For some drug firms, highs and lows of value pricing are evident

Hanna
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For some drug firms, highs and lows of value pricing are evident

Postby Hanna » Mon Sep 05, 2016 8:53 pm

Consumers who are outraged by huge increases in the price of the lifesaving EpiPen allergy drug could also direct a little of their anger toward what’s happened with another old-fashioned drug, called H.P. Acthar Gel.

Hardly cutting-edge science, it’s derived from the pituitary glands of pigs and was actually developed by the Armour & Co. meatpacking company, and has long been used to treat infantile spasms. And like the EpiPen, whose maker has come under harsh criticism lately, it’s a shockingly expensive drug that once used to be very cheap.

Not that long ago the drug sold for maybe $50 per vial, giving it so little commercial value that a drug company called Questcor in 2001 acquired rights to it for $100,000. Questcor jacked up the price and turned itself into a hot enough specialty pharmaceutical company to be bought by Mallinckrodt PLC. H.P. Acthar Gel now costs about $35,000 per vial (with a coupon!) and Mallinckrodt’s pricing practices have been pounded by health care systems, insurers and a bearish investment pro.

(snip)

What pharmaceutical companies do is called value pricing, setting the price based upon the product’s perceived value to the customers who will buy it. Cost is irrelevant. What’s important to grasp as well is that it’s the same pricing process pretty much every savvy business manager has adopted. Anti-inflammatory medication, tacos from a food truck, a replacement battery for the car or estate planning advice from a lawyer, it doesn’t matter, the prices for all were arrived at pretty much the same way. It’s hard to think of a product with a price set only on what it costs to make it.

(snip)

Congressional hearings don’t usually get called to look into the pricing of a drug if the price inches up over a long period, even though by 2016 the price may be eye-popping. A great example is a drug developed by Novartis called Gleevec. This drug was a genuine breakthrough medication for patients with a chronic form of leukemia when it came out in 2001. Novartis developed it for what the company thought of as a relatively small market.

Initially Novartis priced it to cost about $26,000 for a year of treatment. Novartis admitted at the time that getting acceptance for a drug so expensive could be an uphill battle. Well, the customers did buy it, enough for the company to steadily increase its price. It’s now more than $145,000 for a year’s treatment, making this one-time niche drug the biggest seller for a multibillion-dollar global company. Gleevec sales last year were nearly $4.7 billion.

There are something like 18 generic versions of the drug now available around the world including a few in Canada. North of the border the generic medication is sold for about $8,800 a year, according to an analysis published in May in the cancer treatment journal the ASCO Post. A year’s supply costs only about $400 in India. A generic version of the same medication finally came to the market here, too, after a delay when Novartis essentially paid a generic maker to hold off bringing it out. It was priced about $140,000 per year.

So what’s the value-based pricing argument here? Can drugmakers really claim that this miracle drug has a genuine value here, with our richly funded health care system, that’s 350 times the perceived value to buyers in India? It’s doubtful too many Americans relying on this drug will buy that argument. They may yet take to Facebook in droves to share their disgust.

http://www.startribune.com/lee-schafer- ... 392181281/



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John Q. Public
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Re: For some drug firms, highs and lows of value pricing are evident

Postby John Q. Public » Mon Sep 05, 2016 11:24 pm

Who pays for these things, the government? Ordinary people could never pay (or pay back) $145,000/year and I'd think insurance companies would have the clout to bring the prices down. The government can't negotiate prices, so all I can figure is that taxpayers are paying for it.
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ocfootballfan
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Re: For some drug firms, highs and lows of value pricing are evident

Postby ocfootballfan » Tue Sep 06, 2016 4:21 pm

The government should negotiate prices JQP......they are the single largest payer of healthcare

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Re: For some drug firms, highs and lows of value pricing are evident

Postby John Q. Public » Tue Sep 06, 2016 6:09 pm

They should but well, as incredible as it seems, somebody went and wrote a law against it.

Here's an article I meant to post last week but didn't get around to:

5 reasons prescription drug prices keep rising

  1. Drug manufacturers in the US set their own prices, and that's not the norm elsewhere in the world - see above.
  2. We allow "government-protected monopolies" for certain drugs, preventing generics from coming to market to reduce prices - patents are good for 20 years and they're often extended.
  3. The FDA takes a long time to approve generic drugs.
  4. Sometimes, state laws and other "well-intentioned" federal policies limit generics' ability to keep costs down - pharmacists in many states are required to get patient consent to switch to generics but often don't.
  5. Drug prices aren't really justified by R&D - very often the feds pay for that, too

http://www.sgvtribune.com/health/201608 ... ost_viewed
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MDDad
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Re: For some drug firms, highs and lows of value pricing are evident

Postby MDDad » Tue Sep 06, 2016 6:17 pm

ocfootballfan wrote:The government should negotiate prices JQP......they are the single largest payer of healthcare

That may be true. But how are government officials (which I presume means legislators or their appointees) going to negotiate prices for drugs and medical care, when across the table from them sit the drug companies, medical care providers, device manufacturers and insurance companies that paid to put them in office?

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Re: For some drug firms, highs and lows of value pricing are evident

Postby ocfootballfan » Tue Sep 06, 2016 6:35 pm

I get that Dad but that's not the way it's supposed to work. Hate to say it but maybe nationilized healthcare might be the answer.

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Parrotpaul
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Re: For some drug firms, highs and lows of value pricing are evident

Postby Parrotpaul » Wed Sep 07, 2016 8:16 am

I like the idea of nationalized health care.
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Hanna
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Re: For some drug firms, highs and lows of value pricing are evident

Postby Hanna » Wed Sep 07, 2016 8:46 am

Funny thing. In their first debate, Trump mumbled something about having a health care "like Canada."

MDDad
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Re: For some drug firms, highs and lows of value pricing are evident

Postby MDDad » Wed Sep 07, 2016 9:57 am

Coincidentally, there was a healthcare cost horror story in the Times just yesterday.

A Lake Tahoe woman travelling in Southeast Asia a few years ago was bitten by a stray dog and started her series of shots for rabies. The cost of her first shot in Cambodia was $125. The second shot in Thailand cost her $18.25. She got her third and fourth shots after returning to the United States. Those two bills were $5,254.85 and $427.

Thank God we live in a country with the best healthcare in the world.

http://www.latimes.com/business/lazarus ... story.html

Luca
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Re: For some drug firms, highs and lows of value pricing are evident

Postby Luca » Wed Sep 07, 2016 10:48 am

I constantly run into incomprehensible price issues. A medication goes generic and you find out it's no less expensive than the generic. There are other 30-year-old generic medications that are ridiculously expensive for no apparent reason. You change the dose a little bit on a medication and suddenly the price quadruples. Its unpredictable. You wonder why that woman's first shot was over $5000 and the second one $400. Why can you get Viagra class medications for a few dollars from Canada and $30 per pill next-door? It's irritating as hell.

The pricing structure seems to be based on that story during the Depression when a woman was selling apples outside of a New York skyscraper. When a customer went up to by an apple he asked her how much an apple cost and she said "$500."


"My God", responded the guy. "You're not going to sell many apples at that price."

"True," she said, "but I only have to sell one."

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Wabash
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Re: For some drug firms, highs and lows of value pricing are evident

Postby Wabash » Wed Sep 07, 2016 11:12 am

There's an entire layer of pricing controlled by a group called PBM's. They have their noses sunk deep into pharma business model and add nothing but added pricing to the meds industry.
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