A Simple Question About The Pharm Industry.

How many of you think they make too much money now?

menzies said:

How many of you think they make too much money now?

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I think they make too much from the US market and from certain drugs and types of drugs. I think they need to be able to recover costs of developing drugs and if there wasn't an incentive, they'd not develop. However, I don't think they should be receiving double, triple, quadruple and more for drugs in the US compared to any other country. If US costs were just equivalent to Canada costs I'd be happier.

I think there are other structural things that need to be addressed. For instance, the involvement of insurers adds a third party in the US and you're talking profit for the pharmaceutical, the insurer and the pharmacy. Also, Medicare is not allowed to negotiate rates.

Also, there's the question of how researched should be financed. Today it's done through government grants, private and charity grants, and selling the product. Perhaps if it was refined the costs of the drugs could be adjusted.

BandB said:

I think they make too much from the US market and from certain drugs and types of drugs. I think they need to be able to recover costs of developing drugs and if there wasn't an incentive, they'd not develop. However, I don't think they should be receiving double, triple, quadruple and more for drugs in the US compared to any other country. If US costs were just equivalent to Canada costs I'd be happier.

I think there are other structural things that need to be addressed. For instance, the involvement of insurers adds a third party in the US and you're talking profit for the pharmaceutical, the insurer and the pharmacy. Also, Medicare is not allowed to negotiate rates.

Also, there's the question of how researched should be financed. Today it's done through government grants, private and charity grants, and selling the product. Perhaps if it was refined the costs of the drugs could be adjusted.

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All valid perspectives. But if the costs in the USA reduced to the Canada levels, would pharma remain profitable, and be able to stay in business? Yes, its unjust that USA is subsidising other countries costs, but all the health stuff is a difficult thing to get right and few, if any, places have.

The high cost drugs here are subsidised as part of the Pharmaceutical Benefits Scheme, but access is limited. When a drug is added to the PBS it is for a very specific condition/situation, and each new patient case has to be approved to qualify for the subsidy. I don't know how good the people are that make those calls, and it has to be a difficult job. My own experience: During cancer treatment my wife's oncologist wanted to prescribe a drug on the PBS scheme. The request was denied on the basis that for her particular cancer the drug would not provide sufficient extension of life. This was not an assessment of her condition at the time. She did not fit the criteria that had been determined and set in stone at the time the drug first went onto the PBS We could not afford to pay the full cost (it could have ended up as 7 figures), so were unable to test the oncologist's opinion that it might save her life. Was he right? Had the evidence for use changed since it was first listed on the PBS? Her cancer was at an advanced stage, perhaps nothing could have saved her. But it was still very hard for us to accept at the time. Oh, and we had the highest level of private health insurance cover at the time, but that made no difference.

Pharma needs to be able make enough money to fund research, and given the very small probability of getting a breakthrough they have to cover the cost of a huge number of failures for that one success. Another issue is the expiry of patents and impact of generics. Somehow the lack of incentives for pharma to continue research in those areas also has to be fixed.

Right now, with covid-19, its a good thing that the world has the amount of pharma research capability that it does. I would hope there is enough scrutiny of the industry to ensure that unreasonable profits do not occur, but do worry about the capacity of some people to exploit gaps. Detailed disclosure and big sticks required? The carrot being reasonable profit - hard to define that too I guess.

I think not a simple question, or a simple answer.

Yes Pharma would be profitable at Canadian prices. Just not as exorbitantly profitable. Even at European prices..... do you think they are selling at a loss over there?

Its the entire industry that has huge markups.

Anyone with a TV has seen the add where a lady enters a code in her phone and the price purchase price drops to under $10, from almost $70.

This is because most folks have some sort of medical insurance , which gets "discounts" both from the pill pushers and the hospitals.

With insurance and mediwhaever most hospital bills are hugely discounted .

ALL prices need to be posted , no more $80.00 each aspirin pill billing!

Define "too much money" first.

As already mentioned, research and drug trials cost huge money and normally years and years before they make the first dollar. My exwife works overseeing independent 3 party drug trials. You would be amazed at the number that don't reach desired goals (to work better than the existing drug), and either go back to research or get dropped.

Then there are the drugs that have the substantial investment cost, hit the market as the new wonder drug, only to be surpassed a year later by a competitor's drug. Golden goose turns into a common laying chicken.

There are also drugs developed for very small markets (uncommon to rare diseases). These can have high consumer costs. A drug company is a business, why should it pay all the upfront costs on a drug, that it can't recoup investment and make a profit on, before the drug goes off patent?

One of the reasons that so many great products have been developed in this country is that the patent laws and pricing freedoms motivate people and companies to take chances, and risk capital in pursuit of the next great product. Remove the profit incentives, and there's less innovation.

Ted

caltexflanc said:

Define "too much money" first.

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It’s like pornography: we can’t define it, but we all know it when we see it.

Possibly a look at their balance sheets would be in order for the truly interested.

Insequent said:

I think not a simple question, or a simple answer.

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That's the real point here. Anyone who thinks they have the simple answer, only has a simple-minded answer.

One simple answer is competition , sure patent protection is needed to spur new research , but when an old product like an Eppi pen , goes from a couple of bucks to a couple of hundred ,overnight, . competition (not gov force or fraud ) would soon bring the price down.


Competition is the simple and fairest answer.

FF said:

One simple answer is competition , sure patent protection is needed to spur new research , but when an old product like an Eppi pen , goes from a couple of bucks to a couple of hundred ,overnight, . competition (not gov force or fraud ) would soon bring the price down.


Competition is the simple and fairest answer.

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We took that approach and now 90+% of our antibiotics are made in China. How's that working out for us now? Tell me in a month when we're out of them.

Ted

I believe those drugs are made in India, with the raw materials sourced from China?

My GP moved me through 4 different blood pressure meds due to carcinogenic impurities in them from China and India.

Since my wife is a ex-pharmacist and has some views on this subject I thought I'd interject the perspective of marketing, namely the vast sums of money they spend as an industry. I'll let you guys decide if this seems like too much, just enough, or too little. My opinion is it is WAY too much and the money could be spent more efficiently to help lower the cost of drugs.

From the article:
Of the nearly $30 billion that health companies now spend on medical marketing each year, around 68 percent (or about $20 billion) goes to persuading doctors and other medical professionals—not consumers—of the benefits of prescription drugs. That’s according to an in-depth analysis published in JAMA this week. The study broke down exactly how health companies convinced us to spend enormous sums on our care between 1997 and 2016. In that time, health companies went from spending $17.7 billion to $29.9 billion on medical marketing.

Source:
https://arstechnica.com/science/201...-30b-on-marketing-most-of-it-goes-to-doctors/

Careful, as there are lies, damn lies and statistics!

Included in that number are all of the education programs - disease state as well as product. A decade ago the line was very blurred between professional education and marketing. Over the last decade this has been cleaned up a ton. While there are still some "iffy" players out there you will find that the professional medical organizations now follow ACCME guideline when it comes to commercial sponsorship of their conferences and other education.
Of course there will always be cynics - especially those who make a living or their name from bring cynical!

That's amazing!

But Pharma is a business, not a nonprofit.

Imagine how cheap my next trip to a fast food restaurant
would be without all the advertising, but then I might not eat there. Guess that's what advertising is for.

Pharma is business. Without advertising, you might not buy your Male Enhancement drug from their company. That's the way business and advertising work.

Ted

So does Apple make too much money? Many if not all of the same issues noted above.

caltexflanc said:

So does Apple make too much money? Many if not all of the same issues noted above.

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Big difference between life saving, life maintaining products and a commodity.

If people can't afford an iPhone and have go get by with a flip phone or no phone at all, that is very different from getting by with inferior or no drugs due to affordability.

Greetings,
Re: Post #18: "...Male Enhancement drug." Hmm. Puts me in mind of the senior who went to his doctor and requested a prescription for 1/4 strength Viagra. The doctor asked him about his "performance". The senior replied "Not worried about that, I just want to raise it up enough so I don't pee all over my shoes".

RT Firefly said:

Greetings,
Re: Post #18: "...Male Enhancement drug." Hmm. Puts me in mind of the senior who went to his doctor and requested a prescription for 1/4 strength Viagra. The doctor asked him about his "performance". The senior replied "Not worried about that, I just want to raise it up enough so I don't pee all over my shoes".

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Ted

Donsan said:

My GP moved me through 4 different blood pressure meds due to carcinogenic impurities in them from China and India.

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You must be taking the same stuff I am. I am on the last one in the chain of sartans and being told they all have the same base ingredient, all from the same plants, so no real alternatives.
Most are now generic, the name brands were copied many years ago. North American switched to generics and pharma from Europe said stuff it, no more soup for you. Last I heard name brands are not soon to return.

Sure, Canada negotiates prices with the Pharm companies. The US does not but it should. The result? My wife's prescription insulin costs $600/month in the US and this is only partially covered by insurance, but she can get the same insulin OVER-THE-COUNTER in Canada for...wait for it...$13 per vial. Somebody somewhere is pocketing a "Yuge" amount of money.

Steamguy said:

Sure, Canada negotiates prices with the Pharm companies. The US does not but it should. The result? My wife's prescription insulin costs $600/month in the US and this is only partially covered by insurance, but she can get the same insulin OVER-THE-COUNTER in Canada for...wait for it...$13 per vial. Somebody somewhere is pocketing a "Yuge" amount of money.

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Is $13 the negotiated price or the co-pay after their national health system pays for it. That of course is the system that takes 50%+ of your income at source to pay for all this.

So you would be paying for those drugs every pay check since you started earning whether you were on the drug or not.

Not so simple eh?

menzies said:

Is $13 the negotiated price or the co-pay after their national health system pays for it. That of course is the system that takes 50%+ of your income at source to pay for all this.

So you would be paying for those drugs every pay check since you started earning whether you were on the drug or not.

Not so simple eh?

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I will cal BS on the bolded. We actually pay less effective taxes than US after adjustments. That we pay dearly is just a rumor.

Soo-Valley said:

I will cal BS on the bolded. We actually pay less effective taxes than US after adjustments. That we pay dearly is just a rumor.

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Nope. Federal is from 15% to 33%, provincial and territorial adds on another 9% to 21% depending on where you live. Add in Employment insurance of 1.5% and Social Security of 5% and you very quickly get there.

menzies said:

Is $13 the negotiated price or the co-pay after their national health system pays for it. That of course is the system that takes 50%+ of your income at source to pay for all this.

So you would be paying for those drugs every pay check since you started earning whether you were on the drug or not.

Not so simple eh?

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To the best of my knowledge, except for people that are on social security (a minority of Canadians), there is no national or provincial co-pay system for prescription drugs in Canada.

As to "excess" profitability of the pharma industry, I'll let you be the judges.

Here are the 3 year average figures for Return on Invested Capital after goodwill depreciation (ROIC) for various pharma companies:

Abbott: 14.4%
AbbVie: 29.0%
Amgen: 36.4%
Astra Zeneca: 6.8%
Bristol-Myers: 26.7%
Eli Lilly: 33.8%
Glaxo Smith: 24.1%
Merck: 29.2%
Novartis: 8.5%
Novo Nordisk: 132.7% (sic)
Pfizer: 12.7%
Sanofi: 8.6%

Source: Valuentum Secutities Inc.

Hope this helps!

calculators. allow $1,000,000 Can$ = $750,000 US for a single person no dependants comparison. I pay $536,000 (373,626.55US$) and you pay $262,000 (375,861CAN$)
Neither one of us are at 50% tax

https://www.eytaxcalculators.com/en/2019-personal-tax-calculator.html

https://goodcalculators.com/us-salary-tax-calculator/