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Posted: Mon Jul 20, 2009 8:06 pm
by TheCatt
People will always find ways around rules.
Let's say there are two drugs: G and P. P is an expensive, patent protected version of a drug, while G is the cheaper, generic form of the same.
P costs $150 per month. G costs $50 per month. The average copay for P is $50, and the average copay for G is $10. Since the manufacturing costs of the drugs is negligible, most of the costs are to cover R&D, marketing, and other costs. Thus, the most of the $150 is profit.
Since P costs 5x what G costs to the consumer (despite only costing 3x what it costs in reality), the manufacturer of P creates a rebate program where consumers can automatically have a portion of the copay rebated, instantly at the time of purchase.
Say P's make sets the rebate at $40. They charge $150 for the drug, the consumer pays $50, of which, $40 is instantly rebated. Thus, the consumer is paying $10. For the same price as the generic, which would people choose? The patenty one.
So instead of making $150 per prescription, they make $110, but they capture a much, much larger percentage of the market.
Insurance still pays $100 on P and $40 on G. If P's market share goes up, GUESS WHO PAYS? Everyone. Either through higher premiums, or higher prices for those without insurance.
While I applaud MA for being the only state to outlaw the practice, IT WOULDN'T EVEN BE NECESSARY TO TAKE ACTION IN A TRUE MARKET ENVIRONMENT.
Posted: Mon Jul 20, 2009 8:34 pm
by GORDON
All this means is that if Obama gets his health care plan passed, the next private industry to get seized is the drug manufacturers.
Posted: Mon Jul 20, 2009 10:03 pm
by thibodeaux
What kills me are the people claiming that government-run health care will reduce costs.
What planet are these people from?
Posted: Mon Jul 20, 2009 11:29 pm
by Mommy Dearest
TheCatt wrote:People will always find ways around rules.
Let's say there are two drugs: G and P. P is an expensive, patent protected version of a drug, while G is the cheaper, generic form of the same.
P costs $150 per month. G costs $50 per month. The average copay for P is $50, and the average copay for G is $10. Since the manufacturing costs of the drugs is negligible, most of the costs are to cover R&D, marketing, and other costs. Thus, the most of the $150 is profit.
Since P costs 5x what G costs to the consumer (despite only costing 3x what it costs in reality), the manufacturer of P creates a rebate program where consumers can automatically have a portion of the copay rebated, instantly at the time of purchase.
Say P's make sets the rebate at $40. They charge $150 for the drug, the consumer pays $50, of which, $40 is instantly rebated. Thus, the consumer is paying $10. For the same price as the generic, which would people choose? The patenty one.
So instead of making $150 per prescription, they make $110, but they capture a much, much larger percentage of the market.
Insurance still pays $100 on P and $40 on G. If P's market share goes up, GUESS WHO PAYS? Everyone. Either through higher premiums, or higher prices for those without insurance.
While I applaud MA for being the only state to outlaw the practice, IT WOULDN'T EVEN BE NECESSARY TO TAKE ACTION IN A TRUE MARKET ENVIRONMENT.
Not sure where you are coming from when you say r and d is negligible and the 150 is mostly profit. I feel it is the largest part of the cost of the drug. think of the r and d for all of the drugs that do not make it. imo
Posted: Mon Jul 20, 2009 11:38 pm
by TPRJones
Plus the costs of getting the FDA approval is not minor, either.
I wouldn't be surprised to find their final bottom-line profits are indeed hyper-inflated. But the costs are huge, too.
Edited By TPRJones on 1248147568
Posted: Tue Jul 21, 2009 8:56 am
by TheCatt
The R&D etc are sunk costs with respect to the cost of production. Thus, from the perspective of marginal cost, marginal revenue, and marginal profit; The $150 is mostly profit.
That's where I'm getting it from.
Also - I guess instead of P above, I meant B, meaning Brand-name drug, after patent expiration (since the generic drug is also being sold).
Posted: Tue Jul 21, 2009 10:26 am
by TPRJones
TheCatt wrote:The $150 is mostly profit.
Well, yes, from a financial standpoint that is correct. But it's misleading in that if they don't charge high prices to recoupe their R&D costs, they won't be able to do more R&D and make more drugs.
New medicine is expensive because it is expensive to discover, not expensive to produce. If people lose sight of that and start harshly regulating those prices we won't have more new medicines.
Posted: Tue Jul 21, 2009 10:36 am
by TheCatt
I'm not advocating the regulation of prices. I'm advocating a complete market environment for prices.
Posted: Tue Jul 21, 2009 10:50 am
by TPRJones
I know, but I don't see that happening anytime soon. You'd have to have a country based on liberty and freedom for that to happen, and there aren't any of those around anymroe.
Posted: Tue Jul 21, 2009 11:55 am
by TheCatt
Oh, and they had their years of patent protection to recoup costs.
And speaking of medication issues. Acid reducers cause more acid.
I can speak to that from experience. Twice I've let my prescription lapse, and each time, within about 3 days, I've had the most awful stomach pain (and other symptoms). Each time the doctor thought it was a stomach virus, or other issue. I thought it was new ulcers or something. Now I realize it's just my body have issues with the meds.
Edited By TheCatt on 1248191921
Posted: Tue Jul 21, 2009 12:58 pm
by Malcolm
I get the distinct feeling the drug companies have just stopped trying.
To quote Chris Rock, "You know the last thing medicine cured? Polio. You know how fucking long ago that was?"
Posted: Tue Jul 21, 2009 2:01 pm
by GORDON
Know how else I know it would fail? Because so many democrats seem to be rabidly, angrily in favor of it.
I need to stop reading FARK threads.
Posted: Tue Jul 21, 2009 2:58 pm
by TPRJones
Maybe it'll fail so badly it'll take the rest of the bloated buracracy with it.
I know, not likely, but a guy can dream, can't he?
Posted: Tue Jul 21, 2009 3:58 pm
by TheCatt
Malcolm wrote:I get the distinct feeling the drug companies have just stopped trying.
To quote Chris Rock, "You know the last thing medicine cured? Polio. You know how fucking long ago that was?"
To be fair, why would a pharma company want to cure anything?
Posted: Wed Jul 22, 2009 7:39 pm
by Vince
Malcolm wrote:I get the distinct feeling the drug companies have just stopped trying.
To quote Chris Rock, "You know the last thing medicine cured? Polio. You know how fucking long ago that was?"
Chris Rock is a product of modern education. They didn't cure polio, they mad a vaccine for it.
And mumps and even chiken pox now.
Really, all the major viral killers have a vaccine now except HIV which is such a moving target I don't know if we'll ever have a vaccine for it.
Hell they have the vaccine for the virus that can cause ovarian cancer recently.
So Chris Rock's a moron (I know that's a shock)
Posted: Wed Jul 22, 2009 7:43 pm
by GORDON
That's a good point. Vaccines keep paying off forever... the goal is to get a dose to every human in the world, and continue on with every human yet to be born. Good market segment: everyone.
Posted: Wed Jul 22, 2009 9:45 pm
by TPRJones
GORDON wrote:That's a good point. Vaccines keep paying off forever... the goal is to get a dose to every human in the world, and continue on with every human yet to be born. Good market segment: everyone.
Not exactly. The goal is to dose everyone that could possibly get it, and after a generation or two passes the disease is completely gone and you can stop dosing.
Still plenty of sales there, though.
Posted: Wed Jul 22, 2009 10:04 pm
by TheCatt
TPRJones wrote:GORDON wrote:That's a good point. Vaccines keep paying off forever... the goal is to get a dose to every human in the world, and continue on with every human yet to be born. Good market segment: everyone.
Not exactly. The goal is to dose everyone that could possibly get it, and after a generation or two passes the disease is completely gone and you can stop dosing.
Still plenty of sales there, though.
Well, that depends on how the disease originates. Polio has been mostly wiped out, and no longer needs vaccination. However, there's plenty of disease that require vaccination anyway cuz they're still contractible. Just ask any 0-3 year old.
Posted: Wed Jul 22, 2009 11:38 pm
by Malcolm
The ideal situation would be the gov't-mandated medication like in "Equilibrium." Fucking gold mine.