You mentioned "access" and "affordability" but there is a third leg of healthcare in terms of "quality". How do you see your proposed approach affecting healthcare quality?
For example, does public-owned R&D lower incentives to generate new treatments? Or, conversely, does it raise incentives for higher quality drugs for underserved (and unprofitable) diseases?
> How do you see your proposed approach affecting healthcare quality?
In the business end of healthcare, quality is just a base assumption. You (Okay most) would never make a business decision that erodes quality and clinicians are trying to improve quality all the time. The companies I've worked for have entire departments named simply "Quality" with significant budgets/headcount. That said, from an economic standpoint, it just needs to be a part of that formula. The current real thing that comes to mind is CMS (Medicare) issues quality scores to hospitals (star ratings) and their reimbursements go down if their quality score dips. It also helps folks "shop" providers as the star rating is public information.
> does public-owned R&D lower incentives to generate new treatments?
I don't think it has to. Scientist want to do science. If funded, I believe they will. I'm more concerned with what science we're ignoring because it has no obvious GTM strategy, link to some ROI, &/ random business objective.
> Or, conversely, does it raise incentives for higher quality drugs for underserved (and unprofitable) diseases?
I think it does, or can. Because I think it opens the field for more exploration. I've never been very close to how pharma R&D is performed, but my understanding is it's rather narrow. For example, "we want to solve X because we can make $Y". Once we solve X, we can do X.a, X.b, X.c, etc. It doesn't matter that they could make the world a better place by solving Z and perhaps that's what the scientist would rather be doing.
I'd certainly entertain counter-arguements, this is just Sim City brain at work on hypothetical realities.
I somewhat disagree. I think the best solution is for payers (single or not) to set prices based on quality adjusted life years (QALY). This is done in some single payer markets and makes a lot of sense as it couples incentives with impact.
While cooperate Pharma pays most of R&D costs, Fundamental (extremely early) research is usually still publicly funded through academia. This is where the possible solutions to Z come from.
The "problem" is that R&D spend can have more impact (lives saved) on mainstream diseases than rare diseases. Public-funding/ownership doesn't solve this fundamental issue. You can direct funding to rare diseases by decree, but you are still saving fewer lives than you would otherwise.
I also tend to agree that we should be solving problems that affect folks the most and factoring for the magnitude of the issue which is what QALY seems to do to gauge impact, so I like that idea. However, in doing so, I expect you're casting a larger net and bound to stumble on something that serves a smaller market as a byproduct of the R&D. In the current reality, the byproduct would get shelved and never commercialized because it had no ROI, which is also a shame.
That's called a monopoly. And while it is a natural tendency it's also a point of regulation. By preventing monopoly you keep the desirable part of capitalism (competition) without having to enforce less palatable anti-capitalist measures like direct price controls.
But, it's simply not regulated today. You'd have a hard time proving they are pricing in this way as a means to hold the monopoly. They could point to their margins and say, "plenty of room for competition" but meanwhile you can't force other manufacturers to ramp up production without even fatter margins. They'd need margin + market share to break even.
It usually only when the market is very large, manufacturing is not complex, or when the original manufacturer is still charging a lot for generic (sometimes only a bit lower than Brand). That another manufacturer will ramp up production. Often times, even manufacturing a generic drug requires steep initial investment and can be risky.
Even for generics with multiple manufactures, "multiple" might be only a handful. When you compare that fact, to the pricing trends they follow, it then is an effective oligopoly. And while I don't believe it to be the case, the pricing trends I've seen sure do look like collusion. My experience is it's more like an indirect collusion, where company A employs folks that have worked for competitors A, B, and C. So when they hear "through the grapevine" that company B is going to increase prices 10% next quarter, suddenly everyone is increasing prices 10% next quarter (give or take). [This I've witnessed myself a number of times]
Which is how I assumed Amazon was going to enter the pharma space. But what do I know?
Any way, would such a move much change your analysis?
PS: I distinguish market capitalism and corporatism. One is pro competition, the other is utterly opposed to it.
If he begins manufacturing the products, I'm not sure how that works. But I believe there's a lot of regulations and issues around manufacturer-to-patient sales. Tides could be turning, my experience in this part of healthcare is a few years old now. In theory, I suppose Cuban could stand up a separate legal entity for manufacturing where he sells to his pharmacy legal entity at some low price to avoid the economic forces I described.
Sorry, I misread. Further, OC explicitly says "Truepill is a white-labelled pharmacy e-commerce platform that MCCPDC".
I should have read more closely. I think part of my confusion is from not seeing (or maybe not recognizing) any examples on costplusdrugs.com.
Regardless, your points about retail price equilibrium still stands.
The choices remain "hollywood accounting" (fraud) and price controls. I continue to hope there's a third option. Not for any moral reason. But rather to avoid the inevitable omgherd libertarian backlash about the authoritarian governmental depriving corporations their god given right to further impoverish sick people. Something like changing the market incentives from fee-for-service to rewarding wellness (eg capitation). But I have yet to imagine how that could work for pharma.
Anyhoo. Thanks for humoring my grasping at straws.
And then you realize this is simply how capitalism is designed to work. People in the business of healthcare always try to dream up these complicated business models and because the other complicated business models inflate prices and their new and better business model is going to save the world. It almost never happens or works. Capitalism and the set of basic economic laws win every time.
The only real solution I could dream up is to implement price control. Where the consumer's cost is some function of the manufacturer's cost. Where the function/regulators should discourage price gouging and encourage manufacturing efficiencies. Unnecessary costs like mass advertising campaigns should be banned and the R&D side of the business should be separated from the the sales side. I personally wish all the IP generated in medicine was somehow publicly owned; either through purchase, initial funding, or... IDK I just think it would benefit all by having the scientific side of medicine unrestrained from IP.
FWIW, I'm pro-capitalism but don't feel it should be universal. Healthcare deserves a universal approach with a goal of maximizing access and thus affordability. And, I say that having personally built a decent career on the business end of healthcare that would likely evaporate if healthcare was truly "fixed" and I would completely accept that fate for the greater good.