When this gets brought up as a positive to our high healthcare spending (which you're not exactly doing, more just making note of the existence of the argument) it's such a head-scratcher for me.

1) OK... maybe we should stop, then? Like, that seems like a terrible deal? How is that a justification at all? It seems like just a description of something very stupid we're doing.

2) This would be a good deal if we were getting other countries to also pay high prices and bringing that money "home", but basically the exact opposite is happening. WTF.

3) More often than not, the side of the issue that raises this as a good thing is also the side full of folks who think we should e.g. reduce spending on foreign aid, so it's especially weird that they're bringing it up.

Plus, I'm very skeptical that the idea that drug development would dramatically slow down if the US stopped over-spending to the tune of 2x-100x on lots of drugs is even true. But setting that aside, it's still just a bizarre line of argument, to me.

You see, development of new drugs, devices, and treatments is definitely something that we must continue at breakneck pace, by any means necessary, because people keep discovering how awful and harmful the existing ones are, so we need to make consistent progress beyond the status quo.

If you move faster than the science and the lawsuits, then you can keep selling deadly crap to a naïve and trusting populace.

https://en.wikipedia.org/wiki/Reye_syndrome

https://en.wikipedia.org/wiki/Thalidomide

https://en.wikipedia.org/wiki/Tardive_dyskinesia

https://en.m.wikipedia.org/wiki/Fenfluramine/phentermine

> OK... maybe we should stop, then? Like, that seems like a terrible deal? How is that a justification at all? It seems like just a description of something very stupid we're doing.

The US pays for drug development and then the rest of the world caps prices and gets the drugs cheaper. If the US stops then the money for drug development goes down, which is not great. What you really want is to get the other countries to pay their share, but how do you propose to do that?

The reality is we have no evidence that other countries other countries wouldn't start developing drugs. Our fear that no one else would do is not grounded in the rational and we shouldn't let irrational fears decide what we do. This isn't something we can logic out ahead of time, we simply need to commit to not doing it.

Other countries already develop drugs. They just charge more in the US market.

People always forget it's "what the market will bear".

Price caps set a very explicit bar and then ask a company to think very carefully if they truly think the drug can't be sold at that price (and surprise: turns out when motivated a ton of them discover that yes, it can be).

What the market will bear affects an already existing product. R&D is driven by one of two things:

1. An expectation of profit at the end. 2. A highly desired outcome from a motivated pool of Investors.

Price caps can dampen #1. Which can put more of the burden on #2 as a source of funding. Whether you think that is an improvement or not probably depends on your particular ideological position around markets and healthcare.

But there is definitely an objective argument to be made that this might decrease the speed of improvements in healthcare technology.

> But there is definitely an objective argument to be made that this might decrease the speed of improvements in healthcare technology.

Every American posts about "healthcare improvements" like they're a millionaire and that cancer wouldn't bankrupt them (and then also get them fired from their job when their insurer casually mentions the "bad risk" they've got which is driving up the cost right now).

This has nothing to do with the comment you quoted from my post.

What the US could do is cap prices in the US at some modest multiple of the cheapest price charged in other countries. The drug maker would then have a choice: cater to either the US market at an elevated price while losing the cheaper markets, or abandon the US market to have a possibly larger market elsewhere at lower prices.

That is one option. It would mean that some drugs, especially those for rare conditions, are never brought to market in the first place because the expected worldwide revenue would be too low to justify spending $1B+ on a stage-3 clinical trial that might fail. Is that a good trade-off? Depends on your perspective I guess.

It might actually increase world revenue, if it causes some countries to bite the bullet and accept a higher price.

Well then we have a game theory problem. Every country wants to freeload on drug development spending to minimize their own expenses. It's unrealistic to expect that countries like India or France will voluntarily accept higher drug prices just to incentivize new drug development. If the USA decides to stop subsidizing the rest of the world then the most likely outcome will be a permanent reduction in the rate of new drug development. Would that be an improvement?

We have people dying of treatable ailments that have been understood for decades which cost less than the labour used to deny them treatment and lobby against their interests.

A slower pace for rare ailments seems like an obviously acceptable trade off.

you make a committee of old doctors and have them set the prices.

Let the market figure it out—it’ll adjust, companies will raise prices in other markets and simply not serve the ones that won’t let them charge enough to make it worth it—and then explicitly, collectively subsidize it if that produces a shortfall? Pinning the bill for a subsidy on the sick people—but only in our country—we’re claiming to be trying to help, while also claiming our entire country is and must remain, uniquely, a martyr to the cause is a deeply weird way to go about providing a subsidy.

The market has figured it out. The market has figured out, that tech bros will charge you as much as possible for that last dyeing grasp, seeking as much profit, while just glossing over mistakes and oversites that unalive you and your loved ones. The very best of luck with that. Hope you have an immediate and effective alternative.

I meant use monopsony government buying power and/or price controls like 100% of the rest of the developed world, and let the market figure it out. Though I definitely didn’t make that clear, my bad.

Then subsidize, on purpose and directly, not by some lopsided roundabout more-expensive-than-it-needs-to-be scheme, if problems arise.

Please define "their fair share". How much of the money for US advertising shall they bear whilst we are at it.

If advertising wasn't net positive for drug companies, they wouldn't do it, ie. paying for advertising means paying less. But if you disagree with that reasoning, advertising accounts for ~3% of US drug spending, so taking it or leaving it isn't going to make a big difference in prices.

It is notable that the industry spends more on marketing than R&D. Virtually all of this spend is in the US; very few countries allow the marketing of prescription drugs to consumers.

Quite a bit of the high pricing for Americans is also by companies who _don’t even do_ R&D to any significant extent; companies who only make generic price them dramatically higher in the US than elsewhere.

> > other countries to pay their share, but how do you propose to do that?

They cannot pay with money, but honestly speaking they could "pay" with risk taking, I mean trying drugs that the FDA is too risk averse to approve . For example the risk profile of basically every day activity is much much higher in India or Nigeria compared to the U.S. and so the same should be for drugs, medicine is an extremely risk averse field as it is, but with the FDA being the world authority over medicine safety basically the risk profile of the US is being transferred over to the rest of the world which is nuts. Consider for example the risk profile of daily driving in the U.S. vs India or Thailand where everybody goes around in scooters without helmets, it works for them, their economy would collapse if they tried to have the safety of the U.S. drivers going around with 20ft long 7500lbs cars.

The unfortunate thing is that the whole world relies not only on the U.S. for drug research but also drug approval. If the FDA says no to something then not even Lesotho would try it , even though maybe from a risk reward standpoint it would make so much sense for Lesotho to try it .

Not all subsidy is a bad thing. The money is used to fund real expertise and industrial capacity.

High interest rates have stopped way more drug development than lower or higher drug prices ever have.

Between 2019 and 2022 there were like 88 biotech IPO lockup expirations and only 3 were trading higher than post lockup for any period of time.

Macro determines the rate of risk taking. Not “details.” You simply 100% cannot have drug discovery without risk, and risk wants returns.

Should we have low rates and high inflation for the sake of more “discovery of medical techniques?” Inflation and high costs: dude, they are exactly the same thing!

Wouldn't it be even better to explicitly funnel our money to R&D, rather than hoping that it gets there eventually after insurers and paperwork maximizers and intentionally-inefficient providers all take their cuts?

Which researchers do you funnel money to?

The majority of basic research is done in academic research laboratories which are predominantly funded by government research grants. If one of these studies pans out and something can be patented, a business or investor group may license the patent and fund an applied R&D program with the goal of getting through FDA trials. This effort is either funded by investor capital or internal company funds (likely from revenues from the sales of FDA approved medications or other products). Presumably if a business or investor group has a track record of bringing treatments to market (e.g. having a revenue stream from a previously economically successful product) they are entitled with the option to invest more funds, etc.

Exactly this, example: biologics.

I am currently prescribed a medication that is over $30,000 per injection every 12 weeks.

Because we have absolutely atrocious health organization. Pharmaceutical companies can set their prices regardless of anything but their profit.

How should pharmaceutical prices be set?

In general, anything that's mandatory for life/basic quality of life but still needs to be produced by industry should should be regulated to artificially reduce prices in order to compensate for inelastic demand and prevent price gouging. This regulation should include supply-side subsidies and dynamic, carefully considered price controls.

This should apply to food, water, housing, health care, transportation, internet; all those good things that you can't do without and are extremely vulnerable to market manipulation.

It's worth researching the inevitable consequences of price controls, it's a predictable outcome that's been tested many times.

Price controls are Hobson's choice: Would you prefer expensive bread, or no bread?

That's right, which is why basic healthcare (including production of normal, well-characterized, non-experimental drugs) should be taken out of the price system altogether and run directly by the government.

Normal off-patent drugs are already pretty cheap. You can get a bottle of ibuprofen for like $5. Drugs still under patent are, of course, expensive on purpose.

By price controls I literally just mean "anti-gouging regulation", not "you can't charge more than exactly $5 for x"

Describe the operation of "anti-gouging regulation" that isn't just a price ceiling or a cap on how much the price can increase in response to a sudden supply constraint that would otherwise result in a shortage.

Using the free market to respond to a shortage requires competition. Patents can make this impossible. When you have a fixed supply of something and no other entity can produce it having an uncapped price doesn't really help the market respond. Consider the example of a Taylor Swift concert. Are scalpers creating more supply by raising the prices of tickets or is it pure rent seeking?

And, to many, the difference between "expensive bread" and "no bread" in the case of drugs is entirely academic.

Products under patent would already be charging the monopoly price regardless of a shortage. That's what a patent is supposed to do -- cause prices for new drugs to be temporarily high to provide the incentive to develop new drugs. The limit for this is how much better the new thing is than the old thing, such that if you charge more than that people switch back to the old thing.

This obviously kind of sucks when the drug is the difference between life and death, but those are also the drugs we most want a large incentive to develop, and that's why the patents eventually expire.

> Consider the example of a Taylor Swift concert. Are scalpers creating more supply by raising the prices of tickets or is it pure rent seeking?

Scalpers are trading time for money. You want tickets that would otherwise sell out but you don't want to wait in line, so you pay someone to wait in line for you. It causes tickets to be available at the higher price instead of being sold out and unavailable at any price. The way to prevent the rent seeking is to auction off the tickets to begin with so the money goes to the artist instead of the scalpers.

Define gouging.

Every other country appears to have the “bread” at a reasonable price. Ironically, it’s the US which has the same bread for 100x the cost.

Did you know Russian citizens spend half their take home pay on food? Wanna keep running with that point of yours?

I thought we were talking about developed nations participating in the global economy.

There are other markets than Russia and the US what about all of Europe.

First, define the "basic quality of life" and what are you going to do when demand will exceed supply. Because we might as well just start the money printing machine and expect everyone to become a billionere.

Off the top of my head I'd include the following in basic quality of life (but not fundamental ability to live) these days:

* A little extra space in your dwelling * Internet * Access to nature * Hot water * Some means of transportation that grants you access to work, home, and recreation * Leisure time beyond that needed to cook, clean, sleep, and exercise * Some dietary variety * Any functioning smartphone * Access to community * A modest amount of extra money for recreation * Any vacation time * Access to heat/cooling beyond the bare minimum * Access to education * More than one choice in a job * A bed that doesn't hurt you

The list could likely be trimmed or made narrower, and there are likely things I'm not thinking of, but you get the idea. Nothing extravegent or necessarily expensive, just a few things beyond the absolute bare minimum a human needs to survive. Basically, I think everyone should have access to three major things: 1. The necessities of survival 2. A few extras to allow the unmotivated and unambitious to be sustainably content and not truly miserable from true deprivation (so, like, evaluate human needs the way a modern ethical zoo evaluates animal needs rather than a historical abusive menagerie would). 3. Access to tools and resources for the sufficiently ambitious to reasonably improve their situation without making excessive sacrifices from point 1 or 2.

Does any of that strike you as unreasonable or unachievable?

One model is that a government pays a license fee that allows them to produce the drug in unlimited quantities for their country. (In practice, they could buy the drug from the manufacturer at the marginal cost, or they could use another pharmaceutical company as a subcontractor.) Sometimes there is a deal, and the country may get orders of magnitude higher health benefits for a marginally higher price. And sometimes the company refuses, because the deal would interfere with their business model in other countries.

> One model is that a government pays a license fee that allows them to produce the drug in unlimited quantities for their country.

How does this determine how much the license fee should be?

The same way as in any other business contract. How much the government is willing to pay, how much they expect to benefit, what other uses they have for the money, and so on. In practice, the company will likely get a bit more profit from the license fee than it would get from selling the drug normally.

The government is effectively a monopsony in that context, so that isn't a real way to calculate anything, it's just the government making up a number which is likely to be too low (suppressing R&D) or too high (inflating costs). You could potentially fix the first one by giving the company the option to decline and instead sell the drug under the existing system, but how do you fix the second one?

Yeah, it's unfortunate for the US, but since no one else is stepping up to pay for the medical research that benefits all of humanity, we have to do it.

The recent "negotiated prices" for Medicare drugs could be the beginning of the end for this system though.

"I've heard it quipped that Americans are subsidizing the discovery of new medical techniques for the rest of the world."

The way Trump touted an invention from the German company BioNTech as "Invented in America".

To be fair, very critical elements of mRNA technology were developed in the U.S. Nothing is purely German or American nowadays.

To be fair, writing a paper is not developing a technology. And someone from the town I live discovered oxygen. No oxygen, no mRNA.

"Nothing is purely German or American nowadays."

I know that, not everyone seems to though:

"I've heard it quipped that Americans are subsidizing the discovery of new medical techniques for the rest of the world."

And not even nowadays. Like with the Wright Brothers, who used data from Otto Lilienthal.

But the Wikipedia article could not stop trying to minimize his impact,

"Lilienthal's research was well known to the Wright brothers, and they credited him as a major inspiration for their decision to pursue manned flight."

where someone felt the need to add

"They abandoned his aeronautical data after two seasons of gliding and began using their own wind tunnel data."

and make it all about the Wright Brothers. In an article about "Otto Lilienthal" not the Wright Brothers.

Going far enough, we should credit some anonymous Homo erectus for discovering fire... Not that I am completely joking, the tree of human knowledge is fascinating by its depth and goes deep into the pre-literate age.

That said, I wouldn't dismiss Karikó's and Weissman's discovery of replacement of uridine with pseudouridine as merely "writing a paper". It was a pretty crucial technological stepping stone that made mRNA treatment orders of magnitude less dangerous to humans. Same with their discovery of the way how to deliver mRNA into cells (using lipid nanoparticles).