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In short, it's because if the MBAs that head large corporations were dieticians they'd try to make everyone anorexic to save on their grocery bills. If they were home builders they'd remove half the shingles from the roof and one hinge from every door, as well as remove the handles from toilets forcing you to open the tank every time you wanted to flush.
Of course they would personally pocket all the savings, and use it to buy for themselves everything they deny to everyone else in the name of "efficiency". I guarantee you none of the pharmaceutical company execs are going to miss one dose of their meds.
It's misplaced incentives. Often the easiest way to get a promotion is to pawn off a little bit of the soul of the company or brand.
Actually it's the MBAs at the government that want the cheapest price for every drug, and are unwilling to pay even tiny amounts for things like supply security.
For instance, if the government changed it's rules that price is a competition, and instead of the order going 100% to the "winner", it would go 70% to the winner, 20% to the second place, 10% to the third, that would help a lot.
You say that like the government is the only buyer in town. That said I wouldn't mind an award scheme like that, government should support an entire economic ecosystem, not pick exclusive winners and losers. Big military contracts tend to be intentionally split among multiple defense contractors for this very reason.
However, looking at other sectors, somehow Toyota and Honda seem to make decent money off of low-margin Corollas and Civics with superior build quality, but American car manufacturers are ditching their sedans because they "aren't profitable enough". Many of our supply chain issues strike me as something similar. American business leaders love to claim "hate the game not the player" when they do something predatory, but then bitch and moan when the government occasionally tries to make the game less predatory. Likewise they'll cheat, but when regular people try to cheat as well they get called out with "yeah we cheated but two wrongs don't make a right!". Funny how that 1st wrong is always in their favor, and it's only the 2nd wrong that isn't allowed to happen and must be punished.
I don't trust the government, but I trust the private sector even less. Never mind that private sector lobbying is half the reason I don't trust the government.
That's a good idea. We'd have to be careful that 1st, 2nd, and 3rd place aren't actually the same company though (perhaps under different names / legal identities).
Then Pfizer had a tornado destroy a building and 50,000 pallets of medications: https://www.google.com/url?sa=t&source=web&rct=j&opi=8997844...
It's going to get worse.
That URL can be cleaned up to this:
https://www.wcnc.com/article/weather/severe-weather/pfizer-r...
Not sure if there is any tracking in the alphanumeric garbage at the end, but deleting it outright causes it to 404.
The UUID is all that's significant, technically may be watermarked still
https://wcnc.com/article/a/b/c-eb35781b-ac79-4399-955a-dcece...
Of course, this url is now assuredly unique
Thank You
“Life-saving Drugs are too Inexpensive to Produce”
It’s a ridiculous headline, I know. But, that is the gist of this article. It just doesn’t say so. Pharmaceutical drugs, and the pharmaceutical industry is highly regulated. It is very expensive to comply with drug manufacturing and distribution regulations. Those regulatory expenses are so high that it is simply not profitable enough for any company to produce these cheap generic drugs at a sustainable profit. It doesn’t make sense for a pharmaceutical company to comply with all regulations and make a profit on inexpensive, generic drugs.
The real headline is “Generic Drugs are Over Regulated, Making Them too Expensive to Produce”
Your claim doesn’t make sense any more to me than the claim in the article. Costly regulation should simply drive the cost of generics up until they are profitable at a new price.
Your claim is that the market cannot deal with increased costs of a product.
> Your claim is that the market cannot deal with increased costs of a product.
which might be true, if the person cannot afford it at this higher price, despite needing the medication. For example, the gov't subsidies for these people aren't high enough.
Despite what people might think, medication and healthcare is not absolutely inelastic.
Also deregulation doesn't always end well. Especially for a product in ingesting, I'm all for tight controls.
There is a difference in the government's willingness and ability to develop and stockpile:
1. essential medicines that can save lives and promote well being
and
2. weapons that are intended to maim and kill other humans.
In a democracy, the voters are responsible for that difference.
The WHO list of Essential Medicines is a very low bar that any advanced nation should be able to exceed. The fact that something as common as albuterol is currently in shortage, is a national disgrace.
It seems that Executive Order 13944 has had little impact.
https://www.fda.gov/about-fda/reports/executive-order-13944-...
> In a democracy, the voters are responsible for that difference.
Yes and no. We delegate power to representatives to mediate that difference, and they ultimately delegate it to a bureaucracy, hopefully filled by experts in a particular area. These bureaucracies are then funded proportional to the quality of voter chosen leadership.
So I would say voters are responsible for choosing the level of corruption when they vote, but our votes are red or blue, we don't get any kind of say in resource distribution past that unless we are beauracracy/institution participants ourselves.
Imagine a US-China war where China's oil supply is cut off by the US Navy, and China refuses to export the precursors to pharmaceuticals.
About 2/3rds of US adults take at least one prescription medication.
And the US still continues to hesitate to forge stronger ties with India because of Cold-War-era (mis)alignments. It should be Canada, UK, India; instead India doesn't even feature in the top 15 closest American allies.
India’s local geopolitics are much too complex for that string of ties. Canada is almost our twin and the UK had very similar interests and despite the ocean between us has essentially the same neighbors.
India’s necessary relations with China, Russia, and the Middle East are just complex and it would not fit and be a major shift in power for it to align closely with American interests nor does America want to put itself in that position.
It is not difficult to recreate industries with blank checks.
Especially for chemical precursor kinds of things where it isn’t a complexity problem but a scaling problem.
When you don’t care about cost things can be scaled up rather quickly.
Not if you don't have the raw material. Not if you've forgotten how to produce it. Not of you don't have anyone that can run the process.
Restarting a supply chain can be very difficult.
Either you bust monopolies, or this is what you get.
At this point, the US medical system has become a sequence of monopolies at every level. These are the consequences.
Every company with more than 20% market share in a vertical should split in half. Having 5 or 6 companies in every vertical would solve most of the monopoly problems.
Don't forget about the monopsony problems. Large buyers distort markets faster.
10% buying power means you could drop a market player's revenue by 10%, how many businesses could weather that? (See Amazons "Project gazelle" for this in practice)
Are there any chemical precursors these drugs all have in common that could have been exhausted by something else that is more important to manufacture?
Alternatively is supply being commandeered somehow?
So much weird stuff is happening with supply chains that it feels like the US is purposefully being squeezed.
Well can we quantify how conditions are faring in other countries across a host of industries? I've been hearing energy and food prices are through the roof in the UK much worse than the US. Not sure how true it is today but we would need some one to one comparison to see if the US is specifically being squeezed. Its not out of the realm: Biden has pissed off a lot of people from the Saudis, to the Chinese.
I’ve sometimes had to go to multiple pharmacies over the last few years to fill various “common” prescriptions in Germany, and even once accepted a different drug at a pharmacist’s suggestion - German pharmacists have a lot of discretion.
It’s not just the US.
I've been out of 1 important drug (with another’s availability being spotty for months now) for a month thanks to these shortages, and I wasn’t supposed to go from the highest dosage down to zero so quickly. This all seems like a major f___up by someone.
It comes down to profit. Low to negative profit equals no medications. We need to give incentives to manufactures to produce the meds.
Years ago , the Orphan Drug Act law passed by Congress in 1983 incentivized the development of drugs to treat rare diseases. It worked. It has produced numerous drugs to treat rare diseases. They are very expensive but they exist vs not existing at all. If we can get a similar act that would give incentives to manufacture these vital drugs at a reasonable price then it would be a win for everyone.
My first guess would be to have a minimum price that's equal to manufacture cost plus 15% profit.
People are going to automatically oppose it because it will raise prices but the fact is we live in a capitalist system that produces nothing unless it produces a profit too. I would rather have the drugs available that save lives and pay a bit more than not having them at all.
> have a minimum price that's equal to manufacture cost plus 15% profit.
> the fact is we live in a capitalist system
It's called a cost+ contract.
This has a lot to do with the oligopoly in pharmacy benefit managers. top 3 PBMs account for 79% of all prescriptions dispensed in 2020.
These companies in turn negotiate hard with generic manufacturers that often they sell at a loss and aren't motivated to produce for America.
Yeah, kick backs/rebates to PBMs should be illegal. The only compensation they should get is from the insurance plan that hired them to negotiate on their behalf.
Even then PBMs are always going to be a centralizing force in the drug market leading toward a monopsony(single buyer market). Buying power is going to distort faster than large sells (10% of market buying force is very powerful, will 10% of marketing selling share is big but can be worked around)
"I’m a health economist who has studied the pharmaceutical industry for the past 15 years. I believe the drug shortage problem illustrates a major shortcoming of capitalism."
He is arguing against his own point. The problem is a lack of supply but he is promoting the wrong political answer to a politically generated problem. In a purely capitalist economy a lack of supply would cause prices to go increase and the market would respond accordingly. This industry is highly regulated. In some cases for good reason. Regulation always stifles capitalism and results in less profit for the manufacture. The fix for to much regulation is less regulation, not more.
Do you have a citation for regulation causing the low prices as opposed to competition? What's the distribution between commercial payers and government ones? In a perfectly competitive market the margin you can squeeze from a generic drug will shrink and shrink, and that can also cause reduced investment in new supply if you have more profitable alternatives and you don't have an infinite supply of investment in production capabilities.
This argument looks pretty unappealing either way, though: "the problem with vital drugs is that they're too affordable to too many people who need them". Good luck with that political platform.
> cause reduced investment in new supply
...which would cause the supply to be reduce, a slide down the demand curve, prices increase, and suddenly the margins aren't so thin, and everything bounces back. The market heals.
what? you said perfect markets reduce margins and cause people to make less of something… so the concept of a market is invalid in your opinion? this is completely incorrect. supply doesnt wink out of existence in the presence of demand just because margins got thinner and thinner. sometimes supply will disappear for various reasons, or maybe margins were super thin and some huge player made an irresponsible bet, but the market restores supply immediately in these cases just like all other cases. what you are saying is complete nonsense.
So where do we start? Eliminating patents? (One point I'm hinting at is some regulations benefit the wealthy, but they are often the last things we think of as "regulation".)
Since you believe this problem is caused be existing regulation, what regulations would you propose eliminating as a start?
> In a purely capitalist economy a lack of supply would cause prices to go increase and the market would respond accordingly.
In a purely capitalist economy, those with capital would have the easiest time getting more capital, as they get more capital they get more and more influence and exist farther and farther from consequences. Then it's trivial to get things like citizens united, stock trading congress members, and regulatory capture. As ruling institutions weaken so to do the systems that enforce "pure capitalism." Thus "pure" capitalism plants the seeds of it's own destruction.
"The free market solves all problems" is 2000's Ron Paul era thought, and it is clearly very wrong.
The right results from a "free market" are not inevitable. The results, right or wrong, are a summation of the actions of it's individual participants. Culture is the first line of defense, and when culture fails, you must rely on regulation, and when regulation fails, you must rely on force.
> The fix for to much regulation is less regulation, not more.
The fix for the wrong regulation is the right regulation.
Analyzing for less and more is intellectually bankrupt and shows lack of critical thinking. Less regulation used for regulatory capture is good, less regulation used for legitimate consumer protection is bad. More regulation that stifles innovation is bad, more regulation that prevents robber barrons and bullying of small business is good.
You need to do more reading on "the tragedy of the commons." https://en.wikipedia.org/wiki/Tragedy_of_the_commons
Regulation is only the opposite of laissez-faire capitalism and anarcho-capitalism, but nobody really does those things anymore anyway and there are plenty of other variations of capitalism in the world today.
Public ownership and subsidies to support production of things critical to national interests are fairly common, and I think that would be the most appropriate in this case.
why is this comment grey? clearly the price is determined by the market and if the price is too high it can only be caused by something interfering with the market, a monopoly, corruption or malformed regulation. either advocate for fixing this market or advocate for socialized medicine. there is no inbetween.
Because OP is not critically thinking.
They have a very simple idea of market mechanics with very simple ideas of market manipulation.
If our market isn't working, it's just not "pure" enough, right?
https://en.wikipedia.org/wiki/Anti-competitive_practices
https://en.wikipedia.org/wiki/History_of_competition_law
https://en.wikipedia.org/wiki/Natural_monopoly
https://en.wikipedia.org/wiki/Tacit_collusion
https://en.wikipedia.org/wiki/Regulatory_capture
https://en.wikipedia.org/wiki/Tragedy_of_the_commons
I don't think OP has read very many books and I would be surprised if they have a bachelors degree. OP reminds me of myself during Ron Paul's "the free market solves all problems" period on Reddit. Ron Paul presented a very simple idea of how things work, but once you start to think about how those ideas don't work, it's obvious that ignorance is being taken advantage of.
Alternatively he did not respond to the best most charitable interpretation of the post. Simply put: OP's ideas wouldn't last (and aren't lasting) long outside of an ideological echo chamber.
I think a strong obvious argument against a "less regulation" panacea is that we couldn't make our own masks because the free market sent all the production to China. Sending all of our manufacturing to China because they offered the best deal gives china incredible leverage over us. Clearly the "free market" must be analyzed not just in terms of supply and demand, but also in terms of power and coercion. There is no supply/demand curve for power.
How do we know when the price is too high? What is the correct price?
the actual title of the article is...
"Blame capitalism? Why hundreds of decades-old yet vital drugs are nearly impossible to find"
Which shows its inherent political bias.
Blaming political bias denies actual objective truth.
Calling something bias is not very different than saying "well, it's the other teams idea."
Rather than saying something is wrong, it is instead called bias. Calling it bias removes the duty to analyze the information and its relationship to truth.
Bias just describes positions on an Overton window and shortcuts critical thinking.
If you want an environment where it's never correct to blame capitalism what you're at is several steps past mere political bias I think.
Not to mention horrible grammar. I was over here trying to figure out which drugs are "hundreds of decades old" only thing I could think of was aspirin.