The joys of voting visit medicare

[Forbidden Donut]

I think these articles speak well for themselves.

http://www.suntimes.com/output/novak/cst-edt-novak27.html
http://www.washingtonpost.com/wp-dyn/articles/A14900-2003Nov25.html

 

[Natoma]

As much as I dislike the Republican policies, I have to say that this is probably the same thing democrats used to do when they controlled the house and the senate for four decades. I wouldn't be surprised.

However, the only thing that gets me going is the fact that this bill is nothing more than an election year front. The benefits don't take effect until 2006, they say it'll cost $400 Billion but it'll probably end up being far FAR more expensive, the generous payouts to HMOs at taxpayer's expense is too gross, and the fact that if you're on medicare you don't get prescription drugs unless you switch to a private HMO is frankly giving no choice whatsoever to seniors. Is it any wonder that seniors are leaving the AARP and protesting up a storm? If anything, this may just end up losing Bush the senior vote given the rising swell of anger at this program.

Sigh. At least $400 billion for my generation to pay off......... I'm certainly looking forward to the next 20 years once 75 million baby boomers retire and start jacking up my taxes in order to maintain their retirement benefits. The never ending cycle.

 

[DemoCoder]

What do you suggest Natoma? Do you think it is possible to provide a prescription benefits plan for less than $400 billion?

I don't understand your logic. On the one hand, you attack Republicans for trying to privatize the system and influence seniors to switch to private plans and HMOs, on the other hand, you bitch about the fact that your taxes are going to continue to go up in the future as the size of the Social Security ponzi scheme grows.

Are you saying you prefer to phase out SS and switch to forced private savings accounts, or are you saying you want the government to be the only provider of retirement benefits, and that you expect this is going to be cheaper than $400 billion?

Or are you just trying to find some fault with Republicans and if Clintons and the Democrats had passed this bill, you'd be praising it to high heaven, especially since the tactic used by the bill is similar to what Hillary was proposing back in '93

 

[Sxotty]

Umm did youguys know that part of the bill requires that the government not be allowed to bargain for drug prices? Instead they will just have to pay whatever outrageous prices the drug co.'s charge, and that alone makes this bill a terrible piece of legislation.

 

[Natoma]

Umm did youguys know that part of the bill requires that the government not be allowed to bargain for drug prices? Instead they will just have to pay whatever outrageous prices the drug co.'s charge, and that alone makes this bill a terrible piece of legislation.

Yep.

 

[Natoma]

What do you suggest Natoma? Do you think it is possible to provide a prescription benefits plan for less than $400 billion?

It's not only the fact that it's $400 Billion DC. It's the fact that for the majority of seniors, it doesn't actually give them prescription drugs. Once your drug expenditure rises above $2,250, there's a $2,000 gap until your expenditures hit $5,100. Many seniors today can easily spend $200 a month on prescription drugs, and if/when the next "big drug" comes out, that can easily double in price. And yet, no coverage whatsoever.

So the point is, if your average senior doesn't actually get any benefit, where is this money going? It's going in large part as subsidies to HMOs.

But that's not even the point. Once seniors and baby boomers at large realize what's happened, you don't think there will be tremendous political pressure to close that gap permanently? What does that do? Quadruple the price (Businessweek, December 01, 2003 issue) to at least $2 Trillion in the second decade of enactment, i.e. when pretty much all of the boomers have retired. You want to hedge your bets that Congress will have the backbone to say no?

I don't understand your logic. On the one hand, you attack Republicans for trying to privatize the system and influence seniors to switch to private plans and HMOs, on the other hand, you bitch about the fact that your taxes are going to continue to go up in the future as the size of the Social Security ponzi scheme grows.

Are you saying you prefer to phase out SS and switch to forced private savings accounts, or are you saying you want the government to be the only provider of retirement benefits, and that you expect this is going to be cheaper than $400 billion?

Or are you just trying to find some fault with Republicans and if Clintons and the Democrats had passed this bill, you'd be praising it to high heaven, especially since the tactic used by the bill is similar to what Hillary was proposing back in '93

I'm not attacking the Republicans. I'm attacking the supporters of this bill that is outlandishly expensive without actually providing anything of note to the vast majority of seniors. Republicans, Democrats, AARP leadership alike.

This bill is killing my generation and doing nothing for the current generation. And as I said, when they find out, the political pressure to close that gap will be enormous, at which point, bye bye $400 Billion. Hello trillions.

Yes, I do prefer to phase out SS. But I realize that this will not occur politically within the next 20 years. However, it is possible for my generation to bite the bullet and end SS, if we take the steps now while we're young and can do something about it. Boomers and current retirees will not be able to withstand all of the cuts to the program, but with adequate time and preparation, my generation can. But of course no one is thinking that far. If you even try and speak about ending SS, you'll be politically lynched.

 

[DemoCoder]

I still don't understand what you're trying to say. Are you saying you want a bill with no coverage gap at all (and thus, way way more expensive), or are you saying you want no bill at all?

This bill is a compromise bill. It's part coverage. Full coverage would be more expensive, no coverage is what we already had. It's the only thing that could be passed at this point. Would you rather they passed full coverage today, given our current budget crisis?

For a senior that is currently paying $2500 out of pocket, having that reduced to just $250 out of pocket is much better wouldn't you agree? All this gap does is simply set a $2000 co-pay for those who are over $2250, but below $5000 (if you have more than $5000 a year in drugs, odds are, you aren't working, and are in fact disabled)

My mom pops a cocktail of medications today. A few of them are vital (nitro, blood thinner, fluid pills), many of them aren't life threatening (zantac, cholestorol lowering drugs, estrogen, etc)

The $2250 coverage would coverage virtually ALL of her "life saving medications" and she's only have to pay out of pocket for drugs that reduce pain, acid reflex, or post-menopausal symptoms.


You seem to simultaneously be complaining that this bill doesn't implement full coverage, but at the same time, complaining about the cost of future coverage. Sounds to me like you're just trying to find some reason to complain.

Now if you're of the opinion that the prescription drug benefit crisis is an urban legend manufactured by the AARP and Democrats over the years, trying to sell government health care, I'd agree.

See http://story.news.yahoo.com/news?tm...riptiondrugplanisabsurdandexpensiveboondoggle

68% of seniors pay less than $1000 a year for out of pocket drugs. Seems to me, a means-tested benefit would be better. Only poor and disabled would quality for "free" drugs.

 

[Natoma]

I'm saying that the bill should have been done correctly in the first place if it was going to be done at all. Here are a few tidbits:

1) This bill had two major provisions which were eliminated at the behest of the Pharmaceutical Industry. The first one was brought up by Sxotty, i.e. the provision that would have allowed Medicare to use its built-in bargaining power to reduce the prices of prescription drugs. Instead now, the Pharma Industry will be able to charge whatever it likes and Medicare will pay for it, at taxpayers expense.

The second provision was the reduction and potential removal of the limitations on re-imported drugs, such as those from Canada, which in most cases range from 50% to 90% cheaper than the same drugs purchased in this country. This would have forced drug companies to reduce their prices here at home, which along with Medicare's immense leverage in lowering prices, would keep the price of this program at $400 Billion with everyone covered at the least, and significantly less expensive at best with the current coverage plan.

However, both were removed. When one removes the ability of the market to dictate prices what happens? Artificially inflated prices. We call that monopoly power. The CU is estimating that a senior who spent $2,318 on prescription drugs this year will end up spending $2,911 under the new plan by 2007. And that doesn't even take into account the increased expenditures by taxpayers to make up the government co-pay.

2) I was incorrect regarding the average senior bill. It's much higher than I thought. I surmised $200 a month given current average Prescription Drug prices when it's actually $3,160, for a rough average estimate of $263 a month.

3) HMOs were given $12 Billion in subsidies to fund lower prices, at taxpayers expense rather than market forces, and do not have to take on the sickest of patients. Which means that per capita, HMOs will most likely end up with the healthiest patients, leaving Medicare with the most expensive ones, which will inevitably end up destroying the system because of spiraling costs which are not being accounted for today.

This in effect becomes a long term subsidy to the HMOs by taxpayers.

4) The estimated annual cost of the Medicare system by 1991 was $12 Billion in 1966. By 1991 the actual cost was $107 Billion in large part because some of the provisions set aside in Medicare to 'sunset', like many parts of the current $2 Trillion tax cuts package, were instead made permanent, which allowed the price to skyrocket. They also did not take into account people living far longer in the 90s than they were in the 40s, 50s, and 60s. In the coming century, life expectancy will no doubt increase dramatically with the coming of tailored cocktail drugs, DNA therapy, and other advances in medicine. And we haven't even spoken about nanotechnology which theoretically could stop the aging process all together by repairing our DNA at the molecular level and keeping us young. But that's a problem most likely for the 22nd century.

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Anyways, there were many things that were originally in this plan that were taken out, or not included in the first place. I've laid out just a couple that could have reduced the prices for not only you and me, but for people like your mother.

I do not like the idea of passing legislation for the simple fact of passing legislation. If you're going to create a benefit, do it right the first time. I am complaining about the fact that this bill does not implement full coverage because there were ways to do it as I laid out in #1 that could have cost no more than the current plan. And if you don't have full coverage, i.e. you have the current plan, it would have been significantly less expensive. Either way is far better than what we've got now.

 

[DemoCoder]

Well, you're not going to get your uber-nanotech drugs if you want to limit price discrimination by market. Drug importation restrictions exist for the same reason region coding exists on games and DVDs.

Don't you understand that drugs are like software? They are IP. That all of the costs are up front development, testing, and verification, and that the marginal cost of actually producing a pill tends to $0. The bio industry is a risky lottery system. Firms must invest huge sums of money up front to search for a new drug, then years and millions of dollars in testing, and if they are one of the LUCKY FEW they hit the jackpot with a winner. If they are the majority, they fail and lose all their money, like just about every AIDs vaccine bio-startup, for examine.

Why do entrepreneurs join this lottery? Because if they do find a winner, they get a guaranteed large return on investment for 20 years and the ability to set price on a hugely valuable product.


All this means that the correct pricing structure is not to price the drug equally for all markets. Let's say you allow "drug re-importation". Now, we know that producing a pill costs next to $0. What price will you set worldwide for this pill? (e.g. what will you export it for?)

Let's say, we set it to $1 per pill per Canadian market preference. Wonderful, Americans who were paying $2 per pill now pay $1 per pill. But what about the Chinese and Africans, who could have been paying 10cents per pill, but now must pay $1? You've just lost 100 million chinese customers who could have paid 10 cents, but you forced an equalized market price of $1 worldwide.

Oh, perhaps we should set the price to 10 cents you say to get those Chinese? Well, you got back the 100 million chinese, but those 10 million Americans who could have paid $2 are now paying 10 cents.

Fact is, Americans can afford to pay $10 to see a movie, and Chinese can afford to pay 10 RMB to see a movie, we have price discrimination, and both pay purchase power parity adjusted rates. But we impose region coding and copyright laws to prevent American movies sold in China from being re-imported at basically free prices.

The same goes for drugs. The high cost of drugs paid by Americans goes to "Big Evil Pharmaceutical" companies "Evil Profits" and Wall Street investors (including senior's 401ks), which, get plowed into R&D and FDA testing for the next generation drugs.

Unless you are willing to scrap the idea of privately funded biotech industrial, and just have the government fund all bio-drug research, you should get used to paying these costs, which are born by the users of the drugs for which they benefit, but spread to everyone through higher premiums.

Otherwise, if you eliminate the drug re-importation ban, I can predict the following: prices will not go down for Americans, they will go up for Canadians, Chinese, Africans, and Mexicans.

The idea that Medicare can "price negotiate" with the health industry is absurd. First of all, the very notion that the government can negotiate large contracts with drug suppliers is rife with corruption. All of the arguments for disallowing the government from investing SS trust funds in the public markets apply equally well to negotiating price contracts with suppliers. Would you guys have faith in Bush negotiating with HalliBurton? Then why whould you think Dean will negotiate fairly with Pfizer? I worked for 5 years for beltway area consulting firms. The government NEVER gets the best market prices, despite the size of the contracts they offer, PERIOD. Hasn't the entire open-bidding military industrial contracts over the last 50 years taught yout that?

Fact is, with drugs protected by patents, there is no negotiation room. There are not multiple suppliers. Pharmaceutical firms will simply set the price to be the profit maximizing one. Even if the government said "we won't cover your drug", the pharmaceuticals know that if people truly need a drug, they will bypass the government plan and pay out of pocket. Really, this negotiating idea is nonsense. Drugs aren't commodities. At best, the government could negotiate prices on generic brands.


If I spent $100 million on a new drug, I'd frankly want $1-5 billion return minimally (going expectation in VC market is 40 times ROI). Go ahead and support government efforts to destroy "big pharma" with silly policies that eliminate IP protection, and you'll either see increase costs for everyone, or a severe drop in investment in the bio industry.

complaining about the fact that this bill does not implement full coverage because there were ways to do it as I laid out in #1 that could have cost no more than the current plan.

Absolutely no proof for this whatsoever. Just idle speculation and optimism that the government could somehow reduce prices through volume barginining, something it has never ever done in it's entirely history of negotiating contracts. Infact, many economic studies have shown that the government is responsible for *increasing* costs in many industries, due to paying more than market price. Medicare is a classic example. After Medicare was enacted, costs sky-rocketed, instead of going down.


Boy, California is really doing well with those cheap energy contracts that Davis negotiated. Boy, those were far better than the contracts that industrial factories get when they negotiate with the suppliers! I have my doubts as to whether you can ever really negotiate a good contract when other people are paying (taxpayers) and when the penalty for a bad contract is just to raise taxes or borrowing. Government has never been able to control it's spending well by limiting what it buys and contracts for.

 

[Legion]

that was very informative Democoder. I am rather interested in seeing what those whom support socialized medicine think of this.


Speaking of R&D how does the America compare to countries with socialized medical systems? Does America lead the world in pharma development?

 

[Natoma]

Well, you're not going to get your uber-nanotech drugs if you want to limit price discrimination by market. Drug importation restrictions exist for the same reason region coding exists on games and DVDs.

All well and good if this were a relevant example. But the prices of games and DVDs in America and in Europe and Japan aren't 50% to 90% different on average. The main difference is that some games get released in some markets while other games do not, or they get edited for "certain content". DVDs are changed in content as well sometimes, but mostly for language purposes, NOT artificial pricing purposes. Also, we're talking about DVD content that has an average selling price of roughly $10 and gaming content that has an average selling price of roughly $25, and trying to compare that to people spending an average $260 a month? The average gamer buys roughly 5-10 games a year. Even if it's 10 games, that would be an average expenditure of $250 for one year, vs a $3100+ expenditure for the average senior. I don't know of any statistics on DVDs though.

On top of this, if prices suddenly skyrocketed for DVDs and Games, people would probably just stop buying them because they are what? Entertainment.

If prices suddenly skyrocket for prescription drugs, seniors can't stop buying them or those that use them could die. The motivation behind these expenditures is supremely different, as is the cost structure.

Your example here is highly erroneous.

Don't you understand that drugs are like software? They are IP. That all of the costs are up front development, testing, and verification, and that the marginal cost of actually producing a pill tends to $0. The bio industry is a risky lottery system. Firms must invest huge sums of money up front to search for a new drug, then years and millions of dollars in testing, and if they are one of the LUCKY FEW they hit the jackpot with a winner. If they are the majority, they fail and lose all their money, like just about every AIDs vaccine bio-startup, for examine.

Why do entrepreneurs join this lottery? Because if they do find a winner, they get a guaranteed large return on investment for 20 years and the ability to set price on a hugely valuable product.

Firstly, the system of biotech firms investing billions in the development, testing, and verification of drugs is changing dramatically due to heavy investment today in drugs that are tailored to the bio-chemistry of individuals rather than the bio-chemistry of a vast swath of individuals. This process will take another 15 to 20 years to complete, but it has already began seeing dividends in the form of more powerful prescription drugs such as those created specifically for a certain kind of Alzheimers that should be on the market in a couple of years. They are very inexpensive to fund, and directly attack specific ailments rather than try and tackle the whole thing head on.

Secondly, the system of entrepreneurship, risk, and reward, is intrinsic to every capitalist industry. You invest millions and/or billions in a product, and if it fails, you lose all your money. If it succeeds big, you're a winner. There's nothing dire or doom and gloom about that. Why should the Pharma Industry somehow be exempt from this process? It happens every day. What you don't see in most other industries is artificial price fixing more than what market forces would dictate the prices normally be. You see this happening in the RIAA and the Cable Industry. What's broken the back of the RIAA? Internet Piracy, not legitimate market forces. And unfortunately nothing has broken Cable yet because due to government regulation, they can't structurally compete with one another. So what do we get? Higher prices than we should have to pay under normal circumstances. You see tremendous competition in the DSL business, but because of the non-overlap in technologies, it does not affect the cable industry.

So anyways, I'm sorry if I'm not shedding a tear for the Pharma Industry as you seem to be.

All this means that the correct pricing structure is not to price the drug equally for all markets. Let's say you allow "drug re-importation". Now, we know that producing a pill costs next to $0. What price will you set worldwide for this pill? (e.g. what will you export it for?)

Let's say, we set it to $1 per pill per Canadian market preference. Wonderful, Americans who were paying $2 per pill now pay $1 per pill. But what about the Chinese and Africans, who could have been paying 10cents per pill, but now must pay $1? You've just lost 100 million chinese customers who could have paid 10 cents, but you forced an equalized market price of $1 worldwide.

Oh, perhaps we should set the price to 10 cents you say to get those Chinese? Well, you got back the 100 million chinese, but those 10 million Americans who could have paid $2 are now paying 10 cents.

First you're making the erroneous assumption that I believe the markets should be equally priced when I'm not. What I clearly stated is that the government should be allowed to bid for pricing contracts between the Pharmaceutical Industry companies in an attempt to lower the direct pricing given to seniors and footed by the taxpayers. And if a senior see's a prescription drug in Canada that costs $100 while the same drug here costs $200, they should not be legally penalized for importing that drug. Many seniors don't even bother to re-import drugs because they can afford to go down to their local drug store and buy them off the shelf. But many seniors are very poor and/or on fixed incomes and cannot afford such high prices. Yet the fact remains that they still need the medicine.

I have never stated that the price should be held artificially low and that the Pharma Industry shouldn't be able to set their prices accordingly. I have stated that removing the Government's ability to use their bidding power to get a better deal out of the Pharma Industry, as well as removing the individual user's ability to get cheaper drugs themselves, severely hampers the natural capitalistic forces inherent in our economic system and artificially inflates the prices for these drugs because there is absolutely no incentive for the Drug Companies to lower their prices. Medicare will have to pay whatever price the Pharma Industry sets for its drugs and cannot go anywhere else to try and find a better rate, and by proxy, millions of taxpayers and seniors are forced into that bottleneck as well.

That is not capitalism. It is a taxpayer funded monopoly.

Fact is, Americans can afford to pay $10 to see a movie, and Chinese can afford to pay 10 RMB to see a movie, we have price discrimination, and both pay purchase power parity adjusted rates. But we impose region coding and copyright laws to prevent American movies sold in China from being re-imported at basically free prices.

And the fact is that a movie is entertainment, i.e. not life enabling, as the same with your earlier DVD and game examples. On top of that, there are outlets if you truly want to see a movie for cheaper. Blockbuster Rental, VOD, and on multiple viewing, DVD or VHS. Do any o f these market outlets exist in the Drug Industry? No. You either pay the money for the drug or you get nothing.

The same goes for drugs. The high cost of drugs paid by Americans goes to "Big Evil Pharmaceutical" companies "Evil Profits" and Wall Street investors (including senior's 401ks), which, get plowed into R&D and FDA testing for the next generation drugs.

Unless you are willing to scrap the idea of privately funded biotech industrial, and just have the government fund all bio-drug research, you should get used to paying these costs, which are born by the users of the drugs for which they benefit, but spread to everyone through higher premiums.

Otherwise, if you eliminate the drug re-importation ban, I can predict the following: prices will not go down for Americans, they will go up for Canadians, Chinese, Africans, and Mexicans.

Actually that's untrue. The average profit margin against revenues of the Pharma Industry ranges between 15% and 20% year over year (18.5% for a solid figure), and has remained at that high level, even despite the downturn of the past 2-3 years. If you take it as a percentage against stockholder equity, that figure almost doubles to 34%, whereas the average company returns 3% on stockholder equity. While other industries have been flat, or seen negative growth, the Pharma Industry's profit margin has grown, and will continue to grow into the next decade as millions retire and begin paying for drugs. How do you suppose a single industry is able to keep it's profit margin so high despite economic downturns?

And btw, the average R&D expenditure in the Pharma Industry as a % of budget is 8%, after taking R&D tax credits into account. And guess what? The average Marketing expenditure is 25%. Gee, they're not hurting so badly are they? Where is all of this money going? Directly into corporate coffers. Price reductions would not kill the Pharma Industry. Instead of having an 18.5% profit margin, they'd have a 10% profit margin. Oh poo. I'm really feeling bad for them and their imminent demise.

The fact of the matter is that the Pharmaceutical Industry is and always will be a growth industry. People age. People get sick. The world population is graying as we all live longer and longer. Who gets the money to fix our ills? Take a guess. You're preaching doom and gloom for an industry that defies the trends of other industries, simply because of the nature of the industry itself. It doesn't work that way.

The idea that Medicare can "price negotiate" with the health industry is absurd. First of all, the very notion that the government can negotiate large contracts with drug suppliers is rife with corruption. All of the arguments for disallowing the government from investing SS trust funds in the public markets apply equally well to negotiating price contracts with suppliers. Would you guys have faith in Bush negotiating with HalliBurton? Then why whould you think Dean will negotiate fairly with Pfizer? I worked for 5 years for beltway area consulting firms. The government NEVER gets the best market prices, despite the size of the contracts they offer, PERIOD. Hasn't the entire open-bidding military industrial contracts over the last 50 years taught yout that?

First of all there is a difference between open-bidding military industrial contracts and drug contracts. Why? I can't go out and buy the latest and greatest $50 Billion fighter plane. The government has NO competition in that area, and neither does the military industrial complex.

There is a difference between an administration giving no bid contracts to select Oil companies or giving no bid contracts to select pharmaceutical companies, than going out to the market and saying, we've got millions of users here. Give us your best shot. You're trying to compare two fundamentally different market forces and that is completely erroneous because it leads to totally wrong conclusions given the basis of what the true nature of the current markets are.

Of course the government isn't going to get the best price on the market if they give out no bid contracts to Halliburton. What do you expect, Halliburton to crush their own profit margin? Now if the US had opened the oil bidding to companies around the world, you can bet that it would have gotten a FAR LOWER deal on those oil contracts that it currently has. That's basic economics. Come now.

Fact is, with drugs protected by patents, there is no negotiation room. There are not multiple suppliers. Pharmaceutical firms will simply set the price to be the profit maximizing one. Even if the government said "we won't cover your drug", the pharmaceuticals know that if people truly need a drug, they will bypass the government plan and pay out of pocket. Really, this negotiating idea is nonsense. Drugs aren't commodities. At best, the government could negotiate prices on generic brands.

Wrong. There are many different companies and brands all fighting for consumers and marketshare in many different aspects of the market.

Lipitor, Crestor, Lescol, Zocor, Welchol, Alticor, Advicor, and Pravachol are merely a few of the competitors in the cholesterol fighting business.

Prevacid, Nexium, Entocort, Propulsid, Axid, Protonix, and Aciphex are merely a few of the competitors in the acid reflux business.

You can find myriad competitors in each industry. I didn't even talk about erectile dysfunction. That has at least 10 competing drugs and companies in it.

The fact remains that drugs are indeed commodities, if the companies are forced to compete against one another to get a deal. Anything can be commoditized. If the government goes to TAP and says, "We don't like your prices for Prevacid, we're going to take the 50 million people on medicare and move them to your competitor Nexium," you don't think TAP would drop their prices?? This is basic capitalism.

If I spent $100 million on a new drug, I'd frankly want $1-5 billion return minimally (going expectation in VC market is 40 times ROI). Go ahead and support government efforts to destroy "big pharma" with silly policies that eliminate IP protection, and you'll either see increase costs for everyone, or a severe drop in investment in the bio industry.

As I stated earlier, R&D costs as a % of revenue is dwarfed by marketing costs, and even profit margin. You're boo-hooing the demise of "Big Pharma"? Please. They aren't going anywhere. You're just preaching blind industrial politics.

complaining about the fact that this bill does not implement full coverage because there were ways to do it as I laid out in #1 that could have cost no more than the current plan.

Absolutely no proof for this whatsoever. Just idle speculation and optimism that the government could somehow reduce prices through volume barginining, something it has never ever done in it's entirely history of negotiating contracts. Infact, many economic studies have shown that the government is responsible for *increasing* costs in many industries, due to paying more than market price. Medicare is a classic example. After Medicare was enacted, costs sky-rocketed, instead of going down.

As I've shown earlier, this is how to get things done in this market when done properly, which is what I've stated from the beginning is how this should have been done. The reason why Medicare costs, and I brought this up earlier, skyrocketed? Because many of the provisions that were originally set to sunset in Medicare were instead extended and made permanent. That is due to political spinelessness on the part of the politicians at the time, not due intrinsically to the government using its pricing power.

Boy, California is really doing well with those cheap energy contracts that Davis negotiated. Boy, those were far better than the contracts that industrial factories get when they negotiate with the suppliers! I have my doubts as to whether you can ever really negotiate a good contract when other people are paying (taxpayers) and when the penalty for a bad contract is just to raise taxes or borrowing. Government has never been able to control it's spending well by limiting what it buys and contracts for.

Tremendous difference Democoder. The energy contracts were negotiated with California at a time when there was an artificially created energy crisis in the summer of 2002 by Enron, Dynegy, Reliant, Mirant, and other firms. That was an artificially created Ponzi scheme, as you so like to put it. And guess what? They're being sued by the state of California for artificial price fixing, gouging, and fraud. You honestly think Pharma is going to try something like that with the US government, having the backing of 50-80 Million people over the next decade?

And the point remains, if the Government had the ability to bid the companies against one another, or repurchase drugs from other countries, and end users had the ability to repurchase drugs from other countries, Pharma wouldn't be able to pull something that grand off.

The Energy Crisis in California was a Criminal event, not the natural workings of the system, and it is being treated as such. Completely irrelevant to the current problem with the $400 Billion Medicare Bill.

 

[Natoma]

See http://story.news.yahoo.com/news?tm...riptiondrugplanisabsurdandexpensiveboondoggle

Can you edit it to here instead? It's pushing the scroll bars further than they need to go. Thanks DC.

 

[DemoCoder]

All well and good if this were a relevant example.

The example is relevant, and the example is China vs America, not America vs Japan.

Firstly, the system of biotech firms investing billions in the development, testing, and verification of drugs is changing dramatically due to heavy investment today in drugs that are tailored to the bio-chemistry of individuals rather than the bio-chemistry of a vast swath of individuals.

Please Natoma, we are talking about today, not a sci-fi future. When someone invents a machine that can scan your DNA and conccst a custom drug for you on your desktop, we can revisit this conversation. The bio-tech industry today is still driven by compounds directed at a large number of individuals that go through animal and human testing trials.

And you thought my region coding price discrimination example wasn't relevant? Sheesh.

Secondly, the system of entrepreneurship, risk, and reward, is intrinsic to every capitalist industry. You invest millions and/or billions in a product, and if it fails, you lose all your money. If it succeeds big, you're a winner. There's nothing dire or doom and gloom about that. Why should the Pharma Industry somehow be exempt from this process?

Who said they should be exempt? But if you take away intellectual property protection for drugs that are developed, they will be NO REWARD, since the second your drug is discovered, competitors will produce generic brands. If you get rid of drug-reimportation, then pharmaceuticals will just price drugs according to the US market, Canadians, Chinese and Africans will suffer.

Higher prices than we should have to pay under normal circumstances.

The price of a good is what someone decides to charge for it. If someone decides they can get $49.99 for a shitty video game because everyone else can, that's their perogative. There are no "normal circumstances"

Let's say I invent an AIDs vaccine tommorow, but I want to charge $10,000 per shot. That's my perogative.

First you're making the erroneous assumption that I believe the markets should be equally priced when I'm not.

No, you bitched and moaned about the drug-reimportation ban. If you agree that price discrimination is a good thing for developing countries, then perhaps you can purpose a solution that allows us to sell drugs cheaper in China and Africa, but prevent Americans from importing them from those countries at bargin basement prices.

And if a senior see's a prescription drug in Canada that costs $100 while the same drug here costs $200, they should not be legally penalized for importing that drug.

In contradiction to what you said above.

The average profit margin against revenues of the Pharma Industry ranges between 15% and 20% year over year (18.5% for a solid figure), and has remained at that high level, even despite the downturn of the past 2-3 years. ... How do you suppose a single industry is able to keep it's profit margin so high despite economic downturns?

It's not untrue, you just don't seem to understand how things work. Pharma industry is an IP industry just like software, and the margins are similar. The winners win big, the losers lose big. Venture Capital funds have similar large margins, but also had a huge number of losers.

The only difference between drugs and software is that drugs have inelastic demand. If demand goes down, companies drop investment and it goes down, people stop buying databases and servers, so tech industry takes a hit, but people can't stop buying drugs, so people stop buying other stuff for which demand is elastic in preference to buying drugs, which they absolutely need.


Monopolies aren't evil. A winning pharmaceutical company has a monopoly, it's called a PATENT. They have this monopoly for 20 years. This was set out in the constitution of the United States. It is for this reason people are willing to invest $100 million or more into drug development, because if they succeed in finding something, they own their discovery. If you don't like it, change the constitution. I happen to like our system. If there is no legal guarantee or system of laws to protect $100 million investments into IP, then that capital will go elsewhere.

Directly into corporate coffers.

What's a "corporate coffer" pray tell? I love this liberal term. Do they have like a mattress in the back room where they stuff cash? Do individuals have "coffers" too?

Price reductions would not kill the Pharma Industry. Instead of having an 18.5% profit margin, they'd have a 10% profit margin. Oh poo. I'm really feeling bad for them and their imminent demise.

You have no right to dictate to someone what they can charge for a discovery they made on thier money. Who gave you the right to tell someone what the legal margin of profit is?

The fact of the matter is that the Pharmaceutical Industry is and always will be a growth industry. People age. People get sick. The world population is graying as we all live longer and longer. Who gets the money to fix our ills? Take a guess. You're preaching doom and gloom for an industry that defies the trends of other industries, simply because of the nature of the industry itself. It doesn't work that way.

There still needs to be IP protection for developments, otherwise, commercial researchers won't publish their findings, and companies won't be so willing to plunk down huge investments if another firm can simply wait for their discovery and manufacture their pills with no R&D or FDA trial spending.

Wrong. There are many different companies and brands all fighting for consumers and marketshare in many different aspects of the market.

No, you are wrong and operating under the fallacy that these drugs represent substitute goods. It is not like Coke and Pepsi. First of all, there is a difference between a proton-pump inhibitor and a histamine antagonist. Secondly, even two drugs which work on the same mechanism (proton pump inhibition) don't work the identically due to difference isomers, time release rates, and compounds. I have been a chronic sufferer of GURD for 15 years, and I can tell you that Tagamet, Zantac, and Pepcid work differently on me.

Secondly, your example is pretty poor, since Prilosec is now available OTC (Prilosec works best on me) and very cheap. The drugs I was talking about are those uber-expensive drugs for which there aren't a large class of competitors.

With acid reflux, a few mechanisms were discovered (H2, proton pump) and a bunch of companies slightly modified formulas to extend or gain new patents on the variation (some of which work better than others). But this example does not translate into obscure treaments for life threatening diseases. Are there a large class of rougly equivalent competiting brands for Cystic Fibrosis? I think not. Cancer treatments? Nope.

When you talk about the high cost of prescription drugs, do you really think seniors are complaining about acid reflux, viagra, and cholerstol treatments? These are some of the cheapest pills you can get. Many are OTC now.

The fact remains that drugs are indeed commodities

No, SOME drugs are commodifiable. And many are only commodifiable because of sly tricks to get around patent protections by altering the ratio of isomers in the drug.

Tremendous difference Democoder. The energy contracts were negotiated with California at a time when there was an artificially created energy crisis in the summer of 2002 by Enron, Dynegy, Reliant, Mirant, and other firms.

No Natoma, this shows that the government can't use it's power to artificially negotiate down the prices are artificially inflated products.

That was an artificially created Ponzi scheme, as you so like to put it.

Well, it's a scheme, but it wasn't a Ponzi scheme.

And the point remains, if the Government had the ability to bid the companies against one another, or repurchase drugs from other countries, and end users had the ability to repurchase drugs from other countries, Pharma wouldn't be able to pull something that grand off.

And the fact remands, the government has been able to do this for quite a while, but has NEVER done it. Let's talk specifically about IT consulting. There were HUNDREDS of IT consulting firms in the DC area vying for government business, yet the government still paid up to TEN TIMES the hourly rate, that say, Nike would pay to have their website designed for them.


I'm sorry Natoma, but you talk too much about future sci-fi personalized drugs and optimistic scenarios of government negotiated pricing to be taken seriously. Like a typical liberal, you assume that thinks would work nicely if the "right people" in the government did the right thing.

I see a future where contract negotiators in the government would be suceptible to lobbying, accept higher prices, or give out winning deals to campaign contributors. I see a future where everyone pays even higher prices because of the elimination of price discrimination.

And I see you complaining about this issue more than just because of the technical aspects of it, but because you want the Democrats to get credit for doing something. The fact that Bush is going to take credit for an issue which Democrats view as "their domain" must piss you off.

 

[Natoma]

All well and good if this were a relevant example.

The example is relevant, and the example is China vs America, not America vs Japan.

I said American, Japan, and Europe, which at the moment happen to be the largest markets in the world. And you did not address the points I made wrt entertainment expenditures vs life saving expenditures.

Firstly, the system of biotech firms investing billions in the development, testing, and verification of drugs is changing dramatically due to heavy investment today in drugs that are tailored to the bio-chemistry of individuals rather than the bio-chemistry of a vast swath of individuals.

Please Natoma, we are talking about today, not a sci-fi future. When someone invents a machine that can scan your DNA and conccst a custom drug for you on your desktop, we can revisit this conversation. The bio-tech industry today is still driven by compounds directed at a large number of individuals that go through animal and human testing trials.

And you thought my region coding price discrimination example wasn't relevant? Sheesh.

You must not have read this part where I addressed exactly what you just stated:

This process will take another 15 to 20 years to complete, but it has already began seeing dividends in the form of more powerful prescription drugs such as those created specifically for a certain kind of Alzheimers that should be on the market in a couple of years. They are very inexpensive to fund, and directly attack specific ailments rather than try and tackle the whole thing head on.

I already addressed your points but you snipped it out. Come on.

Secondly, the system of entrepreneurship, risk, and reward, is intrinsic to every capitalist industry. You invest millions and/or billions in a product, and if it fails, you lose all your money. If it succeeds big, you're a winner. There's nothing dire or doom and gloom about that. Why should the Pharma Industry somehow be exempt from this process?

Who said they should be exempt? But if you take away intellectual property protection for drugs that are developed, they will be NO REWARD, since the second your drug is discovered, competitors will produce generic brands. If you get rid of drug-reimportation, then pharmaceuticals will just price drugs according to the US market, Canadians, Chinese and Africans will suffer.

Who's trying to take away intellectual property protection for drugs that are developed? No one. If Pfizer sells Lipitor here for $100 a pill, and they sell it in Canada for $60 a pill, that's not destroying their property protection if I purchase that $60 pill from Canada. Now if I purchased a generic from Canada for $20, that's a different story. But the re-importation of drugs has little to do with generics. People are buying drugs from Canada that are the same ones that are sold here!

Higher prices than we should have to pay under normal circumstances.

The price of a good is what someone decides to charge for it. If someone decides they can get $49.99 for a shitty video game because everyone else can, that's their perogative. There are no "normal circumstances"

Let's say I invent an AIDs vaccine tommorow, but I want to charge $10,000 per shot. That's my perogative.

No the price of a good is what the market determines it will pay for it. If you develop a drug and sell it for $100 and someone else develops a similar rival drug and sells it for $70, the market will demand the $70 drug, forcing the $100 seller to drop prices.

But the point is, we don't live in a purely capitalistic society. If we did, the Pharma companies wouldn't have bowed to socio-political pressure to price their AIDS drugs in Africa at rock bottom prices. You think that occurred out of the goodness of their heart? No. When they first began selling those drugs in Africa, they were near the same costs of the drugs you purchase here in the States, and people were purchasing them. Just not the vast swaths inside the continent.

And again, you snipped out one sentence. What was my whole rebuttal focusing on? Normal circumstances = Market Forces. Not, "Oh I just want it at this price so you have to sell it to me at that price".

You're ignoring most of what I've said, taking little pieces, and trying to discuss on that when that will get us nowhere.

First you're making the erroneous assumption that I believe the markets should be equally priced when I'm not.

No, you bitched and moaned about the drug-reimportation ban. If you agree that price discrimination is a good thing for developing countries, then perhaps you can purpose a solution that allows us to sell drugs cheaper in China and Africa, but prevent Americans from importing them from those countries at bargin basement prices.

Again, you ignore the rest of what I stated when I tried to clarify exactly what my position is. I "bitched and moaned" about the drug reimportation ban for specific market reasons, the same reasons why I "bitched and moaned" about the inability of the government to bid for pricing contracts. If you want to make a discussion of this, please address what is written and don't snip tiny little portions and ignore the rest even when I clearly address what your issues are.

First you're making the erroneous assumption that I believe the markets should be equally priced when I'm not. What I clearly stated is that the government should be allowed to bid for pricing contracts between the Pharmaceutical Industry companies in an attempt to lower the direct pricing given to seniors and footed by the taxpayers. And if a senior see's a prescription drug in Canada that costs $100 while the same drug here costs $200, they should not be legally penalized for importing that drug. Many seniors don't even bother to re-import drugs because they can afford to go down to their local drug store and buy them off the shelf. But many seniors are very poor and/or on fixed incomes and cannot afford such high prices. Yet the fact remains that they still need the medicine.

I have never stated that the price should be held artificially low and that the Pharma Industry shouldn't be able to set their prices accordingly. I have stated that removing the Government's ability to use their bidding power to get a better deal out of the Pharma Industry, as well as removing the individual user's ability to get cheaper drugs themselves, severely hampers the natural capitalistic forces inherent in our economic system and artificially inflates the prices for these drugs because there is absolutely no incentive for the Drug Companies to lower their prices. Medicare will have to pay whatever price the Pharma Industry sets for its drugs and cannot go anywhere else to try and find a better rate, and by proxy, millions of taxpayers and seniors are forced into that bottleneck as well.

That is not capitalism. It is a taxpayer funded monopoly.

And if a senior see's a prescription drug in Canada that costs $100 while the same drug here costs $200, they should not be legally penalized for importing that drug.

In contradiction to what you said above.

How is this in contradiction to what I said prior to this? Please explain this to me, with the full text of what I wrote in tow, and not a snipped sentence here and there as you have been doing thus far.

The average profit margin against revenues of the Pharma Industry ranges between 15% and 20% year over year (18.5% for a solid figure), and has remained at that high level, even despite the downturn of the past 2-3 years. ... How do you suppose a single industry is able to keep it's profit margin so high despite economic downturns?

It's not untrue, you just don't seem to understand how things work. Pharma industry is an IP industry just like software, and the margins are similar. The winners win big, the losers lose big. Venture Capital funds have similar large margins, but also had a huge number of losers.

The only difference between drugs and software is that drugs have inelastic demand. If demand goes down, companies drop investment and it goes down, people stop buying databases and servers, so tech industry takes a hit, but people can't stop buying drugs, so people stop buying other stuff for which demand is elastic in preference to buying drugs, which they absolutely need.

Again, as I said before, how exactly is this any different than any other Industry? If I spend $5 Billion developing a new toy line, and it flops, guess what, that's a loss for me, my company, and any VCs that invested in my firm. If I spend $1 Billion developing an oil well site, and it turns out that there is no oil there, or not as much oil as expected, that's a loss for me, my company, and any VCs that invested in my firm.

The nature of IP wrt Software and Drugs, for example, is no different than owning the deed to a piece of land or having a copyright on a particular toy or piece of music or book.

You made the point that people can't stop buying drugs but they can stop buying other things that aren't as necessary. I said that point in the very first part, which you snipped out! That's why I said you couldn't really compare demand and pricing for DVDs and Games to demand and pricing for Drugs.

All well and good if this were a relevant example. But the prices of games and DVDs in America and in Europe and Japan aren't 50% to 90% different on average. The main difference is that some games get released in some markets while other games do not, or they get edited for "certain content". DVDs are changed in content as well sometimes, but mostly for language purposes, NOT artificial pricing purposes. Also, we're talking about DVD content that has an average selling price of roughly $10 and gaming content that has an average selling price of roughly $25, and trying to compare that to people spending an average $260 a month? The average gamer buys roughly 5-10 games a year. Even if it's 10 games, that would be an average expenditure of $250 for one year, vs a $3100+ expenditure for the average senior. I don't know of any statistics on DVDs though.

On top of this, if prices suddenly skyrocketed for DVDs and Games, people would probably just stop buying them because they are what? Entertainment.

If prices suddenly skyrocket for prescription drugs, seniors can't stop buying them or those that use them could die. The motivation behind these expenditures is supremely different, as is the cost structure.

Your example here is highly erroneous.

If you invest, you take a risk. If it doesn't work out, you will suffer. If it does, you win big. There is nothing difficult to understand about that at all, and frankly thus far you've done nothing but deflect any and all of the points I raised. Yeesh.

Monopolies aren't evil. A winning pharmaceutical company has a monopoly, it's called a PATENT. They have this monopoly for 20 years. This was set out in the constitution of the United States. It is for this reason people are willing to invest $100 million or more into drug development, because if they succeed in finding something, they own their discovery. If you don't like it, change the constitution. I happen to like our system. If there is no legal guarantee or system of laws to protect $100 million investments into IP, then that capital will go elsewhere.

Wrong. There is a difference. No one patents acid reflux drugs. But they do patent the process used to create that particular drug, and the drug itself.

See the fact that TAP has patents for Prevacid, but that has absolutely no effect on the patents for Nexium. They do the same thing.

A monopoly would be TAP being the only producer of all acid reflux drugs, and using their power to stifle competition in the market. Again, erroneous example.

Directly into corporate coffers.

What's a "corporate coffer" pray tell? I love this liberal term. Do they have like a mattress in the back room where they stuff cash? Do individuals have "coffers" too?

What??? :? First of all please quote me entirely instead of taking a single sentence within an entire response. This is an unnecessary side track into another issue that has absolutely no relevance to the current discussion. God if I wanted this kind of talk I'd be gabbing back and forth with Joe DeFuria. I'm sick of those kinds of discussions. They're utterly fruitless.

Price reductions would not kill the Pharma Industry. Instead of having an 18.5% profit margin, they'd have a 10% profit margin. Oh poo. I'm really feeling bad for them and their imminent demise.

You have no right to dictate to someone what they can charge for a discovery they made on thier money. Who gave you the right to tell someone what the legal margin of profit is?

Market Forces dictate what someone can charge for a discovery made on their own money. Again,

The fact remains that drugs are indeed commodities, if the companies are forced to compete against one another to get a deal. Anything can be commoditized. If the government goes to TAP and says, "We don't like your prices for Prevacid, we're going to take the 50 million people on medicare and move them to your competitor Nexium," you don't think TAP would drop their prices?? This is basic capitalism.

The fact of the matter is that the Pharmaceutical Industry is and always will be a growth industry. People age. People get sick. The world population is graying as we all live longer and longer. Who gets the money to fix our ills? Take a guess. You're preaching doom and gloom for an industry that defies the trends of other industries, simply because of the nature of the industry itself. It doesn't work that way.

There still needs to be IP protection for developments, otherwise, commercial researchers won't publish their findings, and companies won't be so willing to plunk down huge investments if another firm can simply wait for their discovery and manufacture their pills with no R&D or FDA trial spending.

They would still have IP protection if the Government was able to bid the Pharma companies against one another in order to get the best deal. They would still have IP protection if individual users were able to go to other countries and get drugs themselves. As I said, many seniors don't bother importing from other countries because they can afford it. If I really wanted to save money, I could buy all of my DVDs from overseas and use mod chips to break the region locks. Why don't I do that? Because I can afford DVDs here and frankly I don't care. The same 'meh' attitude applies to many seniors today. Most seniors who import from other countries simply cannot afford to pay for the drugs as they are priced here in America.

You sound like you think I'm trying undermine the IP system when I'm not. I'm proposing market based solutions to these problems. Not anti-business. All my solutions will do is force the companies to compete for our dollars, not just get it on a silver platter.

Wrong. There are many different companies and brands all fighting for consumers and marketshare in many different aspects of the market.

No, you are wrong and operating under the fallacy that these drugs represent substitute goods. It is not like Coke and Pepsi. First of all, there is a difference between a proton-pump inhibitor and a histamine antagonist. Secondly, even two drugs which work on the same mechanism (proton pump inhibition) don't work the identically due to difference isomers, time release rates, and compounds. I have been a chronic sufferer of GURD for 15 years, and I can tell you that Tagamet, Zantac, and Pepcid work differently on me.

Secondly, your example is pretty poor, since Prilosec is now available OTC (Prilosec works best on me) and very cheap. The drugs I was talking about are those uber-expensive drugs for which there aren't a large class of competitors.

With acid reflux, a few mechanisms were discovered (H2, proton pump) and a bunch of companies slightly modified formulas to extend or gain new patents on the variation (some of which work better than others). But this example does not translate into obscure treaments for life threatening diseases. Are there a large class of rougly equivalent competiting brands for Cystic Fibrosis? I think not. Cancer treatments? Nope.

When you talk about the high cost of prescription drugs, do you really think seniors are complaining about acid reflux, viagra, and cholerstol treatments? These are some of the cheapest pills you can get. Many are OTC now.

The point remains that there is competition in every single field of drugs, despite the cost. Why is it that these acid reflux disease drugs are so inexpensive? Why is it that erectile dysfunction drugs are so inexpensive? Why is it that these cholesterol lowering drugs are so inexpensive? It's because you can choose from so many viable products and companies have to price accordingly to get your dollar. Again, basic capitalism.

p.s.: I did the Prevacid website. I know a lot about Proton Pump Inhibitors and GERD. Probably more than I'd ever want to know. Buy Prevacid!

Lipitor site too.

The fact remains that drugs are indeed commodities

No, SOME drugs are commodifiable. And many are only commodifiable because of sly tricks to get around patent protections by altering the ratio of isomers in the drug.

Ugghh!!!!!

The fact remains that drugs are indeed commodities, if the companies are forced to compete against one another to get a deal. Anything can be commoditized. If the government goes to TAP and says, "We don't like your prices for Prevacid, we're going to take the 50 million people on medicare and move them to your competitor Nexium," you don't think TAP would drop their prices?? This is basic capitalism.

Tremendous difference Democoder. The energy contracts were negotiated with California at a time when there was an artificially created energy crisis in the summer of 2002 by Enron, Dynegy, Reliant, Mirant, and other firms.

No Natoma, this shows that the government can't use it's power to artificially negotiate down the prices are artificially inflated products.

No, that was a case of criminality at work. That was not the natural markets at work.

That was an artificially created Ponzi scheme, as you so like to put it.

Well, it's a scheme, but it wasn't a Ponzi scheme.

Well I don't know. They robbed the California taxpayer to pay themselves and their stockholders. Sounds like a Ponzi scheme to me.

And the point remains, if the Government had the ability to bid the companies against one another, or repurchase drugs from other countries, and end users had the ability to repurchase drugs from other countries, Pharma wouldn't be able to pull something that grand off.

And the fact remands, the government has been able to do this for quite a while, but has NEVER done it. Let's talk specifically about IT consulting. There were HUNDREDS of IT consulting firms in the DC area vying for government business, yet the government still paid up to TEN TIMES the hourly rate, that say, Nike would pay to have their website designed for them.

That's why this bill should have been written up correctly in the first place. As I wrote regarding Medicare:

As I've shown earlier, this is how to get things done in this market when done properly, which is what I've stated from the beginning is how this should have been done. The reason why Medicare costs, and I brought this up earlier, skyrocketed? Because many of the provisions that were originally set to sunset in Medicare were instead extended and made permanent. That is due to political spinelessness on the part of the politicians at the time, not due intrinsically to the government using its pricing power.

If the bill had been written with market pricing and consumer friendly provisions in mind, it would have been far less expensive and/or able to cover everyone.

I'm sorry Natoma, but you talk too much about future sci-fi personalized drugs and optimistic scenarios of government negotiated pricing to be taken seriously. Like a typical liberal, you assume that thinks would work nicely if the "right people" in the government did the right thing.

Uhm, as I said earlier, regarding the timelines:

Firstly, the system of biotech firms investing billions in the development, testing, and verification of drugs is changing dramatically due to heavy investment today in drugs that are tailored to the bio-chemistry of individuals rather than the bio-chemistry of a vast swath of individuals. This process will take another 15 to 20 years to complete, but it has already began seeing dividends in the form of more powerful prescription drugs such as those created specifically for a certain kind of Alzheimers that should be on the market in a couple of years. They are very inexpensive to fund, and directly attack specific ailments rather than try and tackle the whole thing head on.

Secondly, I am upset with and have bashed the Republicans, Democrats, and the Leadership of the AARP who supported this bill. If you want to continue to parrot that my complaints with this decidedly bi-partisan bill are merely another attempt to rail against Republicans, hey, so be it. That's your perogative. And it's completely wrong.

You can look over my post history and see, for example, my disgust with the Democrats who voted for the war resolution last year without requiring the President to come back and get permission to go to war. They showed absolutely no spine, and it's even more disgusting now that they try to say "Oh the President is an awful failure in Iraq". Well wtf did you give him a blank check for, before making sure you had all the facts???

But this is of course if you want to know the truth and not continue to parrot preconceptions.

I see a future where contract negotiators in the government would be suceptible to lobbying, accept higher prices, or give out winning deals to campaign contributors. I see a future where everyone pays even higher prices because of the elimination of price discrimination.

When an issue such as this directly affects upwards of 110 million people over the next decade (70 million boomers, 40 million current retirees), you can bet that it will be far more closely scrutinized than some oil contract that goes to a company for Iraq.

And I see you complaining about this issue more than just because of the technical aspects of it, but because you want the Democrats to get credit for doing something. The fact that Bush is going to take credit for an issue which Democrats view as "their domain" must piss you off.

As I said earlier, if you want to continue to parrot that my complaints with this decidedly bi-partisan bill are merely another attempt to rail against Republicans, hey, so be it. That's your perogative. And it's completely wrong. This bill has massive structural problems as I've laid out in my posts here.

 

[DemoCoder]

This thread is getting too long. You're arguing multiple things, and contradictory on each of them.

Let's take them one by one:

1) Drug Re-importation Ban continuation in Medicare.
a) you asserted that you are not against price discrimination by market
b) you are, I assume, also not against selling drugs below global "developed world" market prices to developing countries. That is, price discrimination.
c) you want the re-importation legalized

Sorry, but you cannot simultaneously have all three. If reimportation were legalized, AND, if drugs were sold at low prices in developing markets (Mexico, most of Asia, Africa, etc), Westerners would simply setup import-export businesses and soon the price would be brought to parity to the lowest common denominator. Besides hurting US based pharmaceuticals, it would also divert badly needly supplies from drugs from poor people back to the US. I've already imported drugs myself from China on trips (as well as DVDs). I imported the drugs not by cost, but because I didn't need a prescription (e.g. stocked up on antibiotics). Ebay is already rife with amateur importers.


The removal of import restrictions would simply force pharmaceuticals to stop selling cheap drugs to emerging markets, drawing ire from the self-righteous liberals that they are withholding vital medicines from poor people in the third world who can't afford western prices.

2) Commodification. Yes, almost anything can be commodified in time, but that isn't true for newly developed technologies starting out, which are often the most expensive. Your own argument: that in the future, bio-firms will sell "custom made" drugs for the individual simply means that drugs will cease to be a product, and will instead become a service. You think a custom designed pill rendered as a service by phamacist/doctor is going to be cheaper than a one-size-fits-all pill? You think the government can "price negotiate" what amounts to doctor/individual consulting?

The fact is, your own examples of "drug competition" trip up your argument, since your examples are all cheap drugs with OTC varieties. Let's take Modafinil (Provigil) for example, which costs almost $300 per bottle. There is only one major variation, Adrafinil, which is far less potent and has more sideeffects. The two are not equivalent. Ditto for Celebrex/Vioxx. There aren't a whole lottle COX-2 variations. It will be some time before you have a proliferation of COX-2 formulations compared to H2-inhibitors or PPIs like with acid reflux. Cephalon for example, is the only manufacturer of Modafinil and Gabitril. Which competitors is the government going to play them off against?

It will be years before other companies have figured out tweaked forumulations of the active molecule and gone through FDA testing. The so-called "follow-on" or "me-too" drugs. Yeah, in 5 years, there may be 5 companies selling Modafinil clones. But what's the government gonna do till then?

3) Government negotiating low prices.
a) can you show any example in the history of government procurement of commercial products where the government got a better deal than the going market rate or what other organizations got?

b) Evidence to the contrary is rife: "Beltway Bandits"

c) Government attempts at price controls, either by force (caps), or by market manipulation (bying and selling large amounts) have proved failures. The best example in the world is the attempt by governments to manipulate the money supply, foreign exchange rates, and cost of capital in private markets. A long history of failures with few successes that we're not even sure weren't luck.

d) influence peddling. Previous schemes to have the government play in the markets have been shot down because of the tremendous potential for influence peddling, and despite your assertion that we would be focused on any misdeeds like a laser beam, that hasn't stopped the vast oceans of lobbying and influence peddling, and pork barrel contracts handed down from representatives to their districts, has IT?

4) The funding of bio-tech research and development.
a) only 1 in 10,000 drugs developed are successful
b) because of this, there is a huge "opportunity cost of capital" for funding of pioneering of new drugs and mechanisms
c) therefore, investors expect a large ROI due to the "unpredictability" of the market
d) without proper legal protections for discoveries and freedom to price them according to costs and investor demands, ROI for successful compounds is in doubt.
e) Your figures are wrong. PhRMA claims US pharmaceutics invested 18%, not 8% of revenues in R&D
f) Large pharmaceuticals are only part of the equation, so R&D figures for them don't tell the whole story. Many new developments come from small startup labs doing the pioneering research to discover new pathways for drugs to act (which are then picked up by Big Evil Pharma) These companies are very sensitive to access to capital. While Pfizer has money in it's "COFFERS" (as you say) to last through downturns in investment, the small pharma-startups can't. There was a bio-tech investment "bust" in the 80s, like the dot-com bust of the 90s, which destroyed alot of access to angel and VC money for pioneering startups.

Martha Stewart ain't gonna put her money in if she ain't gonna get more than a risk adjusted expected return higher than what she can get from existing markets.


Finally,

5) Your assertions that we could have "full coverage" for the same or less costs than the $400 billion currently allocated, if all your wishful thinking comes true. Where are calculations? Can you demonstrate any algebra that even remotely guides your thinking, or are you just pulling numbers out of your ass.

Name a government social welfare program that was contained within it's initial cost estimations

If the Congression Budget Office and Government Accounting Office, which are staffed by people far more involved in the financial machinations then you, consistently GET IT WRONG, then why the hell do you think your grossly amateurish ravings are even in the freaking ballpark?

p.s. bold added for readabiliy and emphasis

 

[Joe DeFuria]

Now if you're of the opinion that the prescription drug benefit crisis is an urban legend manufactured by the AARP and Democrats over the years, trying to sell government health care, I'd agree.

As would I

68% of seniors pay less than $1000 a year for out of pocket drugs. Seems to me, a means-tested benefit would be better. Only poor and disabled would quality for "free" drugs.

Agreed as well.

 

[Natoma]

This thread is getting too long. You're arguing multiple things, and contradictory on each of them.

It's only contradictory if you do what you've been doing up to this point, i.e. snipping tiny pieces of what I've been saying and arguing on each one of those alone instead of taking the entire argument.

Let's take them one by one:

1) Drug Re-importation Ban continuation in Medicare.
a) you asserted that you are not against price discrimination by market
b) you are, I assume, also not against selling drugs below global "developed world" market prices to developing countries. That is, price discrimination.
c) you want the re-importation legalized

Sorry, but you cannot simultaneously have all three. If reimportation were legalized, AND, if drugs were sold at low prices in developing markets (Mexico, most of Asia, Africa, etc), Westerners would simply setup import-export businesses and soon the price would be brought to parity to the lowest common denominator. Besides hurting US based pharmaceuticals, it would also divert badly needly supplies from drugs from poor people back to the US. I've already imported drugs myself from China on trips (as well as DVDs). I imported the drugs not by cost, but because I didn't need a prescription (e.g. stocked up on antibiotics). Ebay is already rife with amateur importers.

I addressed this point about 5 posts up. But in short, the vast majority of seniors are on medicare. The role of the government would be to use its bidding power to reduce the prices of drugs. I address the part regarding new drugs that have a 'monopoly' on a certain segment of the market 2 sections below.

The chicken little argument regarding the crash of the pharma industry from everyone reimporting from china and africa and asia is frankly analagous to the same argument you hear anti-marijuana legalizers posit, that if all of a sudden it's legalized, everyone and their mother will be a pothead when that's simply not true.

The removal of import restrictions would simply force pharmaceuticals to stop selling cheap drugs to emerging markets, drawing ire from the self-righteous liberals that they are withholding vital medicines from poor people in the third world who can't afford western prices.

Again, addressed this point about 5 posts up. The vast majority, if not all, of the people trying to get prescription drugs would be on Medicare given the government's ability to price negotiate. The people re-importing drugs would be in the vast minority, as they are today.

2) Commodification. Yes, almost anything can be commodified in time, but that isn't true for newly developed technologies starting out, which are often the most expensive. Your own argument: that in the future, bio-firms will sell "custom made" drugs for the individual simply means that drugs will cease to be a product, and will instead become a service. You think a custom designed pill rendered as a service by phamacist/doctor is going to be cheaper than a one-size-fits-all pill? You think the government can "price negotiate" what amounts to doctor/individual consulting?

The science behind custom made drugs is such that the individual drug is tailored to that person's bio-chemistry alone, or a small subsection of people with like bio-chemistry. What does this do? It removes lengthy and costly trial periods and advertising campaigns from the equation by going directly to the consumer of said material. That automatically reduces prices in comparison to

Also, I agree that drugs always start off priced highly, as with any newly developed technology or product. This happened with Lipitor. It happened with Viagra. The point is that competition in those fields, while taking 3-5 years to come about, still occurred. The ability of the government to price short term contracts given the usual development period for "copy" drugs, i.e. 3-5 years, would be paramount to long term cost reduction for seniors.

The fact is, your own examples of "drug competition" trip up your argument, since your examples are all cheap drugs with OTC varieties. Let's take Modafinil (Provigil) for example, which costs almost $300 per bottle. There is only one major variation, Adrafinil, which is far less potent and has more sideeffects. The two are not equivalent. Ditto for Celebrex/Vioxx. There aren't a whole lottle COX-2 variations. It will be some time before you have a proliferation of COX-2 formulations compared to H2-inhibitors or PPIs like with acid reflux. Cephalon for example, is the only manufacturer of Modafinil and Gabitril. Which competitors is the government going to play them off against?

It will be years before other companies have figured out tweaked forumulations of the active molecule and gone through FDA testing. The so-called "follow-on" or "me-too" drugs. Yeah, in 5 years, there may be 5 companies selling Modafinil clones. But what's the government gonna do till then?

Addressed above.

3) Government negotiating low prices.
a) can you show any example in the history of government procurement of commercial products where the government got a better deal than the going market rate or what other organizations got?

b) Evidence to the contrary is rife: "Beltway Bandits"

c) Government attempts at price controls, either by force (caps), or by market manipulation (bying and selling large amounts) have proved failures. The best example in the world is the attempt by governments to manipulate the money supply, foreign exchange rates, and cost of capital in private markets. A long history of failures with few successes that we're not even sure weren't luck.

d) influence peddling. Previous schemes to have the government play in the markets have been shot down because of the tremendous potential for influence peddling, and despite your assertion that we would be focused on any misdeeds like a laser beam, that hasn't stopped the vast oceans of lobbying and influence peddling, and pork barrel contracts handed down from representatives to their districts, has IT?

Are there any major examples other than Medicare? And I already brought up the structural problems with the original conception of Medicare, which also happen to be in the current bill. Loopholes (the $2,100 coverage gap for instance) that in time will be politically difficult, if not impossible, to close, which when closed will cause the long term price of the program to skyrocket. And as I said before, there is a difference between a program that no one "cares about" and one in which 100 Million people will be directly affected by. Seniors are notoriously finicky and nitpicky when it comes to programs that affect them, and they show that in how they vote. Any medicare bill would be scrutinized to the Nth degree, as it is now.

The other examples that I can think of are strictly 1-1, such as the government purchasing directly from a military company such as Lockheed Martin.

4) The funding of bio-tech research and development.
a) only 1 in 10,000 drugs developed are successful
b) because of this, there is a huge "opportunity cost of capital" for funding of pioneering of new drugs and mechanisms
c) therefore, investors expect a large ROI due to the "unpredictability" of the market
d) without proper legal protections for discoveries and freedom to price them according to costs and investor demands, ROI for successful compounds is in doubt.
e) Your figures are wrong. PhRMA claims US pharmaceutics invested 18%, not 8% of revenues in R&D
f) Large pharmaceuticals are only part of the equation, so R&D figures for them don't tell the whole story. Many new developments come from small startup labs doing the pioneering research to discover new pathways for drugs to act (which are then picked up by Big Evil Pharma) These companies are very sensitive to access to capital. While Pfizer has money in it's "COFFERS" (as you say) to last through downturns in investment, the small pharma-startups can't. There was a bio-tech investment "bust" in the 80s, like the dot-com bust of the 90s, which destroyed alot of access to angel and VC money for pioneering startups.

a) That 1 in 10,000 number sounds a bit high. The figures I've read are more like 1 in 100, which is not too far off from the risks taken with any other product, which nullify the discussion for b-d.

e) That's if you take R&D expenditures as a % of stockholder equity. I read that figure myself when looking up the percentages. If you take it against revenues, R&D expenditures is 8%.

If you take profit margin as a % of stockholder equity, it is 34%. Against revenues, which is typical of how companies generally price themselves, it is 18.5%, though ranging from anywhere between 15% and 20%.

Either way you want to look at it, there is a 100% increase over R&D expenditures when looking at year-over-year profits. And that doesn't even compare against the 25% expenditures for marketing budgets, which is huge whether you look at it as a % against revenues, or a % against stockholder equity, in which it skyrockets past 25%.

f) Again, is this really any different than any other industry that has startups? I'm baffled by you sometimes DC. You argue on one hand to be pro-capitalist in some threads, but here you seem downright protectionist. I'm not saying one or the other is bad, or that what you're trying to do is somehow wrong, but it is somewhat jarring to see the difference in argument.

Martha Stewart ain't gonna put her money in if she ain't gonna get more than a risk adjusted expected return higher than what she can get from existing markets.

As with any market no?

Finally,

5) Your assertions that we could have "full coverage" for the same or less costs than the $400 billion currently allocated, if all your wishful thinking comes true. Where are calculations? Can you demonstrate any algebra that even remotely guides your thinking, or are you just pulling numbers out of your ass.

I see nowhere that there is wishful thinking. Here's some math for you.

The average canadian family from 1997 - 2001 made $63,000 CDN, which translates roughly to $48,000 USD (inclusive of elderly couples). That is higher than the average american family from 1997 - 2001 which made $34,000 USD (inclusive of elderly couples). So you explain to me how they are able to get drug prices which are 50% - 90% cheaper than what we get?

The only major variable that is different is that the canadian government is allowed to buy prescription drugs in bulk, as I've suggested our government do.

Name a government social welfare program that was contained within it's initial cost estimations

I can't, and I've never said that it has been done to this point. The reason why it hasn't been done is because of the very problems that exist in the current Medicare bill (the coverage gap that in about 10-15 years will be closed due to high political pressure. mark my words) and Medicare of the past (why the costs rose dramatically from a $12 Billion forecast by 1991 to a $107 Billion actual price). The problem is poorly written legislature that eventually gets closed due to political pressure. If you write the bill properly the first time, it severely diminishes the added expenditures in the future.

If the Congression Budget Office and Government Accounting Office, which are staffed by people far more involved in the financial machinations then you, consistently GET IT WRONG, then why the hell do you think your grossly amateurish ravings are even in the freaking ballpark?

p.s. bold added for readabiliy and emphasis

And your ravings are no less amateurish? You're somehow more of an authority on this topic than I? We both read our business publications and we both are intelligent people and we both have google at our fingertips. Come now Democoder lets keep this discussion above that.

 

[ByteMe]

From what I see this "bias" agaisnt the bill is a result of the fact that the damn liberals could not get their own medical bill passed. Maybe around a 98% pure politics.


I will admit the increase in government and additional money (at first) do concern me. The principle of the bill is sound tho, so in maybe 5 or so years we will benefit from it from then on.

 

[Natoma]

That's a little strange Byteme considering Fiscal Conservatives on both sides of the political spectrum have voiced grave concerns over this bill, for the same reasons I've expressed. But you go right ahead with Democoder and keep saying it's just the liberals railing against it because it's politics.

On a personal note, I suppose my comments

If anything, this may just end up losing Bush the senior vote given the rising swell of anger at this program.

and

As much as I dislike the Republican policies, I have to say that this is probably the same thing democrats used to do when they controlled the house and the senate for four decades.

and

I'm not attacking the Republicans. I'm attacking the supporters of this bill that is outlandishly expensive without actually providing anything of note to the vast majority of seniors. Republicans, Democrats, AARP leadership alike.

carry no weight. And besides that, as I stated before, you have Fiscal Conservatives, which is what I am, commonly referred to as deficit hawks, on both sides of the political spectrum railing against this bill.

So yea. It's partisan politics at work as usual. :?

I may have a biases against republican policies, and I always state when my motivations are clearly politically driven, but this is most certainly not an issue of political bias, and frankly it's too important to current and soon-to-be retirees, and my generation, to be bogged down in baseless accusations of "partisan politics".

Oh and as a quick side note, I'm glad Bush got rid of the Steel Tariffs. I applauded when I saw the news the other day. Not because they may end up costing him the election (though that is a good side effect imo), but because I didn't believe in them when he imposed them 2 years ago. I believed at the time, and it turns out rightfully so, that these tariffs would do nothing but cost american jobs, and get us in trouble with the world trade organization. I was accused back then of having a political bias against Bush and I'll probably be accused of having some political bias for my opinion on the repeal now. Can't win.

 

[ByteMe]

Newt said this morning on c-span that it was the democrats and the hard-line republicians that did not want this bill. The democrats because of politics the hard-line republicians because they won't vote for ANYTHING that increases the size of government.


" Fiscal Conservatives on both sides"

What? What democrat is a fiscal conservative?