Framing the difference

Brian W

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Can we ever move on to discussing the merits of legislation around here?
Actually, you probably should start your own thread and then you can frame what you want to discuss there via the title.
 

zgrose

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Actually, you probably should start your own thread and then you can frame what you want to discuss there via the title.
I have, apparently not interesting enough topics and the thread spam is real.
 

Sand Bar Bill

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Can we ever move on to discussing the merits of legislation around here?
I started a thread to discusses prescription drug prices - see the thread link for a discussion of the bill. You offered a cogent comment. The prescription bill was last heard in committee on Oct. 22 and ordered to be reported to the House.

I make these policy points:

1. Big pharma opposes it because to allow the federal government to negotiate drug prices would stifle innovation among other things.

2. Here is a sample Republican view... Republicans oppose it and believe free markets will fix drug pricing: "Instead of pursuing Pelosi’s drug plan, we should support market-oriented ways to achieve lower drug costs. Americans deserve to pay fair prices for the medicine they need, plain and simple. Only through market-based reform and innovation – not socialism – we will achieve this goal."

3. The above two views are unconvincing. The free market does not control prices and in fact it is obscene what has happened with drug prices. Insulin for example... an extremely common drug has been getting more and more expensive each year.

Ironically, Pelosi's bill is in fact a free market in action... negotiation for a lower price. Isn't that how markets work?
 
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zgrose

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Ironically, Pelosi's bill is in fact a free market in action... negotiation for a lower price. Isn't that how markets work?
The government using its leverage as a large customer to negotiate better prices is how markets work (see WalMart, etc) but I wonder how effective that negotiation can be when there is a microscopic pool of suppliers that are already unwilling to supply a low margin product in favor of high margin ones. Going back to my previous reply, I think it might be more effective to create space for competition. What I'd like to see more of is the hand of government used to drive costs down as opposed attempting to drive the price down. The former seems more of a prudent investment that brings larger returns and makes the business more profitable and the product more affordable.

Analogies would be the EV and solar markets.
 

Sand Bar Bill

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The government using its leverage as a large customer to negotiate better prices is how markets work (see WalMart, etc) but I wonder how effective that negotiation can be when there is a microscopic pool of suppliers that are already unwilling to supply a low margin product in favor of high margin ones. Going back to my previous reply, I think it might be more effective to create space for competition. What I'd like to see more of is the hand of government used to drive costs down as opposed attempting to drive the price down. The former seems more of a prudent investment that brings larger returns and makes the business more profitable and the product more affordable.

Analogies would be the EV and solar markets.
Part of the problem of applying drug pricing to free markets is that you have literally a captive audience. There is no true freedom of choice when you must buy the product... or be sick or die.

I am not sure whose costs you are talking about, but I assume the costs of a private business to develop drugs and you are talking about government subsides.

However, according to Pelosi, drug companies charge the US more than they charge foreign governments, even though they still make a profit on foreign sales.

I'm afraid that the government not being allowed to address pricing results in abuse by Big Pharma (where insulin prices have doubled for no reason). And no wonder many Americans go to Canada to buy their drugs.
 

zgrose

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Part of the problem of applying drug pricing to free markets is that you have literally a captive audience. There is no true freedom of choice when you must buy the product... or be sick or die.

I am not sure whose costs you are talking about, but I assume the costs of a private business to develop drugs and you are talking about government subsides.
I'm talking about the costs to manufacture drugs and develop more effective ones. My first idea was the shorten the time frame of patents so that generics can come to market faster (lowers licensing costs). Another idea might be related to legal liability for bad outcomes of good-faith actions. Eliminating redundant red tape and dropping tariffs on raw materials (if these exist) would be some more.

Subsidies (tax incentives) should really be reserved for nascent markets facing entrenched competition or for direct action initiatives (create a job, get a tax break).

However, according to Pelosi, drug companies charge the US more than they charge foreign governments, even though they still make a profit on foreign sales.
I'm afraid that the government not being allowed to address pricing results in abuse by Big Pharma (where insulin prices have doubled for no reason). And no wonder many Americans go to Canada to buy their drugs.
I believe some of those government also have price caps so it's a bit of a chicken-and-egg. To be clear, I don't think price controls can't be a part of the solution, I just don't think they are more of a band-aid to treat a symptom versus addressing the root cause. Decreeing from on high that DrugX can only cost $1 because that's popular isn't sound policy. Creating a space where the market can drive the cost down to $1 or less is sound policy.

Reducing artificial barriers to international drugs is another way to drop costs and open price competition.
 
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