A Billionaire Pledges to Fight High Drug Prices, and the Industry Is Rattled

https://www.wsj.com/articles/a-billionaire-decided-to-fight-high-drug-prices-and-the-industry-is-rattled-1540145686

by jseliger • 8 years ago

217 290 8 years ago

jseliger• 8 years ago

It has long puzzled me that we don't have strong political constituencies for price transparency in medicine. Every medical provider ought to have a website that lists every fee and cost; this is not hard to do, yet when I call providers for cash prices, the answer is often, "I don't know" or "I can't tell you."

Old_Thrashbarg• 8 years ago

Agreed, it's so opaque. I feel like I've called a specialist asking what they think my copay will be given my insurance plan and they said they don't know, talk with my insurance firm. I call my insurance firm and they say they don't know, I have to submit the claim first.

Any marketplace where the buyer isn't informed of the price until after the transaction is ripe for disruption.

microcolonel2• 8 years ago

Frankly, I don't see how it should be possible to buy something you're not entitled to know the price of; or rather, I don't think it should be possible to bill more for something than the quote.

rileymat2• 8 years ago

It is complicated ( don't want to excuse it), but I am not sure I would expect the doctor to know your insurance arrangement (or even how much you would expect to pay because you would need to know how much of your deductible you have already gone through.)

And how would the Insurance company know until they are billed for the procedure?

dec0dedab0de• 8 years ago

I couldnt even get cvs to tell me the price of something with my insurance. They said it would take a few days.

maxxxxx7• 8 years ago

I saw this with my girlfriend. She needed a procedure where the provider refused to even give a ballpark number, the insurance refused to tell if they would cover it or to what extent. So if you really need it, your only way forward is to get the procedure and hope for the best without even a basic idea about the costs.

shados• 8 years ago

It's downright barbaric. You have a service for which you basically can't get a quote, can be collected into oblivion if you don't pay, you don't even know WHO will bill you (or even how many bills you'll get!), and you very well might be unconscious or in no position to make this kind of decision. Your life might be on the line!

It only gets some level of sanity (though not to reasonable level) if you involve insurance companies, who have some of the information necessary and the leverage to negotiate.

nickjj• 8 years ago

Also don't forget that the thought of even asking for a refund on prescription medication will get you laughed at.

Right, so I'm supposed to pay $700 for some medication that has a chance of either making my heart stop or cure my condition and if it doesn't cure it, too bad.

maxxxxx7• 8 years ago

I think it was a huge mistake that this didn't get tackled during the Obamacare discussions. Price transparency and the removal of preexisting conditions would be a big step for some sanity in the US medical system. It's also pretty sad that the Republicans who are supposedly for markets don't push for price transparency.

ilove_banh_mi11• 8 years ago

Actually Trump and the Republicans ran on a platform of price transparency, but Senate Democrats can block and have effectively blocked (assisted by now-deceased McCain) any non-taxation-related changes to Obamacare.

Reference: https://www.politifact.com/truth-o-meter/promises/trumpomete...

prostoalex3• 8 years ago

the removal of preexisting conditions

That happened under ACA, didn’t it?

colordrops• 8 years ago

The Republicans would argue that forcing price transparency is regulation and government intervention, just like net neutrality.

danso• 8 years ago

Sounds like there just hasn’t been enough money and support to create a committed movement, not when pharmaceutical companies have the means to push the narrative that it’s an intractable problem.

From the article:

Another reason Mr. Arnold got involved: Drug pricing was an issue no other philanthropist had claimed.

This makes some intuitive sense. America’s healthcare system manages to hide its costs so well while providing modern treatment that it may not seem like the most compelling humanitarian problem for a billionaire, i.e. a first-world problem compared to providing mosquito nets to prevent malaria.

prostoalex3• 8 years ago

California requires hospitals to publish chargemasters (price sheets for most common procedures) and makes them available https://oshpd.ca.gov/data-and-reports/cost-transparency/hosp...

rlpb3• 8 years ago

Perhaps they should be taxed on their MSRP and not be given a tax rebate on discounts. That would encourage them to keep their published prices matched to what they actually charge.

neonate• 8 years ago

http://archive.is/ED7g6

tfha2• 8 years ago

If you want to fix medicine, increase transparency. Earlier this summer, I had white spots on my throat and needed to go get checked for strep.

I called around, and finally settled on a facility that told me they could check for strep for just $59. I go in, get my throat culture, then get my bill.

"Well yeah, the throat culture was only $59. But the nurse had to do it and it's $120 to see a nurse. Also, the doctor has to check in before any operation is performed, and that's $200. After all other fees, your total bill is $400".

There's no way that should be legal. I was quoted $60.

microcolonel2• 8 years ago

There's no way that should be legal. I was quoted $60.

Well, part of the problem is that the state now assumes that consumers are not qualified to take care of themselves, and that the only people who are qualified are state-approved high-demand professionals. Oddly enough, opioid overdoses were not higher when you could just buy the stuff over the counter; but people have forgotten that people used to be responsible for their own well-being, and are convinced that they should not be trusted to defer to experts when they see fit.

gbacon• 8 years ago

Some things should simply be left to Our Betters.

ibeckermayer• 8 years ago

It’s bizarre that “capitalism” is frequently blamed for the moral atrocity that is the American medical industry when really it’s one of the most clear cut examples of a state-mandated cartel

pjc50• 8 years ago

I'm very suspicious of that factoid, given that limiting Paracetamol purchase size was very effective at reducing overdoses in the UK.

Also, the US has seen a recent huge rise in opioid overdoses ...

ergothus• 8 years ago

Any time you try to define what your insurance will cover, all you can get is s nkn binding estimate, yet most places have you sign an agreement to pay in full based on that estimate, even if the estimate is wrong.

vidanay• 8 years ago

Yes sir, we can replace your spark plugs for only $4.00 each.

It costs $75 to pull the car into the garage, the lift fee is $105, it's $21 to open the hood, $64 to unplug the wires from the old plugs, $64 to plug the wires into the new plugs, then there's $18 to close the hood (gravity assist discount), and another $75 to put the car back in the parking lot.

Don't worry, changing your plugs is only $16.

dasil003• 8 years ago

Never once in 20 years of automobile ownership has a mechanic tried a stunt like that on me.

enraged_camel3• 8 years ago

I take it you have never been to a mechanic?

Because every single one I've been to also includes labor cost in the estimate.

jacobwilliamroy• 8 years ago

My (motorcycle) mechanic quotes me based on the parts and the amount of time required to do the repair. So she'll say "A new set of tires is $130, and the shop labor is $110 an hour. If you only bring in the wheels, then labor is just $50." I'm not sure what magical force is causing my mechanic to behave this way. It could be personal preference, some kind of regulatory requirement, pressure from competing shops, etc. Whatever that force is, it doesn't seem to exist in the american sickness and treatment system.

drtz2• 8 years ago

Somewhat ironically, mechanics seem to be generally considered one of the least trustworthy forms of business. I wonder why the medical profession hasn't seemed to earn a similar reputation. Maybe they will but they just haven't gotten there yet.

Splines• 8 years ago

"Don't worry about it, my insurance will cover it"

u801e3• 8 years ago

Don't forget the nurse mechanics needed to transport the vehicle to the right location and the anesthesiologist mechanic to monitor the vehicle's electrical system, and the surgeon mechanic to do the procedure. And they'll also charge you fees for the tools they use.

stickfigure3• 8 years ago

Automobile mechanics are required to provide a written estimate in advance. I don't see why health care should be any different.

Before anyone objects with "but what about emergencies!" note that emergency care is a single-digit percentage of total health expenditures.

enraged_camel3• 8 years ago

>Before anyone objects with "but what about emergencies!" note that emergency care is a single-digit percentage of total health expenditures.

That is true, but emergency care disproportionately results in bankruptcies compared to other forms of care.

lstodd• 8 years ago

It's like being given a potentially ancient, bit-rotten code base and asked to refactor the shit out of it for a fixed price. And you can't know that upfront.

It might take a day. It may take a decade. It may take you the customer to change your entire approach.

This is not feasible. You can not disregard hidden defects and the cost of fixing them unless you do not really want reliabilty. If you do not want it, then don't complain.

In IT this requested lack of reliability is accepted. In healthcare and auto repair it is barred by law.

EDIT: i hate autocorrection.

u801e3• 8 years ago

The example above is essentially an estimate of the cost of parts (the strep throat test). The cost of a sick patient visit is known and could have been easily included in the estimate.

GeekyBear• 8 years ago

One current problem is that even if you have insurance, and seek emergency care at a hospital that is part of the network covered by your plan, you still often end up with a huge surprise bill.

Vox's database shows that patients are especially vulnerable to these surprise bills when out-of-network doctors work at in-network hospitals.

“It does happen quite a lot in the emergency room,” says Christopher Garmon, an assistant professor at the University of Missouri Kansas City.

Garmon published a study last year that found as many as one in five emergency room visits led to a surprise bill from an out-of-network provider involved in the care.

https://www.vox.com/2018/5/23/17353284/emergency-room-doctor...

debacle• 8 years ago

emergency care is a single-digit percentage of total health expenditures.

How does that contrast with "care provided by emergency departments?"

killjoywashere• 8 years ago

"but what about emergencies!" note that emergency care is a single-digit percentage of total health expenditures.

Right, as soon as the patient is admitted, it's a cardiothoracic surgery issue, or an oncology issue, or a high-risk obstetrics issue, or a critical care issue, or a neurosurgery issue, or a nephrology issue, or a general surgery issue, or an in-patient psych issue, or an ENT issue, or an opthalmology issue, or a geriatrics issue, etc.

rayiner• 8 years ago

It’s hilarious that people suggest that doctors should provide written estimates in advance, on a site full of programmers where the accepted wisdom is that its impossible for them to provide accurate estimates for the work they do.

wonderwonder4• 8 years ago

Doctors and the health care industry have better lobbyists than auto mechanics.

shrumm• 8 years ago

Singapore does this really well. A hospital is mandated by law to provide you financial counselling - it’s like a predictive charge sheet of what you will be charged when you’re admitted to the hospital. It’s unreasonable to expect 100% accuracy, they give you an estimate based on everything they know. if circumstances change, they are required to provide you an updated financial counsel sheet.

ryanlol• 8 years ago

Why would you pay?

rlpb3• 8 years ago

What happens if you insist on paying only the $59 that you were quoted?

dev_dull• 8 years ago

They send it to a ruthless collections company and ruin your credit.

dplgk• 8 years ago

Surely goes to collections

valas• 8 years ago

Transparency is good and all, but there is anther way. In most advanced economies professional bureaucracy figures out the costs. Ordinary folks focus on getting healthy, not on costs.

lj311• 8 years ago

In most advanced economies professional bureaucracy figures out the costs.

This works terribly for most advanced economies, Britain and Canada in particular.

Waterluvian• 8 years ago

It is just insane to me that you have a medical issue and you're calling around for quotes. I know we have had this conversation to death for decades now but it just makes me so angry.

nostromo4• 8 years ago

Why?

The most efficient provider should get his or her business. That way we can treat more people for strep and increase human welfare.

bko• 8 years ago

What's the alternative? Everyone charges the same price? Who sets this price?

Calling around and shopping is what people do on practically every other service or good they buy now.

tehwebguy• 8 years ago

If you think you're angry now you should try actually calling around for quotes. My experience is that most places you call won't even try to give you a straight answer!

robertAngst2• 8 years ago

It is just insane to me that you have a medical issue and you're calling around for quotes.

You dont call around for quotes of $100+ services?

Why?

johnpowell• 8 years ago

I was diagnosed with Oropharyngeal Cancer 39 days ago. Keeping up with the appointments alone has been bad enough. I am not sure how I would deal with this if I had to shop around for the best deal.

-I went to urgent care for some swelling on my neck that escalated quickly. 45 minutes later I was getting a MRI. This was on a Friday. They called and said it was cancer.

-Monday I was seen by a ear nose throat doctor. Yes, cancer indeed.

-Tuesday I saw a oncologist.

-At this point I decided to move to Portland since my sister lives up here. So the oncologist referred me to another ENT doctor in Portland.

-About a week later I saw a dentist and radiologist on the same day. Everyone agreed that due to the bad shape my teeth are/were in and the location of the cancer my teeth need to come out.

-A few days later another oncologist

-All my teeth removed (this has been rough)

-Tomorrow a "simulation" and PET scan to see if the cancer has spread

-Tuesday is something called a swallowing test

-Wednesday is a check up with the oral surgeon

-Friday is some intake thing for the feeding tube and a meeting with the nutritionist.

-Next Monday feeding tube installed.

-Next Tuesday another check-up with the G.I doctor.

-Next Wednesday radiation and chemo start.

So yeah.. I have no clue how much this shit is costing and I don't really care since I have Medicare. I just wish everyone had the same luxury.

archagon• 8 years ago

We live in a boring dystopia https://twitter.com/visakanv/status/990570131238473728

11235813212• 8 years ago

Calling for quotes is how buyers (patients) force prices down in the long run.

For example, I got a quote this summer for an outpatient MRI that was 20% the cost of a hospital MRI, faster, and would accomplish the same thing. Now I tell everyone I know about this. If enough people do this, the hospital will not be as free to increase the cost and might even lower it (or at least start providing quotes!)

This price-shopping process is slowed by all the shenanigans that keep prices and services provided confusing, and demand to improve this is hampered by insistence that patients are never in a state of mind to shop for the best healthcare provider. It’s simply untrue—and there are workarounds in the worst cases like healthcare POAs and family members donating time.

yalogin• 8 years ago

The real issue is not a big percentage of the population care about the prices. A good chunk of them are covered by employer based insurance or government medicine. Only the poor and unemployed care about it and unfortunately they don’t have the gravity to change things in the US. Only the wealthy and entities able to fund a 301c can influence things. Point is I do t know what asking around for prices is going to do. By definition if you are asking around you don’t matter to the politicians.

jihoon796• 8 years ago

The lack of transparency is due to perverse incentives in the healthcare system stemming from overly complex legislation.

As a country, the US hasn't decided whether healthcare is a fundamental right or privilege. As a result, we constantly make political decisions that straddle the line without ever really going one way.

The biggest culprit is the "fee-for-service" model of reimbursement, where healthcare providers (physicians) are reimbursed based on the quantity of care rather than patient outcomes. Each procedure has a code (CPT) that is used to bill insurance. Billing for each of these codes is completely arbitrary and up to provider/payer negotiations. The fee-for-service model is a clear example of a perverse incentive.

Who reimburses the fee-for-service model? Either the government (Medicare/Medicaid isn't even entirely government-run, as many states rely on a for-profit Medicare Administrative Contractor) or private health insurance companies. The perverse incentives can now be seen from both the provider's side and the payer's side: hospitals and physicians negotiate to get the best reimbursement rates that they can. And of course, because these insurance companies want to make money, they make it "difficult" for providers to get paid for each procedure and will find any reasonable way to deny the claim from going through. Because of this, providers artificially raise the amount charged to the payers as high as they think they can get away with in the hopes that insurance will pay up.

Meanwhile, patients suffer greatly as there's no transparency.

datavirtue• 8 years ago

You are way off base. The original WSJ article has links to other articles detailing how hospitals merge themselves into a monopoly that has to be accepted by the insurer. The hospital sets the prices. They also go into how these large hospital systems gobble up doctors offices and use the same leverage to increase prices and tack exhoribiant fees--just like the experience of the person you are replying to.

wmccullough• 8 years ago

I cannot divulge my sources, so take it for what it is, but in talking with people at the top of several very large private insurers (as far back as 2016) they were sick of how providers weren't healing people and bleeding them out.

I've seen evidence (firsthand) that value based care can work, but it's hard to get provider networks on board when they are the ones who aren't getting paid when readmission rates are too high.

Brakenshire2• 8 years ago

The biggest culprit is the "fee-for-service" model of reimbursement, where healthcare providers (physicians) are reimbursed based on the quantity of care rather than patient outcomes.

Charge a hospital based on patient outcomes? How would that work?

rebuilder• 8 years ago

Alternatively, socialize the costs. I've never bothered to figure out what going to the doctor would cost me, because it's so cheap here. I don't understand how it's economical to have a workforce with poor health care.

jacobush3• 8 years ago

Or you know, do both! Socialize the costs, but unevenly, then inflate the costs, spread them across as many middlemen as possible, and charge left and right!

themagician• 8 years ago

It’s worth noting that Kaiser does this. They post a fee schedule for just about every routine procedure in every region they operate in. There is no abiguity about what an MRI costs.

Transparency won’t fix healthcare in the US, but it is a starting point. Hell, it’s fundamental to simple free market economics. It’s silly to say we have a free market healthcare system when there is virtually no cost information about goods and services until after purchase.

conanbatt3• 8 years ago

And Kaiser has 7 minute primary care appointments, and a high rate of physician burnout.

tptacek• 8 years ago

That sucks. The CVS Minute Clinic will quote you $99-129 for a strep throat visit, which includes the culture and the script if you actually have it. Nurse practitioners are, I think, the future of primary care.

This stuff is all bad, but it's useful to remember that primary care is actually a small fraction of the overall price of health care. Where we're really spending the money is on long-term and end-of-life care.

leesalminen• 8 years ago

Nurse practitioners are, I think, the future of primary care.

Agreed. When I visit my PCP, I normally meet with a NP. I’ve been quite happy with the quality of care received.

Where we're really spending the money is on long-term and end-of-life care.

With the boomers entering the end-of-life phase of their lives it will be interesting to see if we will be able to change culturally and realize the huge sums of money spent with little benefit to the economy. I’m struggling with this myself currently as my parents are aging (quickly). They don’t have unlimited savings to spend on health care. While I have ample resources, I’m not convinced shelling out $1MM is worth it for them to live with a marginal quality of life for just a couple of years. Just writing that makes me feel like a terrible person but I try to think rationally and without emotions.

Edit to add: I’m genuinely curious about your thoughts on this, @tptacek. I’ve always respected and appreciated your opinion here on HN.

kryptk• 8 years ago

If I suspect strep, I make a same-day appointment with my family doctor, show my government issued health card, get swabbed and have a result in a few minutes. I then smile at the receptionist and walk out; there is no bill for seeing your doctor or having tests run.

If I need antibiotics, my employer provided insurance covers the full cost and I pay a fixed $10 or so fee to the pharmacy.

You live a few hundred km south of me I bet, and in every way except this our world is very similar.. but you guys have far deeper problems then just transparency. Your entire view of healthcare is wrong.

Brakenshire2• 8 years ago

And just a reminder the US doesn’t even spend much less taxpayer money than Canada and other Western countries. The US taxpayer spends about 8-9% of GDP on healthcare, and gets this result. Other countries spend the same and get a free universal healthcare system.

tfha2• 8 years ago

For other reasons, I don't have a family doctor. All the doctors my insurance will pay for require making appointments >9 months in advance, and I fly so much with work that I can't commit to that type of lead time. Twice I've missed appointments, and both times instead of letting me reschedule the practice informed me that I was no longer allowed with them, and that missing an appointment is considered a big offense.

One day I'll figure it out but at 24 years old it's not a huge deal to me.

fma2• 8 years ago

At least you got a quote...I've been told by providers that they only accept insurance patients (no up front cash), and they can't tell you till they bill you...Not sure why this is the only industry like that.

You don't go to a restaurant and get the pricing after you eat. Heck when you go to a buffet you don't get billed based on how many plates you get.

tlb• 8 years ago

My veterinarian charges around $60 for office visits. A surgery with general anesthetic might be $1000. It's about 10x cheaper than a human doctor, maybe 100x if you go to a random emergency room. Veterinary medicine involve all the same steps as for a human patient. I can usually get appointments the same day too. It's a totally free market, where vets compete on price and service.

refurb2• 8 years ago

Same with medical procedures in the US that aren’t covered by insurance - cosmetic surgery, LASIK surgery, etc.

The free market works pretty dam well for those.

ChuckMcM• 8 years ago

This is something I've been advocating for in California. Basically the equivalent to the auto repair law that guarantees that the repair is done to the quote or they tell you it will cost more and you have the right to take their quote elsewhere[1].

[1] If the technician later determines that it will take additional work and will cost more to fix your car than the original estimate, someone from the shop must contact you, describe the additional work and cost, and get your permission to proceed. -- https://www.bar.ca.gov/Consumer/Auto_Repair_Guide.html

RaceWon2• 8 years ago

I work at a small community hospital about 225 beds. They have 9 VPs, 44 directors, and 44 assistant directors. This in addition to the Medical Staff Supervisors. Seems a bit much... no.

r00fus3• 8 years ago

Sounds like rampant title inflation at the very least.

wonderwonder4• 8 years ago

That's pretty frustrating. I had a related experience where I needed antibiotics. As it was the weekend, I just went to a local walk in clinic. The person in front of me did not have insurance and his cost to see the doctor was $90. I had insurance and my out of pocket was initially $45, a couple weeks later I got the remainder of my bill for using out of network: $135. So in total I was charged double the individual without insurance plus the cost of my medication.

It seems that a major driver of insurance and medical costs is that doctors are allowed to charge different pricing for the same service. In this case, paying a monthly fee for insurance ended up costing me more.

King-Aaron• 8 years ago

Imagine a system where you go to the GP, and just make a walk-in appointment. You sit for ten to fifteen minutes, see your GP. They check you over, direct you to go see the nurse, who checks your throat. Then afterwards, the GP tells you that they'll phone you later on with the results.

You walk back past the reception desk, ask what the bill was, and they either say "that'll be $40 which you can claim back by taking the receipt around the corner to Medicare", or they'll say "Oh nothing to pay, it's all bulk billed".

You walk out having either spent nothing, or spent a few bucks which you get back after a five minute walk up the road.

That was my recent experience.

H1Supreme• 8 years ago

$400 for a strep test is highway robbery.

maxxxxx7• 8 years ago

It's pretty sad that we have to rely on "billionaires" because the political system is not able or willing to bring even some level of sanity into this totally perverse system.

jsonne• 8 years ago

There does seem to be some progress being made:

https://www.cnn.com/2018/10/10/politics/drug-prices-legislat...

Someone12345• 8 years ago

That would definitely be a good thing and may help discourage high prices, but let's see if it ever happens. The drug companies are already talking about taking it to court for violating their first amendment rights.

cimmanom2• 8 years ago

One thing that scares me is seeing how he's putting money into swaying how the media report on things. That one billionaire is willing to do such a thing to support the public good is great. How many are doing so for less laudable ends?

stirlo• 8 years ago

All of them? The drug company ones are... About time an organisation started playing the same games these mega corporations do, if you don’t play how will you ever win?

darawk2• 8 years ago

I'm not sure we have to 'rely' on them. This is just a guy that made a lot of money trying to make the world a better place. I don't think there's anything to be sad about here.

maxxxxx7• 8 years ago

I think it's very sad that the democrats system can't address issues like this. It simply shouldn't need rich guys trying to make the world a better place. I am also always skeptical of billionaire do-gooders if you consider that you rarely become a billionaire by being a nice altruistic guy.

djschnei• 8 years ago

Our political system caused (or at the very least was complicit in causing) the problem.

ForrestN• 8 years ago

To a great extent our broken healthcare crisis is largely kept as it is by other billionaires, like the Koch’s for example.

nojvek3• 8 years ago

I’m sure a few billionaires and tons of millionaires minted by this broken system.

It’s a great way to make money legally.

almostdeadguy2• 8 years ago

I’m everyone in this thread talking about price transparency for goods people need to live.

khuey• 8 years ago

Price transparency in food seems to work alright.

jaggederest• 8 years ago

Transportable commodity goods are not really the same as local, nonportable professional services.

Imagine if everything you ate had to come from the county you live in. Would it really matter how much they charged? You would have to pay it, right?

almostdeadguy2• 8 years ago

We're really pretending like price transparency is the primary factor in food prices in the US and that 40 million people don't go hungry in this country?

jancsika2• 8 years ago

I noticed that, too.

Free marketeers: how does price transparency improve prices for emergency room visits?

rland2• 8 years ago

Perhaps it doesn't, for those weird edge cases where they have to bring the unconscious patient in and have him assessed 5 different ways. Situations like that are the domain of insurance agencies.

But most medical care (the majority of the cost) is not rendered like that. Most of it is routine and predictable, and should be priced transparently as such.

QML• 8 years ago

Not a necessarily a supporter of free markets, but I’d argue that more information and transparency is crucial for market efficiency. Take for example arbitrage; it disappears when enough people have access to “private information”, that in game theoretic setting, drive market price to equal the “true” price.

aviv• 8 years ago

We are looking at the health care problem from the wrong angle. Nobody should be needing most of these drugs to begin with. But we have a food culture and system that feed civilization disease causing foods and that's where the cycle starts.

jrace• 8 years ago

There are plenty of people who need medications not because of poor diet.

endymi0n• 8 years ago

“Where it is impossible to create the conditions necessary to make competition effective, we should resort to other methods of guiding economic activity.”

- Friedrich Hayek, The Road to Serfdom, p.37

Free markets work as expected where the alternative is dying at worst: They fail completely. If you're lying unconcious in the ER and there's zero regulation in the country of unlimited capitalism worship, the hospital can charge whatever the fsck they want. And yet, there are still a few people in the US surprised they actually do so.

https://www.forbes.com/sites/chrisladd/2017/03/07/there-is-n...

hexane3602• 8 years ago

I'm kind of surprised that quote is from Hayek, considering I know of him as "that Austrian Austrian economist", and mostly see him quoted in defense of radical free market ideology. I guess it just goes to show how far pro-market the Overton window's shifted recently.

jeffbax• 8 years ago

It is a myth that the US has a free market in healthcare. It is a web of regulatory hell and perverse incentives.

bdcs• 8 years ago

Indeed!

In fact he was outright pro-Universal Healthcare, eg: "Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance, where, in short, we deal with genuinely insurable risks, the case for the state helping to organise a comprehensive system of social insurance is very strong. "

https://thinkprogress.org/hayek-on-health-care-e29ae2d600e6/

chottocharaii2• 8 years ago

Hayek, like Adam Smith, has been quoted to intellectual death by libertarians who haven't actually read him.

pcurve2• 8 years ago

I've been in healthcare, pharma industry for a long time.

Healthcare isn't 'broken'. The high drug and medical prices are by design. That's the way system is designed and it's working as intended by regulators and industry leaders.

If they really wanted to 'fix' the healthcare, they can fix it. But there is no money in fixing it at this point. One guy with small amount of funding will do nothing to highly regulated space full of deeply entrenched incumbents. regulators, doctors, pharmacists, pharma, medical device, pbm, medical insurance, hospital systems, lawyers, and IT jobs at those companies.

raverbashing• 8 years ago

Agreed, though it seems there is a huge window for someone who charges fairly to get in

Fixed and transparent/fair costs (and promotion of it) will get a significant line in front of the clinic.

If someone's got a huge amount of money to play with this, it will be fun to see the incumbents getting trashed. In a way, it's "dumping" (but not really as it's still above cost)

pcurve2• 8 years ago

I think pricing transparency will help for drugs and commodified services like routine testing and procedures.

Historical though, any attempted 'fix' simply results in shifting of profit from one incumbent to another, along with even more creative ways to get around them. Mfr. copay coupons mentioned in the article is a great example.

I'm all for change, but to me, American healthcare is mainly regulatory failure.

gorbachev• 8 years ago

This, and many, many other similar issues will not be fixed until campaign finance reform gets done.

chottocharaii2• 8 years ago

campaign finance will never be reformed, political movement needs to be able to operate in spite of money contributed

I doubt Citizens United will ever be overruled

jorblumesea• 8 years ago

Why do we talk about "high drug prices" as some kind of mystical force? The cause is simple and very obvious: the medical industry is a for profit institution that puts margins and bottom line above everything else. It's a huge industry with a plethora of middlemen whose only purpose is to squeeze dollars out of the system. Delivering effective care is almost always a secondary consequence to making value for investors.

So long as healthcare has quarterly shareholder meetings, we will forever be locked in this battle.

booleandilemma• 8 years ago

When I was younger and more naive I went to a surgeon to ask how much a minor surgery would cost ahead of time. They couldn’t tell me. I said fine, could you give me a ballpark estimate? And they couldn’t do that either.

Imagine going into a grocery store and not being able to check the price of your groceries before you decide to purchase them?

Why do we put up with this?

myroon5• 8 years ago

Knew it would be John Arnold. If you find this interesting, he regularly posts content like this on his Twitter: https://twitter.com/JohnArnoldFndtn

40acres2• 8 years ago

There seems to be a pretty simple solution to high drug prices: the Bayh-Dole Act.

The background to the law is this: previously if a private institution used federal grants to develop a new drug, the federal government retained patent rights. The federal government isnt particularly good at commercializing products so the Bayh-Doye act allows for private institutions to retain patents for innovations funded via government grants. The government retains certain rights to the patent (this is important).

With this situation you have a case where the American tax payer essentially pays twice for certain drugs, their taxes paid for the federal grant that discovered the drug and now they have to pay a private company to actually use the drug.

Well, the Bayh-Dole act grants the government "march-in" rights, which basically allows the government to license any patent derived using federal funds to a third party if the original partner “has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the … invention”.

The government has NEVER exercised it's march-in rights. I understand the hesitation to drastically change the market for a product by granting a 3rd party a patent that they would otherwise never have, but it's been made clear over the past few years that many pharmaceutical companies are acting in bad faith and abusing their market position by drastically increasing drug prices.

I think exercising Bayh-Dole on a high profile drug (EpiPen??) would shake the market back into reasonable price structures. It's a huge hammer the federal government is not wielding.

WaltPurvis• 8 years ago

Do you happen to know how many drugs are developed with federal grant money? I'm guessing that only a small percentage of high-priced drugs were developed using federal grants, and therefore your solution would be only a very partial solution, but I don't actually know. Do you?

40acres2• 8 years ago

According to Wikipedia from 2010-2016 about 200 new drugs were introduced that were partly funded by the NIH, of these drugs about 80 were significant in the fact that they worked via previously unknown mechanisms.

DoreenMichele2• 8 years ago

I'm feeling cranky as hell, so let me go ahead and toss out the wildly unpopular idea that the real solution here is more research etc into dietary and lifestyle changes. But I seriously doubt he's going to go in that direction.

amanaplanacanal4• 8 years ago

That kind of research is really hard. You pretty much have to lock people up for long periods of time, and make sure they only eat what you give them. The current state of dietary research is pretty much a morass of contradictory associations, with no proof of any causative factors.

derReineke• 8 years ago

Much rattled very startle. You'll also be AMAZED what doctors are saying about this new diet thing!

apo• 8 years ago

He [Billionaire Arnold] has spent more than $100 million in health-care-related grants since 2014. A million dollars went to Civica Rx, a nonprofit formed by seven U.S. hospital systems to make generic drugs. Up to $5.7 million is pledged to Initiative for Medicines, Access & Knowledge Inc., which files legal challenges to the validity of certain U.S. drug patents, to clear the way for lower-cost generics.

He funded research about the relationship between pharmaceutical packaging and drug costs, leading Medicare to pass new rules that took effect in 2017. The state of California, advised by an Arnold-funded group, passed a law in 2017 requiring drugmakers to justify steep price increases.

In other words, Arnold is spending money on:

- a consortium that will manufacture generics

- legal efforts to hasten the expiration of patents to provide more generics

- research on packaging

- lobbying legislatures to require justifications from drugmakers on price increases

None of this sounds like it's addressing the main problems leading to high costs:

1. The customer (patient) doesn't directly pay all costs. The economic incentive to keep prices low lies mostly with the insurance providers.

2. It takes more than a decade of research and hundreds of millions of dollars to develop a drug with a new mode of action.

3. At least 90% of these projects will fail to deliver a marketable product.

4. The amount of money spent on a drug project balloons the longer it remains viable.

5. Failure of a late-stage clinical candidate often leaves a drug company with two options: (1) kill the program; and (2) send yet another candidate through the pipeline.

6. Data on late-stage clinical failures are often tightly held in silos, preventing other companies from learning costly lessons.

perpetualcrayon• 8 years ago

"there should be 'compensating upside' for the few drugs that do make it to market to ensure investors continue to fund companies’ uncertain R&D efforts"

Ok, then open your books so we can see why you're pricing the way you are. Obviously, given all the recent attention this has gotten, the industry is not being very transparent about this. Why has no "outsider" been able to connect these dots and why are you (the industry) preventing them from doing so?

EGreg• 8 years ago

Here is a full proposal, I’d like some feedback:

http://magarshak.com/blog/?p=93

A Billionaire Pledges to Fight High Drug Prices, and the Industry Is Rattled

Related Stories