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Medical Forum / General / General / March 2004Cost of medicines
Cost of Medicines Did you ever wonder how much it costs a drug company for the active Ingredient in prescription medications? Some people think it must cost a lot, since many drugs sell for more than $2.00 per tablet. We did a search of offshore chemical synthesizers that supply the active ingredients found in drugs approved by the FDA. As we have revealed in past issues of Life Extension, a significant percentage of drugs sold in the United States contain active ingredients made in other countries. In our independent investigation of how much profit drug companies really make, we obtained the actual price of active ingredients used in some of the most popular drugs sold in America. The chart below speaks for itself. Celebrex 100 mg Consumer price (100 tablets): $130.27 Cost of general active ingredients: $0.60 Percent markup: 21,712% Claritin 10 mg Consumer Price (100 tablets): $215.17 Cost of general active ingredients: $0.71 Percent markup: 30,306% Keflex 250 mg Consumer Price (100 tablets): $157.39 Cost of general active ingredients: $1.88 Percent markup: 8,372% Lipitor 20 mg Consumer Price (100 tablets): $272.37 Cost of general active ingredients: $5.80 Percent markup: 4,696% Norvasc 10 mg Consumer price (100 tablets): $188.29 Cost of general active ingredients: $0.14 Percent markup: 134,493% Paxil 20 mg Consumer price (100 tablets): $220.27 Cost of general active ingredients: $7.60 Percent markup: 2,898% Prevacid 30 mg Consumer price (100 tablets): $44.77 Cost of general active ingredients: $1.01 Percent markup: 34,136% Prilosec 20 mg Consumer price (100 tablets): $360.97 Cost of general active ingredients $0.52 Percent markup: 69,417% Prozac 20 mg Consumer price (100 tablets) : $247.47 Cost of general active ingredients: $0.11 Percent markup: 224,973% Tenormin 50 mg Consumer price (100 tablets): $104.47 Cost of general active ingredients: $0.13 Percent markup: 80,362% Vasotec 10 mg Consumer price (100 tablets): $102.37 Cost of general active ingredients: $0.20 Percent markup: 51,185 Xanax 1 mg Consumer price (100 tablets) : $136.79 Cost of general active ingredients: $0.024 Percent markup: 569,958% Zestril 20 mg Consumer price (100 tablets) $89.89 Cost of general active ingredients $3.20 Percent markup: 2,809% Zithromax 600 mg Consumer price (100 tablets): $1,482.19 Cost of general active ingredients: $18.78 Percent markup: 7,892% Zocor 40 mg Consumer price (100 tablets): $350.27 Cost of general active ingredients: $8.63 Percent markup: 4,059% Zoloft 50 mg Consumer price: $206.87 Cost of general active ingredients: $1.75 Percent markup: 11,821% Since the cost of prescription drugs is so outrageous, I thought everyone I knew should know about this. Please read the following and pass it on. It pays to shop around. This helps to solve the mystery as to why they can afford to put a Walgreens on every corner. On Monday night, Steve Wilson, an investigative reporter for channel 7 News in Detroit, did a story on generic drug price gouging by pharmacies. He found in his investigation, that some of these generic drugs were marked up as much as 3,000% or more. Yes, that's not a typo.....three thousand percent! So often, we blame the drug companies for the high cost of drugs, and usually rightfully so. But in this case, the fault clearly lies with the pharmacies themselves. For example, if you had to buy a prescription drug, and bought the name brand, you might pay $100 for 100 pills. The pharmacist might tell you that if you get the generic equivalent, they would only cost $80, making you think you are "saving" $20. What the pharmacist is not telling you is that those 100 generic pills may have only cost him $10! At the end of the report, one of the anchors asked Mr. Wilson whether or not there were any pharmacies that did not adhere to this practice, and he said that Costco consistently charged little over their cost for the generic drugs. I went to the Costco site, where you can look up any drug, and get its online price. It says that the in-store prices are consistent with the online prices. I was appalled. Just to give you one example from my own experience, I had to use the drug, Compazine, which helps prevent nausea in chemo patients. I used the generic equivalent, which cost $54.99 for 60 pills at CVS. I checked the price at Costco, and I could have bought 100 pills for $19.89. For 145 of my pain pills, I paid $72.57. I could have got 150 at Costco for $28.08. I would like to mention, that although Costco is a "membership" type store, you do NOT have to be a member to buy prescriptions there, as it is a federally regulated substance. You just tell them at the door that you wish to use the pharmacy, and they will let you in (this is true, I went there this past Thursday and asked them.) I am asking each of you to please help me by copying this letter, and pasting it into your own email, and send it to everyone you know with an address. Sharon L. Davis Budget Analyst U.S. Department of Commerce Room 6839 Office Ph: 202-482-4458 Office Fax: 202-482-5480 Email Address: sdavis@doc.gov Mary Palmer Budget Analyst Bureau of Economic Analysis Office of Budget & Finance Voice: (202) 606-9295 Fax: (202) 606-5324 Listen troll. This issue has been brought up and beaten to death. If you are so ignorant to think that the cost of pills should only be based on the cost of active ingredients then you probably are not intelligent enough to discuss the issue in its entirety. Although I agree some drug prices seem ridiculous you conveniently have left out the millions of dollars the drug companies have spent in trying to bring that drug to market. This includes probably hundreds of different drugs created and tested just to get one drug to pass the FDA standards for approval. So I imagine if you have an attorney that charges you a couple thousand dollars for his/her services and he/she only uses $2.00 worth of paper and a $1.00 worth of stamps they should charge you for their services based on the cost of the supplies used rather than the going rate? What your really paying for is knowledge and it isn't much different with prescription drugs. You are paying for the millions of dollars it took for the drug company to come up with a drug not for the manufacturing costs of the drugs. If you were stuck in the middle of nowhere, it's raining and your car died and you needed to get somewhere would you be willing to pay $50 for somebody to fix your car? Most likely yes. But what if when the person arrived they knew from previous experience that all they had to do was push a reset button on your fuel pump safety switch and it takes all of 30 seconds to get you on the road again. Well that is $100 a minute and $6000 dollars an hour. What a ripoff!!! Now all of a sudden your pissed off and feel like you got taken. You didn't get taken. You got your car fixed and you sure as hell couldn't do it. There is no difference with RX drugs. You can't make them and so you need to buy them at whatever the going price is. As far as you bitching about how in this particular example the generic, although cheaper and saving you more money than purchasing brand name, should have been cheaper still because the pharmacy didn't pay as much for the generic as it did in relation to the brand name, your ridiculous. If everybody sold things for what they cost they nobody would be in business because who is going to pay for the pharmacist salary, the techs salary, computers, phones, long distance bills, paper supplies, pens, space lease, electricity, renewal fees for licensing, etc. Somebody has to pay for it. And your list isn't exactly correct. The Prilosec and Claritin is now OTC and much cheaper than you have listed. If you want to go to Costco to buy your meds then do so, get off your soap box and take your issue up via a different venue. CaptainKrunch > Cost of Medicines > [quoted text clipped - 159 lines] > Voice: (202) 606-9295 > Fax: (202) 606-5324 > Although I agree some drug prices seem ridiculous you conveniently have left > out the millions of dollars the drug companies have spent in trying to bring > that drug to market. This includes probably hundreds of different drugs > created and tested just to get one drug to pass the FDA standards for > approval. However drugs in United States are very expensive. Almost all medication, not generic, which appears in list, in Italy has a price between one third and one half of United States one. In some cases is terrible, for example here 28 Prozac tablets has a cost of 14 ?, while the difference is so slight for beta-blockers. Maybe you should buy medication in Italy :-) > Listen troll. This issue has been brought up and beaten to death. If > you are so ignorant to think that the cost of pills should only be [quoted text clipped - 6 lines] > of different drugs created and tested just to get one drug to pass the > FDA standards for approval. And people who defend the pharmaceutical companies conveniently leave out the taxpayer supported funds and research facilities and universities that are used in the development of drugs. The pharmaceutical industry is heavily subsidized, but they try to make people believe that they foot the entire bill for drug research. -- Dan Solomon >>Listen troll. This issue has been brought up and beaten to death. If >>you are so ignorant to think that the cost of pills should only be [quoted text clipped - 15 lines] > -- > Dan Solomon Maybe so. But subsidies are used in many industries. The point is, if the subsidies were removed the cost of the drugs would be higher. And please don't start any nonsense like they make enough already, etc. Last I checked business was business and I don't recall any socialist revolution recently. >>>Listen troll. This issue has been brought up and beaten to death. If >>>you are so ignorant to think that the cost of pills should only be [quoted text clipped - 21 lines] > I checked business was business and I don't recall any socialist > revolution recently. Increase subsidies/tax benies and remove patent protection.  SignaturePramesh Rutajit - p2976221tongue@newsguy.com - remove tongue to reply. > I checked business was business and I don't recall any socialist > revolution recently. Maybe that is just what we need. Our present system of legalized greed has failed the consumer. PJ for approval. >And people who defend the pharmaceutical companies conveniently leave >out the taxpayer supported funds and research facilities and >universities that are used in the development of drugs. The >pharmaceutical industry is heavily subsidized, but they try to make >people believe that they foot the entire bill for drug research. Of course, the ENTIRE NIH research budget is less than half of the money paid by pharms and this includes many studies that have nothing to do with pharm company's needs (indeed they do much of the old drug vs new drug comparisons). > > Listen troll. This issue has been brought up and beaten to death. If > > you are so ignorant to think that the cost of pills should only be [quoted text clipped - 10 lines] > out the taxpayer supported funds and research facilities and > universities that are used in the development of drugs. This is a commonly trotted out factoid though I have yet to see specific evidence that the participation by NIH and/or university medical centers in the drug research process is altruistic. There are shared programs between the public and private sectors that are funded on a shared basis. The ownership of the outcomes of the research is shared as well. The benefit of these endeavors accrues to the patient and to the creators (royalties, patents, etc.), and ultimately to patients, so the taxpayer does benefit. > The > pharmaceutical industry is heavily subsidized, but they try to make > people believe that they foot the entire bill for drug research. I haven't seen a single subsidy paid to the pharmaceutical industry. The accounting costs ae handled the same as with any business, the tax incentives to do research are intended to promote a valuable activity and are available to any research intensive company. What "heavily subsidized" examples can you share? Specifics would be nice - preferably from credible sources, not Time magazine. js >>>Listen troll. Specifics would be nice - > preferably from credible sources, not Time magazine. > > js More likely Guns & Ammo or Redneck Hotrodding. >Cost of Medicines Ever heard of this little expensive and highly risky thing called R&D? >>Cost of Medicines > >Ever heard of this little expensive and highly risky thing called R&D? I'll assume at least some of us are in R&D and realize that drug prices could be cut in half and still put big bucks in our bosses pockets. Now, lets talk about the poor guys that provide made-to-order precursors, play a role in R&D and never reap the benefit. >>>Cost of Medicines >> >>Ever heard of this little expensive and highly risky thing called R&D? ...risk is also declining with HTS and on-site specialties (e.g., crystallographers). >I'll assume at least some of us are in R&D and realize that drug >prices could be cut in half and still put big bucks in our bosses >pockets. Now, lets talk about the poor guys that provide >made-to-order precursors, play a role in R&D and never reap the >benefit. > Cost of Medicines > ".....We did a search of offshore chemical > synthesizers that supply the active ingredients found > in drugs approved by the FDA. As we have revealed in past > issues of Life Extension, a significant percentage of drugs > sold in the United States contain active ingredients made in other countries." Many offshore chemical companies manufacture pharmaceutical ingredients. Many of these companies are NOT approved by the FDA as suppliers to US pharmaceutical companies. I assume you are talking about approved companies. "......we obtained the actual price of active > ingredients used in some of the most popular drugs sold in America. > The chart below speaks for itself." > Celebrex 100 mg > Consumer price (100 tablets): $130.27 > Cost of general active ingredients: $0.60 > Percent markup: 21,712% " You state the cost of ingredients as the cost per 100 tablets in order to come up with your figure. If this is the case (0.6 cents per unit - I doubt it), then those bastards overseas have been raking us over the coals. After all, if they can sell it to us for $0.60, then it must cost them between one and two cents. $0.60 per capsule seems more like it. If you understand how business operates, you know that no organization can afford to stay in business and not make a realistic profit You paint a very simplistic view of this complicated picture. Beside the obvious costs of Research and Development, alluded to by Andrew White, there are many activities within a pharmaceutical company which must come together, before the tablets/capsules start rolling off of the presses. Add to that the many support activities, which are ongoing, you wind up with a comprehensive organization, consisting of many indiduals. Don't forget the distribution channels at the wholesale and retail levels. Each organization adds its cost of operation to the total picture. And yes, having that bottle of tablets on the pharmacy shelf conveys a cost, albeit an invisible one. Would you deny the workers at every level a good living? Would you deny the corporation a profit on top of its cost of operating? Or, would you suggest sending our jobs overseas to reduce cost? Hey, come to think of it, maybe some public sector jobs should be sent there as well. HankG >>Cost of Medicines I have looked at this question in some detail, and I must say that I'm no closer to a position one way or the other. On one hand, the high costs are a tremendous burden on individuals and the health care system and insurers. On the other hand, I'd hate to think what would happen if we killed the golden goose that funds research. Clearly a manufacturer selling substitute generic formulations for a fraction of the original manufactures price is not in a position to pour huge amounts of money into R&D. I don't know the answer, and could argue both positions. > Did you ever wonder how much it costs a drug company for the active > Ingredient in prescription medications? No, because it's irrelevant. Trying to compare the retail price of a drug with the wholesale cost of its raw materials is assinine. You might was well accuse software companies of ripping you off, since CD-ROMs cost only pennies to burn. >Did you ever wonder how much it costs a drug company for the >active Ingredient in prescription medications? Some people >think it must cost a lot Nope. The drug industry's products are much like those in the entertainment industry: the costs of developing a product (the "fixed costs") are high, while the costs of making new copies of the product (the "marginal costs") are low. This sort of product, when put in a market of consumers that have very widely ranging abilities or desires to pay for it, gives a very strong incentive to price discrimination. Setting a uniform price for goods may make your market too small or too low-margin to earn a profit. On the other hand, if you can charge differently based on expected ability to pay, you can make money all around. In this case, the American market represents the high-paying customers, who effectively cover the fixed costs, whereas the foreign markets, who pay less, still cover the lower marginal costs, so drug makers are able to profit from both kinds of market. But if you're a middle-class American consumer, the burden of paying for the drug falls largely on you. The other thing you tend to see in this kind of market is a strong push towards government-sponsored monopolies. (Without monopolies, competitors tend to discourage developing new products involving high fixed costs, and also tend to undercut price discrimination.) In the drug industry, that monopoly is granted in the form of patents; in the entertainment industry, it comes as copyright. In both cases, some degree of monopoly protection is a good thing (since it helps innovators recover their fixed costs, giving an incentive to create new products that otherwise would not exist). But it can also be taken too far, to the detriment of consumers. (And the producers have incentives to extend this monopoly power as far as they can.) Monopoly enforcement can be more of a problem, both for manufacturers and consumers, when consumers find ways around the price discrimination vendors have set up (such as by buying drugs abroad, or using P2P networks to get copies of movies or recorded music). Producers see an erosion of their markets; consumers see erosions of their freedoms as pressure is imposed to restore the pre-existing markets. Here are some things consumers who are suffering under the current drug market can do: -- Buy generic when you can. Generic drugs are those for which monopoly protection has expired, so they're much more competitively priced than patented drugs. And in the US, their preparation is also closely regulated, so you'll usually get a product that's indistinguishable from the brand name. -- Encourage your doctor to consider drugs that are already in the public domain (and can thus be generic) as well as new drugs. Doctors are subject to a lot of marketing for patented drugs (which patients also pay for when they buy those drugs), and older proven remedies may get short shrift as a result. While in many cases new drugs really are the best ones to use, often they have little or no real advantage for many patients over older remedies that are in the public domain. (Most drugs marketed before the mid-1980s are now in the public domain.) Moreover, many of these older drugs have a longer track record of studies showing their safety and effectiveness. And you'll often pay a lot less for them. If you can't afford the newer drugs, it's particularly important to consider alternatives. There's no point in getting a prescription for a new drug that gets rid of 90% of your problem if you can't afford to have it filled, when you could pay for a cheaper drug that takes care of 80% of the problem. -- Encourage your legislators to make and maintain reasonable patent laws. Often they only hear from industry lobbyists, who have an understandably one-sided agenda on the issue. (In related monopoly legislation, the entertainment industry has severely unbalanced copyright law in recent years, for instance.) Special sweetheart patent extensions, which occasionally make it through Congress, should be resisted, as should wholesale expansion of patent terms or powers. -- Encourage both government and drug companies to make special arrangements to provide drugs that are particularly crucial to patients who can't afford them at normal retail. If there's going to be price discrimination in the patented market, it can also be used for good purposes. If drugs go to the people who really couldn't get them any other way, at prices not much higher than the marginal costs, then everyone can benefit: more people get the treatment they need, and the drug companies still make money. John Mark Ockerbloom > >Did you ever wonder how much it costs a drug company for the > >active Ingredient in prescription medications? Some people [quoted text clipped - 8 lines] > very widely ranging abilities or desires to pay for it, > gives a very strong incentive to price discrimination. Which, according to economic models, provides the greatest societal value. > Setting a uniform price for goods may make your market too small or > too low-margin to earn a profit. On the other hand, if you can charge > differently based on expected ability to pay, willingness, not ability? > you can make money all around. > In this case, the American market represents the high-paying customers, How do you know this is true? You just suggested that price discrimination is an objective and now you take 50 or 60 percent of the world market for pharmaceuticals and call it a single market? Hardly evidence of effective price discrimination. Perhaps you'd like to revisit that comment. Is the US a single price market? > who > effectively cover the fixed costs, whereas the foreign markets, who > pay less, still cover the lower marginal costs, so drug makers are > able to profit from both kinds of market. Are you implying that all foreign markets pay less and equally less than all US markets? I would argue that this is not true at all. One of the largest "fixed" costs is the FDA. That is uniquely American. No question that there are regulatory agencies elsewhere but then again, once you have the FDA ok, licensure requirements are likely marginal in cost elsewhere. > But if you're a middle-class > American consumer, the burden of paying for the drug falls largely on you. If you are one of the 85% of US consumers with health/drug insurance, the cost of medications falls on your insurer. Are US insurers not equally as good negotiators as European governments? > The other thing you tend to see in this kind of market is > a strong push towards government-sponsored monopolies. [quoted text clipped - 8 lines] > too far, to the detriment of consumers. (And the producers have incentives > to extend this monopoly power as far as they can.) You should consider the actual patent life and the effective patent life arguments. The effective patent life is measured in months in the pharmaceutical industry. Competition is therapeutic based, not chemical based. The instability indices attest to this dynamic. The advantage of monopolistic competition (this is a bonafide economics term) in terms of market behavior is in its ability to support innovative competition while still maintaing a certain level of price competition. Considering that penicillin doesn't work a third of the time or more, it sure is nice to have macrolides and cephlasporins don't you think? > Monopoly > enforcement can be more of a problem, both for manufacturers and > consumers, when consumers find ways around the price discrimination You've confused some terms, here, I think. Your suggestion of "enforcement" of monopoly (this would be patent protection) and the "ways around price discrimination" (this would be arbitrage) are not interchangeable. For example, in the EU, parallel imports often are the mechanism by which distributors finese the price discrimination issue - but it is hardly a patent concern. > vendors have set up (such as by buying drugs abroad, or using P2P networks > to get copies of movies or recorded music). Producers see an erosion > of their markets; consumers see erosions of their freedoms as pressure > is imposed to restore the pre-existing markets. Your drug example is one of arbitrage, your music example is one of trademark/copyright infringement. These are not the same. > Here are some things consumers who are suffering under the > current drug market can do: [quoted text clipped - 4 lines] > their preparation is also closely regulated, so you'll > usually get a product that's indistinguishable from the brand name. Some have argued brand loyalty and quality but for the general case, this is an effective way of managing drug costs. It is unfortunate that this competitiveness in the US market is not better publicized. > -- Encourage your doctor to consider drugs that are already > in the public domain (and can thus be generic) as well > as new drugs. No drugs are "in the public domain" per se. The only drugs that cannot bve patented are ones derived from "plant" products - though there are some real technical issues here. > Doctors are subject to a lot of marketing for > patented drugs (which patients also pay for when they buy > those drugs), and older proven remedies may get short shrift > as a result. While in many cases new drugs really are the best > ones to use, often they have little or no real advantage for > many patients over older remedies that are in the public domain. What you describe here is what I was referring to earlier. The competition is not at the molecule level but at the therapeutic level. Your observation that some newer drugs provide only incremental benefits is a valid one. However, some of these benefits have more than incremental value in some patients. For example, there is an argument in support of diuretics rather than ACE inhibitors in the treatment of hypertension. The unfortunate thing is that control on diuretics alone is short lived. > (Most drugs marketed before the mid-1980s are now > in the public domain.) Moreover, many of these older drugs have > a longer track record of studies showing their safety and > effectiveness. And you'll often pay a lot less for them. And they also have serious side effects along with marginal efficacy. But, then again, the choice is left to the patient and doctor. > If you can't afford the newer drugs, it's particularly important > to consider alternatives. There's no point in getting a prescription > for a new drug that gets rid of 90% of your problem if you > can't afford to have it filled, when you could pay for a cheaper > drug that takes care of 80% of the problem. Or you can have your physician contact the manufacturer. According to the PMA, many companies have programs for low income (seniors?) to get the drugs they need at a cost they can afford. > -- Encourage your legislators to make and maintain reasonable > patent laws. Often they only hear from industry lobbyists, who have > an understandably one-sided agenda on the issue. There is no rreason why patent laws should be tailored to specific industries. Considering the length of time a drug spends in development and not on the market, I don't think patent protection is a concern for consumers. > (In related monopoly > legislation, the entertainment industry has severely unbalanced copyright > law in recent years, for instance.) Special sweetheart patent > extensions, which occasionally make it through Congress, should > be resisted, as should wholesale expansion of patent terms or powers. patents are an effective public policy tool. Two examples: In an effort to promote the User Fee Act, Congress allowed patent extension of regulatory delays. In order to promote research in diseases with small economic value, the Congress implemented the Orphan Drug Act. In an effort to promote research of adult drugs for use in kids, the Congress provided for patent extensions for pediatric reesearch. > -- Encourage both government and drug companies to make special > arrangements to provide drugs that are particularly crucial [quoted text clipped - 5 lines] > people get the treatment they need, and the drug companies > still make money. This is an interesting comment. I remember a year or three ago companies were being challenged to provide South Africa with low cost HIV drugs. In response, a number of these companies priced these drugs at manufacturers cost. Rather than applauding this effort, the response from Sidney Wolf at Public Citizen was that they were still too expensive and if they could afford to sell them so cheap in Africa they should sell them at theat price in the US, too. John - drug development and computer science had a lot less in common than you might think. js >If you are one of the 85% of US consumers with health/drug insurance, >the cost >of medications falls on your insurer. Are US insurers not equally as >good negotiators as European governments? It has nothing to do with negotiating ability. In most Euro areas (and Canada) the governments don't negotiate prices. They SET them. The governments are what the econ-types call monopsonists, or monopolistic buyers for ease of understanding. In Canada, for instance, the government sometimes doesn't even tell pharm companies what they can charge for a new med until a few months AFTER it is out. Thus, pharm companies, if they guess wrong on the formula, have to give back "overcharges". Don't know of a US Insurer that can do either. >You should consider the actual patent life and the effective patent >life arguments. The effective patent life is measured in months in [quoted text clipped - 6 lines] >time or more, it sure is nice to have macrolides and cephlasporins >don't you think? And there are any number of other cases where first-in-class meds get supplanted by follow ons that have been tweaked for different side effects or effects prfiles, ease of use, etc. See what is going to happen to Viagra, for instance, over the next few quarters. >What you describe here is what I was referring to earlier. The >competition is not at the molecule level but at the therapeutic level. [quoted text clipped - 4 lines] >treatment of hypertension. The unfortunate thing is that control on >diuretics alone is short lived. There are also many instances where medications of the same class just plain don't work the same at the individual level. For instance, it is well established that a person may not respond to one antidepressant (say Prozac) but will for a different member of the same class (say Zoloft). Many other kinds and types of medications have been shown to work in the same strange way. Personally, I am beginning to think that "Me-too" drug may not be a viable discussion point any more. > >If you are one of the 85% of US consumers with health/drug insurance, > >the cost [quoted text clipped - 3 lines] > It has nothing to do with negotiating ability. In most Euro areas (and > Canada) the governments don't negotiate prices. They SET them. No, they do not - they negotiate reimbursement status and listing. France is a very extreme case. Germany has fairly open pricing. The UK has free pricing but limits "profitability" and uses technology assessment to priovide recommendations to NHS. Italy sets maximum prices for inpatient drugs and limits reimbursement for outpatient drugs. > The governments > are what the econ-types call monopsonists, or monopolistic buyers for ease of > understanding. The health systems which may or may not be government run (for example, germany is an exception) are large buyers. As such, they control the shape of the demand function and can influence price. The term monopsonist refers to the control of the demand function whereas the term monopolist refers to control of the supply function. > In Canada, for instance, the government sometimes doesn't even tell pharm > companies what they can charge for a new med until a few months AFTER it is > out. Thus, pharm companies, if they guess wrong on the formula, have to give > back "overcharges". Don't know of a US Insurer that can do either. The Canadian government does not control pharmaceutical prices in Canada directly - it is done indirectly through the PMPRB and administered at the province level and it is done under the guise of a provincial formulary system. US insurers are no different than any other large purchaser - and why should they be? Medicaid gets rebates based on a reference pricing scheme. > >You should consider the actual patent life and the effective patent > >life arguments. The effective patent life is measured in months in [quoted text clipped - 11 lines] > effects prfiles, ease of use, etc. See what is going to happen to Viagra, for > instance, over the next few quarters. I wouldn't know about that. The effect is therapeutic not chemical competition. This is a good thing. > >What you describe here is what I was referring to earlier. The > >competition is not at the molecule level but at the therapeutic level. [quoted text clipped - 4 lines] > >treatment of hypertension. The unfortunate thing is that control on > >diuretics alone is short lived. > There are also many instances where medications of the same class just > plain don't work the same at the individual level. For instance, it is well [quoted text clipped - 3 lines] > way. Personally, I am beginning to think that "Me-too" drug may not be a > viable discussion point any more. Chemical, mechanistic, target, or market definitions are useful inexplaining competition. I think, in general, we are in agreement. I would recommend, though, making an effort to go beyond the NHS sound bite and investigate pricing at the country/payer level more closely. If you find differences between how large purchasers act based on geography, let me know. So far, in my experience, they don't. They use the same approaches, just that they have different constituencies to whom they answer. No one pays more than they need to. js Governments get discounts on full retail pricing including the America VA system and so do private insurance carriers. The person who gets shafted is the poor consumer without any healthcare insurance. He can be charged almost anything as he has no cost basis to know how much markup he is paying. They say only in America and South Africa are people not provided health care as part of the national health policy. > Governments get discounts on full retail pricing including the America VA > system and so do private insurance carriers. The person who gets shafted is [quoted text clipped - 3 lines] > They say only in America and South Africa are people not provided health > care as part of the national health policy. And what do "they" suggest as a remedy? > Governments get discounts on full retail pricing including the America VA > system and so do private insurance carriers. The person who gets shafted is > the poor consumer without any healthcare insurance. He can be charged almost > anything as he has no cost basis to know how much markup he is paying. Do you know what it costs Nabisco to make a box of Ritz crackers? Do you know what it costs Texaco to produce a gallon of gas? How much SHOULD a day in the hospital cost? How much SHOULD a bottle of antihypertensive pills cost? The point made - and the point that is still valid - large purchasers have significant opportunities to negotiate favorable terms. This is an economics thing - not a national thing. js > They say only in America and South Africa are people not provided health > care as part of the national health policy. I don't know who "they" are, but the U.S. has one of the strongest healthcare systems in the world for a reason. Could it be at least in part because our system isn't socialized? Of course. A socialized system in the U.S. would most likely resemble the V.A. system, Medicaid, or Medicare. It probably would be *very* restrictive in terms of a drug formulary (if one was provided at all), there would be rationing of services and long waits for many surgeries and tests (with no outlet, unlike the situation in Canada where people can cross the border and receive care in the U.S. rather than wait for the Canadian system to take care of them), along with other pitfalls. 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