DrStrange
4 of a Kind
There is another situation regarding the pricing of pharmaceuticals that affects about three million Americans that is getting far too little attention in the press. The price of insulin is skyrocketing - $200 / year in 2002 up to $1,000 per year now. (adjusting $200 for 14 years inflation is about $300 in today's dollars.)
Insulin is an old drug, first discovered in 1921. While there have been significant advances over the last century, this isn't a drug with huge R&D costs nor one with expensive risks. The costs of manufacturing are small - little about the drug's recent history would imply the costs have changed dramatically.
It is not optional for a type I diabetic, you take the drug or die quickly. The product is almost 100% inelastic - meaning that people don't buy more when the price is low or buy less when the price is high. The amount sold is almost unchanged by changing prices.
Much of the costs are born by the public at large, they are built into the general costs of insurance. Drug makers have rebate systems to off-set co-pays which has the effect of keeping the pricing off the radar screen of law makers and the general public.
This is a perfect place for price collusion:
the customer has no choice but to buy the drug no matter how it is priced
the sellers have no benefit from price competition
the costs are dispersed throughout society, though this is changing with high deductible insurance plans.
The current result is the pharmaceutical industry is getting 5% of the life time income from diabetics selling them a medicine invented almost 100 years ago. Five percent of the life time income of three million people is a lot of money, and we are all footing the bill.
Why should you care? Well, you are about to get a bill for insurance in 2017. Medical insurance is going to be more expensive than it was in 2016. One of the biggest reasons why, perhaps the biggest reason is the rising cost of drug coverage.
The pharmaceutical industry has a captive customer base. You pay the price or die. The free market price of a life saving drug is everything you own plus everything you can borrow, so in some ways diabetics and the rest of us who need medicine are getting off cheap. I expect a diabetic would pay $20,000 a year for insulin maybe $30,000 if they had to. (the average personal income in the USA before taxes is $32,000)
All that is to say is that the price of insulin and thousands of other drugs are going to rise relentlessly. These increases aren't going to more R&D for new life saving drugs, they are going to marketing, executive pay and corporate profits. They are perhaps the biggest reason why Americans pay more per capita for medical care than any other nation on earth - noting that we are getting nothing of value in return paying ten time the price for the same drugs sold elsewhere in the industrial world.
We have been made into suckers and yet who are we mad at? Not the drug makers -=- DrStrange
Insulin is an old drug, first discovered in 1921. While there have been significant advances over the last century, this isn't a drug with huge R&D costs nor one with expensive risks. The costs of manufacturing are small - little about the drug's recent history would imply the costs have changed dramatically.
It is not optional for a type I diabetic, you take the drug or die quickly. The product is almost 100% inelastic - meaning that people don't buy more when the price is low or buy less when the price is high. The amount sold is almost unchanged by changing prices.
Much of the costs are born by the public at large, they are built into the general costs of insurance. Drug makers have rebate systems to off-set co-pays which has the effect of keeping the pricing off the radar screen of law makers and the general public.
This is a perfect place for price collusion:
the customer has no choice but to buy the drug no matter how it is priced
the sellers have no benefit from price competition
the costs are dispersed throughout society, though this is changing with high deductible insurance plans.
The current result is the pharmaceutical industry is getting 5% of the life time income from diabetics selling them a medicine invented almost 100 years ago. Five percent of the life time income of three million people is a lot of money, and we are all footing the bill.
Why should you care? Well, you are about to get a bill for insurance in 2017. Medical insurance is going to be more expensive than it was in 2016. One of the biggest reasons why, perhaps the biggest reason is the rising cost of drug coverage.
The pharmaceutical industry has a captive customer base. You pay the price or die. The free market price of a life saving drug is everything you own plus everything you can borrow, so in some ways diabetics and the rest of us who need medicine are getting off cheap. I expect a diabetic would pay $20,000 a year for insulin maybe $30,000 if they had to. (the average personal income in the USA before taxes is $32,000)
All that is to say is that the price of insulin and thousands of other drugs are going to rise relentlessly. These increases aren't going to more R&D for new life saving drugs, they are going to marketing, executive pay and corporate profits. They are perhaps the biggest reason why Americans pay more per capita for medical care than any other nation on earth - noting that we are getting nothing of value in return paying ten time the price for the same drugs sold elsewhere in the industrial world.
We have been made into suckers and yet who are we mad at? Not the drug makers -=- DrStrange
