Your point being? It does not change the fact that $12 is a rip off, in fact it is one of the axioms I used to prove it was a rip off.
Canada - Healthcare "Parasite"
- Thread starter Toro
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Your point being? It does not change the fact that $12 is a rip off, in fact it is one of the axioms I used to prove it was a rip off.
I can offer a very simple rebuttal. Drug companies have failed at their mandate to improve medicine. Most of our medical advances happened in the era of the "philanthropist scientist"
People will always develop medicine even without profit, because profit is only ONE human motivator.
Two other ones comes into play, the need to create and the need for some semblance of immortality in deed.
The Pyramids were not build for profit, in fact very few of the great things in civilization were built for profit. Most come from the need to be remembered and live on.
Do you know who developed penicillin? Now who developed Olaparib?
Medicine is an essential service, THE esential service and its most efficiently (both in terms of cost and development) to have it generated non-profit. Very few brilliant doctors decide to get into medicine for the cash.
And all the investors and CEO's...they aren't really needed when it comes to developing medicine. They are pointless for the actual end result we as a populaton want. More medicine to live longer (fear of death not profitability is motivating us).
The Free Market is great, in fact the best, for developing industries that are motivated in the end by a want for creature comforts. Products and services that are a bit higher on the mazlov hierarchy of needs. For base level essentials the Free Market is not as effective as the public good. This means police, fire departments, the military and medicine.
Medicine in the usa is not even remotely free market. You can't go to any doctor you want, even if you pay in cash and don't use a health plan. The government still decides and sets who can practice medicine. If I want to get someone to set my broken arm who is a second year med school drop out, that would be my choice in a free market. And I shouldn't have to go to a government monopoly with skyrocketing prices to get my arm set.
Its like the government telling you only doctors of civil engineering are allowed to build you a toolshed and then claiming its a free market because you can pay any doctor $45,000 to assemble a $500 "Shed Kit" in your back yard. If It were free market I could hire who I wanted since its my money and my shed.
Not so with US socialized medicine, and it is socialized. In fact I'd call it communist since its still state controlled but the people are hosed.
People will always develop medicine even without profit, because profit is only ONE human motivator.
Two other ones comes into play, the need to create and the need for some semblance of immortality in deed.
The Pyramids were not build for profit, in fact very few of the great things in civilization were built for profit. Most come from the need to be remembered and live on.
Do you know who developed penicillin? Now who developed Olaparib?
Medicine is an essential service, THE esential service and its most efficiently (both in terms of cost and development) to have it generated non-profit. Very few brilliant doctors decide to get into medicine for the cash.
And all the investors and CEO's...they aren't really needed when it comes to developing medicine. They are pointless for the actual end result we as a populaton want. More medicine to live longer (fear of death not profitability is motivating us).
The Free Market is great, in fact the best, for developing industries that are motivated in the end by a want for creature comforts. Products and services that are a bit higher on the mazlov hierarchy of needs. For base level essentials the Free Market is not as effective as the public good. This means police, fire departments, the military and medicine.
Medicine in the usa is not even remotely free market. You can't go to any doctor you want, even if you pay in cash and don't use a health plan. The government still decides and sets who can practice medicine. If I want to get someone to set my broken arm who is a second year med school drop out, that would be my choice in a free market. And I shouldn't have to go to a government monopoly with skyrocketing prices to get my arm set.
Its like the government telling you only doctors of civil engineering are allowed to build you a toolshed and then claiming its a free market because you can pay any doctor $45,000 to assemble a $500 "Shed Kit" in your back yard. If It were free market I could hire who I wanted since its my money and my shed.
Not so with US socialized medicine, and it is socialized. In fact I'd call it communist since its still state controlled but the people are hosed.
Your point being? It does not change the fact that $12 is a rip off, in fact it is one of the axioms I used to prove it was a rip off.
It is not a rip off, other than it is Canada who would be ripping off the United States by configuring laws to take advantage of the distribution architecture in the United States. That is the point of the thread (if indeed the author in the OP is correct).
Canada relies heavily on the fact that other countries do not have the same purchasing laws it does. Canada's pricing policies would fall apart otherwise.
No, Canada takes advantage of the fact that pharmaceuticals are a monopoly and the price that the company would fix is not the one which would be decided in a free market. We refuse to be ripped off.
But it is irrelevant to what the OP is arguing against. Which is why this is a big red herring and you are just too stubborn to see it. Too stubborn and too self righteous towards the fact that Canadians refuse to be ripped off, apparently.
The free market price in your toy model is $7.33. Paying more than that is a rip off and that is the only point. Sure, paying less than that in every market would kill the company. But paying differentially has the opposite effect: ripping some people off and selling cheaper than $7.33 to some others allows the company to make 100 times as much money.
The "free market price" is not $7.33. The free market price is above $10 because it costs $10 to make.
Unless you've discovered some magical new economics, this isn't hard to understand.
Without America, you'd be paying far more for drugs. If you had any.
Unless you've discovered some magical new economics, this isn't hard to understand.
Without America, you'd be paying far more for drugs. If you had any.
Without Canada, America would be paying more for oil, lumber and many other resources.
Guess its win-win for both.
Guess its win-win for both.
Yes, in your perfectly inelastic, single market demand model. But in that model Canada doesn't even exist. As I said, your analysis doesn't make any sense because you do not take into account the dependence of demand on price. Nor do you allow the corporation the opportunity to marginalize their costs over multiple markets.
If you really need such an unrealistic toy model to prove your point, congratulations. Heck, I didn't even complain about your perfectly elastic supply. If you are willing to grant some elasticity to your demand and actually marginalize the costs, the cost comes pretty damn close to its asymptotic $7.
As for your last statement, maybe you will contract diabetes and truly appreciate the irony of your bravado.
Nfilmer
Clue you in - most prescription drug prices are inelastic.
I'm not here to develop an econometric model of demand. If you want to go off on a tangent regarding demand elasticity, feel free. Yes, perhaps a 10% rise in prices will decrease demand by 1%, but that's not the issue. You can get bogged down in the details and totally miss the point. Lipitor sales are not going to rise 40% if prices fall 40%. In fact, for high-end drugs such as Avastin, there is often more consumption per capita in the US than in Canada simply because the provinces ration the supply.
As for my last comment, get off your high horse. If we followed your model and priced a drug that cost $10 at $7.33 across all markets, that drug wouldn't exist. Period.
Clue you in - most prescription drug prices are inelastic.
I'm not here to develop an econometric model of demand. If you want to go off on a tangent regarding demand elasticity, feel free. Yes, perhaps a 10% rise in prices will decrease demand by 1%, but that's not the issue. You can get bogged down in the details and totally miss the point. Lipitor sales are not going to rise 40% if prices fall 40%. In fact, for high-end drugs such as Avastin, there is often more consumption per capita in the US than in Canada simply because the provinces ration the supply.
As for my last comment, get off your high horse. If we followed your model and priced a drug that cost $10 at $7.33 across all markets, that drug wouldn't exist. Period.
I really can't get my head around your logic. What does it matter to the drug companies what the Canadian legislation says or the purchasing policies within the healthcare regions. That point is entirely irrelevant in that there is no obligation whatsoever that demands they sell into Canada at all, let alone at a loss. Again, these company's are not charities and rarely will they sell at a loss unless that policy suits their individual needs. In the event that they are willing to sell to Canadians at a lower cost, well, all that indicates is that they are overcharging in the US market, not that they are subsidizing Canadians.
In terms of the economics being bandied about, your assumptions and description is incomplete. No where has there been mention of the reality that their R&D costs are amortized over the livable life of the patent or the nature of the fixed/variable expenses that they are including in the formula nor is there any focus attached to having the exclusive opportunity to manufacture and sell their product for a 25-50 window.
Consider that Lipitor has sold 10's of billions of dollars worth of their product annually throughout the world (Lipitor Market analysis and forecasts Report, 2007-2012, 2017 & 2023 - Business Market Reports) strongly suggests that they recuperate their original development costs 100's of times over each year they have sold this product since it has been broadly accepted in the market place, let alone making a (well deserved) profit annually as well.
That said, with this example in mind, tell me again how the US consumer is subsidizing anyone. More likely, it is the US customer that is being gouged by one of their own.
Toro, the point is about consumers and profits.
Do you know any business losing money still in business after many years ?
Also in Canada it is much more likely that people will seek Medical attention requiring medication were as in the US someone will more then likely wait and wait if he or she is borderline poor and has no insurance. Hence they are not a consumer due no access to medical attention and no prescription. So oddly enough I would wager that most Canadian per capita use more drugs then Americans..
The end result of this all is that the article I pointed out stated Big Pharma could easily change the names of drugs to discourage States or US citizens from buying from these online pharmacies. Personally I know NO Canadian that uses such place to get drugs so they must only cater to outside the country requests by buying medication on the Internet within Canada itself.
Changing the name of drugs or banning the entry of such Medicine at the border solves the problem does it not ?
But Big Pharma doesnt want that it just wants to complain so it can get its piece of the American pie. It already sucks the Canadian Govt out of reseach money for as much as it can so why not whine and get as much more out of the US..
Canada's Versions of Big Pharma
Rx&D - Pharmaceutical Community - Member Profiles
Note in that list how many US Big Pharma names there and established in Canada ?
I really can't get my head around your logic. What does it matter to the drug companies what the Canadian legislation says or the purchasing policies within the healthcare regions. That point is entirely irrelevant in that there is no obligation whatsoever that demands they sell into Canada at all, let alone at a loss. Again, these company's are not charities and rarely will they sell at a loss unless that policy suits their individual needs. In the event that they are willing to sell to Canadians at a lower cost, well, all that indicates is that they are overcharging in the US market, not that they are subsidizing Canadians.
I pass no moral judgment on Canada's policies. I do not even know if the OP is correct. The author cites no sources nor presents any numbers. Rather, I am merely presenting an argument made by someone else. My response to the argument when I first heard it from a Canadian context was , "Yeah. So?"
From a purely rational standpoint, Canada is doing what it should be doing. If America is going to leave money on the table and Canada can pick it up, Canada would be stupid not to do so. That is what a good negotiator does.
However, Canadians should have an understanding how this all works. The piece was written for an American audience, given the debate that is raging down here on healthcare. The author - if he is factually true - is correct in that the US could not implement Canada's drug pricing policies. If America were to force the prices of drugs substantially lower, at some point, either drugs would be sold at a higher price in Canada or not be sold at all.
In terms of the economics being bandied about, your assumptions and description is incomplete. No where has there been mention of the reality that their R&D costs are amortized over the livable life of the patent or the nature of the fixed/variable expenses that they are including in the formula nor is there any focus attached to having the exclusive opportunity to manufacture and sell their product for a 25-50 window.
I think there is a couple of things. First, the ammortization of R&D costs are a sunk cost and thus a fixed cost. That cost must be recovered for the drug to be profitable. It is no different than a plant being built and then depreciated over a period of time.
Second, there is a significant fixed cost structure. If you take a quick look at an income statement of, say, Pfizer, you will see that Pfizer had $48 billion in revenues in 2008 and made $8 billion for a profit margin of 17%. Of the $40 billion cost structure, $8 billion is R&D and $5 billion is depreciation. $15 billion is selling, general and administrative expenses, of which at least half will be fixed. So at least half the cost structure is fixed. (It is here where I expect Nilfmir to start quibbling about whether or not each line item in the P&L is truly fixed or if everything is really variable.)
Finally, I do not think it is unfair to say that the patent protection affords the drug companies excess profits. The profit margins of drug companies are roughly double the average company in America. But even if you halved the profits by reducing prices such that the drug companies earned the average margin, you would lower Pfizer's revenues from $48 billion to $44 billion, or an 8% decline. And to answer what I'm sure will be Niflmir's argument, even if you gutted out $2-$3 billion from the cost structure - a significant amount for anyone who has analyzed the synergies of pharmaceutical mergers - you would be looking at a 15% decline, or the prices you paid roughly four years ago. So, it is not like there would be a dramatic fall in prices.
I pass no moral judgment on Canada's policies. I do not even know if the OP is correct. The author cites no sources nor presents any numbers. Rather, I am merely presenting an argument made by someone else. My response to the argument when I first heard it from a Canadian context was , "Yeah. So?"
From a purely rational standpoint, Canada is doing what it should be doing. If America is going to leave money on the table and Canada can pick it up, Canada would be stupid not to do so. That is what a good negotiator does.
However, Canadians should have an understanding how this all works. The piece was written for an American audience, given the debate that is raging down here on healthcare. The author - if he is factually true - is correct in that the US could not implement Canada's drug pricing policies. If America were to force the prices of drugs substantially lower, at some point, either drugs would be sold at a higher price in Canada or not be sold at all.
In terms of the economics being bandied about, your assumptions and description is incomplete. No where has there been mention of the reality that their R&D costs are amortized over the livable life of the patent or the nature of the fixed/variable expenses that they are including in the formula nor is there any focus attached to having the exclusive opportunity to manufacture and sell their product for a 25-50 window.
I think there is a couple of things. First, the ammortization of R&D costs are a sunk cost and thus a fixed cost. That cost must be recovered for the drug to be profitable. It is no different than a plant being built and then depreciated over a period of time.
Second, there is a significant fixed cost structure. If you take a quick look at an income statement of, say, Pfizer, you will see that Pfizer had $48 billion in revenues in 2008 and made $8 billion for a profit margin of 17%. Of the $40 billion cost structure, $8 billion is R&D and $5 billion is depreciation. $15 billion is selling, general and administrative expenses, of which at least half will be fixed. So at least half the cost structure is fixed. (It is here where I expect Nilfmir to start quibbling about whether or not each line item in the P&L is truly fixed or if everything is really variable.)
Finally, I do not think it is unfair to say that the patent protection affords the drug companies excess profits. The profit margins of drug companies are roughly double the average company in America. But even if you halved the profits by reducing prices such that the drug companies earned the average margin, you would lower Pfizer's revenues from $48 billion to $44 billion, or an 8% decline. And to answer what I'm sure will be Niflmir's argument, even if you gutted out $2-$3 billion from the cost structure - a significant amount for anyone who has analyzed the synergies of pharmaceutical mergers - you would be looking at a 15% decline, or the prices you paid roughly four years ago. So, it is not like there would be a dramatic fall in prices.
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Do you know any business losing money still in business after many years ?
The American commercial passenger airline industry over a century has made cumulative losses. Stunning, but true.
But I am not arguing the pharmaceutical companies are not making money in aggregate. Again, I do not know if the OP is correct. I am taking it at face value, and he may be wrong. But if true, then on a stand-alone basis, Canada loses money for the drug companies but continues to sell into Canada because the contribution margin is still positive.
The American commercial passenger airline industry over a century has made cumulative losses. Stunning, but true.
But I am not arguing the pharmaceutical companies are not making money in aggregate. Again, I do not know if the OP is correct. I am taking it at face value, and he may be wrong. But if true, then on a stand-alone basis, Canada loses money for the drug companies but continues to sell into Canada because the contribution margin is still positive.
Really? Inelastic? There is nobody in the US who cannot afford their medicine? Then this thread is merely one big troll bait by you, isn't it? There is no issue. Give me a break, you wannabe troll.
Nowadays, the majority of patented prescription drugs have alternatives that have been around for a while. There are relatively few diseases where there are no treatments and those that exist have a lot of public money funding research for.
The demand is not inelastic. Some people simply cannot afford any price and at some price, say $10,000 a pill, even the very rich would seek some other treatment.
Do your math. If you are too lazy, tell me the price you think nobody would be willing to buy your drug and I will tell you what your numbers predict. But a little hint, it will be less than $10.
Yeah, yeah, whatever you say Nilfmir. Keep chasing down those blind holes.
If demand for a product is price inelastic, it means that demand is not particularly responsive to changes in price. Most prescription drugs are price inelastic. Whether or not you want to believe it is irrelevant.
The concept is a simple one - if a drug is important to improve the quality of life, or critical to life, people will pay up for it and sacrifice demand for other products.
If demand for a product is price inelastic, it means that demand is not particularly responsive to changes in price. Most prescription drugs are price inelastic. Whether or not you want to believe it is irrelevant.
https://www.researchgate.net/public...lder_People_in_Australia_A_Natural_Experiment
Estimating the price elasticity of expenditure for prescription drugs in the presence of non-linear price schedules: an illustration from Quebec, Canada
Pharmaceutical Economics and Public ... - Google Books
The concept is a simple one - if a drug is important to improve the quality of life, or critical to life, people will pay up for it and sacrifice demand for other products.
Sure, but my complaint is that you made it perfectly inelastic: ie an infinite elasticity. Which is completely unrealistic. It may be a high value, but at some price demand goes to zero. I mean, just imagine if the price was a million dollars. Obviously nobody could afford it. But in your example, 20 million people could.
Toro,
To start, I don't see this discussion as a moral issue nor do I think that profit is a bad word.
On that note, the drug companies approach negotiations with an identical philosophy. What we don't know as outside observers are the details of the agreements (ie a contract may include volumes and pricing on a basket of that company's drugs) nor the drug company's beliefs and practices as they relate to different markets/demographics, etc.
That potential certainly exists, but by in large, that is the sole decision of the corporate entity. Further, it is also a 2-way street. Drug companies have greater leverage in nations with socialized medicine to employ politics and public perception to pressure gvts to adopt the use of certain drugs. An example of such exists in Alberta today. There is a medication available that treats a rare form of epilepsy. This disease results in the patient suffering very severe seizures that essentially prohibit them from functioning in anything that would be considered a normal capacity. A treatment is available (drug therapy) but has a cost attached that is inexcess of $700,000.00 USD per year (no, that isn't a typo).
Clearly the drug company will have a better opportunity to sell this in regions with gvt sponsored systems long before they would see real success in private systems. The above example is extreme and certainly 'rare' but happens nonetheless.
The point is, again, it is a 2-way street.
The above comment is accurate, however, assuming that the company is profitable, a significant % of those amortized costs are captured indirectly. That indirectly effects the bottom line in a positive manner in both the short and long term.
These numbers reflect the overall operating costs of the entity as a whole. If one were to allocate the individual costs as they related to a specific project, the ROI would be much higher on the successful brands and recorded as losses on the losers.
You already know this, but the point is that the winners are subsidizing the losers (as occurs in any business/sector). Essentially the effect is magnified by thisand the author of the article in the OP purposely eliminates this info and relies on that to embelish his position on Canada.
As I stated above, I see nothing wrong with a drug company making billions nor do I feel that these companies have any moral obligations to society based strictly on humanitarian reasons (although I highly admire the practices of those that do). While the patent doesn't guarantee a profitable venture, it still allows for the development of that market over a long period of time. Even if the product wasn't a big winner like Lipitor or Viagra, the companys are in an excellent position to recapture their development costs as well as annual operatingcosts and still profit for that extended period.
To start, I don't see this discussion as a moral issue nor do I think that profit is a bad word.
On that note, the drug companies approach negotiations with an identical philosophy. What we don't know as outside observers are the details of the agreements (ie a contract may include volumes and pricing on a basket of that company's drugs) nor the drug company's beliefs and practices as they relate to different markets/demographics, etc.
That potential certainly exists, but by in large, that is the sole decision of the corporate entity. Further, it is also a 2-way street. Drug companies have greater leverage in nations with socialized medicine to employ politics and public perception to pressure gvts to adopt the use of certain drugs. An example of such exists in Alberta today. There is a medication available that treats a rare form of epilepsy. This disease results in the patient suffering very severe seizures that essentially prohibit them from functioning in anything that would be considered a normal capacity. A treatment is available (drug therapy) but has a cost attached that is inexcess of $700,000.00 USD per year (no, that isn't a typo).
Clearly the drug company will have a better opportunity to sell this in regions with gvt sponsored systems long before they would see real success in private systems. The above example is extreme and certainly 'rare' but happens nonetheless.
The point is, again, it is a 2-way street.
The above comment is accurate, however, assuming that the company is profitable, a significant % of those amortized costs are captured indirectly. That indirectly effects the bottom line in a positive manner in both the short and long term.
These numbers reflect the overall operating costs of the entity as a whole. If one were to allocate the individual costs as they related to a specific project, the ROI would be much higher on the successful brands and recorded as losses on the losers.
You already know this, but the point is that the winners are subsidizing the losers (as occurs in any business/sector). Essentially the effect is magnified by thisand the author of the article in the OP purposely eliminates this info and relies on that to embelish his position on Canada.
As I stated above, I see nothing wrong with a drug company making billions nor do I feel that these companies have any moral obligations to society based strictly on humanitarian reasons (although I highly admire the practices of those that do). While the patent doesn't guarantee a profitable venture, it still allows for the development of that market over a long period of time. Even if the product wasn't a big winner like Lipitor or Viagra, the companys are in an excellent position to recapture their development costs as well as annual operatingcosts and still profit for that extended period.