Here is why you'd rethink that position.

By law, insurance companies have to spend 80-85% of their revenue on patient care. Which means that their potential profits are limited by medical expenses paid out. As long as they have properly projected and accounted for the medical expenses in their business model, they therefore have a financial incentive to let expenses be high.

Spending $43,354 for something and getting a $30 copay in return will never be a part of any clever scheme to fleece anyone.

There's a few ways we can pay less for a compound where there are generics/biosimilars. We could contract with a hospital group saying we will pay a small % markup on the cheapest drug to treat each condition - i.e. they can use the cheapest generic/biosimilar and make profit, or use a more expensive one and make a loss. They naturally shift all volume to the cheaper one. That then makes demand very elastic to price, and so encourages a lower price from manufacturers. We do see some compounds all sit at the same lowest price and not shift - that does suggest collusion - potentially tacit collusion though. An alternative is to contract with one pharma company to get a rebate if we push volume to their drug. We could then mandate to providers that we'll only pay for that drug.

Games theory is pretty clear about how this all ends... Badly.

If they manage to undercut gouging, that should lead to lower insurance costs and put pressure on the rest of the industry to control costs too...

They are? Where is this happening? This could be a good thing, but I doubt it since the regulations on such entities will likely be warped in their favor.

First, they make you get evaluated by one of their psychs. Take depression for this example. Unless you're having suicidal thoughts, according to Kaiser, you don't have depression. So no, therapy is not covered.

So, you say "no really, I am demonstrating every symptom of depression other than suicidal tendencies, I just want a therapist." ok fine we've got a troublemaker over here demanding the healthcare they pay for, stick'm in a room with 10 other patients and an unconcerned therapist, call it "group therapy," done.

"But I don't want a room full of random people to know about the shit I go through in my life or my past abuse. I have depression, I want therapy." Fine, you have overcome the requisite 3 months of phone calls and bullshit that filters out 90% of our insurees, so you get to be on the waiting list for one of the five Kaiser approved therapists in the bay area. Next appointment: 2021.

Of course, you could always just pay out of pocket, between 100$ and 200$ a session...

They've been outsourcing significant amounts of this to secondary companies (e.g. Easter Seals, BHPN), which then outsource the work to smaller agencies. This turns into the smaller agencies fighting for basic services on behalf of clients.

There are regular mandatory meetings (monthly I think) where execs from Kaiser and the intermediaries announce breaking changes, or straight out berate the group of providers for doing their job, or for not doing things that aren't their job. They like to change coding rules without telling people and then blaming them for not coding properly. They also like to force companies to follow rules, especially when it doesn't particularly make sense (like carrying insurance for injuries to customers when customers aren't allowed on-site).

Then after all of that they'll arbitrarily hold payment as long as the possibly can. A couple of the smaller agencies in our area have gone under because they couldn't pay staff while they waited for checks. We've seen them delay payment by over a year after services were billed.

The only real strategy in this case is to spread out your customers by insurance provider. Unfortunately that means turning very needful customers away, because you can't become too reliant on any one funding source.

Source: I provide support to a mental health services agency in my off time.

Which is insane. Even I know that the DSM's definition of major depressive disorder includes numerous other criteria besides suicidal ideation, and I ain't even got a psychology degree (I did ace my AP Psych exam, though). That actual licensed psychologists/psychiatrists (and/or the representatives thereof) would pretend otherwise is surreal.

It was great being able to go to one facility to see a doctor, a specialist, get tests, and fill a prescription.

https://prospect.org/article/why-aetna-and-cvs-merger-so-dan...

Better to remove the profit motive from most of the healthcare economy rather than move it around.

Essentially they want to get you having more than your blood pressure checked and enjoy some other things they can throw at your insurance.

But about how much they can profit from it.

I remember reading a book about the history of some (famous) chemical company in the U.S. – Dow? Dupont? – doing exactly what I described to compete with the at-the-time existing German chemical company cartel.

Plus there's the issue of whether a drug can remain safe to use after long periods of time at all.

The set of people with the condition probably does. I wonder if a kickstarter for generics would be successful?

In this particular case, there are actors for whom the profit would not be directly generated by sales of goods, but by the amount they save elsewhere in their operations - which, depending on various factors, might actually be multiples.

You could find a profit maximising capitalist who would be happy to enter the market and compete for a fraction of the outrageous profits - that would make a lot more money than paying to invest as is more usual. In theory there only needs to be a handful or so and that would be enough to bring the market back down close to cost of production.

However, it seems likely that government regulation would disrupt that process somehow, otherwise it would have happened by now.

It's not just prices as well. The US stands also out as being one of three countries that allows direct consumer drug advertisements.

https://en.wikipedia.org/wiki/Direct-to-consumer_advertising...

How do street drug dealers compete with each other? Not by lowering prices. No. They actually attempt to monopolize their territories by either eliminating or merging with their competitors, until a stable state is reached.

They then set their prices to maximize margins and profits. This continues until something happens to destabilize the market, at which point there is some kind of struggle or even war, which stops when another stable state is reached by eliminating or merging the competitors.

Without regulation to prevent the creation of monopolies and cartels, this happens in legitimate businesses just as much as street drug dealers.

Competition by lowering price does happen, but when it does, it is part of the unstable phase that ends when another stable monopoly or cartel forms, at which point margins go right back up.

The elimination part of that is important though. If companies were allowed to round up a group of the boys and go break some kneecaps when the boss didn't like something then it is true there won't be a lot of competition.

But in civilised country that isn't an option. Nobody wants that level of deregulation - basic policing of physical safety is something of a given. People are somewhat protected by law in their attempts to compete.

But companies do things like dump product to drive a competitor bankrupt, and then raise their prices back up. After that happens a few times, people get the message that there is no money to be made competing with them.

Or they play patent games and litigate the competition either out of business, or strongarm them into joining a patent cartel.

The tools may be different, but without specific anti-monopoly and anti-cartel regulation that is enforced aggressively, companies will ruthlessly drive markets towards monopolies or cartels.

You charge robbery rates for drugs A, C and F and I'll take B, D and E.

We both make lots of money and don't have to worry about each other.

Competition assumes sellers don't collaborate and negotiate but they do all the time.

[1] https://en.wikipedia.org/wiki/Triethylenetetramine

It's not easy to put that Nitrogens in the middle of the chain. Moreover, the method to produce it is to mix some smaller chains that have the Nitrogen in the ends of the chain and make them combine in a longer chain.

This produces a mix of a lot of similar chains with different length and number of Nitrogen. They have similar properties, so it is difficult to separate them. They use distillation. But at high temperature that Nitrogens like to burn, so heat the mix carefully.

Also, the mix you produce have a lot of compounds with the same "2D" formula, but they have a different shape in "3D". Some of the versions may have totally different properties, like been very toxic. So you must separate them too, and again, it's difficult.

Note: I studied a Chemistry specialization in the Secondary School, so I have some general knowledge about this, but I'm far from an expert in medical drug production.

Note 2: If you like this kind of things, I recommend to see the Nile Red channel in YouTube https://www.youtube.com/channel/UCFhXFikryT4aFcLkLw2LBLA It's nice to see some easy and not so easy projects, and he explain the reactions, and the problems and pitfalls he found. (I don't understand everything he does.)

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Anyway, the difference of the cost of the medical drug and the chemistry drug is annoying.

https://www.sigmaaldrich.com/catalog/product/aldrich/132098?...

How do you get from 60% to 99%? Do you have to (for pharmaceutical grade)?

What are the remaining 40%? poison? harmless byproducts?

Of course the latter two eventually will get you in deep shit with the FDA.

Ah, so we should just get rid of those regulations and let the little guy compete!

Not so fast. Maybe the first new market entrants are motivated by altruism as much as by profit. They do everything carefully but charge prices closer to cost. Patients pay less and there are hardly any downsides, except to the financials of legacy pharma companies.

But by year 3 there are people who have learned that you can buy barrels of technical-grade active pharmaceutical ingredients off of Alibaba and make pills from them without any quality control in between. Sometimes the products are contaminated with carcinogens. Sometimes they vary widely in potency across lot numbers. In the absence of regulations, fraudulent and shoddy products become widespread. It would be like the supplements industry, except that people actually die if they don't take real prescription drugs they need (this is less common for people who are sold fake herbs.)

You likely need to prove that you are producing a clean product, etc.

Similar to how there is regulation of you make food at industrial scale.

I've looked into it but the regulations get in the way. It's a crock of bologna - if you hire an American Chemist and set up an American chemical plant, you have to build the facility and wait for FDA inspection before you can start manufacturing and in some cases, you have to pay for a trial to prove that your medication works. Or you can just import the drug from China and India and the FDA will let you act like a compounding pharmacy and repackage the Chinese / Indian active ingredients.

Then you have to pay the licensing fees which are borne equally by all manufacturers. If you make 100 doses/yr, you pay as much as your competitor who makes 1 billion doses/yr.

There's a reason the market for easily-produced medication hasn't been disrupted yet, if you make affordable high quality medications in a way that doesn't defer to the FDA's stupid system, you can and will go to prison.

These cases from the last 1-2 decades are always because of FDA regulations. The drug is out of patent, any manufacturer is allowed to make it, but the FDA regulations for actually starting up manufacturing are so difficult and time consuming that whoever is left as the only manufacturer of a rare drug can crank up the price from $177 to $43k, and ride on that profit wave for a few years while FDA processes competitors applications.

More sad detail here: https://slatestarcodex.com/2015/09/24/the-problems-with-gene...