-- Gleevec (a cancer treatment): $6,214 (per month/per customer) in the United States, compared to $1,141 in Canada and $2,697 in England.
-- Humira (for rheumatoid arthritis): $2,246 in the United States, compared to $881 in Switzerland and $1,102 in England.
-- Cymbalta (for depression): $194 in the United States, compared to $46 in England and $52 in the Netherlands. In fact, there is also a generic version of Cymbalta so these prices reflect having a cheaper alternative.
Look back at the last paragraph in my response above. Medicare is required to cover a number of classes of drugs. they can't say "no, we're not paying for it."
As a result, Medicare has no negotiating power. Unless you can walk away from the table, why would drug companies budge?
And if Medicare did have the power to say "no", how would that work politically? I'm guessing the AARP would be up in arms if Medicare said "no, we're not paying for that drug, find an alternative."
And the price you quote are comparing list prices in the US to net prices (that's usually what's published in the EU and Canada).
Humira is significantly discounted in the US. 40 to 50% discounts are not unusual for large payers.
A great example are the HCV drugs. When a 2nd class of products entered the market, the drug manufacturers rushed to discount their products to maintain market share. As a result, the US price is lower than the prices in Europe.[1]
> Medicare is required to cover a number of classes of drugs. they can't say "no, we're not paying for it."
> As a result, Medicare has no negotiating power. Unless you can walk away from the table, why would drug companies budge?
Those statements are only true for drugs with no alternatives - which doesn't apply to all (most?) drugs. And, even for those, couldn't the government say "we're not going to pay $(RANSOMPRICE) for drug X. If you insist that we do, we will not buy any other drugs from you but will instead source from your competitors at all times."
Private payers are free to do that, but don't. The reason why they don't is because they have customers and telling someone "no you can't have this drug" makes people really upset.
I'm not sure Medicare would have much more success in that area. I could imagine politicians phones ringing off the hook with call from retirees stating "why won't you pay for my drug"?
Because most patients are not competent to source alternatives.
Lets be honest, apart from generics, are you able to dive through source material to find older, equally effective, but with different side effect drugs?
"What is preventing legislation that simply opens borders / trade for filling prescriptions?"
US suppliers sell to Canada at a different price than they sell in the US.
If 'borders were open' - the price in US would go down, the price in Canada would go up, roughly to the same price.
I understand that it seems odd, but I reject the idea that it's 'corrupt' to sell to one country at a different price than another.
Drugs are essentially IP, so it would be like the US selling Canada the 'Superbowl' and then Canada selling and broadcasting it to the rest of the world at a discount.
I think something should be done about that - but drugs are not like most goods. And of course, many goods have different controls and regimes.
Another aspect: it's not really 'free trade' when a government entirely regulates the economy for a good. So when gov of Canada 'sets prices' for a good, it kind of flies in the face of regular trade rules and potentially gives one side or another advantages, so it really doesn't fit well under things like WTO or NAFTA.
Surely we could have some new thinking about this though ...
A complex tango between drug companies that want to maintain their margins, and European governments that want to drive drug prices artificially low to force American payers to make up the difference.
You're getting downvoted, but you're right. Currently, the US is implicitly subsidizing other countries in this regard. If we removed the trade barriers for prescription drugs, US prices would fall and other countries would end up paying more.
An alternative scenario might be that drugs would get cheaper in the US, European drug prices stay the same and pharmaceutical companies somehow scrape by with lower (but still positive) profit levels.
Seriously, if drug companies were making a net loss in European and other countries, they'd just stop supplying in those countries and subsequently enjoy higher profits. Unless you're suggesting companies like Pfizer and Merck & Co do it anyway out of the goodness of their hearts. And prices the US pay are in no way related to what other countries pay: it's simply a function of market power and being in a much weaker bargaining position.
Most of these countries have 'single buyers': essentially a panel of medical practitioners and economists who negotiate prices on the basis of cost-benefit ratio on behalf of the entire country. So the lower drug prices in European countries (and other single buyer/universal insurance countries like Britain, Australia, Canada etc.) is simply drug companies supplying the market at the price it will bear. They are price takers in such countries, because those countries are monoponsy markets.
I realise Pfizer (net income: $7.74 billion) and Merck & Co (net income: $4.44 billion) are really doing it tough, but I think they'll be OK if Americans realise it's insane to pay close to double (>15%) the OECD average (7-8%, medical spending as a % of GDP). Although I hear US medical treatment is top notch if you're rich, otherwise statistically (and conservatively) 25% of the time it will send you bankrupt, assuming you make it out of the waiting room alive (compared to, say, the UK where medical costs account for %5 of households that report 'financial difficulty'). [0]
It truly baffles me when I hear Americans talk about this issue, as they always argue it's actually really a good thing that they're getting rogered by most of the private medical industry in their country (hey, they're nice people, we cuddle afterwards). There's some crazy mental gymnastics going on if you truly believe that paying double the 'rich country club' average on health care costs for basically the same outcomes (apart from the much higher bankruptcy rate) is in some way a good thing.
It's almost like some weird form of buyers' remorse: 'Yeah, but we treat cancer better that anyone. USA #1!'
> An alternative scenario might be that drugs would get cheaper in the US, European drug prices stay the same and pharmaceutical companies somehow scrape by with lower (but still positive) profit levels.
You're treating this as if it's a question of "fairness" to the drug companies, and it's not about that at all. If you could drive drug company profits to $0 with no collateral effects, it'd be unambiguously the right thing to do.
The question is, though, what does that do to the market? If you're an investor that has a billion dollars lying around, do you put it into drug development or social media? Both are highly risky, but the former is burdened by a regulatory regime that thinks companies in that sector should just "scrape by," while the latter has unlimited upside.
You're basically sending a signal to the market that the more valuable your business is to society, the less money you're going to make from engaging in it. That's ass backwards.
> Seriously, if drug companies were making a net loss in European and other countries, they'd just stop supplying in those countries and subsequently enjoy higher profits
They continue to sell in European countries because they don't make a marginal loss there. But if their revenue levels in the U.S. were at the level they are in Europe, they absolutely could not justify their enormous fixed costs.
> And prices the US pay are in no way related to what other countries pay: it's simply a function of market power and being in a much weaker bargaining position.
It's true that drug companies are in a much weaker bargaining position in European countries, but only because European governments exercise seller-side market power to artificially drive prices below what they would be in a market with many buyers and many sellers.
> I realise Pfizer (net income: $7.74 billion) and Merck & Co (net income: $4.44 billion)
Fun fact: Facebook's net income is about 30% higher than Pfizer's even though its total revenue is only about half. Obviously Facebook's product is much more valuable to the world and should be incentivized accordingly.
> But if their revenue levels in the U.S. were at the level they are in Europe, they absolutely could not justify their enormous fixed costs.
Maybe the public could help them substantially lower the costs by not allowing to advertise prescription drugs to laypeople?
Agree with the GP. There is some massive Stockholm syndrome going on here.
Some countries have well-functioning health care systems since the 18XX, not just since the feel-good story of "Murica is subsidizing other countries because we are such a great nation" became a thing.
Working health care is not rocket science, but it looks like everything that doesn't fit the American narrative of exceptionalism is conveniently ignored these days.
> Maybe the public could help them substantially lower the costs by not allowing to advertise prescription drugs to laypeople?
That argument, though oft-repeated, is mathematically non-sensical. Unless companies are currently operating irrationally, one less dollar spent on advertising will result in more than one dollar lost in revenue.
Every dollar earned by advertising prescription drugs to the general population is a dollar that shouldn't have been earned in the first place.
See the Opioid epidemic that is still taking lives in the US for more than 20 years. Imagine what an economic benefit it would be for the populace if all those average middle-class Jane and John Does wouldn't have had their life shattered by addiction and instead would be holding down a steady job paying taxes.
Or imagine how much cheaper it would be if the US' reckless abuse of antibiotics in both humans and livestock wouldn't cause such a rise of multi-resistant strains of diseases.
Why would drug companies allow it? When a lot of Americans were filling their prescriptions in Canada, the drug companies simply applied quotas to their shipments to Canada. They know how big the markets are, so why would they ship 500% of estimated demand to Canada knowing it would flow back into the US?
As a result, a lot of pharmacies (and some gov'ts) restricted sales to out-of-country patients to prevent shortages in their own countries.
Corruption. However, the line is generally described as: If companies can't discount per country then all countries end up paying high prices without discounts. However, if they can discount prices in some countries then that maximizes profits which increasing the customer base.
It's much more complicated than that. Sales in the US where they can charge more are what actually offer pharma companies good ROI. Effectively the US is subsidizing R&D for the rest of the world.
Agreed. Pharma is managing their expenses and profitability based upon the ability to charge much higher prices in the US. Take that away and suddenly everyone outside the US will have to pay more -or- Pharma will have to rethink their business model. The more this connection is obfuscated the easier it is to confuse decision makers.
The implication of the 'subsidy' argument is that there's a certain level of profit required to drive a certain amount of product development and innovation. In other words, to get the current level of drug discovery / development / etc., pharma requires the current level of return.
The question for me is how how inelastic this relationship is. The pharma companies would have you believe that if some kind of price controls of some kind were put in place, and the total amount of profit to be had was reduced, then the inexorable result would be a scaling down of the whole process: a sinking tide lowering all ships. Is that a realistic model? I don't know. Is there way to know? I don't know that either.
It's easy to make religious claims from either side, but it would be nice to have a better sense of the system dynamics here.
Not for European drug companies (and there are quite a few of them) who must negociate price in Europe, yet still cover all their R&D.
Those same comapnies then sell the same drug with pure profit (minus marketing & regulatory cost) in the US, for 4x the price because they have a monopily on it.
Saying it's a lie makes it sound like you think it's deliberately mendacious. In fact, it seems more likely that the poster believes it. It might be more constructive and interesting to say something like 'this is incorrect because/as this reference shows...'
57 million, but that oncludes 17.6 million that are in third-party at-risk plans where Medicare is just paying a portion of the premiums (Medicare Advantage), not traditional "single payer" Medicare, so don't count in Medicare's negotiating power. So there's just under 40 million in traditional Medicare.
You need to be careful with that definition. For prescription drugs, Medicare just pays premiums to private insurers under Part D. Following your logic, Medicare has zero negotiating power for those drugs.
Technically there are four different NHS', one for each nation in Britain. Wales, Scotland and NI each report to their government rather than Westminster.
To extend GPs point, there are negotiators in the US who are bigger and therefore seemingly have more leverage than several of those countries. Therefore, perhaps it's not just a size/leverage thing.
From http://www.cnn.com/2015/09/28/health/us-pays-more-for-drugs/
-- Gleevec (a cancer treatment): $6,214 (per month/per customer) in the United States, compared to $1,141 in Canada and $2,697 in England.
-- Humira (for rheumatoid arthritis): $2,246 in the United States, compared to $881 in Switzerland and $1,102 in England.
-- Cymbalta (for depression): $194 in the United States, compared to $46 in England and $52 in the Netherlands. In fact, there is also a generic version of Cymbalta so these prices reflect having a cheaper alternative.
Some molecule. Different price.