Didn’t get any bites on this earlier, but what about this proposal. This would be fair to any manufacturer, but also cap what they could charge for their drug because the threat of immediately taking the patent would make them consider how much they are costing the government with their pricing.
Fine idea. The federal gov’t already has the legal authority, as long as the payment is “reasonable”. They just don’t use it. Of course, is “reasonable” the most the patent holder could earn by aggressive pricing, or the cost of developing the drug plus some percent, or the “utility” of the drug?
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That’s interesting… I didn’t know that.
I think they just need to have the drug manufacturers justify their prices, similar to a rate filing, but at the federal level.
And maybe they only need to justify their prices on drugs that cost more than $X per month or $Y for a one-time treatment so that they don’t get bogged down approving a price increase from $6.00 to $6.50 for a course of generic amoxicillin.
But when Duraprim goes from $13.50 a pill to $750 a pill that would / should require regulatory approval, as would setting the price at $750 a pill in the first place.
I’d have to think about this some more, my initial reaction is I prefer ‘rate filing’ to an outright rule on taking a drug off patent for some amount of money.
If you got things lined up to be able to look at cost of production, and expected benefits, that’s something. Folks would surely disagree on how to value non-monetary clinical benefits but conceptually… it’s a framework.
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I think even the threat would force drug manufacturers to think differently. Also @Indy that is fascinating. Thank you.
Heal a bunch of people at random? Hard to think of a less pertinent example.
He once insisted that a rich man give away all his wealth, and that’s good to think about, but it’s not policy.
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Is that a feature or a bug?
some of us aren’t susceptible to diabetes, some are. it’s kinda like healing at random.
it’s also proof that jesus is really RNGsus
To bit a bit more color on it, I think cost could be used to create a floor. If it costs $100 to make a drug, then the manufacturer should have a price floor above $100. I don’t think there should be much of a price cap based on cost. Now, if there isn’t $100 worth of benefits, then maybe payers shouldn’t cover the drug.
I think the cap should be around benefits, if the benefits (clinical plus financial) are small then you can’t charge $10k/month for it (see: Zaltrap, Zytiga). If you create a cheap drug that cures diabetes, you should be able to charge a lot. I’ll punt on how much ‘a lot’ is here.
What percentage of pharmaceuticals are derived from government funded research, grants, and tax breaks?
What percentage of the profits from those pharmaceuticals should the government be able to recoup, either in a percentage of the profits or reduction in what the drug maker is allowed to charge to the general public?
You’re looking at this all wrong. If it wasn’t for all that free research, drugs would be more expensive. The free research keeps drugs cheap.
I agree in the abstract, but having a regime make decisions on the basis of relative life value incurs insurmountable practical problems, except perhaps in the narrow case of limiting taxpayer subsidies according to incremental QALYs.
As to Indy’s post, I also agree, but here is my math:
Value: hundreds of thousands of dollars’ savings per year to the risk pool
Cost: one life
Also a cost: millions of people fearing they’ll be next on the chopping block
The crux of the problem right here. Try as you may, deriving “the formula” will prove impossible. At best you’ll simply end up expanding expenditures each time a new drug comes to market. This will continue to send more and more resource to the HC market.
The solution is set a budget for HC in total, then do your best to maximize the benefits given that amount of resource. We still end up with winners and losers, but any process will do that.
Solve the pricing issue in a vacuum only if you’re OK with diverting all of the budget to HC and ignoring any and all other possible benefits in other areas ( defense, infrastructure, etc.). Set up the budget, then do the best you can. Either the new drugs make the cut or they do not.
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Why are we putting strict caps on how much profit insurers are allowed to make but thinking that drug manufacturers should be able to charge a crap ton just because they can?
Yes, they are entitled to make a profit, just as insurance companies are. And the profit for the drugs that do work obviously needs to be high enough to cover the R&D costs of all the ones they tried that didn’t. (As the trope goes… the second pill cost $2 to make. The first one cost $20 million.) And it has to be high enough to incent them to keep looking for cures / better treatments.
But I think there’s plenty of room for drug makers to be profitable without jacking up prices more than 5000% all at once.
I don’t know that this always works as intended.
Fair question. I guess I’m assuming they take more risk than insurers. And maybe that’s not a true assumption. Or, maybe if their revenue was capped like we are talking about, the downside risk would be higher.
I may have some other bias creeping in, wanting to reward people for solving problems creatively or whatever.
So I don’t know where the balance is. If someone were to cure diabetes I’d want them to make a lot of money. But I don’t know how much ‘a lot’ is.
That was sarcasm on the internet. Hard to tell these days, I know.
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In my, never-gonna-happen world, we hold an annual referendum on the federal budget. Voters decide how much tax they are willing to pay to support defense, how much for social security, how much for help-the-poor programs, how much for Medicare, etc. That would work with your spending cap.
(Yes, this requires a much simpler tax structure.)
I have a weak sarcasm meter, so that might be at least partially on me.
I have also been known to give serious replies to posts that I did know were sarcastic. 
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That seems fraught with problems. When money is tight is when government expenditures tend to increase.
I think there would be way too much uncertainty with your model. When times are plentiful everyone will want to pay plenty for defense and then when times are lean they won’t want to and we’ll have to cut pay, lay off troops, cancel defense contracts with considerable sunk costs we can’t recoup… there would have to be a LOT of protections against that sort of thing. IMO.
Our representative democracy has a lot of flaws, but I think that in general representative democracy with a constitution is a fine idea.