Drug Goes From $13.50 a Tablet to $750, Overnight


Most analysis I’ve read about why the US system is so damn expensive point to pharma costs plus a customer-satisfaction-first policy (as opposed to customer health first, these don’t go together) that generates unnecessary testing that raises cost and negatively affects health of patients (on average) due to unnecessary interventions and medications that (somewhat) reduce life expectancy and quality of life (and definitely do not improve anything but the hospital’s revenues).

I guess doctors are part of the equation (if they earned less the extra tests wouldn’t be as expensive) but it doesn’t seem to be the main cause.

Of course, the customer-satisfaction first policies are consequence of the hospitals being private for-profit organizations, that prefer keeping patients than actually doing what’s best for them (which many times is telling them they have nothing and please go home, stop worrying).


Early research on the changes in the Dutch healthcare system are leaning toward privatisation having a negative effect.


I lived there for awhile. They’re not the same. They have registers, and you exchange cash. It’s different in a few significant ways, and that’s just one example. I never said it wasn’t SP either, so much as their system is different. When USA talks about SP, it’s like we have blinders on for anyone beyond Canada and the UK.

This isn’t always intentional. If you have an XRAY done at one hospital, they might repeat it at another. Those two systems may not be exchanging information efficiently or even aware that the patient had just been seen at another facility. EMR advances are helping with this. Don’t assume it’s always just to get another paycheck. There are some information exchange problems in this area too.


I’d like to commend everyone in the last several pages for their civility and manners. The “to be impolite…” bit was about the most English Gentlemen thing I’ve read in a while.

I’ve dated more than one pharmaceutical rep. They are are hot girls, without exception from what I can see. They should recruit them directly from Hooters if they aren’t already, as that’s about equivalent to their intended use. Of course the marketing influences them. If it didn’t, they’d stop doing it and shift resources elsewhere. Free markets are great at feedback loops like that.


Pretty much everyone on the planet claims they are not affected by marketing. Of course the fact every industry and most companies market would suggest that’s not the true. They wouldn’t do it if it didn’t work, for the most part.

If you try to end marketing of brand name drugs directly to health systems, mainly the practitioners themselves, you’re going to hit the lobbying powers of the drug companies, the physicians, maybe the nurses as well as other groups, and you have to have a better argument when they say their oaths and dedications to service prevents them from succumbing to the evils we’re talking about than… well we don’t believe you. And the first time someone says something like well profit is evil, you might as well not have stepped through the door.

These are private companies taking financial risks and just because they are dropping a ton of money into an industry that saves lives or betters lives doesn’t mean somehow they shouldn’t be rewarded for that risk. I am thankful that we keep getting better medicines and cures and treatments for diseases that basically considered lost causes just decades ago. That doesn’t just because we want it to. There’s a lot of work and resources put into this sort of thing, and not just by the government.

Now in both these cases it’s not the original company that’s jacking up the price, it’s one that purchased the rights later on. In one case we have a patent not for the drug itself but the delivery system (and the delivery is very important in this case) and the other was on the market long enough for a generic to be made but it looked like the volume of sales didn’t justify one of the generics to pick it up. It wasn’t worth anyone’s time to make a generic because the price was so low and the volume so low.

The general populace feels a line has been crossed in both cases. That line should actually be defined. And I hate that we keep talking about out of pocket costs like what the insurance company or the government payor pays doesn’t matter… It sure as hell does matter. If we’re talking about reasonable costs and prices, we shouldn’t be fine with someone paying zero knowing that their insurance company and therefore the rest of us are paying over 500 dollars when it used to cost substantially less than that and they’re lobbying to make their product mandatory in a lot of places.


Patents are an artificial construct designed to reward innovation by banning mimicry. They are not in any way ‘natural’ and are in effect a legal monopoly to certain industries, with the expectation being that the reward to society as a whole will be larger than that under a no patent system (because there will be more innovation and thus more innovative new products that are a benefit to society).

Ignoring for a moment whether that’s true or not (there’s no compelling evidence that it is), surely this compact between the State and the relevant Industries means that there is an expectation that the granting of a legal monopoly is only valid for so long as monopoly profits are not sought and social benefit > social cost?

Spending on R&D (as a proportion) has been dropping precipitously since the 1990s and continues to do so. Profits have continued to rise (both proportionally and as an absolute amount).

The justification of and premise for granting legal monopolies is clearly gone.

Why haven’t patent laws been changed (whether breadth/scope, or strength)? Why hasn’t evergreening been tackled? Why are generics still constantly tied up in fallacious legal arguments designed not to win but to delay? Etc etc.

As for the argument that patents encourage innovation and/or provide net social welfare society:

How Do Patent Laws Influence Innovation? Evidence from Nineteenth-Century World Fairs

Do Patents Perform like Property?

[quote]In any case, the empirical economic evidence strongly rejects simplistic arguments that
patents universally spur innovation and economic growth. The direct comparison of estimated
net incentives suggests that for public firms in most industries today, patents may actually
discourage investment in innovation[/quote]
(Pharma & Biotech were the two industries that made more from patent profits than from patent litigation, but the study doesn’t directly address innovation in those industries)

The Case Against Patents
This is the best study I’ve read on the role of patents in Innovation. It’s relatively short, superbly written and I would encourage anyone to read it. As it’s so good, I’m going to quote in depth.

[quote] It is impossible to study the
history of innovation without recognizing that inventors and innovators exchange ideas as a matter of
course and that secrecy occurs, in those cases in which it occurs, only in the final stages of an innovation
process, when some ambitious inventors hope to corner the market for a functioning device by patenting
it. A good case in point is that of the Wright brothers, who made a modest improvement in existing flight
technology which they kept secret until they could lock it down on patents, then used their patents both to
monopolize the U.S. market and to prevent innovation for nearly 20 years. This is discussed in Shulman
[2003]. The role that Marconi and his patent played in the development of the radio is altogether similar –
see Hong [2001] – as are innumerable others. At the opposite extreme we have, again among many, the
example of the Cornish steam engine discussed in Nuvolari [2004a, b]. Here engineers exchanged nonpatented
ideas for decades in a collaborative effort to improve efficiency. The modern and highly
successful open source software movement is a more contemporary example of how collaboration and
exchange of ideas thrives absent intellectual property. How much public benefit of the various patented –
and never-the-less secret – pieces of the Microsoft operating system has occurred? [/quote]
It then goes on to give several examples on how first mover/first to market has been a larger factor in success than in obtaining early patents that restrict entry.

[quote]The relevance of patents in the
pharmaceutical industry – then, and contrary to “Schumpeterian” theories – is most likely not due to the
high fixed costs but rather the fact that disclosure in the case of drugs is more meaningful than in that of
cars and most other products. The chemical formula and the efficacy of the cure as established by clinical
trials are available to competitors essentially for free and it is the second (a public good, privately
produced due to a political choice) that accounts for about 80% of the initial fixed cost. On the other side,
the downstream cost of monopoly pricing of pharmaceutical products is much higher for life-saving
drugs, and the cost of monopoly pricing of other pharmaceutical products is also quite high. Hence
various economists, holding differing views about intellectual property, have nevertheless argued that if
government intervention is indeed needed in this market a system of prizes would be far superior to the
existing system of monopolies.[/quote]

[quote]We have made mention of the loss
of human life due to the pricing of AIDS drugs. More revealing is the empirical study of the Quinolones
family of drugs (Chaudhuri, et al. [2006]). It measures the economic consequences to India of the
introduction of pharmaceutical patents for this family of drugs and concludes that the consequence to
third world India will be nearly 300 million USD in welfare losses – while the gain to the first world
pharmaceutical companies will be less than 20 million USD.[/quote]
Pharma patents increase net social welfare?

The Empirical Impact of Intellectual Property Rights on Innovation: Puzzles and Clues

[quote] This paper examined the impact of changes in
patent policy on innovation. Rather than analyzing a single case, I studied 177 of the most significant shifts in patent policy across 60 countries and 150 years. Adjusting for the change in overall patenting, the impact of patent protection enhancing shifts on applications by residents was actually negative.[/quote]

From [this] (http://www.economist.com/node/21660559) Economist article;

[quote]However, the history of the industry raises doubts about such arguments. Until 1967 German drug companies could only patent the way they made drugs, not the formulae of the drugs themselves. Anyone could sell copies of the medicines if they found another method of making them. Yet Mr Boldrin and Mr Levine say German drugmakers produced more innovations than British ones (remember where aspirin was invented). Another interesting case is Italy, which had no patent protection for drugs until 1978. One study showed it invented a larger proportion of the world’s new medicines before that date than afterwards. Before the “reform” it had lots of copycat firms, but the biggest of these also did research on drugs of their own. They were largely wiped out once they had to pay royalties on their copycat drugs.

It is true that, encouraged by the prospects of patents, pharma companies do a lot more research today than in the 1960s and 1970s. But it is also true that they are not alone in their endeavours. Public support for biomedical research has soared over past decades; the budget of America’s National Institutes of Health is five times what it was in 1970. Mr Boldrin and Mr Levine reckon that once subsidies and tax breaks are accounted for, American private industry pays for only about a third of the country’s biomedical research. In return the patent system provides them with a great deal of income.[/quote]

[quote]America’s health systems, he noted, spent $210 billion on prescription drugs that year. Based on how much cheaper generic drugs were than patented ones, Mr Baker calculated that a competitive patent-free market might have provided the same drugs for no more than $50 billion. That represented a saving of $160 billion.

The drug companies reckoned at the time that they were spending $25 billion on R&D; the government was spending $30 billion on basic medical research. The money it would have been able to save buying drugs for Medicare and Medicaid in a patent-free world have allowed the government to double that research spending, more than replacing industry’s R&D, while still leaving $130 billion in public benefit.

With America’s prescription-drug bill now $374 billion, the opportunity looks all the greater, even though the companies now say they are putting $51 billion a year into R&D. Imagining that the government could spend R&D money as effectively as the corporate sector may sound like a stretch. But a government which simply wanted to make drugs available for competitive manufacture might find various ways to get innovative results from contract research companies. Joseph Stiglitz, an economist at Columbia University, and others have suggested encouraging teams of autonomous scientists to develop new breakthrough drugs by offering those that succeed big prizes.[/quote]

There are plenty of economics articles on the positive effect of patents on r&d and innovation, as well as (fewer) economics articles on the negative effect. However, they all rely on arcane statistical models and formulae to derive their significant results and I genuinely believe they offer no real value in this argument. I have read several thousand (mostly banking) economics papers based on incredibly complex modelling, and they are inevitably invalidated by real world data and experience later on. Rather than being descriptive or informative, they ever try to be prescriptive. The banking crisis in particular destroyed almost 20 years of self-congratulating economics ‘research’ and left the whole field in near tatters.


Fair enough. As I said, I think the Japanese system is more efficient and definitely a better model (partly a matter of the system, partly a matter of culture) and the copayment (the excahnge of cash) is something some EU healthcare systems have and something I would like to come to ours in Spain (a small copay helps to avoid misuse of the system, specially the Emergency departments).

You do need price controls to make it work, of course.

This is a problem pretty much everywhere, but the main cause of the overtesting (and overtreating) is not the lack of information exchange, but the rarity for a -private, profit driven- healthcare institution to deny a test for a patient that is willing to pay for it on the grounds that it’s not necessary.

Not only that. The different policies on what is adequate testing and treatment in US institutions versus public managed institutions in other countries is considerable, and it’s a matter of policy (hospital policy) and a customer (satisfaction) first approach not of access to records. It definitely is not a matter of better healthcare if we define better as better outcomes for the patient long term, so there has to be another reason for these policies.

Please understand I do not see any malice in this, but rather a different outlook in the patient-doctor relationship based on the private nature of the business (a doctor can try to convince a patient something is not necessary but will rarely outright deny a test).


My main point is the there is this pushback against SP because of lines and lack of choice that’s being described by some, certainly not all, from the systems you see in Canada and the UK. However, Japan has kind of a quasi model where it’s not “free” for everyone. There can be an out of pocket expensive, but there is also a bit of a private piece that can also provide more choice for those willing to pay for it.

If you have good health insurance in the USA right now, you don’t have a lot of incentive to want to change that. If you manage a high deductible plan well, especially at a young age, you can also do pretty well.

Personally, I think the first step is to get insurance away from the employers and more of a large pool like a per state sort of approach. The days of parking yourself at a single company from the start of your career to the end is a lot less likely now… so having the insurance tied to the employer is only a tax benefit for the employer to actually provide a higher package for less real dollars. If we took it away from the employers and had insurance pools at the state level (just using that since it’s a large enough pool that an insurance company should be able to make money from it) then we can at least sell the idea that it’s okay and stable to get insurance from someone other than an employer.

A lot of these healthcare systems are actually not for profit. Some of the largest systems are not for profit, and you find that in the insurance industry as well as healthcare provider systems themselves. They’re not “for” profit in the sense you’re describing them.


When I say “for profit” I mean client driven (so yes, probably misusing the term). That is, they are healthcare providers that need to gain and keep clients to survive. That’s a very different proposition than providing the best healthcare (because clients don’t search for the best healthcare, but what they think is the best healthcare, which most of the time is a very different thing).

One thing people seem to not realize (here I agree with you) is that government controlled healthcare does not forbid the existence of parallel private healthcare. There’s no real lack of choice, just a lack of choice whithin the primary, government financed, system. But as far as I know there’s no First World country that forbids private healthcare because of their public system.

In fact, having a good, universal access, government financed (which is what, I believe, people mean when they say single payer) public healthcare system makes private healthcare more affordable (and thus, it can be argued, gives more people more choices, no less).

When I say affordable private healthcare we are talking $30 a month for a person in their 40s for good healthcare barring some chronic conditions and $60 a month for top tier full private healthcare including everything (major surgery, long term hospitalization and chronic condition treatment). No deductible in either of the options. Goes up to about $200 a month if you join in your 60s, but it doesn’t go so high if you join earlier.

But to push private healthcare and insurance cost so low you need to have a good public financed competitor.


I do think everyone assumes that if you have an SP based service, no one ever exchanges payments at the door (some do like Japan), and there are long lines for months for all services and you can’t see the physician you want to see. Well we know there are different kinds of SP based systems. There are already challenges for some government insured patients, especially Medicaid, to get in line so to speak to see a physican because Medicaid doesn’t cover costs. This means physicians generally limit how many of these patients they take on. I also think some forget we do have managed care systems in the USA today as well, the HMOs that had a pretty harsh backlash a number of years ago too.

And I don’t see how we can take on a conversation about costs in healthcare without also talking about rising costs in education. The amount of loans some of these physicians take on is staggering, and I can’t really blame them for going just a little more to pick up that specialty because they get paid so much more when they are a specialist. What we really need though, in addition to stellar specialists, are more primary care, general med providers. Just shifting people away from using hospitals as their primary, read only, source of medical care could help a lot too but where would we push them? We don’t have enough primary care practitioners as it is.

And all of that doesn’t even cover the issues with insurance for the providers and how mal-practice suits have pushed out a lot of specialists from even working outside large health care systems like OB-GYNs. I am under the impression in other countries you aren’t going to see millions of dollars in medical malpractice suits like you see here…

In summary, taking on the USA healthcare is a very large and complicated problem that far exceeds the idea that there are bunch of greedy companies out there just trying to squeeze “evil” profits out of the little guys. We’re dealing with drug costs, rising insurance costs, rising education costs, an aging nurse workforce and a patient population that wants to have their cake and eat it too. I don’t think you’ll find a lot of citizens that will say they will forgo the chance to sue a system heavily for a medical mistake… i think a lot of people are going to want an SP system and still have all the same things they have today which I am not sure is entirely possible.

I also realize that there is a group that basically pushed out of the market entirely, and since they have nothing they see SP as access. I don’t blame them for that.

But back to the original point. Asking people nicely to devote their lives and companies to creating drugs and delivery systems of those drugs to save lives out of the goodness of their heart is not an option. It’s simply not realistic. Unless everyone on this board is working for free, I suspect everyone knows that. So if we can take that off the table and realize money goes in, a lot of money goes in, and they expect something out of that time and financial commitment and that expectation is not inherently evil or wrong, then we’re probably closer to finding a starting point to finding a solution to the relatively cheaply made drugs that have likely recouped their initial investment and then some scenarios that are pricing people out of access to the product.

I know EpiPens save lives. We’re talking about inevitable loss where even the time for an ambulance to show up was too long or even running back to a school bus could take precious minutes away from saving a child or adults life. It’s amazing really, if you think about it, really think, about it what this product can do. And it’s not a given that no matter what happened in the past we’d wind up with it here and now.and designed to the point where just about anyone can use it. It’s right up there with a modern defibrillator which are so idiot proof now that the machines not only talk you through using it, they won’t actually fire if the heart isn’t in a status that it can help with. This is amazing technology that we get to argue about, and we shouldn’t take for granted these products exist and are largely accessible at even today’s prices.


Except pharma companies make a profit selling in countries with SP systems at a fraction of the cost they sell in the US (and many of the bigger companies are EU based). And doctors and medical staff in those systems get payed handsomely (but not extravagantly). Nobody is expecting anybody to work for free, but there’s greed and upward cost pushing in the US market that is not neccesarily driven by R&D costs or research staff, but by marketing costs and the system being private and allowing for that.

Of course profits in the US are higher, but so are marketing expenses there (by a higher margin). If they sold in the US at European prices, global earnings would fall by 13% on average which could be offset by lower marketing expenses.


Nesrie, you keep inventing false arguments… or at least arguments no-one has thus far made, to add legitimacy to your own argument/point.

For example, to add legitimacy to ‘for profit pharma industry status quo’ you post the other option as being ‘free development of pharmaceuticals by individuals/businesses’.

No-one suggested that. No-one even went near to suggesting that.

Yet you use it to reduce a complex subject into binary black & white options, with the only seemingly reasonable option out of the two being therefore your position.

Most of your posts so far, including the last one, are simply meandering tangential monologues interspersed with exercises in reductio ad absurdum arguments where you turn nuanced subjects into absurdly simple if/or topics.

It’s basically a 40 year old design. That we have the epipen we do today isn’t amazing by any definition of the word.

AEDs are very cost ineffective and fail the QALY test in the UK, USA and Ireland. The propagation of AEDs is purely a result of marketing and lobbying, not from actual benefit/value to society.


Dutch healthcare used to be great. It’s been descending into garbage ever since the whole privatization started. Elderly care in particular has been atrocious for years now with no signs of improvement.

Free market healthcare will never work because it’s inherently not a free market.


No no guys, Nesrie correctly identified me as a Bernie Bro, so she knows that I must obviously want pharma corps to pay ME for the privilege of giving me drugs cuz I just want everything to be free free free! My own words in the topic should have no bearing on what I meant at all :-P


Mylan, the makers of the EpiPen, announced today that they will graciously begin offering a generic version of the EpiPen starting next year. The price for this life-saving generic? $300 per 2-pack. So while it is 50% of the price of the current EpiPen, it’s still a 200%+ increase from the original price and is still significantly higher than the price in Single Payer countries.

At this point, pharma needs some regulation. They are out of control mob bosses who can no longer be trusted to regulate themselves. I have read most of the posts in this thread and I agree with points from both sides on the for-profit vs life-saving medications debate. As long as the current patent system is in place that allows medical companies to essentially hold people’s lives hostage, I fall on the side of regulation. No one should have a monopoly on a life-saving medication if they are just going to continually raise the price until their patients have to decide between declaring bankruptcy or letting their loved ones die.

There either needs to be price regulation or a method to allow competing companies to license the patents before the standard time period expires.


Yep. We insist on treating pharmaceutical companies like they’re making toasters or televisions. And if you take that approach, charging $600 for an EpiPen makes sense. As their spokesman said, the price is a reflection of the value of the product… because what price wouldn’t you pay to save the life of yourself or a loved one?

We were just having a conversation about this the other day here at the office and while everyone expressed outrage, everyone was equally insistent that the government needs to stay out of it completely because they will “just make it worse”, and that what we need is a “free market solution”. I swear to god if I hear “The government isn’t the solution to the problem, the government is the problem” one more time my head is going to explode.


As some of the links above pointed out, the solution is to rethink the patent-protected free market. Companies do need some form of reward for investing research that saves lives (unless the government is going to somehow fund all research), but a much better form of that would be prize-based rewards for breakthroughs and more government funding of the testing. The current system lets you patent whatever you want and then sell it for whatever people will pay. A better system could allow you to patent something, but instead of being able sue another company for selling the item, the patent would give you credits for each unit sold, which could then be redeemed for government-funded trials of other products (or sold to other companies looking to run those tests). For really important outcomes (like specific known diseases), bigger prizes could be offered for the first to meet certain milestones. This kind of system would keep the private-enterprise-driven nature of the innovation but without the need to jack the price way up when something works (and therefore make new drugs and devices available only to the rich).

I also want to defend insurance if not the companies that provide it. Insurance is incredibly useful to society because it spreads risk across a large group individuals - it’s true that in aggregate the cost paid by a group will be higher with insurance than without (which is how the company makes money), but for the people who get unlucky, it is a huge benefit (vs a small cost for everyone else). It seems to me that one of the easiest ways to improve equality would be to offer government-run insurance across a wide variety of potential risks - turn all those insurance premiums into taxes and guarantee insurance for everything to everyone. Socialist utopia, I know, but the problem with private insurance is that there isn’t enough of it or it tries to cut costs by not paying; it isn’t a problem because it “does nothing to help people”.


They need to investigate the hell out of that. They’re just positioning themselves into the market to undercut another company from doing a generic. We need a non-Mylan company to create a generic to compete with them. It sounds like the current delivery system, not created 40 years ago but in 1996, is out of the patent period so they should be able to do that. I’m all for re-evaluating patents, copyrights, trademarks… that whole sphere. I think a lot of it’s gone beyond the original purpose of protecting creation and creators to something more akin to preventing competition and the ability to sue the daylights out of anyone who even steps in an area.


Western IP protection moved well past “rewarding innovation” into “enabling and encouraging ever-growing rentier entities to extract profit at the public expense literally forever” long ago.


[Here is the original 1976 patent] (http://www.freepatentsonline.com/4031893.html).

Yes it has changed, but those changes have been minor particularly given the 40 year time scale.

Also, the current EpiPen patent lasts until 2025.

Auto-injectors are particularly susceptible to evergreening. Also, the FDA has no clear principles on how generics can demonstrate that combined drug/delivery systems can demonstrate equivalency to branded product - hence the lack of competition against the EpiPen.

The Lancet had a short study on ‘Is Patent “Evergreening” Restricting Access to Medicine/Device Combination Products?’