The customer is the health insurance. This is why most of the health systems have issues now, because the patient is not the customer, the patient is only a vehicle to extract money out of the health insurance.

Plants in India undercut everyone in price and drove them out of the market by making a substandard and dangerous version of the drug violating basic safety standards. The FDA failed miserably to detect this until everyone was driven out of the market by these low prices.

Had the FDA done it's job from day 1 this would not have happened. And had we built a strategic reserve in case something went wrong we would have enough of a buffer to weather this storm.

I focused on the thin profit margins and the consequences.

Then perhaps the government should be building plants to produce these domestically as clearly they need to be a common good rather than subject to the free market, no?

Or, perhaps, we shouldn't allow medical equipment and supplies to be manufactured overseas and imported as that results in cheap overseas manufacturers dumping product at prices sufficiently low that they will cut corners hoping the FDA doesn't catch them all the while driving out domestic suppliers?

Or, perhaps, any company found to have imported drugs from a plant that won't pass FDA inspection needs to have its executives sitting in fucking jail so that US companies have a vested interest in directly inspecting their overseas plants?

See, there are solutions ...

Options 2 and 3 are wretched ideas. It’s the reason we have $100 insulin instead of $3. It’s also why the US has inferior treatments in certain areas.

Logically the FDA kills X amount of people per year by hindering rapid and accessible adoptable of medicine. They save Y by hindering the adoption of bad medicine.

In theory Y is higher than X, but I am skeptical if that is still true.

I’d recommend you watch Dallas Buyers Club.

However, medicare having say the ability to produce generic drugs if they're not being produced sufficiently might fly.

Another would be Medicare a greeting to buy X amount of some drugs from non-profit manufacturer setup specifically just to produce generics. Though even Medicare being able to negotiate prices would be huge wins.

I've got a bit of a cold right now. Once we've solved that we can spend on the cancer patients.

Alternatively, less inflammatorily, the marginal dollar will provide more social utility if spent on buying tirzepatide and mass producing it. So let's do that first.

Someone is buying those "substandard" products or it wouldn't be driving competitors out of business. Did the FDA suddenly realized something the rest of the Regulatory bodies didn't?

They ship generic drugs to the US. The FDA is the regulator. And their regulatory system is terrible. They run extremely infrequent checks, they give months of notice before they do so, and they still manage to find horrific safety violations.

Instead of constant checks that would find small things, they discover a mess every time. This time they found everything you could possibly imagine: incorrect drugs, impure drugs, falsified tests, engineers overriding safety software when it reported impurities, incorrect amounts with falsified reports, etc.

The actual story is about a long list of drug shortages across a wide variety of categories, driven by a wide variety of proximal causes. That list is here: https://www.accessdata.fda.gov/scripts/drugshortages/default...

I count about 15 drugs which are in shortage or recently were in shortage that are also proprietary and don't have generics available on the market. On one hand you can say "well 15 out of 220 clearly shows generics are more likely to have shortages!" but the vast majority of drugs (counted either by licensed drugs or prescriptions written) are generics. There's not a clear correlation between whether a drug has generics available vs. whether it is or recently was subject to a shortage.

Bacteriostatic water / Water for injection absolutely fits the model you posited -- American Regent discontinued production and no one else wants to fill the gap because as soon as demand is satisfied, prices will plummet and drive negative ROI. Game theory shows the stable equilibrium is continued shortage for these generics, as you've stated. But your model does not fit Wegovy, Semaglutide, Ozempic, Avycaz, Trulicity, Ultravist, etc.

Commodities like medicine and food do have terrible price elasticity which cause great problems in unregulated markets. Unsupported, these commodity prices can crash to floor, and in one year farmers might switch to other crops or shut their doors forever, and then in the next year there would be huge shortages and high prices which take too many years to fix. The original commodity swing could be caused by anything - consumers decide for whatever reason that milk/cheese just isn't that cool this year, last year prices went up 10% and then too many farmers jumped in on that commodity so this year there's a massive oversupply, etc. The natural free-market state of things is: wild price swings and capacity chasing last year's profits/losses. Ideally the futures markets would help stabilize these prices by creating incentive for smart people to predict capacity-demand equilibria for upcoming years and allocate capital appropriately but it doesn't seem to do that effectively for really any inelastic commodity, at least from what I see -- all minerals/oil/gas/food/etc seem to experience incredible price swings on a regular basis. The nature of reality is that demand for inelastic commodities does not seem to be able to be predicted to the precision needed to maintain stable prices and maintain the necessary revenue flows to keep enough producers online in a free market.

That's a major reason why many (most? all?) developed nations create various "Farm Safety Nets" to help create an annual floor for the production of basic food staples. The USDA knows about how much of each basic food staple the nation needs in an average and works to ensure that something like 110% of this amount is produced each year. They do this by paying for excess production -- in years when consumer demand is low, they pay the excess and leave it up to the farmers to figure out what to do with the product that no one wants. Maybe it's sold at a nominal loss to someone who can use it for something else, maybe it's buried in the ground, whatever. (During parts of the COVID swings, new Farm Safety Nets were authorized because the farmers literally didn't have enough cash to even dispose of some excess food). These basic crops include milk, wheat, oats, barley, corn, grain sorghum, rice, soybeans, sunflower seed, rapeseed, canola, safflower, flaxseed, mustard seed, crambe and sesame seed, dry peas, lentils, chickpeas, etc etc.

There's still the possibility that too many players jump into a market, prices crash, and some producers fail. But the USDA does their damnedest to ensure that 110% (or whatever, I don't know what their target safety margin is) of the necessary production is well supported and can go on to produce again with more guaranteed margins next year.

We probably need more systems like this for some other industries -- medicine being a pretty good contender for the first industry we should put more attention into. It's been working well for our farms and food supplies for 100 years. It has the potential to be used disastrously in a failed communist style USSR/Mao planned-economy debacle or an equally disastrous kleptocractic / regulatory capture / campaign finance corruption / conflict-of-interest debacle, but we've been doing it already for a century and we seem to be doing it reasonably well, all things considered. Though the shortages and price spikes of the past few years since COVID do give me a bit of pause.

New Zealand has free health care, but there are a variety of drugs you can’t get prescribed easily (often because the system is trying to prevent drug-seeking). However it regularly ends up that necessary medicines are legally unobtainable (two situations recently in my own family). I have seen friends turn to illegal sources, or seek substitutes (especially “alternative” medicines and/or internet bullshit).

Any "ideal market" assumes some kind of demand elasticity, i.e. people will buy more when it's cheap and less when it's expensive. But for cancer drugs, that really shouldn't be the case. The amount of drugs a patient takes should be determined by the best science, not some market mechanism.

In the case of cancer, it means a patient should be given the appropriate dose for their diagnosis, as determined by what science has shown to be effective.

Typically, QALYs, Quality Adjusted Life Years. We decide how much (in dollar terms if you're just that fundamentalist about it, but person hours or other metrics are fine too) a QALY is worth, and we will spend no more than that on healthcare interventions.

The set of situations where there's a viable intervention but it's too expensive isn't empty, but it's not large either, so, you just build a bureaucracy to handle those cases.

1) on the medical provider end, find every possible excuse to charge 1% more and pay it out to themselves, not using it for patient care

2) on the insurance/government end, find every possible way to charge 1% less, no matter the cost

So yes "let science decide" means to let doctors decide what care to provide (meaning you'd need a difficult admissions test for this class of people). Yes, they will cheat, which will benefit themselves, but also patients. And there's a limit, because doctors are fundamentally limited. And then you just eat the cost, and have a board (IMPORTANT: of doctors) weed out the worst abusers on a regular basis. And yes, if a doctor says "spend X on this patient", then we spend X on that patient. End of discussion.

And yes, this is probably "mercantilist" instead of capitalist, and provides a fundamentally unfair advantage in the economy to people who manage to get the degree of medical doctor. In trade, you get good health care.

The elasticity isn't in the amount, but in whether the patient obtains the drug.

If there are few patients, the demand would be low.

Inflation up? Rates up.

Zero consideration for what is actually causing it. That's grossly negligent and yet the execs get paid handsome money for this rubbish and won't face any consequences of ruining people's lives.

You probably never listened to a Jerome Powell press conference. He spends so much time explaining what the causes of inflation are, and what the Fed can do about some of them.

> yet the execs get paid handsome money for this rubbish

What execs get paid handsome money? The Fed employees are government employees, their salary is public. Jerome Powell makes $200k/year [1]. The other Fed board members make less. Is that handsome money?

[1] https://markets.businessinsider.com/news/stocks/jerome-powel...

It's indirect and inexact, but it's not random.

at least in india we have this generic medicine system that is run by the government. Not a fan of a lot of things but generic medicine at very very low prices.

check this link out and search for medicine.

remember the prices are in indian rupees where $ 1 USD = 90 INR ~.

they have cancer medicine, surgical supplies, basically almost all generic medicine under the sun.

I wonder why cant this model be replicated in other countries.

Cisplatin may cost $6 a dose to buy, I bet it sells for much more at the US hospital to the Insurance company or god forbid the patient.

Is this reflected in your microeconomical model? It should break the assumptions of most theorems.

In a market with only two bidders, the more expensive one is guaranteed to get whatever they ask for.

Seems to me just something wrong / slowing down the price adjustment mechanism? e.g. layers of regulation / bureaucracy or whatever it is the US runs on these days?

In Switzerland there are laws covering biddings, where the state has to accept the second to lowest offering, not the lowest, thereby circumventing this race.

Seems reasonable to upgrade "might" to "must". The article is quoting drugs with a sticker price of $6. It isn't reasonable to say that drug manufacturers would rather let the market enter a state of shortage rather than price their drug at $12 and see what happens. On a bad day I can buy bottled water at insane markups at these sort of prices, and water is much easier to compete with. Drug companies could easily be charging $10 for something that usually costs $6 and that would push the market towards a profitable equilibrium price. People aren't that picky about their purchases if there are no alternatives.

My money is on it being illegal to charge the real market rate if it involves raising prices.

Cheap healthcare products ensures more productive society, that needs less spend on healthcare and pays more taxes.

National businesses do not care for being profitable and will keep prices in check for monopoly profiteers, but probably not be lean enough to kill private generics businesses.