If the US government would negotiate better prices for drugs by buying them in mass as a single nation, then the drug companies would obviously take in less money for that sale.
But it should not be an immediate conclusion that they would therefore make less profit. Their overhead would be far lower since they would not have to advertise and sell to thousands of smaller companies anymore. Their distribution would be much simpler, and inventory would be simplified.
To use the ongoing cars example, as a car manufacturer would you rather sell 1 car to a million different people throughout the US - or sell 1 million cars to 1 one person in the US. What is going to be easier for you to market and distribute and which sale can you more easily plan your inventory levels around. Sure you’ll give the guy buying 1 million cars a big discount but ultimately your costs will be way down. Down enough that you may well be making more profit, or perhaps not depending on hundreds of things we can’t quantify here. But ultimately the difference won’t be as simple as saying that the lower cost will directly impact the companies profit margin and they can no longer keep up with their R&D.
Innovation is more than just the initial breakthrough. Production specifications for fully functioning commercial medical devices don’t just appear on the doorsteps of the companies that manufacture them. Turning a scientific breakthrough into a real-world tool available to patients and doctors nearly always requires private capital from companies who depend on revenue. Plus, virtually every medical device on the market today (pacemakers, heart valves, replacement joints, MRI, CT scan) is a substantial improvement over the original item. That ongoing development begins with the manufacturers the moment they purchase the patents. Compare an artificial knee from today to one from the '70s and you’d be hard pressed to argue it’s not innovative. Commercially-manufactured MRI machines today are a far cry from what they were when first developed fifty years ago.
No matter how you slice it, profit motive and capital revenue are driving forces in the quality of healthcare today.
Right, which explains why the USA has a very average life expectancy for the developed world, despite throwing an extra 8% of GDP at healthcase, and missing a sizable chunk of the population.
You have to be totally set in your mind to not see how the American people have been completely suckered for 40 years.
You’d have to save a whole lot on overhead to make up the difference if the U.S. cut its per capita drug spending by 50%, which is what it would have to do to reach the OECD average.
Also a separate issue. Europe and Canada have all the same drugs, diagnostic tools and medical devices as the U.S., so it’s not a matter of innovation. Life expectancy issues in America are a product of lifestyle. We eat too much and exercise too little.
I’ve not seen anyone pick up on this, but this statement is false. The more profit the company makes, the more it has to spend on R&D. It doesn’t matter how high the revenue is, if the costs are so high there’s minimal profit, or actual loss. As the cost of doing business in a multi-payer environment are higher than a single payer one, it’s not obvious that the companies profit more from the US than elsewhere. They may do, but you’ll need a cite to show it.
I don’t think you are going to find a cite, because profitability by country is not going to be reported publicly, and all the big companies do business in a lot of countries. But here is one data point. I worked for a company that has a huge pharmacy business (retail and wholesale) in both Canada and the US. Our margin in Canada is pretty much the same in DOLLARS per prescription for brand name drugs. The average wholesale price is almost double in the US. Since the drugs are produced in exactly the same facilities, you had better believe the pharmas are making a lot more gross profit in the US than Canada. They have higher marketing costs in the US for sure, because they can advertise in the US, but not in Canada (except in a very limited form). But they wouldn’t advertise if that didn’t increase their profits, net.
“US profit growth was maintained even whilst other top industries saw little or no growth.[28] Despite this, “..the pharmaceutical industry is — and has been for years — the most profitable of all businesses in the U.S. In the annual Fortune 500 survey, the pharmaceutical industry topped the list of the most profitable industries, with a return of 17% on revenue.”[29]”
Considering the U.S. accounts for nearly half of all pharmaceutical sales in OECD nations and pharmaceuticals are the most profitable industry in the U.S., it should be fairly clear that revenue from this country significantly outpaces any other nation in the cohort… if not all of them put together.
If your main interest is really focused on improving health care through creation of more innovative drugs and not simply preserving the profits of drug companies, how about this:
The government, through the FDA determines the criteria for approving new drugs for sale in the USA. Currently, these criteria only require that a drug perform better than a placebo to be considered effective.
How about instead the drug is required to perform better than existing drugs designed to treat the same thing?
This would provide assurance to the public and medical professionals that the new drug is indeed an improvement over previous similar drugs.
It would also provide incentive to the drug companies to not waste research dollars on “me too” drugs, because they will not be approved for sale.
I think it could be a step in the right direction worth considering. At least it gets our heads in the right area of concern. But, it could be a candidate for the law of unintended consequences.
What constitues treating the same thing? There are numerous antidepressants, for example. Would the standard be that it has to be better at treating depression in general or that it has to be a better seratonin reuptake inhibitor or a better MAOI?
Either way, how do we test if one drug is truly better than a different version? Not everyone responds the same to different drugs designed to treat the same condition. Those same antidepressants all have different degrees of efficacy on individual sufferers. It’s often a trial and error process to determine which drug or combination of drugs works for a particular patient. The same is true for a host of other drugs.
How about this: A substantial tax credit or other incentive for companies that produce drugs that work on the body in a way that is genuinely unique? Developing criteria could be a minefield, but it might be a good place to start the conversation.