid a lot of taxes that they aren’t collecting. This isn’t helping the demographics/finances of the program either.
If you prefer to think of Medicare and SS more from the Ponzi perspective of “pay as you go and hope”, the fact that 1/3 or 1/4 of the people won’t live long enough to collect (and more may die shortly after 65 and only collect for a few years) means your future liability is that much smaller. Either way, you have to come up with less money than needed for a current beneficiary by this factor.
