Map of life expectancy at birth from Global Education Project.

Thursday, August 25, 2016

Have I ever mentioned that drug companies are evil?

They aren't really of course -- corporations aren't people nor are they moral agents. But human beings do act on their behalf. With price gouging by pharmaceutical manufacturers all of a sudden in the news (despite it has been going on forever), some of our friends from Hahvahd, aka World's Greatest University, explain some of the ins and outs of drug pricing wonkery (and wankery).

Some of the main points are:

  • The U.S. grants long periods of monopoly over new drugs, and let's companies use various loopholes and fancy tricks to extend their monopolies.
  • Even when they lose legal monopolies, they often have practical monopolies for various structural reasons in the industry. The simplest is that if you are in a competitive market for generic drugs, there isn't much profit there in many cases, so you don't get a lot of competition.
  • Medicare is not allowed to negotiate drug prices, and drugs can't be imported, even though they're cheaper everywhere else in the world.
The companies claim they need to haul in the big bucks to pay for R&D, but that's a total crock. They conclude:

High drug prices are the result of the approach the United States has taken to granting government-protected monopolies to drug manufacturers, combined with coverage requirements imposed on government-funded drug benefits. The most realistic short-term strategies to address high prices include enforcing more stringent requirements for the award and extension of exclusivity rights; enhancing competition by ensuring timely generic drug availability; providing greater opportunities for meaningful price negotiation by governmental payers; generating more evidence about comparative cost-effectiveness of therapeutic alternatives; and more effectively educating patients, prescribers, payers, and policy makers about these choices.
The problem is, of course, that the companies own congress, so none of this is going to happen.

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