Obama takes on healthcare

[bascule]

I wasn't expecting this so soon, but:

 

http://www.cnn.com/2009/POLITICS/03/05/health.care.summit/index.html?eref=rss_topstories

 

Among other things, Obama is seeking to set aside $634 billion in a health-care reserve fund over the next 10 years to help move the country closer to the goal of universal coverage.

 

Very interested to see where this is going... I certainly support a move towards a universal healthcare system and have thought of America as somewhat backwards in that respect.

[ecoli]

I wasn't expecting this so soon, but:

 

http://www.cnn.com/2009/POLITICS/03/05/health.care.summit/index.html?eref=rss_topstories

 

 

 

Very interested to see where this is going... I certainly support a move towards a universal healthcare system and have thought of America as somewhat backwards in that respect.

I don't want to turn this into a debate over universal health coverage (a system that I don't particularly like).

 

I want to know how Obama is going to pay for this one. The entitlement budget is already huge and growing and now he wants to make even more redistributions? It doesn't bode well methinks.

[bascule]

I want to know how Obama is going to pay for this one.

 

One approach is to levy more payroll tax in exchange for providing healthcare coverage.

[Pangloss]

Well actually the proposal is that healthcare would be paid for specifically by the tax increase realized by cutting the charitable donations exemption. Unfortunately according to George Stephanapoulos at ABC News that measure is D.O.A. due to lack of support amongst Democrats who feel that it would unfairly hurt charities. Obama says he's going to fight for it, though.

[iNow]

You all seem to be missing the fact that he and his administration have been working already to decrease costs. As I understand it, we pay about two to three times more as countries with fully realized "health care for all citizens" systems, and yet we do it two or three times more inefficiently. I was watching CSPAN last night and the comment was made by one of our representatives (sorry, can't recall the name, was tired) that (to paraphrase), "although we'd be spending, we'd also be saving over a trillion dollars, so arguments must weigh this before simply resting on "Oh noes! we'd have to spend more!" to implement this."

[Pangloss]

I don't know that we're so much missing it as wondering whether or not that can actually happen. I was encouraged by the healthcare summit the other day where he had people from all the different interests and industries present, but the insurance industry is the one of the most powerful lobbies there is, and they're not going to go down easy.

[ParanoiA]

If they want to lower costs, why not start by stopping the monopoly american pharmaceuticals enjoy over the american people? I haven't forgotten that piece of legislation - one of the most disgusting corporate-hugging back stabbing laws I've seen from our government. It goes straight to health and affordability - they are literally starving people of medications by keeping them from buying in other markets, providing no competition here in the states.

 

I think the most productive feature they could provide at the health reform summit would be a sniper.

[blike]

If they want to lower costs, why not start by stopping the monopoly american pharmaceuticals enjoy over the american people?

Pharma companies have to recoup R&D costs from someone. That isn't going to happen if people import drugs on the gray market.

[ParanoiA]

Pharma companies have to recoup R&D costs from someone. That isn't going to happen if people import drugs on the gray market.

 

Curious, how do the other markets in the country secure their R&D while competing internationally? And what, then, makes this market the exception?

 

I'm not a big fan of legislating markets for corporations. R&D is a part of many a business model for numerous markets in the US that must compete with imports, and I just find it hard to believe that Pharma can't do, successfully, what they do. Note I said, hard to believe though, not unbelievable. I'm ignorant as to what makes this particular arrangement unworkable without using laws to keep us from buying outside the country.

[iNow]

Pharma companies have to recoup R&D costs from someone. That isn't going to happen if people import drugs on the gray market.

 

Agreed, but they're also spending twice as much on marketing than on R&D, so that sort of takes the wind out of the sails on that particular argument.

 

 

http://medicine.plosjournals.org/perlserv/?request=get-document&doi=10.1371/journal.pmed.0050001

From this new estimate, it appears that pharmaceutical companies spend almost twice as much on promotion as they do on R&D. These numbers clearly show how promotion predominates over R&D in the pharmaceutical industry, contrary to the industry's claim. While the amount spent on promotion is not in itself a confirmation of Kefauver's depiction of the pharmaceutical industry, it confirms the public image of a marketing-driven industry and provides an important argument to petition in favor of transforming the workings of the industry in the direction of more research and less promotion.

 

 

Also, as you can see by this figure, across multiple pharma companies, R&D is never more than ~17% of sales.

 

[iNow]

Here's some more data:

 

http://dcc2.bumc.bu.edu/hs/sager/pdfs/020402/Pharmaceutical%20Marketing%20and%20Research%20Spending%20APHA%2021%20Oct%2001.pdf

Drug makers say they have to charge high prices to earn high profits to finance research, or else we’ll all die.

 

In fact, the industry’s widely-reported high profits don’t pay for research. They are what drug makers retain

after

paying for research and all their other expenses.

 

 

 

 

 

Either way, to tie this back on topic, the point is that there are many areas for costs to go down, and the previous powerful lobbies of big pharma and their public perception are no reason to hold us back.

[blike]

Agreed, but they're also spending twice as much on marketing than on R&D, so that sort of takes the wind out of the sails on that particular argument.

 

http://medicine.plosjournals.org/perlserv/?request=get-document&doi=10.1371/journal.pmed.0050001

From this new estimate, it appears that pharmaceutical companies spend almost twice as much on promotion as they do on R&D. These numbers clearly show how promotion predominates over R&D in the pharmaceutical industry, contrary to the industry's claim. While the amount spent on promotion is not in itself a confirmation of Kefauver's depiction of the pharmaceutical industry, it confirms the public image of a marketing-driven industry and provides an important argument to petition in favor of transforming the workings of the industry in the direction of more research and less promotion.

Good paper and good points. However, one can't make the assumption that a dollar saved by cutting promotions translates to a dollar that could be shifted to consumer savings or R&D. In other words, promotions isn't necessarily an expendable part of the process where dollars can simply be trimmed off and transferred to other places. It's an investment, just like R&D. Obviously if big pharma could increase their profits by trimming off promotional money they would have done it a long time ago. They've determined that a large promotional budget is just as essential to profitability as R&D. Once a drug gets to the market, it requires a huge amount of money to convince physicians and patients that the new expensive drug is better than the old cheap drug.

 

Also, as you can see by this figure, across multiple pharma companies, R&D is never more than ~17% of sales.

 

With the exception of the telecommunications industry since the late 1990s, that percentage is higher than almost any other industry (according to this paper).

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Consecutive posts merged

Either way, to tie this back on topic, the point is that there are many areas for costs to go down, and the previous powerful lobbies of big pharma and their public perception are no reason to hold us back.

I agree that there are many areas for costs to go down. I just don't think that the government being involved in any way with the financial workings of a private company is the way to do it.

[ParanoiA]

I agree that there are many areas for costs to go down. I just don't think that the government being involved in any way with the financial workings of a private company is the way to do it.

 

Isn't that what is happening when the government writes laws to keep us from shopping outside of the country?

 

I guess I'm more interested in the potential cause and effect of removing such laws and forcing Big Pharma to compete like everyone else. Their business model will have to adjust to gain the efficiency to continue to compete, like any other industry. So, will that then cause more problems than it solves? Will total R&D by the industry drop such that quality and breakthrough research suffers?

[Pangloss]

BTW, a 16% profit margin is a whopper for a Fortune 500-class company. An absolute whopper. If I'm not mistaken, only insurance and, recently, the oil companies do better.

[blike]

BTW, a 16% profit margin is a whopper for a Fortune 500-class company. An absolute whopper. If I'm not mistaken, only insurance and, recently, the oil companies do better.

Indeed. It's 2-3x the average.

[bascule]

If they want to lower costs, why not start by stopping the monopoly american pharmaceuticals enjoy over the american people?

 

That's a very good question. The 2003 Prescription Drug Bill has boosted Medicare expenses by $100 billion per year. This bill requires Medicare pay retail price for drugs, as opposed to negotiating with pharmaceuticals for bulk discounts. This is the reason drugs from Canadian pharmacies are so much cheaper than the ones available in America.

 

I hope the Democrats seek to undo this terrible piece of legislation soon.

[ecoli]

That's a very good question. The 2003 Prescription Drug Bill has boosted Medicare expenses by $100 billion per year. This bill requires Medicare pay retail price for drugs, as opposed to negotiating with pharmaceuticals for bulk discounts.

 

So they don't realize that negotiating for prices helps determine retail prices?

[bascule]

So they don't realize that negotiating for prices helps determine retail prices?

 

I'm not sure what you're asking. The present arrangement precludes Medicare from buying drugs directly from the pharmaceutical companies, allowing them to negotiate volume pricing. Instead the drugs are first distributed to pharmacies, who charge retail price and then bill the government.

 

In the end Medicare recipients get their drugs from the government. I don't see how Medicare negotiating a volume discount affects the market rate. People are either on Medicare or they aren't, and when they are they're going to get their drugs from the government as long as they're eligible. The only difference is how much the government is able to acquire those drugs for in the first place.

[john5746]

Once a drug gets to the market, it requires a huge amount of money to convince physicians and patients that the new expensive drug is better than the old cheap drug.

 

Sometimes because it isn't better - at least for most people.

[Pangloss]

What exactly is a volume discount? Does it have to reflect an actual, logistically-realizable deduction, or can it simply be a marketing ploy and still have validity both for end user and manufacturer?

[ecoli]

I'm not sure what you're asking. The present arrangement precludes Medicare from buying drugs directly from the pharmaceutical companies, allowing them to negotiate volume pricing. Instead the drugs are first distributed to pharmacies, who charge retail price and then bill the government.

 

In the end Medicare recipients get their drugs from the government. I don't see how Medicare negotiating a volume discount affects the market rate. People are either on Medicare or they aren't, and when they are they're going to get their drugs from the government as long as they're eligible. The only difference is how much the government is able to acquire those drugs for in the first place.

sorry for not being clear.. i agree with you here. I'm thinking of Medicare like a pharm. distributor. It makes no sense for medicare to being buying in wholesale quantities for retail prices. The market process shouldn't work this way. (I'm sure it's a result of big pharm in govt.)

[bascule]

The market process shouldn't work this way. (I'm sure it's a result of big pharm in govt.)

 

Michael Moore's movie Sicko blames Billy Tauzin, who was offered some $2.5 million to lobby for it [source], and departed Congress to become CEO of the Pharmaceutical Research and Manufacturers of America. I'll let you be the judge on that one... Michael Moore reports, you decide.