Wednesday Highlights

Good morning.

  1. Press releases “of the damned.” 
  2. Reading the bill, and remaining unimpressed.
  3. A twist to the Obama/joker poster story.
  4. A new Miyazaki film noted.
  5. The scum beneath the tape.
  6. I’m interested … 92 mpg for 3k miles
  7. Evil and modern political parlance.
  8. Pharma and price control.
  9. Against drones in Pakistan.
  10. One paramedic’s perspective.
  11. Adding and “R” to cash for clunkers.
  12. Specialization.
  13. Housing numbers.
  14. Byzantium (and Gondor) and why it matters, even if some of my commenters disagree.
  15. The liturgical gangstas.
  16. Under cover techies.
  17. Suu Kyi on sanctions.
  18. Into the valley of the mega-church.
  19. Jurisdiction and healthcare.

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  1. Boonton says:

    Pharma and price control.

    Megan fails to see outside the box. A pill costs a penny to make but sells for a dollar. Why? Because it took $500m in R&D to get to that penny pill. But why $1? Why not $1.25 or $0.75? No one really knows. Pharma companies simply try to get the best price possible without pushing it so far that insurance companies will refuse to pay. But since there’s no competition for new drugs (patent protection gives the company a monopoly for a period of time), there’s no way to figure the price in a dynamic market.

    This is hardly the only possible model for drug pricing. I think the next generation model is going to be less ‘per pill’ and more of a subscription based model where results are what is reimbursed rather than individual pills. Hence a pharma/health management company might get $2500 per patient in a post-chemotherapy population each year they are cancer free. Certainly ‘per pill pricing’ will make sense in some cases. For example, viagra style drugs are probably best priced that way as are drugs you take for very short periods of time like antibiotics…but something to consider here is many of the premium wonder drugs from the last ten years are quickly moving to generics. Generics are produced by multiple firms and there’s price competition. Price control would be ineffective since the prices will essentially be manufacturing costs plus overhead to begin with.

  2. Boonton says:

    Additionally, Megan’s thesis seems to rest on this analysis:

    A premium drug costs pennies to make but is usually marked up quite a bit due to intellectual property protections. Therefore a national healthcare system would target those markups for cost savings before anything else.

    A serious problem with this is how come it hasn’t happened already? Premium drugs cost more than generics in countries with single payer systems like Canada, the UK, and Europe. Cross border trade is a problem (buying the drugs cheaper in a country that bargained a lower price and importing them into a higher priced country). Nonetheless, new drugs command a higher price.

    How can this be when so much medical spending is happening by large players like HMO’s, employer based insurance companies, the gov’t etc.? Why do these players neddle doctors about reimbursement rates when they can send a team of crack negotiators into talks with the pharama companies and demand huge markups be slashed?

    Perhaps a few answers:

    1. Health insurance is not drug insurance…unless I’m mistaken this is a pretty big thing to get wrong in debating Obama’s proposal.

    2. Despite the number of large players who *could* target markups for aggressive negotiation (aka price control), they don’t because drugs are usually cost effective. An expensive diabetes drug still beats the cost of the medical procedures required when one poorly manages their diabetes.

    3. Drug markups are temporary, generic drugs quickly become super cheap. It is easier to cut costs by steering patients away from premium drugs when possible.