The joys of voting visit medicare

[Natoma]

And somehow Newt is an unbiased source? Oooookaaaaay....

Look up the voting records and political positions of democrats and republicans who voiced their concerns about this bill, as well as fiscally conservative, but not politically aligned, foundations that have come out against this. Also, the concerns and records of the republicans who were politically browbeaten into support for this bill after opposing it even into the final hour.

Yes, there are fiscally conservative but socially liberal people in the world ByteMe. I happen to be one of them.

[EDIT]One thing I was thinking about while here at work is the current reversal of historical roles when it comes to government spending. It seems that the party in the majority always loves to spend spend spend while the minority is the one calling for fiscal conservation.

The democrats were in charge of congress for 4 decades, and the republicans were the bastions of the "Don't Spend! Cut government waste!" while the dems were "spend spend spend!". Now that the republicans are in control, the democrats are now "Don't Spend! Cut government waste!" and the Republicans have raised spending 27% over the past 3 years, one of the highest spending rate increases in history. I just find that dichotomy rather funny and ironic. Especially since I've always been a fiscal conservative.

Anyways just a side note to the main discussion.[/EDIT]

 

[pax]

One of the main points is whether people would rather pay more for private goods or services or pay less through public. I dont have a prob with large increases in gov spendnig to provide a basic essential service. Its merely moving the market from the private to the public and it shouldnt represent normally a new form of living on credit. At least less living on credit if the cost of private or public is cheaper.

If pharmaceuticals are willing to sell bulk (as they do in canada to a point)as they likely know they will sell more per capita of an essential drug and make their money thru volume sales vs item profit then its all good for everyone isnt it?

 

[Natoma]

Precisely pax, as I brought up here:

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.

Unfortunately this medicare bill removes the government's ability to bid the Pharma companies against one another and forces them to purchase at whatever price the companies dictate. The Canadian government has no such restriction, and despite a higher per capita average than we have in the US, they pay far less for prescription drugs than we do in this nation.

And that is one of the points I've been debating with Democoder, to which he obviously disagrees.

 

[Fred]

A lot of the needed prescription drugs are oldschool, so in that sense many have been on the market for a long time and the marketplace benefits from competition that should drive prices down.

It is a problem of course for the latest and greatest of course.

In the end, I don't think that issue will be that huge a contribution to the money pit, hopefully the move to privatization should drive efficiency up (assuming its well monitored by the justice department).

Natoma, im surprised you say you are a fiscal conservative. You mean you don't advocate social programs, more SS etc etc for the needy like every good liberal should? Weren't you also for tax increases etc?

IMO a pure fiscal conservative stereotypically advocates less government, budget balancing, more state controlled activities, and of course lower taxation. They don't buy into the redistribution of wealth model, big social programs and keynsian economics.

 

[DemoCoder]

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.

How does this address the issues raised above? This has nothing to do with Medicare. I am asking you, how do you resolve getting rid of the drug re-importation ban with the need to price discriminate by market? You asserted you wanted the trade barrier lifted, but you also asserted you were not against price discrimination. You are in contradiction sir.

Pick one: Either you are for one price, or you are for the drug reimport ban. Go pick up an economics textbook on the "Law of One Price" before you try to start quibbling. You can't simply wave this issue away by saying "In the future, the government will be buying all the drugs, so individuals purchasing drugs won't matter".

The reason no one sets up an import shop in open view today is because it is a FELONY. That's why importers are overseas based or hit-and-run SPAMMERS. Simply buying scheduled substance online can net you an arrest by a postal inspector when they deliver it. IT HAS HAPPENED.

It removes lengthy and costly trial periods and advertising campaigns from the equation by going directly to the consumer of said material.

Uh huh. So there will be no advertising of who has the best services? No marketing of machines and technology to those performing the service? No malpractice insurance needed?

That automatically reduces prices in comparison to

No it won't. The history of services is that they are more expensive than products. If anyone does custom work to build you anything, it ends up more expensive than a mass produced one. Ever heard of economies of scale?

Are there any major examples other than Medicare?

Example of government programs which exceeded their original mandate and budget limits? ALL OF THEM. Examples of government paying higher than market price for competitive open bid contracts? ALL OF THEM.

I challenge you to find an example of a government program which stayed within it's original budget (adjusted for inflation, GDP, and population growth), and one which procured products and services from the private sector at legitimate rates.

Did you miss the 20/20 special years ago showing something as simple as procuring BISQUICK PANCAKE MIX, the government had a 50 page manual on "pancake mix requirements" and they they spent 50 times as much as simply going to Safeway to get it? Did you miss AlGore's whole government streamlining attempt?

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.

Two wrongs. First, 10,000 drugs developed for every 5-250 WHICH GO TO FDA TRIAL out of which ONE IS SUCCESSFUL. This makes drug development unpredictable with many false starts and blind alleys. NIH claims drug development is unique and unpredictable.

Second wrong: I never said other industries aren't risky, I merely stated that when there is high risk, there have to be legal protections for the winners that prevent others from stealing. I have gone through the venture capital process having started two companies and sold them, I know what VCs ask for, and if there is nothing to protect IP from being copied or stolen, it is a huge issue for them.

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%.

Well, you read wrong. Stop googling and go to the source yourself: The SEC quarterly filings. Let's take Merck as an example: $16.858 billion sales in last 9 months, $2.283 billion in R&D, or 13%. Who cares what the other budgets are. Corporations need their marketing, sales, legal, financial, and administrative departments. And if you had their way, they'd need to switch their huge marketing budgets to electing people who will see to it that they get favorable price contracts.

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%.

Irrelevent. All successful IP companies have high gross profit margins, due to the nature of IP: marginal cost of production tends to $0. Microsoft has an 85% margin on the sale of each addition windows copy.

You argue on one hand to be pro-capitalist in some threads, but here you seem downright protectionist.

Arguing for support of property rights is not protectionist.

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?

Wrong. First of all, averages are not a correct basis of comparison, medians are. Median household income, according to the 2002 US Census Bureau report is $42,409. (Which INCLUDES Elderly retirees on SS according to the CB) Finally, you have to compare income after taxes.

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.

There is a difference:

1) I have gone through the investment process of raising money, through a risky endeavor, until finally selling off, so I am accutely aware of cost of capital.

2) I don't google and read second hand interpretive essays. I usually go directly to the source and bypass people who interpret the data for me (e.g. essays, business journals, pressure groups like Public Citizen)

3) I don't have an inherent trust in the government or anyone to do the right thing.

4) I am not the one making claims, you are. The burden of proof is one you to prove your cost estimates and claims, not me. Sorry if the history of government stands in contradiction to your optimism.

 

[Natoma]

A lot of the needed prescription drugs are oldschool, so in that sense many have been on the market for a long time and the marketplace benefits from competition that should drive prices down.

It is a problem of course for the latest and greatest of course.

In the end, I don't think that issue will be that huge a contribution to the money pit, hopefully the move to privatization should drive efficiency up (assuming its well monitored by the justice department).

Again, this doesn't address the fact that prices for drugs in Canada are, per capita, far less expensive than prices here in the states. And there is no major reason for this to occur other than the fact that the canadian government buys its prescription drugs in bulk and forces the companies to compete for business, and ours does not.

Natoma, im surprised you say you are a fiscal conservative. You mean you don't advocate social programs, more SS etc etc for the needy like every good liberal should? Weren't you also for tax increases etc?

IMO a pure fiscal conservative stereotypically advocates less government, budget balancing, more state controlled activities, and of course lower taxation. They don't buy into the redistribution of wealth model, big social programs and keynsian economics.

I've actually advocated getting rid of SS on quite a few occasions. Even sent a paper to Senator Clinton with my proposal. Tax increases? I see it as Tax restoration, especially to fund necessary programs today such as Homeland Security.

Fiscal conservatives try and balance the budget and keep spending in line with acceptable tax rates. What you're proposing is the republican brand of fiscal conservatism, which is not the end all be all.

 

[DemoCoder]

And there is no major reason for this to occur other than the fact that the canadian government buys its prescription drugs in bulk and forces the companies to compete for business, and ours does not.

I told you what the reason is, but you chose to ignore it in favor of repeating this canard. I mentioned two reasons: disposable income disparity and price controls

Let's review shall we: Patented Medicines Price Review Board

Summarizing:
Prices can't increase faster than rate of inflation for existing drugs
New drugs can't cost more than similar drugs for same illness
New pioneer drugs can't cost more than median price of drug in other countries.

Get it Natoma? PRICE CONTROLS It's not free market negotiations between the government and competiting companies for the best price. It is the government saying NO ONE CAN CHARGE MORE THAN WHAT WE SAY, IT'S ILLEGAL

Is that really what you want? You want government agencies in the US to set prices on what they "compute" according to their centralized marxist calculations, what is the "real" and "correct" price of goods? You want the government to dictate that all prices must be at or below "median", e.g. no price discrimination/one price? And what if every government dictates that prices must be below or at the median. How is that gonna work?

 

[Natoma]

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.

How does this address the issues raised above? This has nothing to do with Medicare. I am asking you, how do you resolve getting rid of the drug re-importation ban with the need to price discriminate by market? You asserted you wanted the trade barrier lifted, but you also asserted you were not against price discrimination. You are in contradiction sir.

Pick one: Either you are for one price, or you are for the drug reimport ban. Go pick up an economics textbook on the "Law of One Price" before you try to start quibbling. You can't simply wave this issue away by saying "In the future, the government will be buying all the drugs, so individuals purchasing drugs won't matter".

Hmmm. The vast majority of seniors on medicare purchase their drugs through the system, and the other tiny percentage purchase their drugs from Canada through fronts such as RxDirect and RxConnection. Is this any different than you going to China and purchasing a DVD and circumventing the region lock, or buying a DVD from an import site online?

The reason no one sets up an import shop in open view today is because it is a FELONY. That's why importers are overseas based or hit-and-run SPAMMERS. Simply buying scheduled substance online can net you an arrest by a postal inspector when they deliver it. IT HAS HAPPENED.

No one? It appears Springfield, Massachusetts would buck that trend. Oh and btw, the House passed legislature earlier this year that would allow people to import drugs from Canada and 24 other countries. It is pending approval in the senate.

It removes lengthy and costly trial periods and advertising campaigns from the equation by going directly to the consumer of said material.

Uh huh. So there will be no advertising of who has the best services? No marketing of machines and technology to those performing the service? No malpractice insurance needed?

The costs are sharply reduced when you're trying to hit a few hundred thousand, rather than tens of millions, with a single drug. In every facet.

That automatically reduces prices in comparison to

No it won't. The history of services is that they are more expensive than products. If anyone does custom work to build you anything, it ends up more expensive than a mass produced one. Ever heard of economies of scale?

The underlying science behind tailored drugs does not have to be repeated for each product. Economies of scale are replicated with each product that makes its way to the market. And you were the one who said that producing a pill costs next to nothing were you not.

Are there any major examples other than Medicare?

Example of government programs which exceeded their original mandate and budget limits? ALL OF THEM. Examples of government paying higher than market price for competitive open bid contracts? ALL OF THEM.

I challenge you to find an example of a government program which stayed within it's original budget (adjusted for inflation, GDP, and population growth), and one which procured products and services from the private sector at legitimate rates.

Did you miss the 20/20 special years ago showing something as simple as procuring BISQUICK PANCAKE MIX, the government had a 50 page manual on "pancake mix requirements" and they they spent 50 times as much as simply going to Safeway to get it? Did you miss AlGore's whole government streamlining attempt?

Yes I know about government spending $1000 on a toilet seat. That was the whole point of me saying that this bill should have been constructed properly in the first place to close all potential loopholes, and put as many consumer and market competition provisions as possible. The removal of the current ban on reimportation as well as the removal of the government's ability to bid on prices are two such provisions that would have factored heavily in the quick reduction in drug prices that taxpayers and seniors have to pay.

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.

Two wrongs. First, 10,000 drugs developed for every 5-250 WHICH GO TO FDA TRIAL out of which ONE IS SUCCESSFUL. This makes drug development unpredictable with many false starts and blind alleys. NIH claims drug development is unique and unpredictable.

Actually you are incorrect, as was I. For every 5,000 drugs scheduled for approval, 5 make it past Phase III, at the low end of the range, and 1 of which gets approved by the FDA.

http://www.mbiotech.com/prod_approval_process.pdf

Second wrong: I never said other industries aren't risky, I merely stated that when there is high risk, there have to be legal protections for the winners that prevent others from stealing. I have gone through the venture capital process having started two companies and sold them, I know what VCs ask for, and if there is nothing to protect IP from being copied or stolen, it is a huge issue for them.

You're talking about generics. And as I said in an earlier post, I'm not talking about generics. I'm talking about the same brand medicines that are sold in countries such as Canada.

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%.

Well, you read wrong. Stop googling and go to the source yourself: The SEC quarterly filings. Let's take Merck as an example: $16.858 billion sales in last 9 months, $2.283 billion in R&D, or 13%. Who cares what the other budgets are. Corporations need their marketing, sales, legal, financial, and administrative departments. And if you had their way, they'd need to switch their huge marketing budgets to electing people who will see to it that they get favorable price contracts.

You gave one company. I gave the industry average. You're saying I read wrong? Please. Of course it would appear that way if you take one company. There are hundreds of Phama companies. If you want to read the SEC filings for each individually, be my guest.

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%.

Irrelevent. All successful IP companies have high gross profit margins, due to the nature of IP: marginal cost of production tends to $0. Microsoft has an 85% margin on the sale of each addition windows copy.

And you honestly believe their R&D comes anywhere close to their margins? Their R&D expenditures in 2002 averaged 6%. This year it's averaging 13%. And let's not get past the fact that each version of Windows, Office, and SQL Server all build on prior incarnations of themselves, which helps spread the cost of R&D over many product cycles. It's one of the reasons why the government found Microsoft a monopoly. Their "overpricing" and use of their market status as OS leader to squash competition in various other markets such as media players and web browsers.

You argue on one hand to be pro-capitalist in some threads, but here you seem downright protectionist.

Arguing for support of property rights is not protectionist.

You aren't arguing for property rights.

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?

Wrong. First of all, averages are not a correct basis of comparison, medians are. Median household income, according to the 2002 US Census Bureau report is $42,409. (Which INCLUDES Elderly retirees on SS according to the CB) Finally, you have to compare income after taxes.

Fine let's do median household income. Median household income in Canada was slightly higher in USD, i.e. $49,400, than the average of $48,000. Again, how is it that canadians can get prices for prescription drugs that are anywhere from 50% to 90% cheaper than the same exact drug in the US?

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.

There is a difference:

1) I have gone through the investment process of raising money, through a risky endeavor, until finally selling off, so I am accutely aware of cost of capital.

And I work for a small firm that was 9 months old at the time of my hiring. I hit my 5th year there in 3 weeks. I as well am acutely aware of the process and risks of raising and investing capital because I have spoken with my CEO of the firm extensively over the years regarding the process.

No difference.

2) I don't google and read second hand interpretive essays. I usually go directly to the source and bypass people who interpret the data for me (e.g. essays, business journals, pressure groups like Public Citizen)

And what source would this be? SEC filings? There's not exactly much "relevant" first hand data outside of that. So you're willing to tell me that you read thousands of SEC filings in your spare time?

And for someone who seemingly poo poo's business journals, I remember in the last discussion between us that you brought up your fondness for The Economist.

3) I don't have an inherent trust in the government or anyone to do the right thing.

You must follow my post history to make such a statement. I don't have a trust in the government to do what's right. I believe in writing loop hole proof legislation that's right, and following that legislation. It was done with the Constitution and the Bill of Rights. It can certainly be done with someone comparitively insignificant as a medicare bill.

4) I am not the one making claims, you are. The burden of proof is one you to prove your cost estimates and claims, not me. Sorry if the history of government stands in contradiction to your optimism.

Actually you have made many claims. Claims to the contrary, which frankly haven't proven anything to this point. The burden of proof is frankly as much on you as it is on me. And up to this point, I've provided hard figures regarding pricing structure here vs canada, as well as cost differential per capita.