Drug Pricing and Patents – Part I

by Dennis Crouch

My law school Dean, Lyrissa Lidsky recently published a new op-ed entitled Patent reform is needed to protect patients’ access to lifesaving drugs.  Dean Lidsky is in the midst of breast cancer treatment that includes $150,000 for the biologic drug Herceptin.  Genentech (Roche) has aggressively protected this multi-billion-dollar marketplace by asserting its patent rights against potential competitors.

Dean Lidsky is receiving the treatment and insurance is paying price, but argues that the cost is simply too high:

I’m grateful that pharmaceutical companies continue to make discoveries like the one that saved my life. But Congress should pursue patent reform that puts patients first. Our lives are worth it.

The Op-Ed does not present a solution, but does cite to efforts by former Mizzou Law School professor Senator Josh Hawley (R-MO) and others.

Hawley and Sen. Rick Scott (R-FL) proposed the Transparent Drug Pricing Act of 2019 (S.977) includes a fairly weak transparency proposal requiring each state to adopt policies requiring pharmacists to disclose the price of prescription drugs.

The Bill would also limit the “retail list price” of U.S. drugs to “the lowest retail list price for the drug among Canada, France, the United Kingdom, Japan, or Germany.” Sen. Hawley explains in his press release: “There is no reason why U.S. pharmaceutical companies sell drugs to people in foreign countries far cheaper than what they charge Americans.”  As it stands, the Bill this provision could be easily skirted by manufacturers and retailers.  Notably, the Bill does not (1) define “retail list price;” (2) offer any enforcement mechanism; or (3) indicate if any agency would have authority to enforce the pricing provision.  Unless those elements are tightened-up, the provision will be mere lip service.

Prior to becoming Senator, Josh Hawley helped lead the charge against the Affordable Care Act (Obamacare) both as Missouri AG and privately in the Hobby Lobby case.

84 thoughts on “Drug Pricing and Patents – Part I

  1. 11

    On the general subject of what some of us do consider questionable business practices by dominant marketers that I think should be corrected: Amazon goes to a lot of trouble to get you to accidentally ship a purchase under a “free offer” of “Prime” unless one is careful to take action to opt out of that [the reverse of what the practice should be]. Then, to avoid soon after getting automatically trapped into unmentioned extended [not free] charges on your credit card for Prime you apparently have to go to your account and go through a 5 step process to stop it. Did the FTC bless that?

  2. 10

    Does anyone have data on what fraction of medical spending is on patent protected medicine/techniques/devices?

    Assuming that this fraction is not overwhelming, it seems like it’d be prudent to focus on cost saving measures in other areas. Let’s worry about whether our society can afford innovation incentives after saline is cheap and NPs manage all general care.

  3. 9

    I’m grateful that pharmaceutical companies continue to make discoveries like the one that saved my life. But Congress should pursue patent reform that puts patients first. Our lives are worth it.

    This is an odd statement, I think. The “I’m grateful” sentence seems to recognize that patent incentives are driving much of the research that brings these drugs into existence in the first place. So, what does it mean to “put[] patients first” and say “our lives are worth it.” What should the reform be? And had this reform been in place 20 or 40 years ago, would Herceptin now exist for people to be able to take while complaining about the cost?

    On an emotional level, I get it, but these complaints collectively send a message to pharma companies that if you ever develop something truly life saving, there will be enormous political pressure to give it away cheaply or for free, and Congress might just take it from you, so better to focus your efforts on things like baldness and ED…? Maybe I’m reading too much into the statement, but it seems to overlook or give short shrift to the question of how these drugs get developed and discovered in the first place.

    Also, it looks like a biosimilar (Herzuma) was approved last year…

    1. 9.1

      Yes, Kanjinti, a biosimilar for Herceptin, is in fact available in the US market.

      1. 9.1.1

        I went back and read the full op-ed, and apparently there are five biosimilars out there. From the op-ed:

        Herceptin has been on the market since 1998. The many patents on it are set to expire this year. On June 13, the FDA hit a milestone by approving its 20th biosimilar — drugs that are akin to generic versions of biologic medications — for a Herceptin competitor. That makes five biosimilars for Herceptin (the generic name of all of these drugs is trastuzumab); the first of these was approved in 2017. That should be good news, but none of these biosimilars has been able to go to market because of ongoing litigation with Genentech about patents.

        Just from this paragraph, it sounds like the patent system working as it’s supposed to. Genentech had an approximately 20-year monopoly on this drug, but beginning in 2019, the market is going to open up to competition and presumably prices should drop when there are six on the market instead of one. “[N]one of these biosimilars has been able to go to market because of ongoing litigation with Genentech about patents –Yes, that’s how patents work. I feel badly that someone is fighting cancer and the treatment costs more than 90+ percent of American households make in a year, but this op-ed seems… remarkably ignorant. If the alternative is no treatment at all, or long-delayed invention of the treatment, that’s not a difficult choice.

        1. 9.1.1.1

          As noted previously, you have identified drivers such as emotions and feelings.

          Here, you lay out a simple dual choice, and take the logical view that “long-delayed”*** is much better than “non-existent.”

          Such though, is only “really” a choice at the moment of patent grant. It becomes an unprovable assertion as to any sense of timing that would have occurred if there had been no grant at all (for example, let’s indulge Malcolm’s people of good will only making such an advance).

          As I said though: such is an unknown and unprovable comparison.

          *** of course, you did forget that an immediate benefit — even if the actual claims are exclusive — is that follow-on invention may well be guided (or promoted) by the now known presence of the patent.

          Separately, I have to wonder if not some non-small part of this zeitgeist flows from the larger and overall Efficient Infringer efforts to denigrate the more pure Exclusion facet and instead of that more pure “keep-out,” have violation of the keep-out be deemed a rather small “business” offense, “easily” rectified by some nominal “license fee.”

          If such a “feeling” is engendered for the non-medical “goods” that the Efficient Infringers want to peddle (one may even use as an example, multi-balloon water ballon filling devices), then how much more are such Efficient Infringing “feelings” simply “justified” when the innovation is connected to human health and human life?

          Perhaps that “but we are talking lives” aspect buttresses that unprovable timing aspect, and it is some combination that makes people forget that patents are supposed to have BOTH aspects of carrots (reward and fuel) as well as sticks (punishment and ‘the mother of necessity’)…?

          All too often the “stick” portion is simply forgotten, or worse, is portrayed as a negative (for example, by the Supreme Court).

          But that “stick” portion and the adage of “necessity is the mother of invention” are both very real, as any student of the history of science and technology could tell you.

          So instead of the “dual choice” that you provide (which, while perhaps ‘true’ to some unprovable extent), perhaps the better dual nature to be emphasized is the carrots AND sticks and the rebuke of the Efficient Infringer mode…

    2. 9.2

      The “I’m grateful” sentence seems to recognize that patent incentives are driving much of the research that brings these drugs into existence in the first place.

      I think that’s a bit of leap. A lot of the research is conducted by people who would like to prevent suffering, for the sake of preventing suffering. You know, some people (like me) have lost friends and family members to breast cancer. Normal people are motivated by things other than greed. It’s true! If you’ve forgotten that, maybe you are spending too much time hanging out with greedy @ h0les. This is a problem for many patent attorneys.

      Note also:

      The drug was first discovered by scientists including Dr. Axel Ullrich and Dr. H. Michael Shepard at Genentech, Inc. in South San Francisco, CA.[44] Earlier discovery about the neu oncogene by Robert Weinberg’s lab [45] and the monoclonal antibody recognizing the oncogenic receptor by Mark Greene’s lab [46] also contributed to the establishment of HER2 targeted therapies.

      Golly, I wonder if government funded research was relied upon at any point in time by any of these people? Perhaps the “great” country of the United States could benefit by funding more such research. Oops! I forgot. That would be socialism, which is the worst thing ever. Just ask the glibertarian/patent maximalist crowd — they’re very serious people, and totally not just greedy self-interested hacks.

      Also this:

      On September 16, 2014 Genentech notified hospitals that as of October, trastuzumab could only be purchased through their selected specialty drugs distributors not through the usual general line wholesalers. By being forced to purchase through specialty pharmacies, hospitals will lose rebates from the big wholesalers and the ability to negotiate cost-minus discounts with their wholesalers

      Oh well. As long as Genentech’s board of directors and their shareholders are making tons of money, then who really cares about breast cancer patients getting reamed? After all, Genentech and its scientists are the only entities in the world that would ever have been able to make a monoclonal antibody.

      Seriously: f—k these @ holes. And also please stop contacting me every week offering me a sh-tty job with your company. Thanks.

      1. 9.2.1

        f–k these @holes for having created Herceptin? You should have your head examined. It is time.

      2. 9.2.2

        MM responds: I think that’s a bit of leap. A lot of the research is conducted by people who would like to prevent suffering, for the sake of preventing suffering.

        Golly, I wonder if government funded research was relied upon at any point in time by any of these people?

        These are fair points, though they’re what I had in mind when I said “much of research” rather than “all” or “most.” I might have been clearer about that, but my point is basically that I think the incentives in the patent system generally work in the pharma field and push the technology forward faster than it would move with a nonexistent or weaker patent system.

        I suppose it may ultimately be a question of degree. I’m fine criticizing the logic of the argument, but I’m not actually sure how I feel about $150k for this drug.

        1. 9.2.2.1

          Twice now you have alighted upon a driver: emotions and feelings.

          In the absence of clarity (the reason I espouse sun light across the entire Pharma cost/profit scene — including [especially] insurance and their own special gambits), what you end up with is the irrationality of feelings driving the muck of “for the commune” and short-sightedness that “patents must be to blame.”

          Are there excesses in the Big Pharma world of cost/profits?

          Without a flippin doubt (and yes, I know this for a fact with inside information).

          But that is why the first step of clarity — well before any type of mandatory pricing or takings — would inform and that informing alone would be a driver for curbing much of the excesses that now thrive in the shadows.

          This informing would also then put on display the profit lever exploited (at the expense of the US consumer) for Big Pharma putting up with unreasonable demands from totalitarian States (something in denial by certain posters).

          Does it shock you that the likes of Pharma mouthpiece Greg “High Road” DeLassus snipes at legislation that includes clarity with a “watch your wallet” as all facets of Pharma (including generics) do not want sun light on their profit mechanisms?

          There is a world of difference between “greed” in the sun light and greed in the shadows.

          We do not need to banish capitalism or entertain preposterous views that expensive research will be forthcoming purely out of the kindness of people to address the emotions/feelings of “the part of the problem that actually vexes actual citizens.” — clarity and critical thinking based on that clarity will suffice.

          But let’s obtain that clarity first.

          1. 9.2.2.1.1

            Greed in the shadows …. Shall we start requiring the controlling party of interest in a patent/app to be updated on PAIR (whether it be a licensee, or the corporate owner of a subsidiary)?

            1. 9.2.2.1.1.1

              Given that applications are (through the non-publication request) and by and large should be OUTSIDE of the purview of the public until grant, your point does not reach.

              Further, my comments are geared to addressing a different problem than the one that you appear to be aiming for. But maybe there is room for discussion — just what are you aiming for?

              1. 9.2.2.1.1.1.1

                … I would also add a caveat as to the fact that because Efficient Infringement is a real thing, some of the property owner identity information may NOT be a good thing to merely expose for its own sake. The larger mechanisms that I speak of for Pharma are really more “actual product” driven than they are “patent information” driven.

    3. 9.3

      there will be enormous political pressure to give it away cheaply or for free

      There’s a huge middle ground between “charging massive sums of money” and “giving away”.

      1. 9.3.1

        Absolutely — but the answer is NOT your rants against capitalism, nor your cognitive dissonance that “patents are bad.”

        Sun light and capitalism and patents — that is the answer.

  4. 8

    Senator Josh Hawley (R-MO)… proposed the Transparent Drug Pricing Act of 2019 (S.977)…

    Josh Hawley used to be my senator. He ran for attorney general announcing that he was not one of those politicians scrambling to “climb the political ladder.” Nine months after taking office as attorney general, he announced that he was running for senate.

    One of Hawley’s first acts as a U.S. senator was to vote for a giant tax cut for foreign banks. Now he rails against “cosmopolitan elites” whose “money changing on Wall Street ultimately benefits those who have the money to start with.”

    In other words, Josh Hawley is the quintessential two-faced politician. Now that he is posturing to lower drug prices, those who take prescription medications should hold on to their wallets.

    1. 8.1

      Certainly, as a politician, Hawley and his rhetoric should be carefully treated (as is true FOR ALL POLITICIANS).

      But it is more than ironic that Greg “High Road, but Big Pharma mouthpiece” seems to NOT want any actual sunshine into the cost/profit mechanisms of the Pharma system, while advising others to “hold on to their wallets”….

      I have to wonder how comfortable Greg is, living in the shards of that once glass house.

      1. 8.1.1

        What if every drug had a list price of $500,000, but that is not what private insurance paid, medicare negotiated, or was the co-pay for each prescription insurance plan. How would that help?

        Wouldn’t it be better to get “true” transparancy” and actually see all those costs?

        1. 8.1.1.1

          You seem to be confused as to what I am advocating here.

          Maybe read posts 3.2, 1.1.1.1, and 1.2.

  5. 7

    First, my best wishes to Dean Lidsky for a full and speedy recovery. I am glad that there is a treatment available to her, even if it is expensive.
    But I don’t know how she knows or can say the cost is “too high.” As has already been pointed out in the thread, it is very expensive to invent such treatments. The inventor has to recover these costs, as well as recoup some of the costs for unsuccessful attempts. The period that the inventor has to recoup these costs is uncertain, and subject to technology and competitive risks. The technology risk is that it may later be discovered that the invention has undesirable side effects. The competitive risk is that someone else may invent a better treatment, or successfully challenge the patents and compete for the formerly patented treatment.
    A pharmaceutical company must price its offering without knowing exactly how long it can charge a premium price. When a company like Genentech (Roche) has a success like Herceptin, it needs to continue to charge the premium for as long as it can, to make up for all the other inventions that succumbed to these technology and competitive risks.
    A system that gives pharmaceutical inventors more protection from these technology and competition risks would allow pharmaceutical inventors to spread the costs over a longer period of time, lowering consumer cost. That is not the system we have, however, and I don’t think we should blame pharmaceutical inventors for adapting to the system we do have.

    1. 7.1

      as well as recoup some of the costs for unsuccessful attempts.

      Why?

      This is NOT a “has to.” This is a “want to.”

      There is a huge difference.

    2. 7.2

      When a company like Genentech (Roche) has a success like Herceptin, it needs to continue to charge the premium for as long as it can, to satisfy the demands of shareholders and keep its CEO salaries competitive.

      Fixed for accuracy.

      Yay, capitalism!

      1. 7.2.1

        Satisfying shareholders and even competitive salaries per se are NOT the excesses that the shadows bring that are of most concern.

        ALL industry has those factors.

        1. 7.2.1.1

          Hmm, I should say that most all industry has those factors (or similar ones), being that some industry, or perhaps more accurately, industry does provide for various business models and some of those models do not provide for shareholders.

          Say: La V.

  6. 6

    Hey Dennis, could you ask Dean Lidsky which of Roche’s patents she takes issue with? Is there some particular patented technology involved that Roche shouldn’t be protecting? Because if we knew this, we could have, you know, a more informed discussion.

  7. 5

    Hey Dennis,

    Has Dean Lidsky proposed lowering the cost of tuition? I mean I’m grateful that universities continue to educate our students like the one that educated me. But Congress should pursue tuition reform that puts students first. Our lives are worth it.

    1. 5.1

      I’d love an upvote or like button for comments like this. Spot on.

    2. 5.2

      Hmm,

      Maybe we need a system that simply redistributes goods, services, income, and the like from those who can to those who need in this great big commune of ours. Individual liberty and heck, even free will just get in the way of the more important stuff…

      What could go wrong with such a government system?

      1. 5.2.1

        Individual liberty and heck, even free will

        LOL

        So now that someone brings up the idea of lowering drug and tuition costs (presumably so poor people can more easily afford them without wrecking their lives) you are pretending to be concerned again about “individual liberty and free will”, Bildo? Those are really important principles for you all of a sudden?

        Because most of the rest of the time you are here ranting like a total f—-ing id-I-0t because a tiny tiny tiny fraction of entitled rich white guys aren’t being the right to tell me whether I can use a detection device to detect something, whether I can instruct a computer, or whether I can legally correlate one fact with another.

        Glibertarianism truly is a form of ment @ l illness. Funny how it seems to inflict itself primarily upon young white boys.

        1. 5.2.1.1

          There is no “all of a sudden” – and maybe you should pay attention to my other posts on this thread.

          Oh wait, if you do that, then YOU end up in that same “one bucket” as me.

          No wonder you want to be obtuse.

    3. 5.3

      Didn’t Bernie Sanders express a view that would effectively address the concern of tuition costs (from the student perspective) that would not entail any control of costs from the perspective of Dean Lidsky?

    4. 5.4

      Touche. Just as there’s a fix for bloating tuition costs – cut out all the middle management that has permeated US universities in the last 40 years or so – there are fixes for high drug prices. But those lie in the FDA approval process, not in decimating incentives for drug developers to develop new drugs.

      And it is depressing that ostensibly smart people, like a law school dean, just don’t get it.

  8. 4

    Prior to becoming Senator, Josh Hawley helped lead the charge against the Affordable Care Act (Obamacare) both as Missouri AG and privately in the Hobby Lobby case

    Hawley … attended Yale Law School, where he led the school’s chapter of the Federalist @ H0le Society and received a Juris Doctor degree in 2006

    Just another dyed-in-the-w00l Repu k k ke @ h0le. Health care too high for you to afford? Too bad. This is America, where the rich great richer and if you’re poor then Josh Hawley is here to help you s–ck it and make life even worse for you. Capitalism uber alles! Because insurance companies are people. Well, not just people but the very very best people, really.

    Besides, how can America afford to provide health care anyway? Surely it can’t come from taxing the super rich. They’ll stop buying yachts and islands and creating the jobs we all depend on.

    Clearly the best solution to this problem is to expand patent rights further to include not just drugs but also abstractions like correlations and methods of using logic and databases to process information related to medical treatment. Certainly when the pharma companies own even more intellectual property then they do now, they will feel more comfortable about lowering prices on all their (LOL) “wares.”

    1. 4.1

      I know that you are in hurry to use that “one-bucket” thing of yours and rant away, but did you not notice that Hawley is on the side fighting Big Pharma here?

      1. 4.1.1

        Hawley is on the side fighting Big Pharma

        LOL

        My goodness but the naivety is impressive.

        1. 4.1.1.1

          Please explain what you mean by naivety. And remember to include the recognition of which side Hawley is on in the immediate matter at hand.

          1. 4.1.1.1.1

            Please explain what you mean by naivety

            I mean that if you think what Hawley is doing is “fighting” then you are naïve. Hawley isn’t “fighting” diddly squ@t. He’s throwing tiny bones to his constituents and none of what he is proposing is going to have a significant impact on anything.

            Contrast with, say, Elizabeth Warren’s proposals. That’s “fighting.” And that’s why I’m voting for her.

            1. 4.1.1.1.1.1

              Do you have a link to what Ms Warren has proposed on THIS topic?

            2. 4.1.1.1.1.2

              So Malcolm, when I ask for something substantive, you disappear.

              But I did find this Warren blurb about her own bill:

              “In market after market, competition is dying as a handful of giant companies spend millions to rig the rules, insulate themselves from accountability, and line their pockets at the expense of American families,” said Senator Warren.

              Sounds like “one bucket” material to me.

              Should note here that Warren’s bill only aims at the generic marketplace.

              (But we have seen that Generics do not want sun shine either)

              1. 4.1.1.1.1.2.1

                … since this so much sounds like Hawley, we can be sure to hear Greg Pharma Mouthpiece DeLassus tell us all to watch our wallets with Ms Warren as well, right?

        2. 4.1.1.2

          From the Hawley press release link:

          Senator Hawley said, “It’s infuriating to watch the big pharma companies abuse American families again and again by charging them outrageous prices for lifesaving medicines. We need to lift the veil of secrecy that surrounds prescription drug pricing. Insurance companies need to be up front about what consumers will pay for prescription drugs and pharmacies need to disclose the lowest price available. It’s common sense.”

          1. 4.1.1.2.1

            … it sure seems odd that Malcolm wants to accuse me of naivety, clamors (apparently) for the very same thing as Senator Hawley, and does not realize that he — for this topic — is sounding in the exact same “bucket” as both Senator Hawley and myself against Big Pharma (you know, that “Out of control corporate greed

            Applying Malcolm’s own rhetoric, it would appear that he himself is now in that same “one bucket” of “glibertarian psy-ch0-p@ths wet dreams.

            Or maybe the “naivety” comes from expecting Malcolm’s rants to actually be logically consistent…

  9. 3

    Herceptin is protected by numerous patents covering all aspects of its production, and Genentech has used them to sue competitors… The effect of such litigation has been to help preserve Herceptin’s market dominance for more than 20 years—arguably going beyond the period necessary to reward Genentech’s undisputed innovation. [emphasis added]

    That “arguably” is doing a lot of work here. Anyone who has ever worked in (or even interacted with) the biological drug R&D process knows that it is expensive. The facilities necessary to do the work are expensive to maintain in working order. The personnel necessary to do the work are expensive to employ (both because they are uniquely brilliant individuals with many lucrative alternative lines of work, and because many of them require expensive immigration sponsorship to bring them to those expensive facilities to do the work). The reagents consumed in research are expensive to obtain, expensive to store in working condition until they are ready for use, and then expensive to dispose when finished. The regulatory processes employed during and after research to ensure patient safety are expensive both to administer and with which to comply. Finally, the product liability after market launch is astronomical. In other words, every aspect of this industry—from earliest inception in a scientist’s head until the last needle goes into the patient’s vein—is expensive. Small wonder, then, that the prices charged for these treatments can be high!

    So, in order to keep the lights on, a company that wants to work in this space will have to charge high prices for the products it sells. Keep in mind, the price charged for the successful product not only needs to recoup the capital invested in that product, but also all of the tried-&-failed alternatives that were explored on the way to the success.

    If we are to take 20 years as the presumptively correct period (as the author “arguably” postulates) in which to recoup that cost, then the prices charged in that 20 year window must be correspondingly higher. It is conceivable that a profitable business model could exist with a lower initial price, but only if that lower monopoly price is extended over a longer time horizon. In other words, there is a trade-off here: do we want a higher monopoly price over a shorter time, or a lower monopoly price over of a longer time?

    I would like to argue that there are two reasons that we should prefer the low/long option. First, the high/short option means that when the drug is newly out, it will be available only to a few, fortunate (i.e., rich) individuals. Making the initial price lower (but for a longer monopoly term) makes it available to more patients who need it right from its first market launch.

    Second, there are some drugs whose initial launch price would be so high under the high/short model that no one would be able to buy those drugs. In other words, the market for such drugs would be $0. Under such a regime, no company would invest the R&D capital to develop that sort of drug, because there would be no financial return to the work. There are, in other words, various useful drugs that can do good for patients, that can come to market in the low/long policy universe, but not in the high/short policy universe.

    1. 3.1

      All very nice, Greg. That doesn’t change the fact that $150,000/year ($10,000 per vial) is a lot of money for a tiny amount of a chemical which has been sold by the company already for 20 years, particularly when the cost is kept inflated by Genentech’s lawsuits against bio-similar providers (delaying alternatives) and who knows what other dubious “ever-greening” patent strategies are being employed by the company, not to mention whatever lobbying efforts Genentech engages in to maximize its profits and “market share” (the costs of the lobbying is also passed down to consumers).

      Out of control corporate greed is a real thing. Cancer by itself can really ruin your life if you aren’t lucky. It shouldn’t be the case that if the cancer is totally treatable that your life (to the extent that you rely on money to live) still needs to be destroyed just to satisfy some glibertarian psy-ch0-p@ths wet dreams.

      1. 3.1.1

        MM – if we capped drug prices, would you be willing to cap product liability lawsuits too? I am genuinely interested in your response. Greg offers an interesting quid pro quo.

        Putting this into perspective, JnJ is defending against 14,000 lawsuits claiming its baby powder caused ovarian cancer and mesothelioma; and has been ordered to pay $4.69 billion to 22 women. That’s a lot of baby powder to sell to make up for those costs.

        1. 3.1.1.1

          Why must the two be linked?

          1. 3.1.1.1.1

            It doesn’t. But there are at least two opposing sides to this issue, and if one wants to more forward with one’s objectives, like pricing reform/caps, then the “other side” may be more willing to accept that position if there was some concessions to what the other side would like to see done. I dunno, a compromise?

            1. 3.1.1.1.1.1

              “this issue” is NOT any attendant business risks.

              You appear to confuse and conflate different issues.

              Again – the first step here is NOT caps or any forced pricing per se, and is more for full and actual accountability to the entire price/profit mechanisms.

              I happen to have first hand knowledge of the truly 0bscene profit margins in the Pharma world, so — as I advocate — sunshine is what would truly serve Greg’s noted “part of the problem that actually vexes actual citizens.”

              1. 3.1.1.1.1.1.1

                anaon – thank you for proving my point. Your conclusion as to what is obscene is noted. By what measure do you use to reach this conclusion? Your only reason for “shedding” light on process is to try and shame the pharma companies for profits that you think are too right.

                “I looked up fairness in the dictionary and it was not there.”
                ― William Giraldi

                1. By what measure do you use to reach this conclusion?

                  The wealth of inside information on business practices, including actual profit margins.

                  Sadly, I am constrained to NOT reveal actualities.

                  Unfortunately, you got one word VERY wrong in your statement of: ‘shame the pharma companies for profits that you think are too right.

                  Hint: it’s the last word.

                  But certainly, “shame” WOULD be a huge factor if these things were to be brought into the sunlight.

                  I tend to doubt that THAT is your “point.” Not only is your point unclear, but my writing proves MY point – not yours, whatever it is that you think it to be.

        2. 3.1.1.2

          if we capped drug prices, would you be willing to cap product liability lawsuits too

          Corporations don’t get cancer.

          1. 3.1.1.2.1

            But corporations (as juristic persons) can die.

            On a tangent, it’s kind of interesting that you are willing to extend “human” to non-human things when it comes to the computing arts (you know, anthropomorphication), but you want to draw a hard line for humans as humans when it comes to juristic persons.

            1. 3.1.1.2.1.1

              corporations (as juristic persons) can die.

              Who cares?

              A thousand book clubs “died” last week. So what?

              1. 3.1.1.2.1.1.1

                While certainly, juristic persons are not the same as real persons, YOU as an attorney who MAY have a juristic person as a client better damm well care.

                But hey, if YOU want to “A lot of the research is conducted by people who would like to prevent suffering, for the sake of preventing suffering.” – you might want to let your clients who ARE juristic persons know that you have an ethical conflict (or at least let them know of your cognitive dissonance).

    2. 3.2

      One of the pernicious great Big Pharma business model myths:

      Keep in mind, the price charged for the successful product not only needs to recoup the capital invested in that product, but also all of the tried-&-failed alternatives that were explored on the way to the success.

      Why should such failures necessarily be subsidized by any of the successes?

      What this really does is inoculate Big Pharma and entrench the mechanism of not caring for the costs of failures, thereby thwarting a natural mechanism for innovating in effective drug development. When any and all failures are subsidized, there be no need to be concerned with any process that generates such “expensive” failures because the truly 0bscene profit margins of the successful drugs are not in plain view (even though the sense of that 0bscenity is generally present).

      This is why — even without ANY price caps or forced pricing of any kind — actual system-wide cost/profit clarity would be a H U G E first step in rectifying any “hydraulic effects.”

      It’s rather funny though that even the generics would rather not have sunlight on those business practices…

    3. 3.3

      Greg, please stop making sense. You’ll give Mooney a headache.

  10. 2

    A few thoughts:

    (1) Mandating disclosure of retail prices is not going to lower U.S. prices even one cent. In fact, various insurance companies have done this to physicians (i.e., made providers in their networks disclose list prices for various medical procedures). The result was that the lower cost physicians were able to look at the list and see that they were charging less than the market would bear. The result was that the lower priced physicians raised their rates, and total healthcare prices went up. My prediction is that essentially the same dynamic would play out in pharma.

    (2) “The Bill would also limit the ‘retail list price’ of U.S. drugs… .” What would “limit” mean here? Does this mean merely that a drug maker may not list a price higher than the international comparison price, or that the drug maker may not charge a price higher than than comparison price? If the former, this is will make no difference. If the latter, then this really will bring down U.S. drug prices—because we will be imposing price caps (just like all of those other jurisdictions listed above, who all have lower drug costs than we do).

    (3) A lot of effort goes into thinking about how to lower drug prices right now, because that is the part of healthcare spending that is most distorted relative to international comparisons. The larger problem, however, is that our tax treatment of healthcare spending pumps money into the healthcare sector with an almost hydraulic pressure. Right now, that pressurized money is flowing to drugs, but if we squeeze down the drug-price end of the balloon without reducing the pressurized money flow, then that pressurized money will just squeeze into some other end of the healthcare sector. In other words, U.S. citizens will continue overpaying for healthcare overall until and unless we change the tax law. Of course, if we do change the tax law, then the problem of high drug prices in particular will fix itself without requiring any changes to patent law, or FDA law, or price disclosures, or the like. In other words, any legislation aimed specifically at drug prices is really aiming at the wrong target. Such “solutions” will really just shift the problem to another end of the healthcare sector, without actually fixing the part of the problem that actually vexes actual citizens.

    1. 2.1

      Not to get involved in this debate re the asserted ineffectiveness of that particular bill. Simply to point out the logical flaw in the asserted analogy to the disclosure of medical procedure provider’s list prices. That is a situation of competitive providers, whereas the subject situation is the price of drugs for which there is only a single provider for FDA and patent reasons, and thus no competition.

      1. 2.1.1

        Fair enough, Paul. I can agree that the analogy is not perfect. I stand by the contention that publicizing list prices will not actually bring prices down. If you create a legal requirement that a company may not charge a price higher than its published list price, and the company faces no competition for sale of that commodity, then the logical response is to set the list price at something insanely high, and then invent a thousand and one “discount” programs to achieve the highest possible market clearing price (inevitably lower than the “list price”) in each transaction.

    2. 2.2

      Re: “The larger problem, however, is that our tax treatment of healthcare spending pumps money into the healthcare sector with an almost hydraulic pressure.”
      ? I do not know what is really “larger.” But the current personal tax deduction for medical costs is only for that exceeding 10% of taxable income. What about the restrictions on competitive government bidding in the U.S.? Or the widespread reports that pharma industry spending on brand name consumer advertising [to pressure doctors to prescribe them] exceeds their entire R&D budgets? Or obstructing/delaying FDA approval of generic competition? Or reverse compensations to patent challengers?
      One thing I do know is that individualized-generics treatments only good for that individual are never going to be less than astronomically expensive. What will be done about that?

      1. 2.2.1

        [T]he current personal tax deduction for medical costs is only for that exceeding 10% of taxable income.

        Thanks for your response, Paul. That is not the tax treatment of which I was speaking. Rather, I was speaking of the treatment of employer-paid health insurance premia as “not income.”

        That is to say, if my employer pays me dollars, then I am assessed income tax on the quantity of those dollars. One of those things that I can do with the dollars that my employer pays me is to rent a house in which I can live. Very well, and fair enough. What if, however, my employer—instead of paying me dollars with which I might pay rent—provides an apartment on the employer’s premises where I can live? In that case, the IRS assesses the fair market rent of that apartment as “income,” and I pay taxes on that income. Nothing surprising there.

        Somewhat strangely, however, if instead of paying me dollars with which I might pay health insurance premia, the employer instead pays those premia for me, then the IRS does not treat that as “income.” As a result, I do not pay income tax on the value of that health insurance that my employer buys for me.

        This means that a dollar of health insurance compensation is more valuable to me than a dollar of cash remuneration, because I get to keep a larger share of the health insurance income for myself, and have to pay a larger share of the cash remuneration to the IRS. The logical (and empirically observed) effect of this favorable tax treatment is that the share of U.S. employees total compensation that is paid in the form of employer-paid health insurance is much larger than the share observed in other market economies that do not have this special tax treatment for health care spending.

        If people actually want to see health care costs go down, it would be much more efficacious to do away with that provision of the internal revenue code, than is any tinkering that one might do with Title 35.

        1. 2.2.1.1

          because I get to keep a larger share of the health insurance income for myself,

          NO.

          You never see that “larger share” and it is entirely incorrect to think that such ever “graces your hands” to do with as you will.

          Doing away with this tax gimmick MAY force more sunshine on the underlying trickery, but you are NOT treating the root cause, and more likely than not, will merely push the “penalty” on to the ALREADY paying US consumer.

          The only benefit of that which you speak of is that the PAIN to the US consumer would be more evident, and the US consumer may be more quickly tired of that pain point (and then, being tired of such, might be more willing to push for the very thing that I advocate: full Pharma business cost/profit mechanism sunshine).

        2. 2.2.1.2

          Most non-union-employee employers have been dramatically cutting employee medical benefits and raising costs to the employees even faster than they are eliminating pensions.

          1. 2.2.1.2.1

            Yes, it is true that the actual effects of this preferential tax treatment have been waning in recent years. Not coincidentally, the rate of healthcare sector cost inflation has also been slowing over the same time period.

            In other words, your observation is further evidence of the thesis that I am advancing—by pushing money into funds that are only allowed to spend the money on healthcare, our tax laws have encouraged health care spending to increase faster than other sorts of spending. Now that we are “pumping” less money into these funds, the “pressure” in the system is decreasing.

            If we really want to relieve the “pressure,” we should stop the “pumping” altogether. Until we do, we will continue to see U.S. healthcare price growth outpace such growth in peer nations (even if the rate of that outpacing might diminish as the “pressure” injected into the system diminishes).

            1. 2.2.1.2.1.2

              Greg, here is something to chew on further. Normal cost vs demand economics you seem to be applying does not easily provide cost control for this unique situation. Where there is only one effective FDA authorized drug supplier for a given [relevant market] disease there is a classic natural monopoly. And, it has little if any elasticity of demand. [Because few patients, relatives or doctors would chose patient death or staying very sick as an alternative to paying whatever high price the monopoly holder chooses to set.] [Nor is most of our society willing to let that happen.]
              However, antitrust remedies for monopolies do not normally apply to a monopoly that was validly obtained, as is usually the case for drugs from their developers.

  11. 1

    I would not be persuaded by any disclosure of the price of a drug as “sold” in a Socialist state where either patent rights are not fully respected or the right to set one’s own prices for one’s own wares is violated in any way.

    1. 1.1

      Does “violated” include the willful choice to still engage (even if at prices that are lower than desired – but that overall profit margins can be supported through charging more in other geographic zones)?

      Near as I can tell, a choice is still being made by those who it appears you would include in being “violated.”

      1. 1.1.1

        The alternate choice you seem to be referring to is for the drug company not to sell the drug in the country that insists on price controls. Yep, the patient is definitely better off in that case!

        As to adding incremental improvements to the originally patented drug and therefore allow the originator to continue to have market exclusivity as to that improvement, what keeps competitors from selling the unimproved version on which the original patent has run? Once we fix whatever that is, shouldn’t the not-quite-state-of-the-art version be widely available at competition-reduced prices.

        1. 1.1.1.1

          SVG,

          Please do not obfuscate with a false sense of “care” in a situation in which I as a US consumer is forced to be the altruistic one.

          So yes, forcing the issue by making the corporation bear the brunt of its choices may well affect the citizens of other countries. Of course, what you omit is that THOSE countries can well then rethink their attempt to force the profit margin to be had elsewhere.

          (by the way, I entirely agree with your second paragraph)

          1. 1.1.1.1.1

            anon, I agree that US consumers are getting the raw deal, having to bear the cost of drug R&D in order to obtain its benefits, while others get discounts.

        2. 1.1.1.2

          [W]hat keeps competitors from selling the unimproved version on which the original patent has run? Once we fix whatever that is, shouldn’t the not-quite-state-of-the-art version be widely available at competition-reduced prices.

          Exactly correct. The FDA does not permit prior art versions of insulin (e.g., pig insulin) to be sold in the U.S. Obviously, however, we all used to regard ordinary pig insulin as safe and effective. Now, however, the only insulins that are “safe and effective” (as those words are defined in US FDA law) are insulin varieties made in recombinant microbes.

          If the FDA were to continue to class prior art drug variants as “safe and effective” even after new variants are developed, there would be much more market competition. The fix to this requires changes in FDA law, however, not patent law.

          1. 1.1.1.2.1

            This is a fair point, Greg.

          2. 1.1.1.2.2

            Thanks, Greg. I did not know that. The FDA law is indeed the one that is in need of fixing… not the patent law.

          3. 1.1.1.2.3

            Yes, that and other needed FDA statutory changes.

    2. 1.2

      … in other words, my similarly sounding pseudonym friend, what you seem to want to portray as “violations” are merely passed on to (typically) US consumers, with nary a care by the businesses that (still) voluntarily enter those “violating markets.”

      There is a degree of “forced altruism” because the voluntary decision “to be violated” is not paid for by the juristic person, but instead is merely transferred (in the shadows) to the Royal “Me” as a US consumer.

      THIS is — as Greg put it — the part of the problem that actually vexes actual citizens.

      Note as well that I am not even asking for any pricing changes in a (first) step of merely putting the entire cost/profit mechanism into the sunlight.

      Let’s do that at least for awhile and obtain a full and clear picture. Can anyone deny (without pretense) the benefit of such clarity?

      1. 1.2.1

        Let’s start with over the counter drugs. Why does my Mucinex D costs so much ~$29.99 for a 12 pack! I sure each pill can’t be more than a few cents to make. Let’s use this industry as a test case before we venture into the more complicated world of patents and regulatory exclusivity.

        1. 1.2.1.1

          I do not understand for what you are calling here, Xtian. “[S]tart with over the counter drugs”? Start what? What do you think that we should be doing in the OTC market that we do not already do?

          1. 1.2.1.1.1

            Following Anon’s logic, we need transparency at “every” step of the process. What I understand of Anon is that we should be publishing the cost to produce the pills and their list price so that we can see the profit made by the pharma companies. Then, the government can determine what a fair profit will be for pharma.

            1. 1.2.1.1.1.1

              Ah, got it. Thanks.

            2. 1.2.1.1.1.2

              “government can determine what a fair profit will be for pharma”

              They could also do so for food, shelter, haircuts, after all people “need” them to live…

              I prefer to live in a free country thank you.

              1. 1.2.1.1.1.2.1

                don’t forget cell phones and internet. /sarc off/

                Its a slippery slope….

      2. 1.2.2

        I’m not trying to portray anything of the sort… violations are never fully passed on. An optimum market suffers when efficiency takes a hit.. if forced to raise prices, demand inevitably suffers.

        I’m saying that:
        knowing the price of something in other unfree countries with price controls or regulations which result in price controls (that artificially cause prices to be unnaturally low in those countries),
        tells me nothing about the free market price would, could or should be in the US.

        As such, as a consumer, telling me Stalin or Hitler can get drugs for almost nothing (by State edict), does not automatically make me think I should try to demand the same price here… or lead me to believe that the price I am paying is somehow unjust… all I know is that pharma is getting the shaft while trying to reach other markets… and if they are still selling there… well it must be better for pharma’s bottom line than not selling there.

        1. 1.2.2.1

          …and VISIBILITY (which is what I am advocating) would tell you those things that you do not know – and that you choose to believe not (while I – with inside information – tell you that such IS so).

          Pharma is NOT hurt by your supposed “violation.”

          You seem bent on making it appear that Pharma is.

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