# Drug Price Reduction Plan **URL:** \ **Category:** Great Debates\ **Created:** [May 12, 2018, 8:16am UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039 "2018-05-12T08:16:52Z")\ **Posts on this page:** 20\ **Page:** 4
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [May 14, 2018, 3:29am UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/61 "2018-05-14T03:29:26Z")
> [@wolfpup](#): > > Price controls, incidentally, is a concept that in principle I don’t particularly like, but the essence of good policy is to recognize special cases where extraordinary measures are necessary. Drug prices, for many reasons, are one of them because they’re so subject to so many kinds of abuse (an assertion that can be supported by just two words: Martin Shkreli, current serving a seven-year sentence in federal prison). Nitpick - that piece of scum got jailed for something else. Everyone cheered because of his drug gouging. Does pharma advertise in Canada? ---
**Author:** ![RickJay](https://avatars.discourse-cdn.com/v4/letter/r/bb73d2/32.png) [@RickJay](https://boards.straightdope.com/u/RickJay)\ **Post date:** [May 14, 2018, 3:34am UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/62 "2018-05-14T03:34:27Z")
Not on TV and stuff, no. They market through doctors, though. ---
**Author:** ![Kiwi\_Fruit](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kiwi_fruit/32/12_2.png) [@Kiwi\_Fruit](https://boards.straightdope.com/u/Kiwi_Fruit)\ **Post date:** [May 14, 2018, 3:55am UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/63 "2018-05-14T03:55:22Z")
> [@penultima\_thule](#): > > US Big Pharma have two core issues with the PBS > > 1. reference pricing: > Central to the processes of the PBS is the idea that drugs with identical or similar clinical outcomes should have similar prices, known as reference pricing. > 2. they don’t want this mechanism or anything similar like the UK model used as a template for a scheme operating in the US. > [How the US trade deal undermined Australia’s PBS](http://www.anu.edu.au/news/all-news/how-the-us-trade-deal-undermined-australias-pbs) The quoted article was written in 2014, before Trump withdrew from the TPPA, so it does mention what the US wanted to do to all the signatories’ drug buying or price negotiating processes, which was an extension of that in the AUSFTA. It looks like the US wants to re-enter the CPTPP under their own terms, including increasing patent protection periods, even more than in the original plan. Typically increasing by 12 years current patent protection periods. It looks like it would be necessary for the US to conclude agreements with all countries that have a central pricing or buying agent for drugs, in order to “get rid of the freeloaders” as Trump has been reported as saying. PHARMAC is the New Zealand government agency that decides which pharmaceuticals to publicly fund in New Zealand. PHARMAC makes choices about District Health Boards’ (DHBs) spending on vaccines, community and cancer and other hospital medicines. It also funds those drugs through an annual budget. The end user (me) pays $5 for funded medicines and nothing for funded vaccinations. District Health Boards operate the public hospitals throughout NZ. This system has big benefits for users and for the country. It keeps the cost to the user down. It also means that some drugs are not funded because the agency works within a cap. If you have a disease or illness that could be treated by one of those drugs, then you could be paying serious money. An example is a Hepatitis C drug. One woman was advised of a cost of $US100,000 for a treatment course. That was when it was unfunded. It is now funded by PHARMAC, but every time a new drug is funded, either the budget needs increasing, or something else may be dropped. ---
**Author:** ![wolfpup](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wolfpup/32/10618_2.png) [@wolfpup](https://boards.straightdope.com/u/wolfpup)\ **Post date:** [May 14, 2018, 4:50am UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/64 "2018-05-14T04:50:51Z")
> [@RickJay](#): > > Just to clear up confusion, Shkreli is not in prison for setting drug prices too high. > [@Voyager](#): > > Nitpick - that piece of scum got jailed for something else. Everyone cheered because of his drug gouging. I’m aware of that since I’ve been following the gentleman’s career with interest ever since the Daraprim fiasco. He was jailed for being a crook, an unethical asshole with the morals of a sewer rat, yet he was also heavily invested in the pharma industry and was at various times the CEO of at least two different pharmaceutical companies. Unethical and extortionate drug price hikes were essentially his business strategy (he pulled the same stunt with a rare drug called Thiola) because he thought it would be profitable to get manufacturing licenses for unusual out-of-patent drugs for which no generics were available and then hike the prices as high as the market would bear. The interesting thing is that the extortionate drug price manipulations were the one thing he did NOT get in trouble for. That, to me, speaks to an appalling lack of regulatory oversight. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [May 14, 2018, 7:01am UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/65 "2018-05-14T07:01:12Z")
> [@RickJay](#): > > Not on TV and stuff, no. They market through doctors, though. Interesting. Have there been scandals with doctors who prescribe a lot of an expensive drug getting kickbacks and sweet speaking deals? ---
**Author:** ![RickJay](https://avatars.discourse-cdn.com/v4/letter/r/bb73d2/32.png) [@RickJay](https://boards.straightdope.com/u/RickJay)\ **Post date:** [May 14, 2018, 12:28pm UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/66 "2018-05-14T12:28:52Z")
There is some low grade complaining about it, but I don’t recall one story that’s really blown up about it. It is a known issue but I’m not sure it has a lot of public traction yet. My daughter’s pediatrician insisted we should use the name brand, rather than generic, versio0n of a drug she was taking, and went so far as to give me a couple of coupons (no kidding) for it. I was immediately suspicious; was his claim that the name brand was better based on science, or was it because he has a business interest in it? ---
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [May 14, 2018, 1:44pm UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/67 "2018-05-14T13:44:31Z")
> [@wolfpup](#): > > Perhaps, because prices for different drugs vary wildly for many reasons. But [check out this analysis](http://www.pmprb-cepmb.gc.ca/view.asp?ccid=870#1436). Broadly speaking, within large variations for individual drugs, US prices for generics tend to be broadly in line with the rest of the world, while prices for patented drugs are crazy high. This speaks clearly to lack of regulation. Canadian prices for patented drugs tend to be in the median of the rest of the world and far lower than in the US, but generics tend to be high due to being unregulated. Note Table 3. In Canada the generic citalopram costs _ **14 times** _ what it does in the US! Meanwhile, traditionally expensive patented drugs, under price controls from the PMPRB, cost far less than they do in the US. From what I understand of it, there are some generics that are seeing their prices skyrocket. > **[The Rising Cost of Generic Drugs - Public Citizen](https://www.citizen.org/news/the-rising-cost-of-generic-drugs/)** > > Health Letter, July 2016Sarah Sorscher, J.D., M.P.H.The ever-increasing costs of prescription drugs are often in the news these days, with some drugs carrying eye-popping price tags of more than $100,000 per year.\[1\] Typically the highest prices are... > **[Why Are Generic Drug Prices Shooting Up?](https://www.forbes.com/sites/greatspeculations/2015/02/27/why-are-generic-drug-prices-shooting-up/#62bd1d6a3877)** > > Consolidations within the pharmaceutical industry, and supply shortages due to various issues have played a major part in generic price inflation. As a result, some retailers have even dropped drugs from their discount generic drug programs. However,... Making it legal to import drugs from overseas would likely solve this issue. ---
**Author:** ![jshore](https://avatars.discourse-cdn.com/v4/letter/j/b5e925/32.png) [@jshore](https://boards.straightdope.com/u/jshore)\ **Post date:** [May 14, 2018, 3:20pm UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/68 "2018-05-14T15:20:18Z")
> [@RickJay](#): > > But if that were true\* it has nothing to do with the central Republican argument that Canadian prices make American prices higher. If the lack of added profit in Canada is what makes Newdrugatrex unworthy of research then it will not be researched. What will not happen is that American prices will rise to account for lost profits in Canada; that just doesn’t make any sense. American prices are the market clearing price in the USA. Got it…Thanks. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [May 15, 2018, 1:11pm UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/69 "2018-05-15T13:11:47Z")
> [@RickJay](#): > > - > - Just insanely unlikely in practice; it’s not really how this stuff works. No one can really guess the eventual R&D cost of a specific compound that early on, and by the time costs are reasonably predictable you’re in Phase I or Phase II and the drug will either work and be profitable or not and it won’t. The overall high R&D cost of drugs is not because each drug costs a fortune, it’s because most fail. Not so insane. While it’s hard to construct a believable development cost for an individual drug, especially if you’re trying to divy up there cost of failed drugs, pharmaceutical development does require a large investment of time and money. Half of Pfizer’s revenue comes from the US. Their 2017 net income was $21B ($16B adjusted) If we suddenly cut that by $17 billion (very rough estimate using $26B 2017 US revenue and the US/Canada patented drug price ratio of 2.9), that’s looking like a lot less attractive an investment. I’ll take my money elsewhere. Obviously it’s inappropriate to hold all else equal. They would have to change how they operate. But people put money in because they expect to get more money out. ---
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [May 15, 2018, 1:27pm UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/70 "2018-05-15T13:27:36Z")
> [@Ruken](#): > > Not so insane. While it’s hard to construct a believable development cost for an individual drug, especially if you’re trying to divy up there cost of failed drugs, pharmaceutical development does require a large investment of time and money. Half of Pfizer’s revenue comes from the US. Their 2017 net income was $21B ($16B adjusted) If we suddenly cut that by $17 billion (very rough estimate using $26B 2017 US revenue and the US/Canada patented drug price ratio of 2.9), that’s looking like a lot less attractive an investment. I’ll take my money elsewhere. > > Obviously it’s inappropriate to hold all else equal. They would have to change how they operate. But people put money in because they expect to get more money out. Possibly but pharma generally is among the most profitable private businesses out there. Profit margins of 20-25% of gross revenue are not unheard of. Most other private enterprises are lucky if they post a 3% profit margin. Its like I said earlier, I have no real hope for Trump’s plan because any true reform that actually cuts prices will cut into the business model of pharma, and neither party wants to do that (especially not the republicans). ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [May 15, 2018, 1:50pm UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/71 "2018-05-15T13:50:22Z")
> [@Wesley\_Clark](#): > > Possibly but pharma generally is among the most profitable private businesses out there. Profit margins of 20-25% of gross revenue are not unheard of. Most other private enterprises are lucky if they post a 3% profit margin. I’m certainly not weeping for Pfizer or their investors (I am one, I think.) The point is that investment in pharmaceutical development competes with investment elsewhere. And decreasing revenue by a large enough amount will make that investment less worthwhile. And forcing Canadian prices onto the US market would result in a massive decrease in revenue. ---
**Author:** ![RickJay](https://avatars.discourse-cdn.com/v4/letter/r/bb73d2/32.png) [@RickJay](https://boards.straightdope.com/u/RickJay)\ **Post date:** [May 15, 2018, 2:30pm UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/72 "2018-05-15T14:30:12Z")
> [@Ruken](#): > > Not so insane. While it’s hard to construct a believable development cost for an individual drug, especially if you’re trying to divy up there cost of failed drugs, pharmaceutical development does require a large investment of time and money. Half of Pfizer’s revenue comes from the US. Their 2017 net income was $21B ($16B adjusted) If we suddenly cut that by $17 billion (very rough estimate using $26B 2017 US revenue and the US/Canada patented drug price ratio of 2.9), that’s looking like a lot less attractive an investment. I’ll take my money elsewhere. But with due respect, you’re trying to prove something I didn’t say at all. What I said was unlikely was that the Canadian model, specifically, today, results in drugs not being researched; that is just a near impossible thing. Canadas represents a very small part of the world drug market; the delta between the profits made there now and the profits that would be theoretically made if Canadians paid American prices is just not entering into any pharma company’s mind. It is of course possible that the United States forcing down drug prices would affect the industry - well, it’s not likely, it’s certain. What precisely that would do to the general welfare of the world regarding drug innovation I do not know. ---
**Author:** ![elbows](https://avatars.discourse-cdn.com/v4/letter/e/b3f665/32.png) [@elbows](https://boards.straightdope.com/u/elbows)\ **Post date:** [May 15, 2018, 3:04pm UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/73 "2018-05-15T15:04:15Z")
It doesn’t seem like rocket science to me, if you want the best price negotiate as a larger group. That’s how other nations manage it. But your system is purposely fragmented to increase profits. Hundreds of plans, each negotiating different prices, for various sized groups, will never be able to match the prices negotiated by one much, much larger group. Tinker with the market all you want, I don’t think it will overcome this very basic reality. ---
**Author:** ![Treppenwitz](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/treppenwitz/32/3445_2.png) [@Treppenwitz](https://boards.straightdope.com/u/Treppenwitz)\ **Post date:** [May 15, 2018, 4:33pm UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/74 "2018-05-15T16:33:31Z")
> [@RickJay](#): > > …My daughter’s pediatrician insisted we should use the name brand, rather than generic, versio0n of a drug she was taking, and went so far as to give me a couple of coupons (no kidding) for it. I was immediately suspicious; was his claim that the name brand was better based on science, or was it because he has a business interest in it? For what it’s worth, there are certain drugs (with eg narrow therapeutic window, intrinsically variable bioavailability or for conditions where there is a critical need for control) where you just can’t change supplier - once you start with one supplier you have to stick with them or have a full restart to the dose titration process (tho obviously I don’t know if this is what you were describing). Antiepileptics tend to fall into this category. The UK (and I think EU) solution is that for such drugs, generics have to have a brand name in the same way that the original brand has, so if you are using a generic it will be identified by a unique brand name. Not sure if this also happens in the US. So that’s a piece of the science. j ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [May 15, 2018, 9:55pm UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/75 "2018-05-15T21:55:11Z")
> [@RickJay](#): > > What I said was unlikely was that the Canadian model, specifically, today, results in drugs not being researched; that is just a near impossible thing. You responded to a post about Canadian prices being applied everywhere, including the US. Not to a post about the Canadian model, specifically, today. So maybe you intended something else but to refresh your memory: > [@jshore](#): > > There are big sunk costs with drug research. So, could it not be that they are making money on the drugs they sell in Canada (in the sense that the cost that they sell them is greater than the **marginal cost of making the additional quantity** ), but that it would not be profitable to have made the drug at all if they had to sell it everywhere in the world (including the U.S.) at that price (because of the large fixed cost of the research)? Underlining mine, bolding **jshore** ’s > [@RickJay](#): > > But if that were true\* > […] > > - > - Just insanely unlikely in practice; it’s not really how this stuff works. No one can really guess the eventual R&D cost of a specific compound that early on, and by the time costs are reasonably predictable you’re in Phase I or Phase II and the drug will either work and be profitable or not and it won’t. The overall high R&D cost of drugs is not because each drug costs a fortune, it’s because most fail. “That” being that a profitable drug today may not have been profitable in a world where we’ve forced low prices in all markets. I don’t think that is at all unlikely if we cut revenue by over 25%. And I think it’s quite likely that we would see investment (e.g. the $10B VCs pumped into biotech startups last year) going elsewhere. That doesn’t mean it’s a bad idea. ---
**Author:** ![Tee](https://avatars.discourse-cdn.com/v4/letter/t/73ab20/32.png) [@Tee](https://boards.straightdope.com/u/Tee)\ **Post date:** [May 15, 2018, 10:51pm UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/76 "2018-05-15T22:51:22Z")
> [@Wesley\_Clark](#): > > Possibly but pharma generally is among the most profitable private businesses out there. Profit margins of 20-25% of gross revenue are not unheard of. Most other private enterprises are lucky if they post a 3% profit margin. > > Its like I said earlier, I have no real hope for Trump’s plan because any true reform that actually cuts prices will cut into the business model of pharma, and neither party wants to do that (especially not the republicans). I am optimistic, only because the current business model is not sustainable no matter who is in office. I offer the case of an otherwise healthy MS patient currently on an injectable medication that costs $7,000 a month, retail. The current model obviously does not depend on the consumer coming up with this cash, and hasn’t for a long time. It depends on third-party payers. ---
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [May 15, 2018, 11:37pm UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/77 "2018-05-15T23:37:17Z")
> [@Tee](#): > > I am optimistic, only because the current business model is not sustainable no matter who is in office. I offer the case of an otherwise healthy MS patient currently on an injectable medication that costs $7,000 a month, retail. The current model obviously does not depend on the consumer coming up with this cash, and hasn’t for a long time. It depends on third-party payers. But because America is a plutocracy, doing things that reduce revenue for health care providers will be the last resort solution to the issue. Neither democrats or republicans are willing to do anything that’ll reduce medical prices. As a solution to our overpriced health care system, Republicans push for shittier and shittier health insurance, democrats push for government funding of health insurance. Neither party pushes to make health care more affordable. Democrats on the state level talk about health reform that’ll lower costs (single payer) but at the end of the day, all they do is talk. That is what the ACA did. The ACA didn’t reduce medical spending, it just let the government pick up more of the tab for it. ---
**Author:** ![Tee](https://avatars.discourse-cdn.com/v4/letter/t/73ab20/32.png) [@Tee](https://boards.straightdope.com/u/Tee)\ **Post date:** [May 16, 2018, 2:32am UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/78 "2018-05-16T02:32:04Z")
> [@Wesley\_Clark](#): > > But because America is a plutocracy, doing things that reduce revenue for health care providers will be the last resort solution to the issue. Neither democrats or republicans are willing to do anything that’ll reduce medical prices. As a solution to our overpriced health care system, Republicans push for shittier and shittier health insurance, democrats push for government funding of health insurance. Neither party pushes to make health care more affordable. Democrats on the state level talk about health reform that’ll lower costs (single payer) but at the end of the day, all they do is talk. I agree with that mostly, it’s led to our situation today, where on one hand the high costs are killing people, and on the other they represent employment, investment, steady returns on your mutual funds, and $7,000/month injections that actually work. Exploitative pricing and gaming the system are the low-hanging fruit, so it’s not surprising that the Trump administration made it an early priority. ---
**Author:** ![Melbourne](https://avatars.discourse-cdn.com/v4/letter/m/b5e925/32.png) [@Melbourne](https://boards.straightdope.com/u/Melbourne)\ **Post date:** [May 16, 2018, 5:49am UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/79 "2018-05-16T05:49:04Z")
> [@kaylasdad99](#): > > I followed your link, and found it to be, frankly, a bit of a daunting enterprise to try parsing. Do you suppose you could point me to the section that US Big Pharma finds so objectionable? > > TIA. 🙂 Yes, I suppose they would object to the TIA as well 🙂 Lacking any native big pharma, the TIA is the drug-development arm of Aus Government funding. ---
**Author:** ![Melbourne](https://avatars.discourse-cdn.com/v4/letter/m/b5e925/32.png) [@Melbourne](https://boards.straightdope.com/u/Melbourne)\ **Post date:** [May 16, 2018, 6:34am UTC](https://boards.straightdope.com/t/drug-price-reduction-plan/814039/80 "2018-05-16T06:34:20Z")
> [@SuperAbe](#): > > Unless you’re a woman of reproductive age in which case [serious birth defects are a significant issue in tretinoin usage](https://medlineplus.gov/druginfo/meds/a608032.html). Other side effects (leukocytosis, etc) are more rare, but tretinoin isn’t as safe as aspirin/ibuprofen (which have their own issues). Oral Tretinoin. For cancer or for severe drug-resistant acne. Retin-A cream, even the concentrated versions, is not a significant issue: the drug is, in fact, so reactive with the skin that you’d get severe skin burns before significant blood levels. Which is why the cream is an OTC drug in some/most countries. You can buy it as a cosmetic in Aus, but that costs a lot more (cosmetics!) than the product marketed for acne treatment, also OTC but perhaps drug-store only??? (could check, haven’t done so). Dunno why it is prescription-only in the USA, but I don’t assume that necessarily a bad thing: sometimes the USA is a medical leader, sometimes it’s just superstition. [Previous page](https://boards.straightdope.com/t/drug-price-reduction-plan/814039.md?page=3) [Next page](https://boards.straightdope.com/t/drug-price-reduction-plan/814039.md?page=5)