Fed Up with Drug Companies, Hospitals Decide to Start Their Own

https://www.nytimes.com/2018/01/18/health/drug-prices-hospitals.html

by stanleydrew • 9 years ago

405 240 9 years ago

maxxxxx6• 9 years ago

I am not sure if patients will see any of the savings though. I view hospitals as fundamentally dishonest organizations after a few experiences. Their medical treatment is fine but their financial practices are borderline fraudulent.

programmingpol• 9 years ago

Some, if not most, of this is a result of the insurance system. The insurance companies only pay x% of any given item, therefore the hospitals have to jack prices through the roof to collect enough to survive.

The problem with our healthcare system is that too much money goes to drug companies, medical device makers, and insurance companies and not enough makes it to the people actually providing the care. Its a bit more complicated than that, I'd admit, but that's the TLDR version.

chimeracoder3• 9 years ago

Some, if not most, of this is a result of the insurance system. The insurance companies only pay x% of any given item, therefore the hospitals have to jack prices through the roof to collect enough to survive.

To clarify: Medicare reimburses rates that are below COGS, so hospitals have to increase the amount they charge private insurers in order to make up the loss.

reaperducer2• 9 years ago

The insurance companies only pay x% of any given item,

The hospitals negotiate those rates. If they're not happy with them, they need better negotiators.

mywittyname3• 9 years ago

Health insurance companies have taken to denying almost every claim that hospitals file. This overtaxes the hospitals claims denial departments and costs hospitals millions in lost revenue because they don't have the staff to properly review and resubmit every claim (which has to be done by a clinical specialist).

It's like taking your car to a mechanic, and once it's fixed, refusing to pay, claiming car didn't need THAT repair in the first place. Then getting away with it because you have an arbitration agreement in place with the shop. So the shop needs to employ an entire separate department of ASE certified mechanics that are dedicated to documenting that the repairs performed on customer cars were necessary. But the kicker is, YOU GET TO DECIDE IF YOU'RE CONVINCED THE REPAIR WAS NECESSARY.

Hospitals used to have small (1 person per 10k beds) claims denial departments and use outsourcing firms if case loads increased. Now they are acquiring all the outsourcing firms and increasing their staff to like 100 people per 10k beds. It's insane.

I like to retell a particularly awful denial my partner had to deal with, which was a patient had their open heart surgery claim denied by the insurance company because they determined that the patient's condition only warranted observational care (that's right, the insurance company determines what care you need/get). The hospital eventually won that claim, but they routinely lose $100k+ claims and have to eat the cost.

maxxxxx6• 9 years ago

"The problem with our healthcare system is that too much money goes to drug companies, medical device makers, and insurance companies and not enough makes it to the people actually providing the care. "

The surgeons I see through work have very nice houses and 100k+ cars so they are part of this.

Thriptic4• 9 years ago

The real root problems with the system are that a tiny minority of very sick patients account for an overwhelming majority of treatment costs; that it's difficult to prevent this from happening; and that the current care structures make it hard to take early action to incentivize these patients to improve.

It also is almost impossible to have a real discussion about this fact because it makes people uncomfortable.

jjoonathan• 9 years ago

Hospitals are every bit as cynically abusive as the other players. They ratchet up prices as high as they can get away with while blaming insurance companies, the only party in the system with enough leverage to negotiate prices down, they demand huge kickbacks before giving drug companies access to patients (the #1 cost in drug development) and put gigantic markups on drugs they give to patients while pretending drug companies are the sole responsible party for high drug prices, they act like non-profits when asked to pay taxes but for-profits when they decide on executive compensation or location strategy (i.e. close hospitals in poor neighborhoods, open in rich neighborhoods), and they house a guild that has had such diabolical success in "managing" its training pipeline that it publicly condemns the policies it itself put in place to do so.

In general: If you ask the insurance companies who the problem is, they point at hospitals and drug companies. If you ask hospitals who the problem is, they point at insurance companies and drug companies. If you ask drug companies who the problem is, they point at insurance companies and hospitals.

If you look at patient costs in the three sectors compared to other countries, you see a remarkably even division of the spoils between the three heads of the beast.

ekianjo2• 9 years ago

The problem with our healthcare system is that too much money goes to drug companies,

Erm no, actually you pay a lot more for pure hospital services all things considered than whatever is paid for the price of drugs. I totally agree that drugs should be cheaper for patients, but pretending drug manufacturers are the only/main problem is just far from the reality of the market. Every intermediate is inflating their prices as well.

cjalmeida5• 9 years ago

Oh please. Doctors in the US get huge amounts of money, to the point they're the actual 1%. You don't see anything like this in OCDE countries.

Doctor associations all across the country create enormous barriers to the opening of new medical schools to avoid competition.

Don't get me wrong, medical doctors are generally good hard working people. But we need to acknowledge they're part of the problem.

derefr• 9 years ago

Savings, no. But benefit, surely: patients might actually be able to be prescribed melatonin (http://slatestarcodex.com/2013/09/28/sleep-now-by-prescripti...) if there was a hospital-demand-driven drug-lab producing and bottling it to clinical standards.

The entire market for drugs like Ramelteon—drugs that only exist because doctors can't prescribe the generic, because hospital and pharmacy suppliers don't carry the generic, because no drug lab finds it profitable to sell the generic, despite FDA approval—would collapse overnight.

mirimir8• 9 years ago

Well, some hospitals are honest, and dedicated to patient care. And some are dishonest, and only in it for the money. But whatever, none of them are as evil as most drug companies.

yorby• 9 years ago

none of them are as evil as most drug companies

not yet...

darkerside2• 9 years ago

Good Lord, people truly just don't get it. Hospitals are not evil; they are tasked with saving people's lives. People who nobody else can save. All the worst medical problems in the world--sometimes sudden trauma, sometimes a festering problem left to burst--they all end up on the doorstep of the hospitals, full of doctors, nurses, and technicians who are humans just like you and me. And they work ridiculous hours saving as many of us as they can, dragging bodies back from the footsteps of Death itself. Some of them making great money doing it, but others just because it's not in their nature to do anything but help. And yes, like any organization, hospitals scramble for cash to keep the lights on and keep operations going for a mission they hold sacred. But you show up at an ER, and you will get a minimum standard of care, no questions asked. And that's pretty amazing.

Disclaimer: None. I don't work in the medical industry.

chrisgd• 9 years ago

HCA, community health and the rest have gotten insanely wealthy off of sick people

ThrustVectoring• 9 years ago

You'd be hard-pressed to make a system that keeps hospitals from being abusive. Your BATNA to accepting their terms is literally dying, and especially the older folks who need more care have giant piles of cash. The cynical profit-maximizer in that position will raise uninsured prices high until the losses due to "eff this, I'm declaring bankruptcy and my various creditors can squabble over my assets" outweighs the increased collection from payment plans.

62% of bankruptcies in the US are caused by medical debt.

The only saving grace in this all is that you can save enough for retirement in creditor-protected retirement accounts, and can otherwise secure yourself financially while telling your creditors to pound sand if they're being ridiculous.

jacquesm• 9 years ago

Other countries hospitals are doing just fine.

Consultant324522• 9 years ago

I could design such a system overnight. Starting tomorrow instead of paying for medical care the US Medicare and Medicaid programs will simply cut a check to the people who they were previously funding care for. Then those people may choose to spend the money on anything they wish, healthcare or otherwise. The days of not being able to price shop are over, competition will drop prices through the floor.

The hospital can try to be as evil as they want, but their ability to do so in a market that has actual price and service competition will make it very difficult to do so.

pstuart2• 9 years ago

Here's a great analysis of the overall problem: http://truecostofhealthcare.org/

TrainedMonkey• 9 years ago

This site is sluggish on a pretty beefy laptop.

edit: Using Google Chrome Version 63.0.3239.132 (Official Build) (64-bit)

pstuart2• 9 years ago

Definitely a pause in loading, however, it's worth the wait.

It's my doctor's site, I'll let him know.

cheeze• 9 years ago

Highjacks my scrolling to make it "smooth" as well...

reaperducer2• 9 years ago

Coincidentally, some insurance companies that are fed up with hospitals are starting their own.

eatbitseveryday• 9 years ago

Any source, example, etc.? Your comment reads like one of those click-bait advertisements.

Thriptic4• 9 years ago

HMOs. Direct employment of physicians by payers used to be a popular thing until people realized that the incentive structures were conflicting. More money for providers means less for the parent payer etc.

nradov2• 9 years ago

It's really not click bait. Kaiser Permanente already operates under that model with a single organization acting as an insurer and owning hospitals. Other payers are moving in the same direction by acquiring or creating provider organizations. In some markets all of the major providers have merged together in order to gain more negotiating power so the only way payers can get some leverage back is by having providers as employees instead of vendors.

ars• 9 years ago

UPMC. It's both an insurance company, and a chain of hospitals. And Dr.'s offices, and well, pretty much everything.

Not sure which came first though, hospital or insurance company.

fludlight• 9 years ago

Let's say they succeed in launching a new generics company. Ten years down the line they will divest in order to build each hospital a shiny new geriatrics wing. Within six months the spun-off drug company will jack up prices and the cycle will continue.

TillE• 9 years ago

From that perspective, does any country have their own publicly owned pharmaceutical manufacturer? It's the kind of thing the NHS should do, since they control most other aspects of health care, but I don't think they do.

There's so little benefit to competition with generics, you may as well have that vertical integration to at least provide what hospitals need.

ekianjo2• 9 years ago

Country-owned means of production have usually not fared well vs competitive forces in the past. And it could be considered as unfair competition: a state-owned manufacturer could basically have a blank check from the government for any kind of investment and would not have to worry at all about profitability. It sounds very nice as a thought exercise, but economical incentives are very tightly linked with productivity.

toomanybeersies• 9 years ago

In New Zealand, Pharmac [1] is a government run entity that bulk negotiates bulk contracts for supplying the entire country with prescription drugs.

It's not quite the same as manufacturing it themselves, but the bulk buying does bring the price down quite substantially.

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

aa111111111• 9 years ago

www.spc.lk

chillydawg• 9 years ago

Because of the purchasing power of the NHS (enormous) they don't usually run into many problems like described in this thread, although they do happen here. Drug company monopolies need a drug purchasing monopsony to keep them in check.

majormajor3• 9 years ago

This is all nice and cynical sounding like HN loves when it comes to big companies, but even then: is that such a bad thing? You have ten years of a lot of people getting cheaper and better access to drugs, and you have a bunch of hospitals getting much-needed capacity increases with state-of-the-art facilities, and you have a proven business model for someone else to come in and take their turn at the money-making wheel.

It's like saying nobody should start a new company cause "best case they'll be another evil surveillance company like Google/Facebook/Microsoft/Amazon, worst case they'll lose all their money."

mojomark• 9 years ago

Concur with maj maj maj maj... additionally, the the cynisism ignores the introduction of new competitive forces with a different moral vector in a largley unchecked market, the repurcussions of which are certainly uncertain, for certain.

nostrademons• 9 years ago

That's pretty much the case with all of the economy, though. Industry is dominated by big companies that are overpriced and consumer-hostile; new startup enters that actually delivers a decent product at a decent price; startup becomes wildly popular because it's better than entrenched encumbents; startup founders/investors/early employees want liquidity and either sell to big competitor or go public and are forced to be responsive to shareholders; startup jacks up prices and cuts costs; everybody starts to hate the new big company; the cycle repeats.

Think of it as the full-employment theorem for entrepreneurs, or the social-mobility conveyor belt, or the way in which society stays dynamic & responsive. At least savvy customers get a decade of decent service at reasonable prices, and people (from all backgrounds!) with chutzpah and persistence have a shot at becoming fabulously wealthy.

eeZah7Ux• 9 years ago

The first paragraph is true.

people (from all backgrounds!) with chutzpah and persistence have a shot

Economic mobility is lower that what most people think across developed countries and it's decreasing.

thinkloop• 9 years ago

Agree, however the market would have an additional significant competitor, as well as a blue-print and success example for others to emulate if they decide not to defend their value prop.

philipov• 9 years ago

The problem is that the most effective way to defend your value proposition seems to be buying laws that protect you against new competition. Entrenched players might compete with each other, but they can all agree to crush the new guy together.

incompatible• 9 years ago

That would be an interesting cycle. Perhaps the hospitals could document the process of setting up the drugs company, so that as soon as the prices are jacked up, they can start up another one. It could be quite a profitable business model: starting up and selling drugs companies.

justinph• 9 years ago

How would that going to work? The article says they're setting up a nonprofit company. Can't spin that off and sell it.

Feniks• 9 years ago

This is happening in my country and the government has said they'll back any pharmacy deciding to mix the drugs themselves. Healthcare costs are spiralling out of control.

It'll lead to a metric ton of courtcases all the way to Strasbourg and beyond though. The Americans may threaten to invade.

fencepost2• 9 years ago

Just offer to let Trump put his name on a hotel there, or a condo building attractive to Russians wanting to launder some money. Tada, no risk of a US invasion and you may even get better trade deals.

indescions_2018• 9 years ago

I always assumed it would be CVS that got into the game. There are are probably a dozen or so drugs that account for the majority of consumption. Flu vaccines, blood pressure, cholesterol, thyroid, insulin, asthma, progesterone, beta-blockers, gerd, etc. Providing these at minimum cost, as well as community public health services. Could be enormously cost effective. And extend general wellness and productivity many times over.

>> "the trick will be in selecting the right third-party manufacturer to ensure good quality"

Obvious subtext here is outsourcing mass market generics to be produced in India, China and other emerging markets. "Pharma-security" might be a popular way to phrase it today. Quality is undoubtedly reflected in price. And there is enormous opportunity in exponentially reducing R&D costs and finding efficiencies.

Clubber2• 9 years ago

I they seem to be explicitly targeting generics, so R&D doesn't come into play. It's really just find someone who can build a known compound and press it into a pill. This has the potential to be massively disruptive.

mirimir8• 9 years ago

Even generics need FDA approval. Manufacturers must demonstrate therapeutic equivalence.

phillc73• 9 years ago

There is still a significant R&D element in that "press it into a pill" step. This is manufacturing and process R&D. For example, continuous (rather than batch) manufacturing is the big hotness at the moment. Also new techniques, such as 3D printed pharmaceuticals, involve plenty of R&D effort.

mirimir8• 9 years ago

Yeah, I wonder why not CVS and other chains.

jrnichols2• 9 years ago

i was thinking the same thing, but i was thinking that it was going to be Walmart who got into the game first, especially since they were starting to get into the clinic gig already.

CoolGuySteve• 9 years ago

Aside from generics, Boots in the UK used their patent on ibuprofen to dominate their market.

I’m always surprised there isn’t more pharmacy-driven research or investment into exclusive over-the-counter medicines to mimic that strategy, or bidding wars to get exclusive pharmacy rights to new drug patents so that firms can get halo effect shopping.

(Not that I endorse this sort of corporate lechery, I’m just surprised, is all)

refurb6• 9 years ago

Why would a pharmacy care? They typically make a margin on each drug they fill. The more expensive the drug, the more money they make.

mannykannot• 9 years ago

I would not think that CVS, as a retailer, has much incentive - it is not paying the cost of the branded drugs. It is the insurance companies that I half-expected to make this move, unless there are anti-trust issues, or specific legislation (bought by the drug companies) to prevent them from doing so.

Kalium2• 9 years ago

You're right! It's insurance companies and benefit managers that are heavily concerned with this.

CVS is acquiring Aetna and is one of the largest pharmacy benefit managers around.

WalterBright6• 9 years ago

When there's lack of competition, one needs to look for artificial barriers.

Ah, found it:

"Intermountain executives said that they would seek approval to manufacture the products from the Food and Drug Administration, which has vowed to give priority to companies that want to make generics in markets for which there is little competition."

nradov2• 9 years ago

I certainly hope you're not suggesting that we dispense with FDA approval for drug manufacturers just for the sake of increasing competition.

WalterBright6• 9 years ago

I don't need government approval to start manufacturing cars. Why for generic drugs?

Note that you're paying plenty for having the FDA as gatekeeper.

Symmetry2• 9 years ago

No, but a more reasonable level of regulation like the EMA uses would make things a lot better. There are levels of regulation between Anarchy and Stalinist 5 year plans.

shykes• 9 years ago

This article makes it seem like drug companies alone are responsible for predatory pricing in US healthcare, with hospitals being somehow on the consumer's side of the issue. In reality US hospitals are just as guilty of predatory behavior. If they do achieve lower costs through a new generics company, I do not trust them one bit to pass on the savings to patients. Why would they?

icantdrive55• 9 years ago

Never forget being charged 14.99 for one Acetaminophen while in a hospital, and this was years ago.

My father had good insurance. He went in for a spider bite. He needed to stay the night. I arrived and he thanked me for Teddy Bear, and flowers. I told him I didn't send you anything. He said, "Well someone did?"

Weeks later he called me up, and said the gift shop on the hospital send the gift, and charged the Insurance company $230. Billed under something like "psychological affirmations".

Any who--they are thieving entities. It kills me when I meet people, with no assets, who pay their inflated hospital bills out of American pride? They are so strong in their convictions, I don't even bring up a chapter 7. I understand they save live, but don't financially ruin patients.

One other memory. I went in for something. I had great insurance, so I didn't worry about the bill. They gave me a blood test. A week went by, and I got a bill for $900. I called my union, and they the hospital didn't know I had insurance.

My union said my bill would be $10. She said the hospital sent them the bill of $100, and I would pay my 10 percent. I asked, "Why do they only charge you $100?" She said, "It's about Collective Bargaining. Yea--I find it shocking too."

Gustomaximus• 9 years ago

One of the best rules for US hospitals (other than universal care) would be for all hospitals to publish prices annually and charge one set price, be it a walk in patient or large union.

This should be a reasonable rule if people want to keep capitalist system healthcare. Its not stopping them competing, only applying a transparent and level playing field to the market.

dx034• 9 years ago

I don't understand how charging different prices for the same service is legal. If that would be declared illegal (as it is in many other countries) it would probably already fix a lot. Some insurances would pay more but people without insurance vastly less.

AndyMcConachie• 9 years ago

Is there a website where people can post their annotated hospital bills and talk about them? If not, someone should make one.

nkrumm• 9 years ago

Even if they do not directly pass this on to patients, cheaper generics will benefit patients in terms of their availability. I recently was involved in a case where a flucytosine (an old, generic anti-fungal) was considered for a patient, but the cost of treatment was $7,000 (as an outpatient) and therefore not considered (despite this being the best option). For an interesting analysis of this, see [1].

[1] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4885648/

Symbiote2• 9 years ago

"Due to generic drug manufacturer monopolization, flucytosine currently costs approximately $2000 per day in the United States, with a 2-week flucytosine treatment course costing approximately $28 000. The daily flucytosine treatment cost in the United Kingdom is approximately $22."

Would it be permitted to travel to the UK (or somewhere closer) and buy the medicine, then bring it back? Or even order online, there's at least one British pharmacy that can deliver abroad.

siquick• 9 years ago

If they do achieve lower costs through a new generics company, I do not trust them one bit to pass on the savings to patients. Why would they?

As a non-American (UK and Australia citizen) it bewilders me that this is considered a possibility.

Why are hospitals doing the opposite to offering the best care possible to all citizens? Are they for-profit in the US?

kevin_thibedeau• 9 years ago

1) Properly healing people reduces your customer base. 2) Yes (with some exceptions).

The other aggravating factor is that most mutual insurance companies have also converted to a for profit model that reinforces the incestuous coupling between pharma and medical providers. There is no voice left who has an interest in lowering costs.

thaumaturgy2• 9 years ago

Are they for-profit in the US?

Yes, with few exceptions.

Here's how this goes: "But if they weren't for-profit, then it would be more like Canada's or England's health care, and I've heard you have to wait months for anything over there. Also it would mean they wouldn't have as much money for innovation, and, y'know, the US has the best health care technology in the world. Oh, sure, only the rich can afford it, but if you're poor you can still go to a hospital and they won't turn you away."

There, that's every single defense of our system, in one paragraph. I don't think I missed anything.

Now, pardon me, I need to go throw up.

dragonwriter3• 9 years ago

Why are hospitals doing the opposite to offering the best care possible to all citizens? Are they for-profit in the US?

Contrary to sibling comments, no, they generally are not. Most (58.5%) US hospitals are private nonprofits, and another 20.2% are public. Only 21.3% are private, for-profit. [0]

[0] https://www.beckershospitalreview.com/hospital-management-ad...

thousandautumns3• 9 years ago

American hospitals do offer the best care possible to patients. Thats actually the problem. Much has been made recently of the tendency of hospitals (in the US) to overdiagnose/overtreat patients, which is driving up the overall cost of healthcare. In other countries like the UK, I think that there is more caution regarding prescribing costly, unnecessary procedures. The result is that, yes, the actual healthcare is probably better than anywhere in the world, but the additional quality compared to countries like the UK or Australia is marginal considering the added cost, which for anyone with bad/no insurance, is insurmountable.

intopieces• 9 years ago

For one, a significant number of of hospitals are non profit. Excess earnings must be invested into hospital itself in the form of capital improvements and additional staff. Controlling costs is a way of reducing their own need to spend this excess money.

kgwgk2• 9 years ago

Giving themselves huge salaries is another way for non-profit CEOs to put into good use the excess money.

eksemplar• 9 years ago

Drug prices is an increasing problem everywhere.

Now I’m European so bare with me and my “Stalinist” ways, but I don’t see why something so essential to society is in the hands of corporations rather than the public.

Research? You could buy a lot of research for the amount of money we’re currently spending on medicine in healthcare and right now we’re really just paying a corporate tax to save lives so that some 1%’et can get even richer.

mft_5• 9 years ago

Assuming you're referring to the general development and supply of all drugs (in particular new drugs, as well as generics) the simple answer is that the process of discovering and developing new drugs is both high-risk and also heinously expensive. As such, whoever approaches it needs to have many billions to spend and --very likely-- lose. The current capitalist Pharma model has developed to suit: investors in Pharma essentially take on the risk, and the 'downside' is high drug prices to pay back the investors for their investment and its risk.

Are there alternatives? Well... * Large charities (the Gates Foundation, for example) might be able to fund development of drugs, but would be most likely to focus on a limited number of high-return, lower-risk opportunities. The Foundation's annual total spend ($4.6Bn in 2016) is roughly half of one large Pharma company's R&D spend (https://www.roche.com/research_and_development.htm), so they've clearly not got the clout to enter general drug development. * Governments might be able to enter this space, but then you're betting that a government can do it cheaper/better than big Pharma, which is a major gamble, even before you get into arguments about public- vs. private-sector efficiency. You then also run into the challenge of governments not being great at making major long-term visionary investments in a 4/5-year election cycle, the electoral unpopularity of such an approach if drugs fail, and the ethical requirement of firewalling the government development arm from the drug approval (i.e. public-health-safeguarding) arm. And again, you've got to find the money: sure, Roche's drug development spend per year is only ~a tenth of the UK NHS's annual budget... but that's a super-cash-strapped health service - diverting 10% of its budget to maybe improve things in 10 years would be a tough sell.

Any avenues I'm missing?

(Now... fully agree that it would be possible for government or non-profits to enter the generic space, but... the majority of generics make pennies, if anything, and are certainly not cash cows. For every one 'bad' case that's brought to the public attention, be it a rare antibiotic, or the price of adrenaline pens, there are countless thousands of other examples which aren't a problem. So you'd need a very flexible generics strategy to only focus on these rare 'problem' cases... and this might not even always be scientifically or legally possible.)

Kalium2• 9 years ago

Research? You could buy a lot of research for the amount of money we’re currently spending on medicine in healthcare and right now we’re really just paying a corporate tax to save lives so that some 1%’et can get even richer.

You're absolutely, completely, 100% right. That amount of money could buy an incredible amount of research!

Right now, the American government institutions that fund this kind of research are infamous for being very risk-averse. They fund research, but do so in a way that takes few chances. Younger researchers get shut out. Researchers chasing novel ideas often get shut out. After all, why fund some moonshot when there's someone with a good track record of results to fund instead?

Basically, there's ample reason to doubt that the American institutions in question could actually do better if they were handing out the funding. Oh, and the grant-giving bureaucracy is also infamous.

thinkcontext• 9 years ago

Its probably necessary but not sufficient for there to be more competition in this area. That there are nationwide shortages of saline bags and sodium bicarbonate indicates massive market failure, without evening considering more complex drug politics.

You raise a good point about drug companies not being the sole source of predatory pricing in US healthcare. US healthcare is in the neighborhood of $3T whereas drug spending is around $300B, though drug spending is going up faster than health spending overall.

CabSauce• 9 years ago

Those hospital systems are non-profit. Not that there aren't ways to spend new revenue on buildings and equipment, but at least there's less profit motive.

danvoell• 9 years ago

Medical Devices use the exact same play book. Small improvements + patents and new FDA approvals. You can use the old design, but there may be a flaw. Not to mention distribution strongholds and salespeople in the operating room with doctors.

narrator• 9 years ago

Kaiser getting into the drug business would be awesome. Insurance, Hospitals and Drugs all under one roof.

jopsen3• 9 years ago

Really, bigger conglomerates?

tacon• 9 years ago

For a fantastic discussion about the Byzantine process for generic drug approval, I recommend a recent episode of EconTalk[0]. The guest wrote a book called "Drug Wars: How Big Pharma Raises Prices and Keeps Generics off the Market"[1]. When up to half a billion dollars of revenue is at stake, the drug companies have incredible incentives to delay or prevent generics coming to market. Believe or not, they often simply refuse to give a sample of the old drug to the generic company. No sample to compare, no FDA approval. It is illegal to dispense a drug without a prescription, and the sample is not for a patient, so it can take some maneuvers to get a legal sample. Or the drug company can change a tiny feature of the drug, re-patent the new drug, and then destroy/withhold all the old drug. No old drug sample, no FDA approval of an "identical" generic. The drug companies will contract with a generic company that never, actually gets to production (wink, wink). Those contracts are finally being understood by judges, so now they are going to a second level of contract obfuscation that is even harder to notice, but still keeps the generic off the market.

[0]http://www.econtalk.org/archives/2017/06/robin_feldman_o.htm...

[1]https://www.amazon.com/Drug-Wars-Pharma-Raises-Generics/dp/1...

rtpg• 9 years ago

Is this a worldwide problem? Or is this really an American failing?

toyg• 9 years ago

Some of these techniques (like tweaking and repatenting a formula) are definitely used worldwide.

maxerickson2• 9 years ago

I think it is worse in the US.

India goes as far as waiving patents if a drug is too expensive.

steiger• 9 years ago

I live in Brazil and generics for drugs which patents are expired are widely available, accounting for 30~40% of all drug market. If I'm not mistaken, we even broke patents in some cases (HIV drugs), which is cool.

Symmetry2• 9 years ago

It's definitely a US only problem. There are, for instance, multiple competing competing brands of EpiPen competitors in Europe. In the US the FDA's mandate concerns safety only and private entities can sue it to force it to do its job if they think it isn't. Which makes it easy for big companies to launch lawsuits alleging that their potential competition can't prove that they can produce drugs as safely as the incumbents.

jopsen3• 9 years ago

The drug companies will contract with a generic company that never, actually gets to production (wink, wink).

Sounds like I should setup shop as "generic drug company" and land me one of those contracts where I promise to never reach market :)

mmanfrin• 9 years ago

Finally, a career fitted to my sharp ability to never follow through on goals.

zerostar07• 9 years ago

Sorry, i have a patent on that.

ultim8k• 9 years ago

Why not having even "open source" medicine? IT industry got a huge benefit from it.

known• 9 years ago

effectivehealthcare.ahrq.gov does good comparative analysis

AllegedAlec• 9 years ago

People don't seem to understand how prohibitively expensive it is to develop new drugs and get them approved for use. Yeah, drug companies charge huge premiums, and they don't like generic versions of their product, but with a good reason: they spend huge amounts of money not just to make the drugs, but also to make the process more efficient, and before they even know whether a product will be successful, they spent a fortune on research and development.

Take for example the case of Matuzumab, a medicine which was to be used against various forms of epidermal cancer. In 2007 a clinical trial failed and they had to give up on the idea. This company spent tens millions of dollars on the costs of this research, only for it to fail.

chiefalchemist• 9 years ago

It will be interesting to see which side Amazon takes. In theory, it would seem to be these hospitals. However, Big Pharma has the (financial and political) muscle (and will) to add friction to any Amazon.

thousandautumns3• 9 years ago

A lot of people here seem to conflate the pharmaceutical companies causing the issue with the entire pharmaceutical industry. Even in the article, the hospital reps say they are specifically targeting the handful of bad actors, like Valeant Pharmaceuticals and Martin Shkreli types, who specialize in buying up cheap/old drugs and jacking up the prices. This is not a group of hospitals trying to take on the entire industry. Nor is it an entire industry taking advantage of hospitals/patients.

Fed Up with Drug Companies, Hospitals Decide to Start Their Own

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