Again, IMO, we need to eliminate “generic drugs”.
It’s a stupid system.
We just need to need to make Brand drugs cheaper.
Maybe after the patent runs out you’re simply forced to sell your drugs at an estimated cost of production?
Or maybe just say **** it and sell the whole manufacturing chain to an entity with no interest in prices.
Not sure how patents work. I assume you need to reveal your recipe for something to be patented?
Given how complicated making a drug can be, I think that’ll just push companies to never reveal the recipe and never file for a patent.
The problem is that people don’t develop drugs out of good will.
First let the brand sell for 10 years. Let them make $50 billion hold dying people hostage.
Then instead of using generics to bring the price down, just bring the damn price down.
They should be aiming to make all their money in those first 10 years anyway.
that sounds a bit communist
property is theft, comrade
Also, I think this is a good question. You share what the drug is, but not how it is made.
With the new big money drugs (biologics), we can’t perfectly reverse engineer the drug. Instead we go through an expensive process to come up with something similar, which people don’t trust.
Which is all to say, maybe half of my complaint here could be solved by just forcing people to truly share the recipe.
Another thought is to regulate prices. In particular regulate the price differential with other G8 countries. If you sell the drug in Canada for $X, you should aim to sell it in the United States for $X are not allowed to sell it in the United States for more than $1.2X. Give them some slop to account for exchange rate fluctuations. If $1.2X isn’t enough to cover their R&D costs then convince Canada to pony up too. I don’t mind subsidizing drugs for starving folks in Honduras, but we don’t need to be subsidizing the cost of drugs for German & French citizens.
When you say develops what if that development relies on government grants directly? What it relies on government grants indirectly? What it relies on government funded research?
Sure would love to and I am close to this as I work in our formulary and rebate modeling department in our PBM:
starting in 2025 CMS will negotiate prices directly for the top 10 Brand Name drugs in spend each year. The impact here could be huge, but this one is on the wobbliest ground because Republicans do not support this and it’s a reconciliation bill so it can be changed with the next budget bill they are in charge of which could be 2025 after the next presidential election
$35 copay on all insulin products. This is a max and it goes into effect next year.
$2000 hard max out of pocket for all Part D beneficiaries. This is dropped from a soft max of around $5800 now. Insurers must also allow Part D beneficiaries to split this cost out into a monthly payment to make it more predictable.
After that out of pocket max is reached the member now and in the future goes into a catastrophic phase of coverage. Currently CMS pays 80% of the claims in the catastrophic phase, we pay 15%, and the member pays 5%. In the future we will pay 60%, CMS will pay 25%, and the drug manufacturer will pay 15%. The impact here is that since we are on the hook for this a lot of our rebate schemes will not be financially feasible anymore. This should lower up front costs instead of the manufacturer paying rebates on the backend
What is the net impact of all of this?
Sick people will have substantially less out of pocket costs for scripts and premium
Not sick people will have a decent sized increase in out of pocket costs for increased premium (everyone’s premium is going up)
We’re not sure on the behavioral economic implications but I believe the removal of cost from the members will drive up utilization of expensive brand name drugs. Why? Beneficiaries that receive the Low Income Subsidy currently have much more utilization of expensive brands than members who are on the hook for copays and coinsurance. It’s natural as this obligation gets smaller the same dynamic will play out
Drug companies are going to have to do a lot more math when they launch a revolutionary new drug. They will want to charge as much as possible without ending up on that top 10 list mentioned at the beginning of this thread. If you look at LinkedIn they are all hiring people with our skills to figure this stuff out.
*Rebates are going to have a much less adverse impact on sick people. Currently all the financial incentives are for us to push cost to CMS and the member and then collect rebates on the back end. Couple of dynamics here. First we collect 100% of the members share of the rebate. Second what we have to reimburse CMS from the rebates we collect is not based on the specific claim, but on their share of our total claims expense. This means we get to keep some of their share of the rebate on specific claims as well as not all of the catastrophic spending is rebated. In fairness to our side of this puzzle we only get so much margin so the extra benefit is used to buy down premium and get more members. It’s not a direct source of profit. This is why not-sick people will pay more.
That’s a lot so let me know what you have questions about. Some things I can’t discuss because I am sure some of our competitors read this board to.
Such a complicated and fraught topic. I will throw out two ideas.
Regulate the rebates. Manufacturers are literally paying doctors to use brand name drugs and that should be illegal.
Stop ASP+ pricing for injectable drugs.
That doesn’t get too much at the prices of branded drugs, unfortunately. I don’t have the bandwidth for that today.
Can you explain this?
Absolutely. It’s just another form of bribery.
Injectable and infused drugs are often administered in a clinic or hospital. The clinic or hospital buys the drugs from the manufacturer (technically they buy from a distributor, but let’s ignore that for now), gives them to patients, and then bills the insurer for the drugs.
The way they get paid for is by looking at the Average Sales Price (ASP, it’s complicated but safe enough to assume it is what it sounds like), plus some percent. That’s literally how the pricing works, Aetna agrees to pay XYZ clinic 108% (made up number) of ASP.
Assuming the physician acquires the drugs at ASP, they make an 8% margin. Would you rather make 8% on a $100 drug, or 8% on a $1,000 drug?
While on this one subtopic, of stupid incentives, let’s add Copay cards.
Ie.
The payor pays $1k for brand or $100 for generic.
The payor passes $30 for brand and $10 for generic to the member.
The Brand manufacturer gives the member a $30 coupon to the member to cover the copay.
Everybody wins??? Lol.
Also, on the topic of doc bribing, my dad was a town doctor, which meant when I was growing up, I got to go to baseball games and shit for free thanks to pharmas. Not important in the grand scheme of things, but quite dumb.
Ah, sounds like the hospital should be reimbursed for the cost of the drug plus a flat fee for acquiring, storing, and administering it. Their administrative costs for the $100 and $1,000 drugs are the same* so they should be compensated accordingly.
Thanks for the explanation.
*I mean, maybe there are exceptions, like the Pfizer vaccine that has to be stored at -85 degrees or something like that is probably more of a PITA to deal with than J&J that can be stored at room temperature. But base it off their hassle, not a percentage of cost.
Yeah, more bribery that should be illegal.
Once again:
The government is willing to provide a government-enforced monopoly for a limited time. The trade-off is that once the limited time expires, the discoveries are available to anyone without paying a fee to the original discoverer.
Or, as you point out, people can just forgo the patent if they prefer.
Yeah, there was a proposal to do ASP+$100 or whatever a few years ago, docs threw a fit about how it would harm patient care. Do you really want your medical oncologist making less than $700k? Do you? You do.