{"id":60313,"date":"2015-10-01T14:22:08","date_gmt":"2015-10-01T18:22:08","guid":{"rendered":"http:\/\/1boringoldman.com\/?p=60313"},"modified":"2015-10-04T10:23:21","modified_gmt":"2015-10-04T14:23:21","slug":"bound-to-fail","status":"publish","type":"post","link":"https:\/\/1boringoldman.com\/index.php\/2015\/10\/01\/bound-to-fail\/","title":{"rendered":"bound to fail…"},"content":{"rendered":"
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Want to understand drug pricing? Tell pharma to open its books<\/a><\/div>\n
Pharmalot<\/font><\/strong><\/div>\n
by Ed Silverman<\/div>\n
September 30, 2015<\/div>\n

\"MartinLike it or not, Martin Shkreli is the new face of pharma. And for an industry already struggling with an image problem over the rising costs of prescription drugs, companies are going to have a hard time distancing themselves from one of the most controversial men in America. The reason is a lack of transparency. Drug makers do not really want to explain how medicines are priced and, as a result, they have adopted an air of secrecy in which one cowboy can create havoc for an entire industry.<\/p>\n

“The [Shkreli] episode is really an extreme manifestation of an attitude that has taken over the industry,” said Bernard Munos, a former corporate strategy adviser at Eli Lilly who is now a senior fellow at FasterCures, a medical research think tank. Most drug companies “are not raising prices by 5,000 percent, but large prices will leave patients with the same impression.” To recap, the 32-year-old former hedge fund manager caused a firestorm last week when his company, Turing Pharmaceuticals, jacked up the price of a decades-old, life-saving medicine from $13.50 per pill to $750. At the same time, Shkreli made it impossible for competitors to produce low-cost generic versions of the drug…<\/p>\n

Then there are the high prices set for new medications — such as the hepatitis C treatments from Gilead Sciences, which cost $1,000 or more per pill. The company argues that the drugs can save money down the line if patients avoid costlier care years later. There is sound logic to this argument, but in the short run health care budgets are strained<\/a>. The issue is compounded still further by the tug of war between drug makers and insurers, with each blaming the other for the pricing controversy. Drug makers say they offer rebates and discounts to insurers that then shift more out-of-pocket costs onto patients, while insurers argue the prices are set too high in the first place.<\/p>\n

In the end, the pricing problem is like peeling the proverbial onion. If the pharmaceutical industry wants to win consumer confidence, it will have to come clean about the mechanics behind its pricing. Otherwise, drug makers should brace themselves for increased scrutiny and calls for greater oversight. Shkreli may seem an aberration to some, but he is, in reality, the latest example of an ongoing and widespread grappling with the cost of medicines. Like safety warnings in a pharmaceutical ad, the industry may hope we look the other way, but Shkreli is a side effect that is simply too hard to ignore.<\/div>\n<\/blockquote>\n
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Why do drug companies charge so much?<\/a><\/div>\n
Because they can…<\/font><\/strong><\/div>\n
Washington Post<\/font><\/strong><\/div>\n
By Marcia Angell<\/div>\n
September 25, 2015<\/div>\n

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…The public should demand something in return for all that governmental support. Other advanced countries regulate drug prices in one way or another: Some cap profits, some cap the rate of price increases, some have formularies that limit drugs in each class to those that are most cost-effective, and some regulate in more than one way. But they all have some form of regulation, and the result is much lower prices for the same drugs. In the United States, by contrast, Congress has blocked Medicare from negotiating the price of drugs or creating a formulary for patients. It’s time that we, too, move to stop price-gouging by the pharmaceutical industry — even when no one notices.<\/div>\n<\/blockquote>\n
In 2003, economist Robert Shiller was awarded the Nobel Prize for his work on financial bubbles, arising from his book Irrational exuberance<\/a> and his prediction of the 2008 market crash when the housing bubble burst. It wasn’t the only "bubble," rather one in a series. The big one was the housing bubble, but before that, there was a "dot.com" bubble and later, an "oil bubble" [remember those $4+ gas prices?]: <\/div>\n
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The housing bubble was made possible by the opening up of the derivatives market, selling mortgages on the commodities [futures] market. Your house mortgage didn’t have anything to do with the worth of your house. It was just something to gamble with. <\/div>\n

What we think of as the good side of our Capitalism is when prices are controlled by the classic supply\/demand equation. To make big money, you have to step outside of that equation. One way to do that is to have a monopoly eliminating the competition required to keep the supply and demand dynamics in the forefront. Shiller pointed to another big money ploy [that’s in the same ballpark as a ponzi scheme] – to create a runaway market that relies on unlimited growth that can’t possibly keep going forever and is bound to crash. The money is made on the way up and the secret is to get out before the fall [we don’t like to think about it very much, but our whole economy is a bubble right now]:<\/p>\n

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That’s just too big for the likes of this old man. But I can manage thinking about something else we all sort of know – the US healthcare industry is in a similar financial quagmire of its own right now [and has been for a while]:<\/p>\n

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\"AlexWhether you call it a bubble<\/font><\/em>, a monopoly<\/font><\/em>, a captive audience,<\/font><\/em> or just a mess<\/font><\/em> doesn’t much matter. The point is that the problem isn’t Martin Shkreli. He’s just another greedy baby who jumped into the feeding frenzy. There are plenty more where he came from. He doesn’t have the style points of an Alex Gorsky [to obey the scout law…<\/a>], but it’s part of the same problem. As a matter of fact, that Paxil Study 329 I can’t stop talking about is too. Sick people really are a captive audience. The pharmaceutical industry really does have a sanctioned monopoly under our current system of approving drugs. The current steep climb in medical costs in every sector really is a financial bubble of sorts. And our government’s attempts at getting into the driver’s seat really has been successfully thwarted so far by the powerful business interests of the greedy babies. <\/p>\n

All those other countries in the graph have bitten the bullet and recognized that there are a few areas where free-market Capitalism is bound to fail. Medical care is one of them – probably the most important one of all. Greedy babies are just an expectable feature of human life… <\/div>\n
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By the way… Pharmalot<\/font><\/a> is back!<\/div>\n","protected":false},"excerpt":{"rendered":"

Want to understand drug pricing? Tell pharma to open its books Pharmalot by Ed Silverman September 30, 2015 Like it or not, Martin Shkreli is the new face of pharma. And for an industry already struggling with an image problem over the rising costs of prescription drugs, companies are going to have a hard time distancing […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_bbp_topic_count":0,"_bbp_reply_count":0,"_bbp_total_topic_count":0,"_bbp_total_reply_count":0,"_bbp_voice_count":0,"_bbp_anonymous_reply_count":0,"_bbp_topic_count_hidden":0,"_bbp_reply_count_hidden":0,"_bbp_forum_subforum_count":0,"footnotes":""},"categories":[5],"tags":[],"class_list":["post-60313","post","type-post","status-publish","format-standard","hentry","category-opinion"],"_links":{"self":[{"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/posts\/60313","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/comments?post=60313"}],"version-history":[{"count":26,"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/posts\/60313\/revisions"}],"predecessor-version":[{"id":60356,"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/posts\/60313\/revisions\/60356"}],"wp:attachment":[{"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/media?parent=60313"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/categories?post=60313"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/1boringoldman.com\/index.php\/wp-json\/wp\/v2\/tags?post=60313"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}