Posted on 01/22/2004 7:29:26 PM PST by maui_hawaii
Here is my assessment:
They are not. Not in reality.
Right now youre probably sitting there thinking, Whoa, thats totally different that everything Ive heard or its cheaper for me, so its cheaper. Let me explain why I am right.
The difference is social systems (namely socialism) and trade policy. Those are the two biggest factors.
Imagine you are a drug manufacturer. What is your largest cost? Is it manufacturing? Not a chance. Your biggest cost is by far development of newer and more cutting edge drugs. The actual manufacturing could be pennies on the dollar in comparison. Quite often the actual manufacturing is farmed out to local manufacturers in the host country. They arent really selling the drugs across the border, but rather the know-how to a contractor in say Canada or Europe.
Because of our system we have taken a lead in developing new drugs. The vast majority of medicine and medical practices are developed here in the US. Why? Because can afford (and do spend money on) the R&D costs.
Now lets say you develop some really good cancer treatment drug (a fictional example) and it cost you billions in development. Because of the dominant view that drugs are developed for the good of mankind, the drug companies sell drugs in places like Canada where they literally cap what they can be sold for.
What ends up happening is the foreign markets actually in many ways drive up the costs of our prices at home, in other ways they kind of drive down prices. More of the former than latter. Let me explain that seeming contradiction.
First off, one MUST recoup costs of development. Those billions are spent on your cancer drug no matter what.
In a purely Canadian system it would take 100 years to recoup the R&D costs of your new drug, if ever. Its because of price controls.
If the US adopted the socialist price control system it would completely bankrupt the entire industry in less than 10 years thus making everyone worse off. It would happen also if we allow the importation of drugs. 2+2=4.
The R&D costs MUST be recouped one way or another, and the quicker that happens, the faster we get more and better drugs. We are looking at turn-over. One wont reinvest money they dont have or have not yet gotten back. Who will pour money into a money losing venture?
Here is how Canada (and others) drive up our drug costs: because of their system they force US consumers to foot the bill of R&D costs. Those costs are simply spread over less consumers. We have a smaller market (compared the entire world) that is the one actually paying for the R&D. Our cancer drug costs are simply not allowed to be priced in globally. They quite literally force us to pay for our own R&D and recoup the costs all by our lonesome (that THEY are benefiting from). Our companies are not allowed to price drugs internationally so that the R&D costs are spread out among more of the people that actually consume the product. We are not allowed to treat foreigners as actual market participants.
In short, the US consumer is subsidizing everyone elses right to have drugs. If the global drug market was not segmented, on average the US consumer would pay 60% less and everyone else would pay 25% more.
How they drive down costs is that what little they do contribute financially does help the drug companies. Its still though an unfair system. The international markets want something for nothing. If we cut them off from the pot we are SOBs. If we make them pay for what they get we are SOBs. Its a lose-lose situation.
If the US companies refuse to supply their markets everyone does what China threatened to do: Go buy a few bottles in the US, reverse engineer and manufacture the drugs on their own. Then the drug companies get NOTHING and all patents are disregarded. In other words the drug companies are trapped in the system.
The US is the only place in the world where the costs of drug development can be recouped. Thats the simple truth of it. If that market goes, the whole industry dies. That is why the drug companies are so opposed to drug importation. It would in essence Canada-fy our drug market and seriously stifle the development of drugs.
We dont want that.
Instead of complaining about the drug companies maybe we should complain about the socialism overseas. Truth is, if you are American, you are paying for some old Canadian ladys drug bill. Thats what it amounts to.
because...
DRUGS BASE PRICE IS wharever medi-care will pay for it...
as is virtually every other bell, whistle or toot medi-care will pay for.. so this why insurance companys adjust to what medi-care will pay too.....
Force medi-care to lower its price threshold and VOILA! SHAZZAM lower prices for EVERTHING, not just drugs..
I am just trying to figure out the substance of this debate.
On a program about this they said that a new drug had not been developed in Canada for forty years. Do they just sit around and wait for us to do it?
I suspect that a lot of this price jockeying has to do w/ American companies knocking down potential competition. The drug companies are so big that they can undersell any competition--absorb the loss if they must in order to keep a competitor from making profits. Canada is a small market--a Canadian company would have to export & that means getting it cleared by FDA & FDA is likely stacked w/ ex-American drug company execs....
1. Law suit damages are limited to actual damages.
2. Advertizing is zilch.
3. The regulatory environment is very low (everything except narcotic drugs are sold over the counter -- only requiremnet is that a pharmicist (sp?) supervise the store)
4. There is virtually no insurance coverage for drugs.
Keep in mind that patents are taken out when the drug is submitted to the FDA for approval, which can take years. Thus, the patent holder may actually have only 7 or 8 years of real marketing time to recoup their costs.
BTW, I agree that pharmaceutical advertising is BS. The commercials give you a drug name and some pretty pictures, but generally don't even tell what the drug is for. A notable exception I saw a few days ago was something for vaginal dryness, shown at about 5:30 P.M.! You know, just about the time the kids fire up the telly for the evening.
I will agree with Maui that American consumers are subsidising costs globally due to price ceilings in the various socialist sewers around the world. But, with investment in pharmaceutical companies actually being multi-national in nature now, it would probably not be possible to withold shipment to those places that refuse to pay full price.
I am sure the FDA needs work, but in ways aren't they a nessesary evil?
Seriously. Who would want an untested drug from China that could make you go blind?
These other countries might simply say 'if its good enough for the American market we don't need to have a redundant process here'
Could that have an effect?
Whoops! I should've been more clear. I meant that after the FDA finally approves a drug, companies have about 7 years before the patent is up. The patent has to have been granted prior to beginning the approval process. There are some exceptions for rapid approval where the patent can just be applied for. If the patent were 7 years, there would be no drugs. The FDA almost never approves a drug this fast.
However, when I look it up, I see that the average time that a drug can now be sold has increased to 8.1 years. Gotta love that federal process improvement.
Also you know that Drugs are covered under Title 21 not Title 17.
1. They let the FDA of the USA and Japan do their work for them, they permit roughly the same drugs to be sold.
2. Doctors are the authority and their recomendations are followed mostly. If you go off on a tangent it is your tough luck. Asian medicine is popular but most people back up the herbs and roots with real drugs.
3. Perhaps the worst thing is the overuse and misuse of antibiotics. People take cipro for everything.
So, General Motors says: ''That's OK. We'll sell you that car for $20,000 and then, to make up the difference, we'll charge Americans $40,000 for the same car.''
What would happen is that no Canadian car industry would develop; General Motors would control the car market in Canada and Americans would get to pay for their car and the profit margin that GM lost when they sold cars to Canadians. Not a few Americans would be screaming from the top of buildings over unfair business practices & quite a few Americans woudld be sneaking off to Canada to buy their new cars. Then General Motors would start whining to the government to outlaw Americans from importing cars from Canada. And the American consumer gets shafted on prices and both Americans & the rest of car-purchasing world has less selection because the development of competing product has been squelched by artifically manipulating prices.
However, quite a few Americans would take the position that this is an OK deal because General Motors builds really fine cars & we ought not monkey around w/ a business model that produces such fine automobiles.
Exactly.
If costs cross into unprofitability then that activity is ceased, but if they are still profitable they are done. The price Canada is willing to pay for American drugs is too low for our companies to invest time and money into R&D, failed products, legal, FDA, salespeople, ads, marketing, free samples, not to mention the stockholders. These costs must be borne by our market. If they aren't then their will be no new drugs. Period.
If our market pays those costs then companies have factories churning out pills for pennies, but they must be sold to cover the costs listed. If Canada comes knocking and offers to buy some pills for a few dollars they can because they get sales at prices near the margin. It's good business to sell to them.
Suppose Canada then starts undercutting the market by selling their newly bought drugs in the US. As a drug company what would you do. I know what I would do. I'd jack up the price 'til they quit buying, this market was profitable without them, and will be again. All these pols whining about laws that prohibit us from saving money by purchasing from Canada are either stupid or dishonest.
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