Rationing Health Care - it's a lie!

[Francesca R]

I think I proved my point.

You may think that, but it's false.

The only things I've been getting now are "setting price controls are unprotectionist

That's what you are saying and it's why you're being laughed off the thread. You said tariffs (price controls) are "fair":

What the US needs to do is start penalizing Western Europe for [mischaracterisation deleted] Call it a fair market adjustment if you will. We could start adding tariffs on European goods in the US to even the gap. They screw with our prices, we screw with them financially. I would call that fair play.

trying to convince other countries to not use price controls is protectionist

If that's what you think "penalising Western Europe" by "adding tariffs on European goods" is, then yeah it sure is protectionist. I think you won't find any economist who says otherwise.

"everyone can pay less for everything if they just pay band together to pay less, yay!"

Don't know where this comes from, but it is--of course--the logical and proven empirical truth in respect of insurance, which is why universal health systems are the best idea the US never had.

I've got a lot of other things I need to focus on other than arguing with people who don't understand economics over the internet.

Recognised for the retreat that it is.

 

[ddt]

Hey, sure I know. Where did you get those figures, and what currency are they? This page gives as financial highlights: 14.5B$ net assets, 800M$ net income. That's more like 6%.

Fair is fair: Newton pointed out to me that those figures are not from Toyota Motor. The figures he presented are indeed right. My apologies.

 

[Rolfe]

This is actually a bit surreal. On another thread a poster (possibly BaC but I'm not sure) declared that it was impossible for the USA to negotiate any price reductions for patented drugs, because to do that you'd have to be prepared to refuse to pay at the higher price. Only a totalitarian regime which was (plausibly) prepared to walk away from the deal could negotiate, and the USA was screwed because everybody knew it would never do that.

This seems to me to be the exact opposite argument. NB is essentially saying that the imperative is on the drug companies to sell, therefore the healthcare systems can just choose to underpay. BaC was saying that the imperative is on the purchaser to buy, so the provider can just choose to charge what he likes.

Clearly, as I said at the time, the latter argument doesn't really apply in practice. A company may have a patented drug and there is no other supplier, but it doesn't live by Viagra alone. It also makes a lot of things that aren't in-patent, which are needed in vast quantities, and which can be purchased on the competitive open market. So if the drug company insists on too high a price, the purchaser simply says, OK, have it your own way, but my order for the paracetamol and the syringes and the bandages and the i/v fluids is going to your competitor.

At this point the drug company can either decide it's worth it, to get the higher price for the patent drug, or it can have a bit of a re-think, and decide if it wants to give a bit on the pricy drug to keep the bulk order for the boring stuff.

Both parties have negotiating power, and either can walk away from the deal. Or if you like, both parties have pretty strong imperatives to do a deal (one has sick people needing treatment, but the other has a product it needs to sell). THIS IS NORMAL FREE MARKET NEGOTIATING TACTICS.

What NB is calling "price controls" is simply naming your terms at government level. It's advertising to the suppliers that this is what you are prepared to pay. The suppliers don't have to sell to you. If they seriously don't want to, you're going to have to up your offer.

This is different from how Tesco buys from farmers how, exactly? Oh yes. Because Pfizer has a lot more bargaining power than Farmer Giles will ever have.

As Francesca has patiently tried to point out, it is NB who wants to be protectionist. He wants to prevent others from negotiating on the open market, in order to protect drug company income.

Why he imagines that Pfizer and the rest are in any more need of protection to ensure that they have sufficient capital to fund development of their next new model than Ford are, I have literally no idea.

Rolfe.

 

[Ziggurat]

This is actually a bit surreal. On another thread a poster (possibly BaC but I'm not sure) declared that it was impossible for the USA to negotiate any price reductions for patented drugs, because to do that you'd have to be prepared to refuse to pay at the higher price.

It was me, but you are very mistaken about the argument I was making. It is indeed possible for the US to negotiate reduced prices. My point was not about the possibility of doing so, but rather that the public would be unsatisfied with the actual results of doing so (namely, we'd miss out on some drugs).

 

[DC]

well i know from pressreleases from Roche, that the US government has indeed negotiated with Roche about the Price of tami flu.

and i heard from the media, dont know if that is true, that the US Government was ready to walk away from negitiaion, and wanted to ignore copyright and produce themself.

 

[Rolfe]

It was me, but you are very mistaken about the argument I was making. It is indeed possible for the US to negotiate reduced prices. My point was not about the possibility of doing so, but rather that the public would be unsatisfied with the actual results of doing so (namely, we'd miss out on some drugs).

Not sure if that was the same argument, but yes. Do you follow my point about negotiating on a whole deal rather than just a single item? The supplier may have monopoly on an item which is a must-have for me, but I can bargain for the whole deal using my freedom to walk away from the rest of the items. So whichever way it goes, I still get my must-have item.

Rolfe.

 

[kellyb]

NB,
It's not that we "don't understand economics". It's that you haven't provided any evidence that price-gouging Americans is the primary factor behind pharmaceutical innovation.
That is really an extraordinary claim if you think about it, and being skeptics, we are skeptical.

 

[Ziggurat]

Not sure if that was the same argument, but yes. Do you follow my point about negotiating on a whole deal rather than just a single item? The supplier may have monopoly on an item which is a must-have for me, but I can bargain for the whole deal using my freedom to walk away from the rest of the items. So whichever way it goes, I still get my must-have item.

Yes, I follow. And yes, it makes sense. I doubt that the savings you can achieve that way would be terribly significant in the big picture, though. The leverage you gain from non-patent drug orders is going to be a function of how much of the overall purchase is coming from those non-patent drugs. If it's small, you won't be able to get much cuts in patented drug prices. And if it's large, then your patented drug costs aren't dominating your overall costs anyways, so even large cuts in costs on those drugs mean small overall cost savings. It's probably worth doing, but I just don't see how you can get major savings out of it.

 

[kellyb]

Is there a list somewhere of drugs insurance (generally) covers in the US but are denied in countries with UHC?

 

[Rolfe]

You sure that list wouldn't have the opposite heading on it?

Rolfe.

 

[ddt]

It was me, but you are very mistaken about the argument I was making. It is indeed possible for the US to negotiate reduced prices. My point was not about the possibility of doing so, but rather that the public would be unsatisfied with the actual results of doing so (namely, we'd miss out on some drugs).

Is there any evidence this would be the case - that the US customer would miss out on some drugs?

I happen to know a bit about how this works in the Netherlands - I transcribed some interviews with people in this business earlier this year - which also means I should be cautious with what I write about it.

There is a national panel that reviews drug applications for reimbursement under the UHC scheme. When you present a drug to them, you have to show it's effective and also that it's cost-effective. The latter means that your drug should not be more expensive than the standard drug for that illness - unless you can prove it works better than the standard drug. If you can prove it works better for a certain subclass of people, you can apply for that subclass. And if you can prove there's a reasonable expectation it works better than the standard drug, you can apply for a 3-year trial period.

Seems all quite reasonable to me - that really only excludes unneeded ones. There's also an informal limit of EUR 20,000 per QALY, but that's not really enforced, and doesn't apply to orphan drugs anyway.

 

[Francesca R]

well i know from pressreleases from Roche, that the US government has indeed negotiated with Roche about the Price of tami flu.

and i heard from the media, dont know if that is true, that the US Government was ready to walk away from negitiaion, and wanted to ignore copyright and produce themself.

Some governments (India and Thailand at least IIRC) publicly endorsed copying tamiflu a few years back when H5N1 was the scare story. This screwed Roche/Gilead (well just Roche really) at the time but it can arguably be defended as in the public interest (and attacked for not being).

What Newtons Bit is talking about is nothing to do with patent violations.

 

[kellyb]

You sure that list wouldn't have the opposite heading on it?

Rolfe.

Good point.

The theory that "negotiating down pharma prices means that the buyer sometimes says 'no', which would anger Americans" is plausible. But it's just a theory, and we're not in a position where we're at the mercy of competing guesses about how things actually pan out. Every other developed country has UHC, so we should be able to do some sort of actual compare and contrast here.

Is birth control covered under UHC? (it's often not under private insurance in the US.)

 

[DC]

Some governments (India and Thailand at least IIRC) publicly endorsed copying tamiflu a few years back when H5N1 was the scare story. This screwed Roche/Gilead (well just Roche really) at the time but it can arguably be defended as in the public interest (and attacked for not being).

What Newtons Bit is talking about is nothing to do with patent violations.

it wasnt dericted at NB, it was to Rolfe's post about negotiation and beeing able to walk away.

 

[Ziggurat]

Is there any evidence this would be the case - that the US customer would miss out on some drugs?

It's simple logic: you need leverage in order to negotiate anything, and the only leverage in a price negotiation is your willingness to forgo a purchase. And the only way to communicate that willingness convincingly is to actually walk away from some purchases.

Rolfe pointed out that you can forgo purchasing generics from that company (getting them from a competitor instead) as leverage against the patented drugs so that you don't have to forgo the patented drugs, and he's correct. But that leverage is a function of how much of your spending is on such generics: if generics are a small part of your spending, your leverage is small and you won't get a big price break. You can't negotiate a $2 million decrease in the price of patented drugs by threatening to forgo $1 million in generic drug purchases. And if the generic purchases are large, then price breaks in the patented drugs won't make a large impact overall. So the achievable savings, if you aren't willing to walk away from the drug completely, are going to be small.

There is a national panel that reviews drug applications for reimbursement under the UHC scheme.

What you describe is a system for deciding when a drug qualifies for reimbursement, but that says nothing about how the price that your UHC will pay for such a drug is determined. And it's the process of determining price that I'm talking about.

 

[kellyb]

Here:
(because this is a skeptics forum, and I made a claim without evidence)

http://fubini.swarthmore.edu/~WS30/WS30F1998/akussac3.html

Women taking the birth control pill face problems with their insurance companies. Only about 15% of insurance companies pay for the pill4.

Of course, many of us choose to just buy it out of pocket at whatever price it is set at by the free market.

Is BC also an out of pocket expense under UHC?

 

[Architect]

Since this is off the main topic I'll still reply to it. Architects get 6% of the construction budget of a project to do the design. They use this to pay themselves and all of the consultants (structural - me, civil, etc).

They get the job based on how cool of a design they come up with, not on negotiation the price. Every firm gets the same price.

If building owners suddenly decided to band together and set the price at 5% of the construction budget then they would stop getting good products.

If only......

(sigh)

Right, mandatory fee scales were abolished back in the late 80s, when I was still a student, as the EU ruled them to be a restrictive practice. Recommended fee scales were then issued for a while, but the EU spotted this blatant fiddle and stopped it, not least by lodging a huge fine against the Belgians.

Fees are therefore now calculated on a straightforward cost-resource basis, usually on a competitive tender process. To put this in perspective, housing can drop as low as 3 or 4% (madness), hotels sit around the 6 or 7% mark, and high end conservation projects sit around the 8 to 10% mark.

The profit margins are pretty constant across all these sample sectors, the higher % fees being a reflection on the time/complexity.

Traditionally the design team are appointed separately in the UK and Europe, as it makes liability issues more straightforward. "One stop shop" appointments are becoming more common, particularly at the early stages. Don't even start me on design and build contracts.

Now, my practice were one of two architects for the upgrading of a very large hotel where the Open was just hosted. Contract value £28.5m. We provided the specialist heritage advice (heck, tower blocks to conservation, there you go, it's a funny old game) and we were on a direct appointment from the client. The lead architect, services, and structural engineers were appointed directly and separately.

Does that clarify matters?

 

[ddt]

It's simple logic: you need leverage in order to negotiate anything, and the only leverage in a price negotiation is your willingness to forgo a purchase. And the only way to communicate that willingness convincingly is to actually walk away from some purchases.

Agreed.

Rolfe pointed out that you can forgo purchasing generics from that company

That's a possible tactic to convince the company to lower the price.

What you describe is a system for deciding when a drug qualifies for reimbursement, but that says nothing about how the price that your UHC will pay for such a drug is determined. And it's the process of determining price that I'm talking about.

The price is part of the application, I guess - read the process again, "price" is all over the process. You don't get your 23th statine qualified for reimbursement if it's more expensive than the other ones. The rules are public, so the pharma company has an idea how it can set the price. If they nevertheless set their price higher, and don't show it's better, it's their own fault. They knew beforehand what was asked of them.

See also the Canadian rules that have been published a bit earlier in this thread. They say, we don't reimburse more than the median of 7 other industrialized countries.

 

[Architect]

RATIONING ARGUMENT MAKES THE BBC

The Jeremy Vine show in BBC Radio 2 today picked up on the US media adverts claiming nasty things about the NHS, and decided to go to town on it. They invited a representative of the lobby group who made the advert claiming the maximum spend on drugs was $22k or thereby, and a professor of clinical medicine from Edinburgh University.

She completely trashed his "facts", speaking authoritively to issues around NICE recommendations, target values for treatment drugs, and access to things like dialysis.

He, in turn, was asked to respond. And you know what? He changed the subject. Instead of focusing on the points she had refuted in the argument, he tried to argue that the US system was based on "freedom" whilst the HNS was based on "fairness".

Really, I'm not making this up. I'll see if I can find a link on iPlayer, but I don't think our North American cousins can use iPlayer - can they? Some sort of copyright/software issue?

ETA: Ah, there it is. The piece starts around the 1hr mark, just after the 1pm news. I only caught 15 minutes of it myself, as I was going into a meeting.

http://www.bbc.co.uk/iplayer/episode/b00m0208/Jeremy_Vine_13_08_2009/

 

[kellyb]

It's simple logic: you need leverage in order to negotiate anything, and the only leverage in a price negotiation is your willingness to forgo a purchase. And the only way to communicate that willingness convincingly is to actually walk away from some purchases.

So what drugs are covered by insurance here that aren't covered in countries with UHC?