Cost of Medicine

[tarcone]

I was trolling over at the Obama Presidency thread, and there was discussion about the cost of medicines (Meningitis Meds).
Why does it cost so much to produce medicine? I know there is R & D costs and then setting up production. But at what point does it become almost pure profit?
I think of this because I use insulin. If I didnt have insurance, I would be paying hundreds of dollars for my medicine, each month. Insulin has been around for decades. Why does it cost so much?
At what point does saving lives trump profit? (being dramatic here. Ignore if you want.)

If someone is in the know, I would love to find out why this is.

[lungs]

I do know that they can take the same drugs I use on animals, slap a label on it for human usage, and jack up the price tenfold.

Even diagnostic tools that I use such as a BHBA meter.... Buy the strips to test blood from a vet supply for $3.00/strip. Go to a pharmacy and they are $8.00/strip for the EXACT same thing. Of course, order them from a Canadian pharmaceutical supply and they are $2.50/strip.

[JediKooter]

I could be wrong, but, I think part of the cost is that imports from other countries are severely restricted. So, there's a bit of a captive audience here in the states. No competition usually equals whatever price they want to charge and most companies go for the max they can get.

[Mizzou B-ball fan]

Thought this was an interesting illustration of the revenue vs. profit measurements of name-brand/generic drugs.

[thesloppy]

Originally Posted by Mizzou B-ball fan

Thought this was an interesting illustration of the revenue vs. profit measurements of name-brand/generic drugs.

Hmmmm. That IS pretty interesting. So what's to read between the lines? The missing third graph I'd like to see is what they're spending is going towards. While I'm willing to give the brands some slack for the fact that generics are largely profiting off the fact that they're strictly manufacturing someone else's development, I'd imagine they're also saving a massive amount on advertising, pharm reps, lobbyists, and other political/marketing expenses, and I'm less willing to forgive those kind of expenses, when we're talking about health care.

The amount of pharm advertising is so insane that I don't even notice it anymore, and that shit ain't free, and I can only imagine I'd be seeing twice as much of it if I was in a medical profession. I hate to sound like a dirty, naive, hippy but it does seem unethical, considering that those marketing costs are being passed directly to the consumer, who is by definition, ill and/or suffering. I guess it's hard to argue against the idea of an informed patient, but does the general public really need to know the specifics of every goddamn pill on the market? Shouldn't your doctor be mostly responsible for determining and/or explaining your best treatment, at least to the point that we don't need to be bombarded with pharmaceutical advertisements constantly, making them prohibitively expensive in the process?

[Raiders Army]

Originally Posted by tarcone

I was trolling over at the Obama Presidency thread, and there was discussion about the cost of medicines (Meningitis Meds).

Stop yer trolling.

[molson]

I need to think of a drug to invent. It can't be that hard.

[JPhillips]

There are a ton of drugs sold as generics and far fewer under protection. Having another graph that showed the same info per drug would help a little.

[RainMaker]

I think one of the problems we have with the cost of drugs is that the US is subsidizing the cost for the rest of the world. Allow us to buy drugs from overseas and it forces other countries to start paying their fair share.

[Marc Vaughan]

Originally Posted by RainMaker

I think one of the problems we have with the cost of drugs is that the US is subsidizing the cost for the rest of the world. Allow us to buy drugs from overseas and it forces other countries to start paying their fair share.

Errr what - come again .... what exactly would be forcing those 'free market' companies to extort additional money from the US in order to save other countries money? ....

Now if you want to complain that the situation in the US prevents pressure being placed upon companies to lower the price, say having the government do a nationwide health insurance setup where they bargain collectively with companies for the price of drugs etc. then yeah I'll agree thats one of the reasons US drug prices are high, its far easier to keep them inflated in that situation than in the UK with the NHS where economies of scale for sales are in effect.

(basically same sort of thing you see with Walmart vs smaller retailers, Walmart turns around to a manufacturer and orders a vast quantity from them but ONLY if they get them at price 'x' - thats not something a smaller store can do)

[JPhillips]

Subsidize may not be accurate, but there's no question the drug companies argue that they have to keep US prices high because otherwise they can't afford to develop new drugs. That's probably bullshit, but if it isn't any drop in price in the US would require a rise in prices elsewhere until an equilibrium was established.

[fpres]

Originally Posted by thesloppy

The amount of pharm advertising is so insane that I don't even notice it anymore, and that shit ain't free, and I can only imagine I'd be seeing twice as much of it if I was in a medical profession.

It's funny that you mention this. On an average day, I probably get 20-30 pieces of pharm advertising at my workplace and another 5-10 at home. This is even more ridiculous as I run a "no pharm rep" practice and prescribe generics whenever possible (which is the vast majority of the time).

Originally Posted by thesloppy

I guess it's hard to argue against the idea of an informed patient, but does the general public really need to know the specifics of every goddamn pill on the market?

Informed patients are great. I wish I had many more of them. Direct-to-consumer ads annoy me to no end though. All too often, useless information is emphasized while more important pertinent information is either buried or omitted with the label "ask your physician for details" attached.

Originally Posted by thesloppy

Shouldn't your doctor be mostly responsible for determining and/or explaining your best treatment, at least to the point that we don't need to be bombarded with pharmaceutical advertisements constantly, making them prohibitively expensive in the process?

Absolutely. In the continuum of who knows your body/situation the best, I like to think of it this way:
you > your doctor >>> your friendly neighborhood insurer, pharm company, etc.

[Marc Vaughan]

Originally Posted by JPhillips

Subsidize may not be accurate, but there's no question the drug companies argue that they have to keep US prices high because otherwise they can't afford to develop new drugs. That's probably bullshit, but if it isn't any drop in price in the US would require a rise in prices elsewhere until an equilibrium was established.

I think thats more a propaganda thing which has been swallowed by the US rather than reality, a little along the lines of 'nationalized medicine is communism and would be bad' ....

After all do bear in mind that a heck of a lot of research for new drugs is done outside of the US and might not initially be approved/sold in the US for that reason (most companies will 'target' their drugs initially in the countries where they're developed I expect for practical reasons - ie. they're closer to their initial test subjects and have to get clearance for use on them anyway ....).

If the US market was the only one which counted then all drugs would be targetted instantly at that market - however thats not the case at all (although I have no doubt that having a 'big drug' in America is viewed as a Gold Mine, in a similar way to how I'm sure the Gas companies view the UK petrol prices (currently $10/gallon and rising) ...).

[fpres]

Just out of curiosity too, I'd be interested in knowing how the percentage and sum total of pharm company expenses devoted to DTC marketing has changed since PhMRA started their self-policing policy a few years back. I suspect all that money which was going to free lunches, pens, mugs, etc just got diverted into marketing instead (rather than cutting overall expenses). Can't market to docs like before? Just market to patients even more aggressively then.

[RainMaker]

Originally Posted by Marc Vaughan

Errr what - come again .... what exactly would be forcing those 'free market' companies to extort additional money from the US in order to save other countries money? ....

Now if you want to complain that the situation in the US prevents pressure being placed upon companies to lower the price, say having the government do a nationwide health insurance setup where they bargain collectively with companies for the price of drugs etc. then yeah I'll agree thats one of the reasons US drug prices are high, its far easier to keep them inflated in that situation than in the UK with the NHS where economies of scale for sales are in effect.

(basically same sort of thing you see with Walmart vs smaller retailers, Walmart turns around to a manufacturer and orders a vast quantity from them but ONLY if they get them at price 'x' - thats not something a smaller store can do)

We don't have a free market here for prescription drugs unless there are generic options available. Each patented drug is a mini monopoly. Other countries can negotiate for cheaper prices because they can make their profits off US customers. If the US opened the doors to other countries for prescription drugs, it would change the negotiating dynamic.

If they are unable to make as much off their drugs from us, they'll have to get more from other countries. That or just not make a drug that the risk of a financial loss is too high.

[Masked]

Based on industry data, a drug entering clinical trials has approximately a 10% chance of ultimately being approved for sale. So the one drug that makes it, has to fund the R&D of the 9 drugs that didn't make it. Now the R&D costs for each of the other 9 drugs is less than the one that made it because development stops on them when they fail some stage. However, I'm also not considering the cost of getting drugs to the stage where they are ready to enter clinical trials.

[fantom1979]

Originally Posted by molson

I need to think of a drug to invent. It can't be that hard.

[RainMaker]

I always thought it would be beneficial for countries to band together and create their own drugs. We have things like CERN for scientific research. Wouldn't it make sense for say the top 10 countries to band together, all pitch in some money, and just have a kickass lab doing medical research non-stop? You create something that works and the knowledge is free to anyone to produce.

I know there is a lot of government sponsorship in regards to research, but I always thought it'd be interesting to just band together, bring in the brightest minds, and invest in producing things for all of humanity.

[Young Drachma]

Originally Posted by RainMaker

I always thought it would be beneficial for countries to band together and create their own drugs. We have things like CERN for scientific research. Wouldn't it make sense for say the top 10 countries to band together, all pitch in some money, and just have a kickass lab doing medical research non-stop? You create something that works and the knowledge is free to anyone to produce.

I know there is a lot of government sponsorship in regards to research, but I always thought it'd be interesting to just band together, bring in the brightest minds, and invest in producing things for all of humanity.

[fantom1979]

Originally Posted by RainMaker

I always thought it would be beneficial for countries to band together and create their own drugs. We have things like CERN for scientific research. Wouldn't it make sense for say the top 10 countries to band together, all pitch in some money, and just have a kickass lab doing medical research non-stop? You create something that works and the knowledge is free to anyone to produce.

I know there is a lot of government sponsorship in regards to research, but I always thought it'd be interesting to just band together, bring in the brightest minds, and invest in producing things for all of humanity.

This sounds like new world order and medicare for all. Count me out.

[Glengoyne]

Originally Posted by Mizzou B-ball fan

Thought this was an interesting illustration of the revenue vs. profit measurements of name-brand/generic drugs.

What the graphic above shows is that everyone in the distribution chain, except the original manufacturer, makes more money on generic drug sales than on brand sales. On brands the margins are very tight.

The big open secret of the industry is that a number of very profitable brand drugs are going generic in the relatively near future. So there will be a bonanza of profits all though the industry. Well, except for the manufacturers. They are scrapping for ways to retain their share of the profits. An example of this is Lipitor. You've seen the ads for $4 coupons. They are also aggressively rebating a very high percentage of the purchase price. Back to insurers. That way they retain some of the market share that the generics are eating up. Sure it was great when they made 8 billion a year on the sales before it went generic, but if they can continue to scrape by on 2 billion a year they can hopefully keep up the R&D on the next cash cow. I actually have no idea what profit Pfizer was or is making on Lipitor, the numbers above are just to paint a picture of their strategy.

In short the heyday the brand manufacturers have been enjoying for the past fifteen or twenty years is winding down. Their cash cows are going generic and they don't have near enough left under patent protection to make up all they are losing.

[Chief Rum]

Originally Posted by fantom1979

I don't have access to this youtube here at work, and I just see my company's big no access symbol overlayed over what would be the youtube link. So tell me if I am correct: did fantom post a link to the video for Huey Lewis and the News "I Want A New Drug"?

[CrimsonFox]

Originally Posted by molson

I need to think of a drug to invent. It can't be that hard.

There are some plants in your backyard. Grind them up into a powder. FIll some capsules with them and call them Molsonite! (or Molnicillison or Molsonia)
You'll make millions...

[CrimsonFox]

Originally Posted by Chief Rum

I don't have access to this youtube here at work, and I just see my company's big no access symbol overlayed over what would be the youtube link. So tell me if I am correct: did fantom post a link to the video for Huey Lewis and the News "I Want A New Drug"?

Nothing so out of date. It is an interview with a redneck in intensive care whose meth lab exploded on him when he sweat on it.

[Galaxy]

Originally Posted by JediKooter

I could be wrong, but, I think part of the cost is that imports from other countries are severely restricted. So, there's a bit of a captive audience here in the states. No competition usually equals whatever price they want to charge and most companies go for the max they can get.

I thought part of it is that other countries have price controls, which forces companies to use the U.S. as the profit-generating market to subsidy the other markets?

[JediKooter]

Originally Posted by Galaxy

I thought part of it is that other countries have price controls, which forces companies to use the U.S. as the profit-generating market to subsidy the other markets?

I have no idea. I seem to remember somewhere (can't remember if it was something I watched or read) that the reason it's so expensive here, is because a customer can't get their drugs from somewhere else. They have to purchase them from a company that sells them in the US. So if company A, sells it Canada for $1 a pill, you can't buy it in Canada, you have to buy it in the US for $11 a pill. Same pill, same company, just not allowed to be a fiscally smart consumer.

[Marc Vaughan]

Originally Posted by JediKooter

I have no idea. I seem to remember somewhere (can't remember if it was something I watched or read) that the reason it's so expensive here, is because a customer can't get their drugs from somewhere else. They have to purchase them from a company that sells them in the US. So if company A, sells it Canada for $1 a pill, you can't buy it in Canada, you have to buy it in the US for $11 a pill. Same pill, same company, just not allowed to be a fiscally smart consumer.

Its likely that (for the reasons of preventing importing of dodgy substances or tampered drugs which can't be monitored by the US - ie. good reasons) combined with the afore mentioned lack of a central negotiating body for such prices in the US, whereas most countries with centralised healthcare negotiate in bulk and thus corporations have to accept a small profit on large deliveries or lose a huge potential market.

This also leads into the various other debates/reasons why US healthcare is so expensive comparatively to elsewhere in the world ...

[JediKooter]

Originally Posted by Marc Vaughan

Its likely that (for the reasons of preventing importing of dodgy substances or tampered drugs which can't be monitored by the US - ie. good reasons) combined with the afore mentioned lack of a central negotiating body for such prices in the US, whereas most countries with centralised healthcare negotiate in bulk and thus corporations have to accept a small profit on large deliveries or lose a huge potential market.

This also leads into the various other debates/reasons why US healthcare is so expensive comparatively to elsewhere in the world ...

I really don't know. I just seem to have (for some reason) this recollection of why drugs cost so much more here than in other countries. I don't think it's a conspiracy or anything like that, I just think that the drug companies know they have a captive audience and are legally taking advantage of it. I would buy prescription drugs from another country, but, from the same company that sells them in the US, if it made financial sense.

There's a lot of reasons why healthcare is expensive here and no one magic bullet to fix it. However, I don't mind doctors getting paid a lot. I want the best of the best working on me that went to a top notch school. There's just certain services I don't mind paying a premium for and that's one of them.