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Not the correct fix
Nov. 1st, 2011 10:18 pmThe issues are always more complex than they seem, and what I know comes largely from WSJ articles, and newspaper articles are always simplifications and frequently flat-out wrong, but somebody in government fails to understand how humans are motivated.
There's a problem right now about a lack of drugs for life-threatening diseases like leukemia, and many, many others.
Why do we have this problem?
One possible answer is corporate greed.
Another possible answer is that corporations are not motivated or able to stay in businesses that are unprofitable.
My understanding of the situation is that medicare has a "negotiated rate" with drug companies for drugs. "Negotiated" in quotes, because the government also controls the FDA and the flow of new drugs onto the market. Companies are strong-armed into accepting just barely the manufacturing cost for a drug, and little or nothing for the cost of R&D. If they choose not to accept that price, their future R&D efforts are held up by the FDA. Large insurance companies piggy-back on that price with most-favored-nation clauses. Now there is an escape clause -- if there is a "shortage" of a drug then drug companies are allowed to charge more than the negotiated rate.
Is that a recipe for causing a shortage or what? I can seem them thinking, "Hmmmm, if I stop making this product, then the price goes way up for the amount I have left on my shelves, and I can continue to pay my R&D workers and improve my position in the market? Yes, it may hurt some poor little kids with ADD and leukemia if the supply chain isn't just right, but if I go out of business then there will be no more new drugs, and I'd be out of a job along with all my employees."
So, because of the current regulations, we have shortages in lots of major medications, so that companies can charge what they really wanted to charge in the first place, plus some to make up for the lower-than-reasonable price they had to charge originally.
Now, what is the fix for this situation? I know! Let's villify the price-gouging drug companies! We'll get the public turned against them, and add yet another new regulation on them, so that when they choose to discontinue making an unprofitable product, they have to notify the FDA in advance, so we can lean on them even more! We can even go after them with criminal charges if they don't make cheap drugs all the time! They'll surely want to start making more drugs more cheaply then, because poor little kids have cancer! Cancer! Yes, kids with cancer are hurt! That's the solution to this shortage!
....
I'm sorry, but if you want to go to a completely socialized drug delivery system, just do it already. Nationalize the entire industry, but please stop these divisive class-warefare announcements. This is not free-market greed, this is a half-nationalized market trying to survive. The vilification of an industry does not help America.
Personally I'd prefer to get rid of the FDA and leave regulation of all drugs (currently legal and otherwise) to the states. That will never happen, but if we have to have it national, at least get the incentives right and let the price float to market conditions, shortage-or-no. Don't add another new regulation to "fix" an existing bad one, get rid of the bad one.
--Beth
There's a problem right now about a lack of drugs for life-threatening diseases like leukemia, and many, many others.
Why do we have this problem?
One possible answer is corporate greed.
Another possible answer is that corporations are not motivated or able to stay in businesses that are unprofitable.
My understanding of the situation is that medicare has a "negotiated rate" with drug companies for drugs. "Negotiated" in quotes, because the government also controls the FDA and the flow of new drugs onto the market. Companies are strong-armed into accepting just barely the manufacturing cost for a drug, and little or nothing for the cost of R&D. If they choose not to accept that price, their future R&D efforts are held up by the FDA. Large insurance companies piggy-back on that price with most-favored-nation clauses. Now there is an escape clause -- if there is a "shortage" of a drug then drug companies are allowed to charge more than the negotiated rate.
Is that a recipe for causing a shortage or what? I can seem them thinking, "Hmmmm, if I stop making this product, then the price goes way up for the amount I have left on my shelves, and I can continue to pay my R&D workers and improve my position in the market? Yes, it may hurt some poor little kids with ADD and leukemia if the supply chain isn't just right, but if I go out of business then there will be no more new drugs, and I'd be out of a job along with all my employees."
So, because of the current regulations, we have shortages in lots of major medications, so that companies can charge what they really wanted to charge in the first place, plus some to make up for the lower-than-reasonable price they had to charge originally.
Now, what is the fix for this situation? I know! Let's villify the price-gouging drug companies! We'll get the public turned against them, and add yet another new regulation on them, so that when they choose to discontinue making an unprofitable product, they have to notify the FDA in advance, so we can lean on them even more! We can even go after them with criminal charges if they don't make cheap drugs all the time! They'll surely want to start making more drugs more cheaply then, because poor little kids have cancer! Cancer! Yes, kids with cancer are hurt! That's the solution to this shortage!
....
I'm sorry, but if you want to go to a completely socialized drug delivery system, just do it already. Nationalize the entire industry, but please stop these divisive class-warefare announcements. This is not free-market greed, this is a half-nationalized market trying to survive. The vilification of an industry does not help America.
Personally I'd prefer to get rid of the FDA and leave regulation of all drugs (currently legal and otherwise) to the states. That will never happen, but if we have to have it national, at least get the incentives right and let the price float to market conditions, shortage-or-no. Don't add another new regulation to "fix" an existing bad one, get rid of the bad one.
--Beth
