ACA, "No thanks I'll just pay the penalty"

[Aemon Stark]

That's not the question I asked -- yet, anyway. The first question is how those nations would respond to a "pay the American price or else no drug" position from manufacturers, because clearly, increasing the price overseas would be the first preference of the manufacturers. Presumably, you're saying that those nations would not be willing to pay the U.S. price, period. I agree with that, but obviously, their unwillingness to pay that higher prices goes to my point.

This is a pointless argument since it has no connection to the real world behaviour of said manufacturers, particularly non-US-based corporations like GSK, AstraZeneca, Novartis, Sanofi, and Bayer. Patented medications are not exactly unprofitable elsewhere, and by and large these companies have profit margins of 10-20% or more of total revenues. Hypothetical arguments only work when they are grounded in factual assumptions.

I don't see why it should be a disconnect. Is there some reason that focusing on the demand side is wrong? Here, you have legislation in other countries that creates an artificial demand curve, with demand essentially dropping to zero once you exceed the government-authorized price.

No. Lots of people cannot afford new on-patent medications because they are still too expensive despite regulation. In fact, it's fair to say that demand is limited mainly by the number of people with adequate private insurance (or low-income and/or seniors benefits from government).

I agree, but I want to interject for a moment here to make what I think is a rather key point. Leaving aside generics (where U.S. prices tend to be very low), the main costs associated with new drugs are not the manufacturing costs, but rather all the other fixed costs associated with bringing drugs, and attempting to bring new drugs (that failed) to market. And the prices at which those drugs are sold overseas are high enough to pay the variable costs, so they as long as the sale price is above that point, it makes sense to make that sale rathe than make no sale at all. But ultimately, revenues that cover only variable costs likely are not going to be enough to sustain the same level of product development, because you need revenues to cover all the fixed costs as well.

If the patent-oriented pharmaceutical industry were plagued by thin margins like, say, civil aviation or supermarkets, you might have a point here. As it stands, it tends toward incredible, consistent profitability, which is aided by legal framework (i.e. patents) that shields new medications from any competition for 20 years or more after development.

Okay, now please hold on to that for a second. This is exactly why I asked up top the question that you didn't answer. If drug manufacturers said to Canada and all those other countries "sorry, but if you don't pay the U.S. price for this drug, we're not selling it to you", what would those countries do? Would they pay the higher price, or do without?

I think it's quaint that you think that the US can legislate prices in foreign countries.

I think other nations have made more compromises on those issues, and are willing to accept some diminution in health care (on the individual level) in exchange for significant cost savings. Now I know I've read in a few places that there are some drugs that are available in the U.S. that are not available in Canada because of the pricing. The Canadians, through their elected representatives, have said that they're not willing to pay that price, and would sooner do without.

I'm not aware of a single drug that is not available in Canada because of pricing. Certainly there are variations based on different regulations, since Health Canada does not simply approve whatever the FDA does. Anyway, by all means provide some actual evidence for your assertions for once.

[Former Lord of Winterfell]

This is a pointless argument since it has no connection to the real world behaviour of said manufacturers, particularly non-US-based corporations like GSK, AstraZeneca, Novartis, Sanofi, and Bayer. Patented medications are not exactly unprofitable elsewhere, and by and large these companies have profit margins of 10-20% or more of total revenues. Hypothetical arguments only work when they are grounded in factual assumptions.

You're right. It's pointless because you repeatedly refuse to address the point. The point itself is very relevant, though.

No. Lots of people cannot afford new on-patent medications because they are still too expensive despite regulation. In fact, it's fair to say that demand is limited mainly by the number of people with adequate private insurance (or low-income and/or seniors benefits from government).

I never said the only factor affecting demand was the price set by regulators, so your response has nothing to do with the point. I just said that the setting of a legal maximum price means that the demand above that point is zero.

If the patent-oriented pharmaceutical industry were plagued by thin margins like, say, civil aviation or supermarkets, you might have a point here. As it stands, it tends toward incredible, consistent profitability, which is aided by legal framework (i.e. patents) that shields new medications from any competition for 20 years or more after development.

Looking at the margin on each drug sold misses that drugs that do not succeed also must be paid for. And while the patent is 20 years, that's misleading because the patent clock begins to run at the date of filing, not at the date the product is approved for sale. The actual period of patent protection for sale is much lower because it can't be sold until it is approved. That's why there is the additional protection of exclusivity available, because some drugs might be out of patent before they are even approved.

I think it's quaint that you think that the US can legislate prices in foreign countries.

Trying a little condescension now, eh? Maybe you'll learn how to discuss things like an adult at some point. Anyway, please point out where I said that the U.S. can legislate prices in foreign countries.

I'm not aware of a single drug that is not available in Canada because of pricing.

Really? That's a shame. All it takes is a bit of googling to find drugs that have not been available at various times because of disagreements between the PMPRB and manufacturers, to prove that such impasses do indeed happen.

ETA: Personally, I'm in favor of removing all restrictions on U.S. citizens or companies importing pharmaceuticals from Canada.

That means Americans would have ready access to all drugs under patent at whatever price they are sold at in Canada. I think that's the fairest result all around.

[Former Lord of Winterfell]

I realize I'd misread his question., but your answer isn't quite accurate, either. All they need do, is form a separate corporation in each state, while they hold all the shares of each corporation. Fifty separate legal entities, all owned by the same corporate parent.

While it is true that companies themselves can sell policies in more than one state, the real issue is whether or not they can sell policies across statelines, and the practical answer to that is no, because each state has its own insurance regulations and requirements.

[Guy Kilmore]

You can be under duress to do something, and still choose whether to do it or not. The bully in the lunchroom comes up to two kids, and demands their lunch money or he'll punch them in the face. One kid is willing to give up his lunch, and does. The other is not willing to give up his lunch, and takes the punch in the face. The concept of duress still exists. Their response to the duress is different. That's the exact point I was making with respect to the drug prices.

All that aside...what fucking difference does it makes? I've explained repeatedly the context in which I used it. Yet, you still want to debate the word choice rather than the concept. That is just boring at this point.

I disagree because you basically said one of two things. People can never be made to do something against their will; or people are willing to do things against their will. The first puts someone in a precarious moral spot and the second is a logical fallacy But you are correct, this is a stupid discussion that has no real relation to the post and I only posted because I felt that the confusion surrounding the use of the world "willing" was clouding the discussion. The conversation moved on since that post, so I will drop the issue.

[Illyrio Mo'Parties]

Thanks for answering, people.

3. Is is true that health insurance companies are forbidden from trading across state lines, or something like that? Like, say you lived in Arkansas, you couldn't buy health insurance from a company in New Jersey?

True, and that's a good thing; otherwise, it would be a race to the bottom as every insurance company moved to the states with the most lax regulations.

Wouldn't they also race to offer the best deals and lowest prices though?

I think the question of whether or not Americans like getting their insurance from their companies is a complicated one. I think most people would love it if they didn't need to, but that's hard to imagine as the system is so ingrained...

But plenty of folks certainly are aware of employer-provided health insurance as a benefit and see it very much as such. But part of the reason for that, and thus part of the need for health reform in the first place, is that half the reason that shit is cherished is because going for coverage on your own is such a bitch in the status quo.

This is what I thought: that because so many people are getting their health insurance through their job or their union or whatever, it makes individual policies more expensive and unwieldy. My armchair solution would be a controlled deregulation of health insurance coupled with a shift towards individually-purchased health insurance policies. By the sounds of it, the former would have to be enacted on a state-by-state basis, and the latter would require a cultural shift more than legislation. I'm not sure it's a problem that can be solved in one fell swoop from the top.

[TerraPrime]

My armchair solution would be a controlled deregulation of health insurance coupled with a shift towards individually-purchased health insurance policies.

That's the main thrust of the PPACA, thiugh the deregulation part is weak. It does, however, make a significant push to decouple employment from health insurance.

Which, incidentally, is one point that most of the free-market opponents to PPACA rarely seem to want to address. The individual mandates push morep people into being independent from their employment for healthcare coverage, which will increase the mobility of our labor force. In turn, that should spice up competition for qualified labor since workers are now more free to move from job to job for the best deal. That ought to be part of the equation of free market people, right?

[TrackerNeil]

Wouldn't they also race to offer the best deals and lowest prices though?

Well, it's impossible to know for certain what insurance companies would do if selling across state lines were allowed, but I suspect that only healthy insureds would receive good deals. Sick people would either be shut out or forced to pay through the nose.

Robin:

I realize I'd misread his question., but your answer isn't quite accurate, either. All they need do, is form a separate corporation in each state, while they hold all the shares of each corporation. Fifty separate legal entities, all owned by the same corporate parent.

I was referring specifically, as FLoW pointed out, to policies.

[Prosesskrift]

I would have thought that a claim in which one says that the sale of patented drugs outside of the US do not in themselves produce enough profit to justify the current amount of research into new drugs, require at least some sort of documentation. It seems a tall claim to make withouth providing any sort of factual basis.

[Robin Of House Hill]

Robin:

I was referring specifically, as FLoW pointed out, to policies.

I've come to realize that on this particular subject, arguing with FLoW is unproductive. I'm unwilling to scrap ACA even though it is flawed, unless something else was immediately available so that healthcare was affordable. FLoW doesn't share that view. If it were up to me, there would be a single source system that totally froze the insurance companies out of the process. The only thing insurance companies provide is added cost. They provide nothing in the way of healthcare.

[Aemon Stark]

You're right. It's pointless because you repeatedly refuse to address the point. The point itself is very relevant, though.

Nah, you're not arguing in good faith. No more replies after this.

I never said the only factor affecting demand was the price set by regulators, so your response has nothing to do with the point. I just said that the setting of a legal maximum price means that the demand above that point is zero.

So the demand above the maximum price is zero? Why would people want to be willing to spend more than the marketed price of a drug? Another empty circular argument here.

Looking at the margin on each drug sold misses that drugs that do not succeed also must be paid for. And while the patent is 20 years, that's misleading because the patent clock begins to run at the date of filing, not at the date the product is approved for sale. The actual period of patent protection for sale is much lower because it can't be sold until it is approved. That's why there is the additional protection of exclusivity available, because some drugs might be out of patent before they are even approved.

I'm not talking about the margin on each drug sold, but the overall gross profits on gross revenues which are, arguably, "excessive" or at least hardly very tight. If it takes 20 years for a drug to be approved, we might question its usefulness. A lot of new agents offer at best marginal benefit over existing ones, and frequently may be worse. Anyway, this is just the usual "Big Pharma needs Big Profits or we won't have New Amazing Breakthrough Cures" talking point.

Trying a little condescension now, eh? Maybe you'll learn how to discuss things like an adult at some point. Anyway, please point out where I said that the U.S. can legislate prices in foreign countries.

You've suggested the US legislate to prevent transnational corporations from setting prices in non-US markets lower than US prices, which would amount to requiring said corporations to fail to adhere to local laws and regulations. Either way, it's a fanciful idea with no practical means of implementation.

Really? That's a shame. All it takes is a bit of googling to find drugs that have not been available at various times because of disagreements between the PMPRB and manufacturers, to prove that such impasses do indeed happen.

Oh yes? I couldn't find any. The PMPRB is not even involved in drug approval, and frequently only makes ruling on prices after a new drug has been on the market for a while. It does have the power to require companies to pay back revenue from "excessive" prices. This is all handled through quasi-judicial and Federal Court proceedings at arms length from politicians. The idea that granting of a patent ought to exempt a new product from further scrutiny of market-distorting price-fixing (i.e. a new drug that's approved with limited to no benefit over an existing drug in the same class, but maybe comes in an extended-release form) completely ignores that patents are legal privileges granted to spur innovation and appropriate protection of intellectual property. They do not provide license to market a new "wonderdrug" and charge grossly in excess based on, say, direct-to-consumer advertising prompting people to "Ask their doctor". Not that we allow such advertising here.

ETA: Personally, I'm in favor of removing all restrictions on U.S. citizens or companies importing pharmaceuticals from Canada.

That means Americans would have ready access to all drugs under patent at whatever price they are sold at in Canada. I think that's the fairest result all around.

So if you favour dumping of imports whose prices are regulated into a market without such regulation, what is the purpose of protecting pharmaceutical companies' profits by opposing further regulation in the domestic market? In principle, allowing cheaper foreign-priced drugs into the US should completely crowd out those sold at domestic prices. That's an odd sort of competition to advocate.

I've come to realize that on this particular subject, arguing with FLoW is unproductive. I'm unwilling to scrap ACA even though it is flawed, unless something else was immediately available so that healthcare was affordable. FLoW doesn't share that view. If it were up to me, there would be a single source system that totally froze the insurance companies out of the process. The only thing insurance companies provide is added cost. They provide nothing in the way of healthcare.

Well. That's pretty much true. On both counts. With apologies to the actuaries around, they represent a deadweight cost to health care that increases costs without improving any front-line care or access. If you eliminate the adjusters and policy managers and actuaries, and simply insure everyone regardless of pre-existing conditions, income, or age, you will get rid of considerable wasteful administration cost. That doesn't eliminate other issues with health care delivery or financing, but there's a reason why health care is so much more expensive in the US. And it's not simply that people "demand more". They just spend 30% of their money on premiums and deductibles on deadweight insurance company bureaucracy.

[TerraPrime]

Insurance does enable access to health care to the extent that certain health care services have a price tag beyond the means for most middle-class families. That's how insurance works, right? It'd be just as same to say that car insurance does not improve driving conditions - of course it doesn't. Car insurance makes it affordable for more people to drive because in cases of accidents, people are not financially ruined. So in that sense, car insurance does grant access to driving.

Obviously, the need for health insurance will go down if health care services are more affordable. But risk-sharing is going to be indispensable, far as I can see, in any form of health care policy. We either farm that risk-sharing to insurance companies, or we take it on in the government, or maybe a hybrid of both?

[Aemon Stark]

Insurance does enable access to health care to the extent that certain health care services have a price tag beyond the means for most middle-class families. That's how insurance works, right? It'd be just as same to say that car insurance does not improve driving conditions - of course it doesn't. Car insurance makes it affordable for more people to drive because in cases of accidents, people are not financially ruined. So in that sense, car insurance does grant access to driving.

Obviously, the need for health insurance will go down if health care services are more affordable. But risk-sharing is going to be indispensable, far as I can see, in any form of health care policy. We either farm that risk-sharing to insurance companies, or we take it on in the government, or maybe a hybrid of both?

Well it already is a hybrid in the US. My point about deadweight cost is that a single-payer system eliminates this by simply covering everyone, equally, regardless of any individual characteristics. That's still insurance; it just doesn't bother to adjust for risk since it's already maximally pooled.

Insurance is designed for episodic health costs, often which take the form of costs that are too high to be readily saved or planned for. It ensures a steady revenue stream to make sure that providers are available all the time, since an "as needed" basis could strike anyone, anytime, but probably not all at once.

The problem is that it wasn't really designed for ongoing and/or chronic costs, so while insurance works for ensuring access to the chronic patients well enough, this comes with higher overall costs to everyone.

[Robin Of House Hill]

Insurance does enable access to health care to the extent that certain health care services have a price tag beyond the means for most middle-class families. That's how insurance works, right?

Insurance is nothing more than cost averaging. Those who have major medical issues benefit, while those with little need for medical attention, do not.

[Aemon Stark]

But those with little medical need now may need more later when they get cancer/coronary artery disease/dementia diagnosis.

And that's why health care should be primarily funded as social insurance.

[Former Lord of Winterfell]

Nah, you're not arguing in good faith. No more replies after this.

That's crap, demonstrated by you trying to shift the debate to non-U.S. manufacturers, when the entire argument has been about U.S. drug manufacturers. They have every incentive to maximize revenues, so presumably, if they are selling drugs at lower prices overseas, it is because they were unable to get those countries to agree to higher prices.

That is directly relevant to Robin's expressed concern that, by paying much more for drugs than other nations, U.S. consumers are essentially subsidizing drug availability in those countries. So, if you're against differentiated pricing, and you can't get foreign countries to agree to a higher price, the only alternatives are to either lower the U.S. price, or stop selling the drug overseas. That's it.

So the demand above the maximum price is zero? Why would people want to be willing to spend more than the marketed price of a drug? Another empty circular argument here.

This was in response to you saying that I was focusing on the "demand side", and that was somehow misleading. It's not. The question presented, again, was why prices were different, and it is due to the simple reason that Americans are willing to pay prices that other nations, through their governments, have refused to pay.

I'm not talking about the margin on each drug sold....

I am, because you have to do that to understand pricing. I assume you're familiar with the concept of variable and fixed costs. Before investing in a product, a company will determine whether projected revenues are enough to exceed both fixed and variable costs, plus accounting for any capital investment. Once they are producing the product, they'll set a price for each sale that at least covers variable costs. They're not going to produce and sell (deliberately, anyway), products where the price is less than the variable costs. That's the bottom line number that (for the most part) determines the lowest price at which they will sell. In the case of the pharmaceutical market for U.S. manufacturers, that's generally the lowest price they'll agree to for foreign purchases.

However, in terms of overall revenues, they're (generally) only going to keep producing if total revenues exceed total (variable plus fixed) costs. And that's why asserting blindly that companies can afford to charge U.S. consumers the same price they charge other nations is flawed. That may be true in some cases, but it's certainly not a given. Because it is entirely possible that the price charged overseas is enough only to cover the variable costs of each sale, but not enough to cover fixed costs. If they reduce the price to match what is sold overseas, the total revenues may not cover total costs, and manufacturing of the drug amounts to losing money.

but the overall gross profits on gross revenues which are, arguably, "excessive" or at least hardly very tight. If it takes 20 years for a drug to be approved, we might question its usefulness. A lot of new agents offer at best marginal benefit over existing ones, and frequently may be worse.

And a lot of them may be better. Or a lot of them may seem more promising when they start off, but turn out to be less so. Or sometimes, they hit a homerun with a new drug and cash in. In any case, rants like this one are useless when it comes to talking policy, because what are you suggesting? That no more drugs be developed because they only offer marginal benefits, or actually make things worse? That drug companies only research and market drugs that offer significant benefits? Don't you think that's what their goal is anyway?

Anyway, this is just the usual "Big Pharma needs Big Profits or we won't have New Amazing Breakthrough Cures" talking point.

Nobody is saying that drug companies have to make massive profits or they won't make new drugs. But only a fool would argue that projected ROI has nothing to do with decisions to invest in and research new drugs. Of course it does. It's a continuum. Generally, the greater the projected profits from new drugs, the more they're going to invest in them. The lower the projected profit, the less likely they are to invest. That's just common sense.

What we'd prefer is to find the right balance, but it is extraordinarily difficult to figure out exactly where that point is. And that's further complicated by the fact that individuals will weight that balance differently.

You've suggested the US legislate to prevent transnational corporations from setting prices in non-US markets lower than US prices, which would amount to requiring said corporations to fail to adhere to local laws and regulations. Either way, it's a fanciful idea with no practical means of implementation.

No, I haven't, and if you think I have, I'm asking you for the second time to point out where I said that. We cannot "legislate" -- which was the word you used -- prices in other nations. We can legislate/regulate prices in our own nation, but not in others. I suppose we could pass a law saying that U.S. manufacturers would not be permitted to sell drugs overseas under the prices charged here, but that still doesn't set the price, because foreign nations might say "sorry, we're not buying it at that price."

Oh yes? I couldn't find any. The PMPRB is not even involved in drug approval, and frequently only makes ruling on prices after a new drug has been on the market for a while.

There are a bunch of drugs that have been approved for sale in Canada, but that are not sold there because of disagreements between the PMBRB and manufacturers over price. I'm not going to spend my day trying to dig them all up, but one example is a colorectal drug called Erbitux, which was approved for sale in Canada in 2005, but not available for purchase until 2008 because of the PMBRB and the manufacturer not being able to reach an agreement on price. Which meant for nearly three years, Canada choose to go without the drug rather than pay the price demanded.

http://www.cbc.ca/news/technology/colorectal-cancer-drug-to-be-sold-in-canada-1.735946

In principle, allowing cheaper foreign-priced drugs into the US should completely crowd out those sold at domestic prices. That's an odd sort of competition to advocate.

I should have clarified that I was referring to drugs that have been approved for sale in the U.S. already. In other words, I'd open the door to reimportation. Perhaps just limit it to Canada and/or Mexico.

Anyway, the last thing I saw comparing prices for patent drugs in the U.S. and Canada was that Canadian drugs are approximately half price. So how do you think U.S. manufacturers would react if the law permitted open importation of those drugs from Canada?

[The Progressive]

That's crap, demonstrated by you trying to shift the debate to non-U.S. manufacturers, when the entire argument has been about U.S. drug manufacturers.

This distinction is meaningless given that almost all the big pharmas with market cap of over 1 billion (says Roche or AbbotLab or Pfizer et al) are all global players.

Just show how clueless and uninformed flow is on this issue I guess.

[Sixshells]

That's crap, demonstrated by you trying to shift the debate to non-U.S. manufacturers, when the entire argument has been about U.S. drug manufacturers. They have every incentive to maximize revenues, so presumably, if they are selling drugs at lower prices overseas, it is because they were unable to get those countries to agree to higher prices.

That is directly relevant to Robin's expressed concern that, by paying much more for drugs than other nations, U.S. consumers are essentially subsidizing drug availability in those countries. So, if you're against differentiated pricing, and you can't get foreign countries to agree to a higher price, the only alternatives are to either lower the U.S. price, or stop selling the drug overseas. That's it.

Not true. Drug companies are able to get other countries to agree to higher prices, it's just a bit harder and not as generalized than in the US because there are more regulations, but it's perfectly feasable if they manage to game the system.

[Former Lord of Winterfell]

Not true. Drug companies are able to get other countries to agree to higher prices, it's just a bit harder and not as generalized than in the US because there are more regulations, but it's perfectly feasable if they manage to game the system.

I don't think we're talking about the same thing. I'm talking about the final price after all negotiations and gaming.

Drug companies clearly would rather a nation pay a high price for those drugs rather than a lower price, and would prefer to bargain so as to increase that maximum allowed price as much as possible. But at some point, they've bargained as best they could, and a final price is set. And that price is the maximum price those manufacturers were able to obtain. For example, if you go to Canada and some patent drug is sold for $54/dose, that is the best price the drug manufacturer was able to negotiate.

That's the point from which I am starting. What happens when Canada sets the price at $54, and the U.S. price is $110. That's, essentially, the point Robin raised earlier.

[Former Lord of Winterfell]

I've come to realize that on this particular subject, arguing with FLoW is unproductive. I'm unwilling to scrap ACA even though it is flawed, unless something else was immediately available so that healthcare was affordable. FLoW doesn't share that view.

I'd just point out that I haven't argued about the ACA at all in this thread. I've been talking about the drug-price issue that you raised, which is a separate topic.

[TrackerNeil]

If it were up to me, there would be a single source system that totally froze the insurance companies out of the process. The only thing insurance companies provide is added cost. They provide nothing in the way of healthcare.

Oh, I'm with you. We should put every American on Medicare and levy a tax to pay for it, but the Democrats never asked me.