The Suddenly $750 Pill

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johnfajardohenry
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Re: The Suddenly $750 Pill

Postby johnfajardohenry » Fri Feb 24, 2017 6:30 am

I can feel it coming on...

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Re: The Suddenly $750 Pill

Postby johnfajardohenry » Fri Feb 24, 2017 6:30 am

It's building...

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Re: The Suddenly $750 Pill

Postby johnfajardohenry » Fri Feb 24, 2017 6:30 am

WATCH OUT!!!!!

I am having an OCD attack!

John Henry

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Re: The Suddenly $750 Pill

Postby johnfajardohenry » Fri Feb 24, 2017 6:31 am

I was reading an article on how to steal beer from Walmart and it mentioned something called "Eroom's Law" which I don't think I'd heard of before. Eroom because it is the inverse of Moore's Law.

https://knowledge.sparkcapital.com/epon ... .yrsqy4nk4

It linked to Wikipedia

https://en.wikipedia.org/wiki/Eroom%27s_law

Eroom's Law says: "The cost of developing a new drug roughly doubles every nine years."

The Wikipedia article is worth reading as it gives some of the reasons why costs increase so dramatically.

John Henry

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Re: The Suddenly $750 Pill

Postby johnfajardohenry » Fri Feb 24, 2017 7:14 am

Henry Vilas wrote:Why do people in other industrial nations pay much less for their prescription medicine? Are the pharmaceutical companies not making a profit on those sales?


Just to be clear, Henry, I would think that we would agree to the following basic statement:

Price (at which a drug is actually sold) = Cost (of making it) + Profit

Or, if you prefer:

Profit = price - cost

So if we agree to that, we would also agree that the only way to cut price is to cut cost or profit. You seem to agree with me that drug companies make reasonable profits so probably not a lot of room to cut there. We are left, as I've said before, with reducing cost as the only way to reduce price.

Drugs manufactured outside of the US have significantly lower costs. Thus they can sell for a significantly lower price while maintaining the profit margins. Lots of reasons for the lower costs but one of the biggies is FDA and FDA equivalent regulation. "FDA Equivalent" means the various national regulatory agencies.

Some of this is in the discovery and bringing new drugs to market. A lot is in the day to day regulation. Even countries that we think of as sophisticated like France, England, Italy etc are pretty primitive compared to the US in pharma manufacturing plants. Maybe the level of the US in the 60's.

When you get outside of the first world countries like France et al, it is the wild wild west. You can read a pretty good article here about the Clinton Foundation's favorite pharma company, India's Ranbaxy Labs http://katherineeban.com/2013/05/15/dir ... -magazine/ This article also has some good info about the fraudulent AIDS drugs Ranbaxy was supplying to Africa under the auspices of the Clinton Foundation.

Katherine Eban has done a lot of good investigative reporting in the pharma industry over the years. Lots of other good links at the site. Her book Dangerous Doses, about counterfeit Epogen, is well worth reading.

Besides the lower cost of discovery and manufacture, other countries extort US pharma companies into selling drugs to them at below cost. Canada, for example, has a law that if prices are too high, a drug can be made by a Canadian company. If under patent, the Canadian manufacturer pays a 4% royalty to the US manufacturer.

So US manufacturers sell to Canada at a reduced price to avoid having this kick in and Canadian drugs flooding the US market. Other countries have similar laws.

The US company may even be able to charge enough to cover variable costs of manufacturing, though not the total costs. The fixed (sometimes called overhead) costs are borne by the US customer.

Then there is the whole problem of counterfeit and adulterated drugs around the world. 15 years ago I was doing some work in the Product Surety area. At that time, according to WHO, $21,000,000,000/10% of drugs worldwide counterfeit. Once you get out of the first world countries, it is probably closer to 50%.

Counterfeit drugs don't cost much to make. A Tylenol tablet has about 0.06 cents worth of active ingredient. A single tablet sells for about a 0.10 cents. Pretty good markup, though not a lot of profit. If you make it legitimately.

The US has the safest, best made, most controlled drugs in the world. That costs money.

Could we reduce the amount of regulation without reducing drug safety in the US? Probably.

Should we? Or, the real question, how much do you want to reduce drug prices?

John Henry

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Re: The Suddenly $750 Pill

Postby Henry Vilas » Fri Feb 24, 2017 9:50 am

The very same drugs made by the very same manufacturers are sold for less outside the U.S. Address that if you can.

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Re: The Suddenly $750 Pill

Postby PaleoLiberal » Fri Feb 24, 2017 10:25 am

The real reason?

It's much more complicated than the explanation below, but this is a very oversimplified version. The real answer also deals with differences in QC and testing protocols for drugs identical to American drugs, but manufactured outside the US.

Consider this a rough approximation of the truth, not the truth.

First consider the developed countries.

Drug companies know they can charge a lot more in the US.
When they plan their R & D strategies, they assume the vast majority of their profits will be in the US.
They know the prices they can charge in the US will be high enough to cover the costs of R & D, not just for THAT drug, but for various other drugs that never get to market.

So, when OTHER countries get in the picture, they know the drug companies are recovering their R&D costs mostly from the American market. The other countries say, in effect, that the drug companies can charge enough to make a profit over the MANUFACTURING costs, but not enough to cover all of the R&D costs.

Essentially, the American consumer is subsidizing the developed countries that have greater price controls.

If the US had a law that these companies had to charge the same price in the US as in the EU and Canada, one of two things would happen. Either the EU and Canada would have to agree to pay more for their drugs, or else fewer drugs would get developed.


There is also the case of the poor nations.

Drugs sold in those countries are SOMETIMES done as a form of charity. That means much smaller profits, or no profits, or even sold as a loss. This is not always the case, but SOMETIMES the case.

The real picture, as I said, is far more complicated.

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Re: The Suddenly $750 Pill

Postby Henry Vilas » Fri Feb 24, 2017 11:08 am

Canada (as well as the Department of Veterans Affairs) are single payer systems and that bargaining power pays off in much lower prices. And yes the manufacturers, including those outside the U.S., are passing off R&D costs to the average American.

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Re: The Suddenly $750 Pill

Postby johnfajardohenry » Fri Feb 24, 2017 11:15 am

Henry Vilas wrote:The very same drugs made by the very same manufacturers are sold for less outside the U.S. Address that if you can.


Are you talking about US drugs made in the US?

Read my note. I did address it. With Canada specifically, with the rest of the world in general.

Besides the lower cost of discovery and manufacture, other countries extort US pharma companies into selling drugs to them at below cost. Canada, for example, has a law that if prices are too high, a drug can be made by a Canadian company. If under patent, the Canadian manufacturer pays a 4% royalty to the US manufacturer.


They sell more cheaply because if they sell for more than the variable cost, the fixed costs can be absorbed by the US consumer. They sell more cheaply because govt's extort lower prices. "Sell to us at a lower price or we will let our manufactures make it regardless of your patent"

If the US consumer stops subsidizing the world's drug costs, who else will do it?

If you are talking about US manufacturers making drugs outside of the US, I addressed that too. Costs are lower outside the US.

My daughter worked for one of the top 5 pharma companies in the US. When they closed her plant, they sent her to France for a year to work on regulatory issues in one of their plants. The French plant had lower costs. It was also a mess, though in compliance with French and European regs. Not just the regulatory but the buildings, the machinery, the people, the supply chain.

As one example: A sterile injectable drug was compounded in one sterile area. Then it was carried outside, in tanks sealed with Tyvek and string, and into another building for filling into vials.

This was an aseptic process which means that the drug is made and filled sterily with no final/terminal sterilization. That is a pretty standard practice for small volume parenteral drugs. But not the way the French do it. Not in the US. Here it never leaves the sterile suite until it is sealed in vials. Now FDA is even tightening that up. They are "encouraging" completely sealed processes, called "isolation". Nice technology, cool machinery but probably triples or quadruples the cost and complexity.

Its why the US imports few drugs from outside the US. Very few plants comply with US regulation.

The drugs may not work. They may kill you.

But they are cheap.

I guess that is what you want?

John Henry

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Re: The Suddenly $750 Pill

Postby johnfajardohenry » Fri Feb 24, 2017 11:17 am

PaleoLiberal wrote:The real reason?

It's much more complicated than the explanation below, but this is a very oversimplified version. The real answer also deals with differences in QC and testing protocols for drugs identical to American drugs, but manufactured outside the US.


Seems like we are pretty much in agreement, Paleo.

John Henry

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Re: The Suddenly $750 Pill

Postby johnfajardohenry » Fri Feb 24, 2017 11:25 am

Henry Vilas wrote:Canada (as well as the Department of Veterans Affairs) are single payer systems and that bargaining power pays off in much lower prices. And yes the manufacturers, including those outside the U.S., are passing off R&D costs to the average American.


What does single payer have to do with it? How is VA any different from Blue Cross in buying pharmaceuticals?

Oh, yeah. VA is part of government. VA can ask for lower prices. If they don't get them:

"Oh, you want a new plant approved? Gee. Gonna take us (FDA) an extra year." Not only does the company have to eat the cost of the delay, they also have one year less of on-patent sales.

Or maybe they want a favorable tax treatment or something else from the government.

So they charge the VA less.

What is it you do not understand about Canada, Henry? Are you being deliberately obtuse? Canada quite openly tells companies that if they don't give them what Canada considers a nice price, they will let Canadian companies make the drug. Even if on patent. This has nothing at all to do with single payer.

So they charge Canada less.

And who winds up bearing the burden of the MFGs costs?

The US consumer.

Sounds like extortion to me.

John Henry

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Re: The Suddenly $750 Pill

Postby Henry Vilas » Fri Feb 24, 2017 11:32 am

The VA system is much larger than say Blue Cross, so they have a correspondingly larger bargaining position over the costs of drugs. And they aren't out to make a profit, as are the various private insurance carriers.

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Re: The Suddenly $750 Pill

Postby PaleoLiberal » Fri Feb 24, 2017 11:42 am

I have had a little experience with differences in regulations.

Actually, the worker safety regulations are stricter in the EU, esp. in the UK.

I once worked for a company that made scientific equipment, so it had to follow the strict EU regulations. Whenever we installed a product in the UK, we had to add on some extra redundant safety features. Completely unnecessary from a safety point of view, but required by law.

Interesting that they were more concerned than the US with worker safety, but less concerned about patient safety.

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Re: The Suddenly $750 Pill

Postby johnfajardohenry » Fri Feb 24, 2017 5:59 pm

PaleoLiberal wrote:I have had a little experience with differences in regulations.

Whenever we installed a product in the UK, we had to add on some extra redundant safety features. Completely unnecessary from a safety point of view, but required by law.


Emphasis added.

So it didn't actually increase worker safety, right? But it did increase costs and some govt regulator justified their job.

I've had some experience with European, mainly Italian and German, manufacturing machinery being brought into the US. Good machines but as made to comply to European regs, they can't be used in the US. Generally nothing major and a lot has been done in the past 20-30 years to standardize better. I don't know that one set of regs is better than the other. They are just different.

That seems to be happening a lot in the US. It is one of the things President Trump has vowed to fight. Some regulations are necessary. Some are not. Reasonable people can disagree on which are which. All of them add cost, ultimately born by the consumer.

A bit OT but regarding differing opinions on safety I read an article on eggs Monday or Tuesday. In the US, egg producers are required, by USDA I guess, to wash all eggs before they go to market. Reasoning is that washing removes bacteria and contaminants.

In Europe producers are forbidden to wash eggs by EU regulation. The reasoning is that washing removes a natural protective coating leaving the eggs more susceptible to contamination.

Me? I have no idea who is right on this. It does make it difficult and expensive to ship eggs between countries.

John Henry

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Re: The Suddenly $750 Pill

Postby johnfajardohenry » Sat Feb 25, 2017 1:42 pm

Henry Vilas wrote:The VA system is much larger than say Blue Cross, so they have a correspondingly larger bargaining position over the costs of drugs. And they aren't out to make a profit, as are the various private insurance carriers.


Got links? No? I do.



Per the VA there are about 21mm living veterans in 2017. Around 10-11mm are enrolled in veterans health care

https://www.va.gov/vetdata/docs/QuickFa ... FY2014.PDF

Wikipedia says Canada has a total population of about 35mm. Enrollment in the Canadian healthcare system is about the same.

Blue Cross covers "more than 106 million Americans", according to Wikipedia.

Did you really not know this? Were you just making it up? Or did you know it and you were lying?

So no, VA healthcare is not larger than Blue Cross and does not have more bargaining power. At least not because of size. It's about 1/10th the size.

Ditto Canada. Its system is about 1/3 the size of Blue Cross. Size alone would give it considerably less bargaining power than Blue Cross.

The reason both have more bargaining power than Blue Cross is guns. If the US or Canadian govt don't like the prices on offer, they can force a price they do like.

This is not "bargaining power" in any normal sense of the phrase. It is extortion pure and simple. "Nice patent you have there, Pfizer, J&J, Merck, Glaxo, Amgen, etc. It would be a real shame if something happened to it."

John Henry


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