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You are here: Home / Anderson On Health Insurance / High drug prices for what?

High drug prices for what?

by | 16 Comments

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In a recent Journal of Managed and Specialty Pharmacy, Tadrous et al examine what types of drugs are available in the US but are not available in Canada.  We pay substantially higher prices and this might lead to more or better drugs becoming available in the US earlier/ever.  That is a very reasonable question.  Paying more to get something better and faster is not a crazy idea

 After exclusions, there were 399 drugs; 120 (30%) were “cancelled post-market,” 38 (10%) were “dormant; approved but not marketed; cancelled pre-market,” 49 (12%) were “formulation unavailable,” 130 (33%) were “existing drug class,” 35 (9%) were “therapeutically similar,” 3 (1%) were “preapproval,” 15 (4%) were “atypical access available,” and 9 (2%) were “unavailable” in Canada. 6 of the 9 drugs had been evaluated by 1 or more independent organizations, and all 6 were rated as offering minor to no additional therapeutic value compared with existing drugs…

The therapeutic value of drugs in the “unavailable without alternatives marketed” category was determined by searching the databases of 3 organizations that evaluate the efficacy and safety of new drugs… The therapeutic value of the remaining 3 has yet to be given an ordinal therapeutic rating by the 3 organizations that we consulted….

 

So what are we paying for?

Reader Interactions

16Comments

  2. 2.

    scav

    Brand management and delusion of ‘merkan free-market superiority?

     

    ETA.  The other half of the shoe to drop would be analyzing general public access to the therapeutic use of all these magic magic wonder-drugs.

  3. 3.

    ChrisSherbak

    @Old School: Makes sense. Also, I thought US consumers were the main source of revenue for Pharma research+profits, while other, smaller (?) markets could get a free(ish) ride off our dime.

  4. 4.

    Ruckus

    @Old School:

    That may be a very truthful answer.

    A second answer might be “Some really, really nice homes and cars, along with some rather nice bank accounts, for some in the “Healthcare industry.” Which the healthcare insurance companies are a part of.

    Now remember that the point of business is not to create products or services but to make money but doing those things. It is always about making money. The most successful companies are the ones making the most money. PERIOD. Not the ones providing the best product or service but the one that makes the most money. I mean they must be good – look how much money they make…..

    And you can’t make money in the insurance business by selling less than you pay out. No matter which segment of the insurance business you are in. Actually no matter what business you are in. The concept is not to provide a product or service at a loss – that is throwing money away. Might as well stand on a street corner and burn dollar bills.

  5. 5.

    Ruckus

    @ChrisSherbak:

    Not all Pharma research/production is done in the US. We may be a relatively wealthy country but we are not the only country doing pharmacological research/production. Not by a long shot. There are approximately 8+ billion people in the world and a few of them require some medications. Now I’d bet that not all of them will get what they need/deserve but the numbers are a somewhat large size, making medical drugs a somewhat large business.

  6. 6.

    Chief Oshkosh

    @ChrisSherbak: Pharma research — it does happen, but an awful lot of it is already funded by NIH, which means, you and me. So, we get to pay for the basic and translational research that gets some drugs, devices, treatments into the equivalent of Phase I, maybe Phase II. By that point the “principals” have formed a start-up with sole purpose being to get bought out by one of the Big Boys, who get most of all the output of years of student/postdoc/PI sweat and ideas handed to them on a platter. Even then, they often manage to FUBAR getting approval and to market (and of course blame it on the FDA). Still, they manage to not screw the pooch just enough times to make insane profits at the end. So, everyone does well except the taxpayer and the patient.

  11. 11.

    Another Scott

    This is a drum that Dean Baker beats hard and frequently.

    E.g. CEPR.net (from 2023):

    There are lengthy articles in all the major news outlets on the list of drugs whose prices will be subject to negotiation by Medicare. Many of these pieces discuss negotiation as a form of government interference with the market. This is a case where we really need to step back a second and get a clearer picture of what is going on.

    The reason drugs are expensive in the first place is that they have government-granted patent monopolies or related protections. There are few drugs that are actually expensive to manufacture and distribute. This means that without government-imposed barriers, most drugs would be cheap. Prices of patented drugs fall by 90 percent or more after enough generics have time to enter the market.

    In short, the drug companies and politicians who are angry about Medicare negotiating drug prices are not upset about government interference in the market. They are angry about an interference that will lower drug prices and reduce the industry’s profits.

    There is an argument that we need high drug prices to give the industry an incentive to develop new drugs. This is true, but we can ask how high prices have to be. There is also the option to substitute public money for patent monopoly-supported research, as we did when we paid Moderna to develop a Covid vaccine.

    We could look to apply this approach more widely, paying for the research upfront and then having the drugs developed available as generics from the day they are approved. The pharmaceutical industry probably would not like this approach, but it is a way that we can get drugs at reasonable prices.

    Pharma likes the current US system because they know how to operate within it to generate the large profits they’re used to.

    STATNews.com (from September):

    Health care stocks stumbled compared with the rest of the market in 2023. Companies missed their profit targets. Some CEOs even lost their bonuses.

    But the biggest names in health care still made $3.5 billion combined last year, compared with $4 billion in 2022. The average chief executive brought home $11 million, while the median was $4.1 million. Those figures compared to an average of $13 million and median of $4.3 million in 2022.

    Even in a down year, the median health care CEO made 51 times the median American household income, which was around $81,000 in 2023. The heads of pharmaceutical companies and medical device firms continued to sit at the top as their patented products reaped the biggest windfalls.

    […]

    The COVID vaccines were a great illustration of alternative funding regimes. None of those giant companies and their executives will willing jump into the void of a new funding system that they don’t know how to game as well as the existing one, but it’s clear that we can do things differently and cover more people more fairly.

    Thanks.

    Best wishes,
    Scott.

  12. 12.

    different-church-lady

    Well, according to an actual overheard conversation between low-level Takeda executives from a few years ago, it’s for things like them to go to bars in Ireland that have over 1200 kinds of whiskey.

    I was taking down A/V equipment and they were chatting amongst themselves after a meeting as though I wasn’t even in the room. And I’m silently thinking, “This is why my health insurance needs to be subsidized…”

  15. 15.

    AM in NC

    @Chief Oshkosh: Also a lot of Pharma research is begun at state universities. Drug development is done at pharmaceutical companies, but the underlying research is often taxpayer-funded and then turned over to corporations at low to no cost.

  16. 16.

    Anonymous At Work

    Devices are also a big market with big mark-ups.  worth considering, not at all because I am digging into HUD regulations and details…

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