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LOL, so much for getting "cheap" drugs from Canada...
- Thread starter Eric-GCA
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It's just such a bizarre situation when you think about it: America looking to import cheaper drugs from Canada that were originally made in America by American companies but sold at cut-rate prices to the Canadians. All because the Bushies don't wanna put the screws to big pharma here in the states. Shame...
Very weird when you look at it that way.
Very weird when you look at it that way.
Uh, what? I'm pretty sure that's atypical, though you're treating it like the exclusive.Loki said:It's just such a bizarre situation when you think about it: America looking to import cheaper drugs from Canada that were originally made in America by American companies but sold at cut-rate prices to the Canadians. All because the Bushies don't wanna put the screws to big pharma here in the states. Shame...
Very weird when you look at it that way.
Socreges said:
I don't get what you're saying.
All I'm trying to point out is the inherent absurdity of a situation where Americans are clamoring for cheaper drugs made by American companies, yet they have to try to get them from another country who was able to get the drugs from those same American companies for vastly reduced prices. In other words: using a middle-man where none should exist is funny (and sad).
Is that clearer? I don't get what you meant by saying that I was trying to make it seem like "the exclusive" (what was I trying to make seem like an "exclusive"; what does "exclusive" mean in this scenario, even? I'm just totally lost
). What precisely is "atypical" about either what I said or the scenario in general? I'm just not sure what you're getting at.videogamer
Banned
Loki said:I don't get what you're saying.
All I'm trying to point out is the inherent absurdity of a situation where Americans are clamoring for cheaper drugs made by American companies, yet they have to try to get them from another country who was able to get the drugs from those same American companies for vastly reduced prices. In other words: using a middle-man where none should exist is funny (and sad).
IIRC, drug distrubution is full of middlemen... which can make it hard to trace where the drugs have been.
importing drugs from canada sounds nice, but useless in any sort of meaningful way. Drug companies make their money from America mostly because they have to sell cheaply to Canada and countries in Europe due to price control.
Nytimes has a nice article about it as well. It goes over the same stuff as the FT article in more detail.
http://www.nytimes.com/2004/10/16/b...artner=rssuserland&pagewanted=print&position=
The Meat of the article.
Nytimes has a nice article about it as well. It goes over the same stuff as the FT article in more detail.
http://www.nytimes.com/2004/10/16/b...artner=rssuserland&pagewanted=print&position=
The Meat of the article.
eggplant said:
Possibly-- though that holds more for illicit drugs than legal ones.
Sure, some of the actual production of drugs are farmed out to plants in various countries, but most of it still comes from the US, developed by US companies. The sort of "middle-man" I was talking about has nothing to do with the sort of middle-man you're talking about. I'm just saying that in a sane world, instead of it going like this:
American companies ---> Canadian pharmacies ---> American consumers (either directly via internet purchases or by way of gov't negotiation and bulk purchases from Canada)
It would go like this...
American companies ---> American consumers (at similar prices as would be had by the above process)
Since it doesn't work like that, something is quite comically wrong imo. Agreed?
videogamer
Banned
Loki said:Possibly-- though that holds more for illicit drugs than legal ones.
I'm just saying that in a sane world, instead of it going like this:
American companies ---> Canadian pharmacies ---> American consumers (either directly via internet purchases or by way of gov't negotiation and bulk purchases from Canada)
It would go like this...
American companies ---> American consumers (at similar prices as would be had by the above process)
Since it doesn't work like that, something is quite comically wrong imo. Agreed?
OK fine agreed. And we also agree on how the drug companies make an obscene amount of money and yet cry about R&D costs.
In other words, with importing drugs from Canada, Americans would most often get drugs manufactured in Canada. As well as some from India, and other countries. It just so happens that some of these drugs did initially come from America, but that generally isn't the case, from what I've heard.
You might be thinking of American companies that have manufacturing warehouses in Canada.
You might be thinking of American companies that have manufacturing warehouses in Canada.
Ripclawe, cry me a river with your free market nonsense. Boo-hoo, the drug companies only made $100B in profit last year, not $200B. Weep for them.
In an ideal world, prices would be enough for a modest profit, in line with the other Fortune 500 companies (iirc, big pharma's profit margins are around 14-16% whereas the other companies on the F500 are around 4-6% per year). R&D costs would eventually have to start being spread around to the various nations, because as it stands, we are subsidizing the rest of the world's drugs, which I don't believe is fair. Patterns of funding can be based upon consumption or need or whatever. But on top of that, there is no reason to tolerate profit margins 2-4 times as high as normal for big pharma. Some of those profits should be funneled back into their own R&D; the huge margins wouldn't be there if consumers in America were being charged a reasonable price. If the R&D funding was spread around a bit more than it is currently, there would be no reason why these drugs couldn't be brough to market at vastly reduced prices.
Another issue in keeping costs artifically high in the US is induced demand, for which we have direct-to-consumer advertising to thank. Check when direct-to-consumer advertising started (hint: early 90's) and then check when drug companies started seeing record profits an order of magnitude greater than other publicly-traded corporations (hint: also the early 90's). Deregulation of the advertising laws for pharm companies was the beginning of the gouging of the American consumer.
The whole system is a joke, quite frankly.
In an ideal world, prices would be enough for a modest profit, in line with the other Fortune 500 companies (iirc, big pharma's profit margins are around 14-16% whereas the other companies on the F500 are around 4-6% per year). R&D costs would eventually have to start being spread around to the various nations, because as it stands, we are subsidizing the rest of the world's drugs, which I don't believe is fair. Patterns of funding can be based upon consumption or need or whatever. But on top of that, there is no reason to tolerate profit margins 2-4 times as high as normal for big pharma. Some of those profits should be funneled back into their own R&D; the huge margins wouldn't be there if consumers in America were being charged a reasonable price. If the R&D funding was spread around a bit more than it is currently, there would be no reason why these drugs couldn't be brough to market at vastly reduced prices.
Another issue in keeping costs artifically high in the US is induced demand, for which we have direct-to-consumer advertising to thank. Check when direct-to-consumer advertising started (hint: early 90's) and then check when drug companies started seeing record profits an order of magnitude greater than other publicly-traded corporations (hint: also the early 90's). Deregulation of the advertising laws for pharm companies was the beginning of the gouging of the American consumer.
The whole system is a joke, quite frankly.
Socreges said:
In terms of where they're manufactured, that might be the case (though I'd still wager that a good amount are produced in the US and shipped abroad); still, though, as the article noted, the cost of manufacturing a drug is negligible, but the cost of developing a drug is huge. And those costs are almost exclusively borne by the US on the backs of US consumers, which speaks to my point.
Socreges said:You're full of shit.
No I'm not.
Seriously, that's what I meant; I can rephrase my original post and keep my same sentiment like so, if it makes it clearer:American drugs developed by American companies at considerable cost to American consumers ----> Canadian pharmacies/Canadian manufacturing plants ----> American consumers
Now where is the cost-shifting there? Obviously it's from the drug companies back onto the American consumer (since low prices are mandated by the Canadian gov't and manufacturing costs that may be incurred by Canada are minimal in comparison to the development of the drug), same as in my original scenario.
I just think that it's a comical thing that people should have to go through that to get drugs made by their own companies.
Cerebral Palsy
Banned
This whole thing is a crock of shit anyway. We shouldn't have to import our own U.S. manufactured drugs from Canada. They should be that fucking cheap here.
It's comical, yes, but I don't have any problem with it personally (forcing them to do this). It would be different if we were talking about a luxury item, but this is medicine. If it were sold to other countries at the same price it is here (or somewhere in the middle), they would end up reaching less people. This is one of several issues that I actually disagree with the democratic party on.
I agree with you on the advertising though, and haven't looked at enough information to comment on profit margins.
I agree with you on the advertising though, and haven't looked at enough information to comment on profit margins.
Cerebral Palsy said:
We can't import all our drugs from Canada. It's an economic problem. The more drugs we import from Canada, the more the drug companies will charge Canadians. Drugs cost a certain amount to research and develop (that's the big expense, not the marginal cost of materials), and companies who go through the process of researching will demand their certain amount of compensation. Right now they get that from the US, because the US uses so many more drugs that the rest of the world. The rest of the world doesn't use nearly as much, and some other countries can't afford the higher prices anyway, so drug companies cut a deal to nations like Canada. There is no solution to this importing problem. It must be dealt with at the source, the expense of developing new drugs. Drug companies might make a lot of money, but it also costs a lot to develop new drugs. Since Americans are the ones that actually use the drugs, it will be us shouldering the costs.
videogamer
Banned
ChrisReid said:
You might want to read one of Loki's earlier posts and this drug company thread again. The profits take into account the R&D spending (and marketing among other things).
While I wouldn't be the one to force the drug companies to cut costs, I wouldn't lose any sleep if someone forced them to cut prices.
Cerebral Palsy said:
That's exactly my point; if nothing else, prices should meet in the middle as less of the cost is shifted solely to the US market and more R&D costs are borne by other nations.
ChrisReid:
It's not entirely correct to say that Americans are shouldering the brunt of the development costs solely because of our increased consumption of these drugs as compared to other nations. There are various factors at work, some of which I alluded to earlier (e.g., cost-shifting); perhaps tomorrow I'll elaborate, but I need me some sleep.
you're full of shit ripclawe. US consumers don't just absorb the brunt of costs. they're providing the vast majority of profit because regulators haven't done a thing to bring prices (where patients are by the way a captive audience) into line in the US, whereas CAD and EU regulators have clamped down in a big way.
fart said:
Exactly. I wanted to make one more post about this to finish fleshing out my thoughts about this matter.
In 2000, the drug industry's after-taxes profit margin was 18.6% of sales, according to a stuy published by the Kaiser Family Foundation. This can be contrasted with the after-tax margins of (median) 4.5% for all Fortune 500 companies. So we can see that drug companies realize over 400% more profit than all the other major corporations in America. So any claims of R&D costs spurring drug companies to raise prices is a joke. In fact, here's a list of the major drug companies listed by name, % of revenues spent on marketing/advertising/administration, and lastly % of revenues spent on R&D (this is crucial):
1. Merck, 13%, 5%
2. Pfizer, 35%, 15%
3. Bristol-Myers Squibb, 27%, 12%
4. Abbott Laboratories, 23%, 10%
5. Wyeth, 37%, 13%
6. Pharmacia, 44%, 16%
7. Eli Lilly, 30%, 19%
8. Schering-Plough, 36%, 13%
9. Allergan, 42%, 15%
In summary, the biggest nine pharm companies generated $30.6B in after-tax profit last year, which was 60% higher than their expenditures on R&D. For instance, Merck's profits were nearly three times the amount it spent on R&D. So hopefully this will put the "R&D myth" to rest; if it doesn't, then I could always point out that many of these companies' research efforts are subsidized by taxpayers via the National Institutes of Health (NIH), and many of their most crucial discoveries come out of university research programs across the country, and are then gobbled up by the drug companies, polished up, and marketed-- exorbitant profits are realized this way.
As you can see, an average of 30-40% of these companies' revenue is devoted to advertising, which increasingly takes the form of direct-to-consumer advertising as seen on TV or in magazines; this creates artifical, induced demand, as patients start to ask their physicians for drug X despite having no medical background. When physicians do not comply-- even if they cite health reasons-- patients are often frustrated, or feel that their doctor is not looking out for them. After all, the drug must be good if it's being advertised on TV as the next big thing, right? On the physician side, they're being squeezed from all sides-- from patients anxious to get their hands on latest drugs on one side, and from the drug companies themselves who lavish them with perks on the other. These perks (which are not cash kickbacks, but rather dinners, paid "conferences" in places like Vegas or the islands etc.), unfortunately, are more and more appealing to many physicians (especially in primary care), who have seen their income decline precipitously over the past 10-15 years or so; consequently, if the drugs are proven efficacious, physicians are more inclined to move away from an old standby (even if nothing is wrong with it) in favor of a new prouct. This is to say nothing of the fact that recent years have seen a TREMENDOUS decrease in transparency in the peer-review process for drug testing; in many cases, a physician has to look long and hard to find truly independent studies on a drug's effectiveness, as more and more of them are commissioned by the companies producing the drugs, sometimes by proxy (yes- they're that sneaky, these companies
). If you search around any physician forum on the web, you'll find a lot of outrage over the increase in this sort of practice and the resultant dearth of independent, methodologically-sound drug trials. So besides advertising (which is a self-serving cost, ultimately, as it creates your market; as an aside, this is a ridiculous scenario, as in health matters, the need, as determined by competent professionals, should dictate the market), where are the profits going? Well, the "administrative costs" mentioned above (whose percentages are seen on the chart above) include executive compensation; let's have a look at the highest paid executives at the big 9 companies, shall we? Figures are per year:
1. C.A. Heimbold, Jr., Former Chairman & CEO, Bristol-Myers Squibb, $74.9 million (plus $76M in unexercised stock options)
2. John R. Stafford, Chairman, Wyeth, $40.5 million (plus $41M in unexercised stock options)
3. William C. Steere, Former Chairman, Pfizer, $28.3 million
4. Henry A. McKinnell, Chairman and CEO, Pfizer, $23.8 million
5. John F. Niblack,Vice Chairman, Pfizer, $15.9 million
Figures for stock options and other perks and bonuses for the other execs were unavailable, but I'm sure you can see the trend. Further, the fact that these companies are publicly-traded subjects them to the same market forces that other corporations are exposed to, which means a desire for greater and greater profits at any expense (mostly the public's expense, as we have seen). Now, personally, I believe that drug companies should either be privatized (and their profits and executive compensation kept in line with other Fortune 500 companies, which is certainly doable considering that they currently take in 400% more profits than their counterparts in other industries). Think about how much drug prices could drop if the government mandated profits of less than 8% (still healthy as compared with the typical 4-5% of other Fortune 500's) for drug companies-- approximately $20B would be saved (i.e., passed along to the consumers in the form of lower prices).
On top of some sort of reform of the profit structure of these corporations, which as has been noted are totally anomalous even when considering R&D costs, I personally believe that a greater portion of the R&D or cost in general should be borne by other countries such as Canada and the European nations, who currently dictate to the drug companies how much they will be paid for their products. There are no market forces at work there, which is perhaps part of the reason why the effects of these "market forces" seems so acute here in the US. In essence, the drug companies attempt to recoup the profit they lose in other nations due to price controls (which they cannot circumvent) here in the US, which is an example of cost-shifting as I mentioned earlier. Now, certainly I am no proponent of the drug companies (or else I wouldn't be writing all this
), but I do feel that the prices paid to them by various nations must rise somewhat so that we meet at an equitable level. There is no reason for Americans to pay $120 for the same prescription that costs $30 in Canada or Europe. That simply isn't fair or sensible. It would make much more sense to compel these nations to pay a bit more and thus flatten out the distribution of costs a bit. So Canada can pay, say, $55, and we can pay $75 (it's not proportionate because all of these other nations who are currently being indirectly subsidized by us would have to institute pricing changes, not just Canada; in the aggregate, I believe that this would-- or should-- decrease our costs about 30-50%).Because as it stands, all these nations are getting the best of both worlds: they get cheap prices by governmental fiat (due to their nationalized healthcare policies) and the best drugs because we're subsidizing both their development AND the corporations' profit margins, allowing them to stay solvent and continue bringing drugs to the market; as Americans, we're really getting it in both ends.
To be certain, many (see: Ripclawe)will say that if you remove the profit motive from bioresearch (which is the biggest and most viable American industry), that the industry will stagnate, resulting in fewer drugs of lesser quality for people the world over. I find this to be specious in light of the facts regarding the level of the profits being realized by pharm companies in comparison to their R&D costs. I don't believe that the sky will fall if we rein in those profits or mandate that drugs cannot be sold here for more than 150% of their price in other industrialized nations (as opposed to currently, where they are sold in the US at anywhere between 300-400%+ of what they are in places like Canada and Europe, despite the majority of the costs in terms of R&D and profits for these companies being borne in the US). I am not proposing eliminating the profit motive (which is the greatest motivator we have, though in an ideal world it wouldn't be ), but rather making it sensible and commensurate with the work put in and the risk. 400% higher profits than other Fortune 500's strikes me as a bit overboard, and I'm sure most can agree on that.Further, if the companies cry about R&D costs being cut into if such a plan is enacted, then these other nations should be asked to pony up for R&D based on the amount of the particular drug that they consume as a nation. As it stands, these nations are allowed to have their socialist utopias largely on our backs, believe it or not. Nary a single new, important drug comes out of any of these countries, because they don't spend the money on research-- either at universities, or biotech firms, or via funding of drug companies. Sure, it saves them money, but at our expense. And that's great for them-- I applaud their governments for managing to work on behalf of their constituency in such a fashion; the fact is, however, that it's about time that our government started working on our behalf. I'm not advocating that prices should be as high in Canada and elsewhere as they are here (because prices are indefensibly high here in light of the facts presented herein), but rather that they should meet at a sensible middle ground that is workable for all involved parties. Corporate reform of big pharm-- both internally as well as in terms of its marketing pactices-- is the cornerstone of all this, the thing without which none of it will lead to meaningful, substantive changes in pricing while maintaining an acceptable level of quality.
Oh, and because I didn't really know where else to stick it, allow me to pick up an earlier thread about how many of these breakthrough drugs are actually funded by the US taxpayer through the NIH or taxes paid to universities where research takes place:
Also...
So as you can see, we not only largely subsidize drugs developed by American companies, but also those developed by foreign companies as well. It's great to be an American! : /
Ballsy. Seriously. Yet hardly unsurprising.
(All above quotes taken from here)
Well, that about wraps it up for what I wanted to say about all this. Oh, one last point about the manufacturing costs versus the retail price (because Socreges pointed out that some of these drugs are manufactured in Canada and elsewhere as opposed to the US):
Here are some prices for 100 pills of the various drugs listed. Now, these are just manufacturing costs, not R&D (which still is vastly overplayed by the pharm companies), but I wanted to highlight just how paltry manufactuing costs are, which shows you that these countries aren't doing us any favors by merely physically producing these drugs on their soil:
(the columns are: milligrams, retail price in the US, cost of manufacture of the active ingredient in each drug for 100 pills, and lastly the % mark-up for retail)
Celebrex 100 mg $130.27 $0.60 21,712%
Claritin 10 mg $215.17 $0.71 30,306%
Keflex 250 mg $157.39 $1.88 8,372%
Lipitor 20 mg $272.37 $5.80 4,696%
Norvasc 10 mg $188.29 $0.14 134,493%
Paxil 20 mg $220.27 $7.60 2,898%
Prevacid 30 mg $44.77 $1.01 34,136%
Prilosec 20 mg $360.97 $0.52 69,417%
Prozac 20 mg $247.47 $0.11 224,973%
Tenormin 50 mg $104.47 $013 80,362%
Vasotec 10 mg $102.37 $0.20 51,185%
Xanax 1mg $136.79 $0.024 569,958%
Zestril 20 mg $89.89 $3.20 2,809%
Zithromax 600mg $1,482.19 $18.78 7,892%
Zocor 40mg $350.27 $8.63 4,059%
Zoloft 50mg $206.87 $1.75 11,821%
So, as we can see, the cost of manufacturing the pills is negligible, whereas the R&D costs are much steeper; these costs are, again, borne primarily by the US-- we also supply these companies with the majority of their overall revenue, not just R&D, which allows them to fund their advertising programs and lavish executive compensation packages, and allows them to generate profit margins over 400% higher than other Fortune 500 companies. Shameful.
videogamer
Banned
Loki said:Exactly. I wanted to make one more post about this to finish fleshing out my thoughts about this matter.
In 2000, the drug industry's after-taxes profit margin was 18.6% of sales, according to a stuy published by the Kaiser Family Foundation. This can be contrasted with the after-tax margins of (median) 4.5% for all Fortune 500 companies. So we can see that drug companies realize over 400% more profit than all the other major corporations in America. So any claims of R&D costs spurring drug companies to raise prices is a joke. In fact, here's a list of the major drug companies listed by name, % of revenues spent on marketing/advertising/administration, and lastly % of revenues spent on R&D (this is crucial):
1. Merck, 13%, 5%
2. Pfizer, 35%, 15%
3. Bristol-Myers Squibb, 27%, 12%
4. Abbott Laboratories, 23%, 10%
5. Wyeth, 37%, 13%
6. Pharmacia, 44%, 16%
7. Eli Lilly, 30%, 19%
8. Schering-Plough, 36%, 13%
9. Allergan, 42%, 15%
In summary, the biggest nine pharm companies generated $30.6B in after-tax profit last year, which was 60% higher than their expenditures on R&D. For instance, Merck's profits were nearly three times the amount it spent on R&D. So hopefully this will put the "R&D myth" to rest; if it doesn't, then I could always point out that many of these companies' research efforts are subsidized by taxpayers via the National Institutes of Health (NIH), and many of their most crucial discoveries come out of university research programs across the country, and are then gobbled up by the drug companies, polished up, and marketed-- exorbitant profits are realized this way.
As you can see, an average of 30-40% of these companies' revenue is devoted to advertising, which increasingly takes the form of direct-to-consumer advertising as seen on TV or in magazines; this creates artifical, induced demand, as patients start to ask their physicians for drug X despite having no medical background. When physicians do not comply-- even if they cite health reasons-- patients are often frustrated, or feel that their doctor is not looking out for them. After all, the drug must be good if it's being advertised on TV as the next big thing, right? On the physician side, they're being squeezed from all sides-- from patients anxious to get their hands on latest drugs on one side, and from the drug companies themselves who lavish them with perks on the other. These perks (which are not cash kickbacks, but rather dinners, paid "conferences" in places like Vegas or the islands etc.), unfortunately, are more and more appealing to many physicians (especially in primary care), who have seen their income decline precipitously over the past 10-15 years or so; consequently, if the drugs are proven efficacious, physicians are more inclined to move away from an old standby (even if nothing is wrong with it) in favor of a new prouct. This is to say nothing of the fact that recent years have seen a TREMENDOUS decrease in transparency in the peer-review process for drug testing; in many cases, a physician has to look long and hard to find truly independent studies on a drug's effectiveness, as more and more of them are commissioned by the companies producing the drugs, sometimes by proxy (yes- they're that sneaky, these companies
So besides advertising (which is a self-serving cost, ultimately, as it creates your market; as an aside, this is a ridiculous scenario, as in health matters, the need, as determined by competent professionals, should dictate the market), where are the profits going? Well, the "administrative costs" mentioned above (whose percentages are seen on the chart above) include executive compensation; let's have a look at the highest paid executives at the big 9 companies, shall we? Figures are per year:
1. C.A. Heimbold, Jr., Former Chairman & CEO, Bristol-Myers Squibb, $74.9 million (plus $76M in unexercised stock options)
2. John R. Stafford, Chairman, Wyeth, $40.5 million (plus $41M in unexercised stock options)
3. William C. Steere, Former Chairman, Pfizer, $28.3 million
4. Henry A. McKinnell, Chairman and CEO, Pfizer, $23.8 million
5. John F. Niblack,Vice Chairman, Pfizer, $15.9 million
Figures for stock options and other perks and bonuses for the other execs were unavailable, but I'm sure you can see the trend. Further, the fact that these companies are publicly-traded subjects them to the same market forces that other corporations are exposed to, which means a desire for greater and greater profits at any expense (mostly the public's expense, as we have seen). Now, personally, I believe that drug companies should either be privatized (and their profits and executive compensation kept in line with other Fortune 500 companies, which is certainly doable considering that they currently take in 400% more profits than their counterparts in other industries). Think about how much drug prices could drop if the government mandated profits of less than 8% (still healthy as compared with the typical 4-5% of other Fortune 500's) for drug companies-- approximately $20B would be saved (i.e., passed along to the consumers in the form of lower prices).
On top of some sort of reform of the profit structure of these corporations, which as has been noted are totally anomalous even when considering R&D costs, I personally believe that a greater portion of the R&D or cost in general should be borne by other countries such as Canada and the European nations, who currently dictate to the drug companies how much they will be paid for their products. There are no market forces at work there, which is perhaps part of the reason why the effects of these "market forces" seems so acute here in the US. In essence, the drug companies attempt to recoup the profit they lose in other nations due to price controls (which they cannot circumvent) here in the US, which is an example of cost-shifting as I mentioned earlier. Now, certainly I am no proponent of the drug companies (or else I wouldn't be writing all this
Because as it stands, all these nations are getting the best of both worlds: they get cheap prices by governmental fiat (due to their nationalized healthcare policies) and the best drugs because we're subsidizing both their development AND the corporations' profit margins, allowing them to stay solvent and continue bringing drugs to the market; as Americans, we're really getting it in both ends.
Further, if the companies cry about R&D costs being cut into if such a plan is enacted, then these other nations should be asked to pony up for R&D based on the amount of the particular drug that they consume as a nation. As it stands, these nations are allowed to have their socialist utopias largely on our backs, believe it or not. Nary a single new, important drug comes out of any of these countries, because they don't spend the money on research-- either at universities, or biotech firms, or via funding of drug companies. Sure, it saves them money, but at our expense. And that's great for them-- I applaud their governments for managing to work on behalf of their constituency in such a fashion; the fact is, however, that it's about time that our government started working on our behalf. I'm not advocating that prices should be as high in Canada and elsewhere as they are here (because prices are indefensibly high here in light of the facts presented herein), but rather that they should meet at a sensible middle ground that is workable for all involved parties. Corporate reform of big pharm-- both internally as well as in terms of its marketing pactices-- is the cornerstone of all this, the thing without which none of it will lead to meaningful, substantive changes in pricing while maintaining an acceptable level of quality.
Oh, and because I didn't really know where else to stick it, allow me to pick up an earlier thread about how many of these breakthrough drugs are actually funded by the US taxpayer through the NIH or taxes paid to universities where research takes place:
Also...
So as you can see, we not only largely subsidize drugs developed by American companies, but also those developed by foreign companies as well. It's great to be an American! : /
Ballsy. Seriously. Yet hardly unsurprising.
(All above quotes taken from here)
Well, that about wraps it up for what I wanted to say about all this. Oh, one last point about the manufacturing costs versus the retail price (because Socreges pointed out that some of these drugs are manufactured in Canada and elsewhere as opposed to the US):
Here are some prices for 100 pills of the various drugs listed. Now, these are just manufacturing costs, not R&D (which still is vastly overplayed by the pharm companies), but I wanted to highlight just how paltry manufactuing costs are, which shows you that these countries aren't doing us any favors by merely physically producing these drugs on their soil:
(the columns are: milligrams, retail price in the US, cost of manufacture of the active ingredient in each drug for 100 pills, and lastly the % mark-up for retail)
Celebrex 100 mg $130.27 $0.60 21,712%
Claritin 10 mg $215.17 $0.71 30,306%
Keflex 250 mg $157.39 $1.88 8,372%
Lipitor 20 mg $272.37 $5.80 4,696%
Norvasc 10 mg $188.29 $0.14 134,493%
Paxil 20 mg $220.27 $7.60 2,898%
Prevacid 30 mg $44.77 $1.01 34,136%
Prilosec 20 mg $360.97 $0.52 69,417%
Prozac 20 mg $247.47 $0.11 224,973%
Tenormin 50 mg $104.47 $013 80,362%
Vasotec 10 mg $102.37 $0.20 51,185%
Xanax 1mg $136.79 $0.024 569,958%
Zestril 20 mg $89.89 $3.20 2,809%
Zithromax 600mg $1,482.19 $18.78 7,892%
Zocor 40mg $350.27 $8.63 4,059%
Zoloft 50mg $206.87 $1.75 11,821%
So, as we can see, the cost of manufacturing the pills is negligible, whereas the R&D costs are much steeper; these costs are, again, borne primarily by the US-- we also supply these companies with the majority of their overall revenue, not just R&D, which allows them to fund their advertising programs and lavish executive compensation packages, and allows them to generate profit margins over 400% higher than other Fortune 500 companies. Shameful.
Gosh that's a lot of writing. Do you have links?
eggplant said:
All the info I posted is public domain, so a quick google search for the relevant terms should do the trick (which is all I did). Besides the link I posted towards the end, I closed the other windows, and don't really feel like looking for them again.
Sorry. Why, do you question any piece of data in particular, or do you just feel like reading a more concise analysis?
videogamer
Banned
Loki said:All the info I posted is public domain, so a quick google search for the relevant terms should do the trick (which is all I did). Besides the link I posted towards the end, I closed the other windows, and don't really feel like looking for them again.
Why, do you question any piece of data in particular, or do you just feel like reading a more concise analysis?
Yes I would like more analysis. Need to prep for them interviews.
happyfunball
Member
Pharm companies should really get more flak for their deceptions that they put out there.
They keep complaining that drugs are so expensive because of R&D costs, they always say that to make one drug it costs $800 million
The truth, though, is that for a completely new TYPE of drug, the cost is around $400 million and the other $400 million they factor in comes from their expected loss if they had invested that money.
In actuality, VERY FEW "new" drugs are actually "new". The majority are "me-too" drugs, meaning they just changed an available drug ever so slightly, bringing down R&D costs DRASTICALLY. If any industry is ripe for some regulation, its these bitches.
They keep complaining that drugs are so expensive because of R&D costs, they always say that to make one drug it costs $800 million
The truth, though, is that for a completely new TYPE of drug, the cost is around $400 million and the other $400 million they factor in comes from their expected loss if they had invested that money.
In actuality, VERY FEW "new" drugs are actually "new". The majority are "me-too" drugs, meaning they just changed an available drug ever so slightly, bringing down R&D costs DRASTICALLY. If any industry is ripe for some regulation, its these bitches.
Phoenix
Member
Loki said:
Curious. When something comes out of a university research program, how much does it cost to send the drug through trials and commercialization before it can be used in the public sector? While I understand that drug companies get a lot of what they use from universities (so do most companies across the board), I find it hard to believe that they are suddenly making absurd profits on it since the process of actually getting drugs approved is punishingly high (one of the main reasons drugs in other countries ends up being cheaper, not that their process is less stringent - just less costly).
I just don't buy that line of reasoning and would actually prefer to see someone's balance sheet to get the percentage of their profits they spend on earnings. Because I was curious I pulled the information for Pfizer just as a random case because I was seeing a lot of numbers that had no actual backing (not really to try to debunk them):
From this I see a wide variety of expenses that are related to R&D (especially for these folks this year) that cut into their profits.
Of particular interest in the financial report were the explanations of the two area in question:
So at least in the case of Pfizer, they seem to be increasing their R&D spending at a rate similar to that of their sales and advertising.
Yep, very true.
I would, personally, mandate that no drug sold outside the United States can be sold at a price cheaper (within reason) than drugs within the States.
Not feeling you on the marketing practices - I think that argument is reaching and about as useful as doctors who prescribe antibiotics for all sorts of ailments despite lacking need. The doctor has both the moral and ethical obligation to not be prescribing things that aren't necessary.
videogamer
Banned
Phoenix said:
You have to remember that the NIH also funds basic research, which most companies have long neglected to invest in. Basic research benefits everyone and it is the foundation upon which new discoveries are built.
Like Loki has posted, many of the companies aren't even American. Furthermore, many 3rd world countries wouldn't be able to afford some drugs if it weren't for the discounts that the companies give the countries (ex: HIV drugs). It becomes a humanitarian problem.
I personally view the companies' large expenditures on marketing as holes in the "We really really need the money for R&D"
Phoenix
Member
eggplant said:
Of course, but I'm talking about how much money this is REALLY saving. If I get a drug idea based off some NIH research, how much does it cost me to get this drug into your hands - not to mention whether or not someone has a competing drug on the market at the same time.
No, it doesn't. That's a line item in humanitarian aid. You can still charge the same amount of money. You don't need to make the drugs CHEAPER, you just need to give money to subsidize it (which is in reality what we end up doing).
I don't myself. I'm sure if you look at a fast food company there advertising expenses will be huge as well - but we don't point to that as the reason why fast food is going up in price and tell people to stop advertising extra value meals every 5 minutes on TV.
But since I like to know for sure, I pulled up the McDonalds Financials as well and they are spending (as a percentage) the same amount of their earnings as Pfizer (http://www.mcdonalds.com/corp/invest/pub/financial/discussion_analysis/page_4..html). That's why I reject the SI&A as a reason that R&D is out of place.
videogamer
Banned
Phoenix said:
IIRC drug testing costs a ton of money, but if drug innovation is so cheap, why don't the drug companies do more of it? Furthermore, basic science is available free to the private companies, and they practically build their research on it. Just look at publications and see how much information came from NIH-funded research.
I don't follow. You said nothing about humanitarian aid nor subsidizing other countries' drugs. Drug companies do give discounts to certain poor countries. I'm not talking about a country's foreign policy, but a private corporation's discounts to poor countries. If you somehow stop the companies from giving discounts to poor countries, this can adversly affect them.
Loki is also trying to say that the drug companies are making a significantly larger amount of profit than other Fortune 500 companies. The drug companies spend a huge amount of advertising while making considerably more money than companies in other sectors.
Phoenix
Member
eggplant said:
Humanitarian aid as a function of a drug company? Never heard of it. I've heard of countries giving humanitarian aid. A corporation cannot give aid, but it can give discountrs on products to other markets. I'm mixed on that as well. If you can afford to give such low priced goods to other markets, why are you overcharging your home market? Somehow that doesn't seem 'business ethics' sound given a corporations responsibility to its employees and its community (re: Business Ethics: Concepts and Cases). Seems to violate those two contracts right off the bat.
As a whole or as a percentage? As a dollar value - absolutely, as a percentage (the only way you can really compare the two sectors fairly) I'm not so sure. I'll pull up those figures when I get home and see, but somehow I don't think they are 'overall' making more than say Microsoft or Nike.
videogamer
Banned
Phoenix said:
I think is more about PR than anything, but the lower costs help the third world countries.
Apparently both.
http://66.102.7.104/search?q=cache:.../id/5886411/+drug+company+profit+margin&hl=en
http://66.102.7.104/search?q=cache:.../profits.asp+drug+company+profit+margin&hl=en
BigJonsson
Member
Americans need to stop taking drugs and flu shots that are intended for Canadians
Not our fault if you're country has a fucked up health care system
Not our fault if you're country has a fucked up health care system
Phoenix said:
Like I said, after-tax profits are 60% higher than R&D costs. As for the particulars of how much the R&D cost is lessened by the development of the drug at universities or biotech firms, I'm not sure. Though I can't imagine how the total R&D costs wouldn't be lessened by at least 10-20% when the bulk of the work-- the actual discovery of the drug-- is done elsewhere. Yes, they have to jump through hoops in order to bring it into compliance with FDA regulations, but they have to do that for all drugs anyway, and as was pointed out, their profits exceed their self-professed (read: inflated) R&D costs by 60%. So I think it's fair to say that it lowers it a substantial amount (not 50% or anything, but maybe 10-20% like I said seems reasonable, though this is conjecture).
First off, allow me to say quite frankly that to believe the data that these companies provide themselves is asking for trouble. They are notorious for overstating the case for R&D. Notorious. Take a look at these:
http://www.rossde.com/editorials/edtl_rx.html
http://www.namiscc.org/newsletters/July01/DrugPrices.htm
Further, I'm not sure what you're trying to prove with your first link; I can't see any "profit" column except perhaps for the "net income" line, which reads $3.9B. It puts R&D costs at $7.1B. According to the stats I posted earlier, pharm companies' profits exceed their R&D costs by 60%, and this is borne out by the analysis of the very same Pfizer income statement you posted, seen here. Some notable excerpts:
There is also a lot of discussion at that link that speaks to the advertising tactics and other marketing practices that you say "you don't buy". These have deletrious consequences for our society as a whole. Look at it this way: direct-to-consumer advertising used to be illegal until the early 90's. Before then, pharm companies weren't suffering-- their profit margins (accounting for R&D) were about the same as for the other Fortune 500's. SInce deregulation in this area, they've seen their revenues soar, to the point where they now average 400% higher profits than the other top 500 companies in the nation. If you think there's no connection there-- or maybe just feel that it's not a big deal even if there IS a connection-- then I don't know what to tell you. Here's an analysis by the Congressional General Accounting Office (GAO) of the effects of direct-to-consumer advertising:
http://www.gao.gov/new.items/d03177.pdf
It's conclusions support many of the statements I've made in this thread, including DTC's overall effect of raising drug prices and expenditures on drugs by consumers; it also notes how unresponsive these companies have been to FDA pressure, including outright ignoring official letters sent to them by the FDA regarding certain advertisements that were in violation of code. I don't mean to inundate you with links and stuff-- I tend to try not to do that, which is why I kept my first post relatively link-free; but believe me when I tell you that it doesn't take much looking to find independent studies that support each and every assertion I made in my post. But, quite honestly, I just don't have the time to make another post like that anytime soon.
Direct to Consumer advertising was deregulated around 1996 or so; since then, the percentage of revenues spent by pharm companies on it has increased dramatically (as have profits)-- obviously it is a very effective tactic that helps their bottom line, or else they wouldn't be doing it. Now, if you don't want to believe that artifically induced demand is a corrosive influence on the system, then we're just going to have to disagree. Like I said earlier, it wouldn't be so bad if it weren't for the fact that the majority of the "studies" done on new drugs are commissioned by the very companies producing them, in a clear conflict of interest ethical breach. It is often very difficult to find independent studies of new drugs nowadays that are untainted by the companies' biases. So if a patient goes to the doctor and inquires about a specific drug they saw on TV, and all the physician has to go on is basically propaganda put out by the drug company under the guise of an "independent study" (which will undoubtedly play up the benefits and minimize the risks), then they will be more prone to bow to the pressure by the consumer, since they can see no ostensible risk to it (which they might have seen in a peer-reviewed, formalized study of the drug-- something that is increasingly rare these days). If you think that I'm overstating things, do some snooping around, or ask some physicians about the state of information flow in the medical field today vis-a-vis pharmaceuticals. It's a pretty shameful situation, really; these companies have utilized their absurdly high profit margins to buy influence in every sector, allowing them to sidestep numerous regulations and safeguards. It has to stop imo.
Average post-tax profit margins for drug companies are around 18%; for other Fortune 500 companies, that average (as a percentage, which seems to be your sticking point) is around 3-5%. How can you say that they don't realize larger profits as a percentage of revenue (or of cost?)? It's pretty much established fact; you'd be hard-pressed to find a single independent entity that corroborates such a stance as you're taking. Even the analysis I posted above of the Pfizer income statement (straight from the horse's mouth) you posted shows this to be the case, with 24% of revenue being pure profit-- this is in comparison to Pepsi Co's 10% and McDonald's 9.8% (which is down from a high of 16.8% three years ago). So either as absolute dollars or as a percentage of revenue, pharm companies are making out like bandits; this much is inescapable.
I'm not sure what else to say, really.
Stuggernaut
Grandma's Chippy
Man I love my insurance....I pay very little for meds
I also like the option to retire into Canada after I make my money in USA (Canadian citizen)....not that I am making any lare amounts of money yet...nor will I in the forseeable future...God damnit my plan is failing!
I also like the option to retire into Canada after I make my money in USA (Canadian citizen
)....not that I am making any lare amounts of money yet...nor will I in the forseeable future...God damnit my plan is failing!
Phoenix
Member
Loki said:
But what I'm asking is, how is this different from other companies that have inflated R&D costs like say IBM or Microsoft?
Not trying to prove anything. You provided no evidence to support your claim so I felt it necessary to go forth and see if your position was sound or not.
Last I checked, the pharm companies weren't the only ones doing direct-to-consumer advertising.
Everything I've read in this could just as easily apply to Microsoft or Sony or hell even Lexus. Why is it allowable or even ethical to allow other companies to to DTC marketing but not pharm companies? DTC has also been blamed for the rising cost of software, and GAMES. If we're going to do this and be fair across the markets, shouldn't we apply to same rules for EVERYTHING?
I don't mean to inundate you with links and stuff-- I tend to try not to do that, which is why I kept my first post relatively link-free; but believe me when I tell you that it doesn't take much looking to find independent studies that support each and every assertion I made in my post. But, quite honestly, I just don't have the time to make another post like that anytime soon.
Its not that your post and position aren't backed with information (I'm sure the pharm companies could come up with lots of facts and numbers as well). I'm looking more at the bigger picture of change that is both fair and enforcable.
But this is where you position doesn't make any sense. "They are spending a lot of money therefore its bad?" How is this different from any other 'tech' company that spends an absurd amount of money in advertising? My problem is that your position is not unique to pharm companies - it befalls most tech companies across the board.
Microsoft, IBM, Diebold, etc. Yes it has to stop, but stop them in other markets as well. You can't just legislate one playing field. The margins on ANY piece of software is obscene. They abuse patents just like the pharm companies AND they don't have to deal with generics... they sue them out-of-hand.
No time for a substantial reply, but to speak to one thing:
Ok, let's assume that these other industries have R&D costs comparable to pharmaceutical companies (which they don't). Let us also assume that they attempt to recoup these costs by raising prices (anyone who's seen the price of Microsoft's suite of programs can testify that it's outrageously expensive). First off, the profit margin they realize are nowhere near as large as those of drug companies; since I'm obviously not opposed to the profit motive in principle, I do not begrudge companies the realization of profits in line with the majority of businesses (i.e., 4-6% after tax profit margins)-- obviously businesses need to stay solvent and continue to innovate (although even this "innovation" is overrated in big pharma's case, as noted earlier by myself and eggplant). I believe it's "different" for two reasons: One, because if these other companies like IBM or Microsoft were realizing margins in excess of 18%, I think you'd see heavy pressure, both public and governmental, to lower the exorbitant prices on their goods; secondly, I feel these situations to be different because of the fundamental nature of the drug market, which is health and wellness. If somebody isn't able to purchase MS Excel or Word, they'll live; if they can't afford to purchase certain drugs, they may not live. As such, different pressures must necessarily be brought to bear on these industries in terms of keeping their pricing affordable. Necessity versus luxury and all.
Further, while many companies abuse patents, none do so to the extent of pharmaceutical companies. In many cases, drug patents extend for 15-20 years before generic (read: affordable) alternatives are permitted to be brought to market. When you have ostensible collusion among the drug companies to keep prices outrageously high, and continued attempts at suppressing both generics as well as any industrious attempt by consumers to circumvent pharma's stranglehold on the market (internet purchasing etc.), then you have an indefensible situation imo.
Fine, ignore the direct-to-consumer advertising, then-- it's the least of our troubles, really. Look at it this way:
If the maximum realizable profit margin was capped at, say, 8% (still nearly double the average non-pharm company's), and the R&D cost spread around to various nations (so that it wouldn't cut into those profits), then I believe we would be able to have drugs here in the states at 40-60% of their current price. This seems more than reasonable, as there would still be enough money floating around to "innovate" (twice as much money, nearly). I'd also like to see them implement a law stating that drugs cannot be sold for more than 150% of their cost in other industrialized nations here in the states. So if a drug costs $40 for 100 pills in Canada, it cannot cost more than $60 here, no exceptions. Currently, that same $40 Canadian drug (made by American companies on the backs of American taxpayers via R&D costs and NIH funding) would likely run you around $100-150. I don't think that that's a defensible situation, and I'm sure you don't either.
Whatever has to be done to fix it should be done imo. And soon.
EDIT: Btw, my stance on drugs is exactly analogous to my stance on healthcare in general. In short, I believe that market forces should not be removed from the health sector (via socialization etc.), and people should pay according to their ability to pay; there is a LOT to be said for capitalism and market forces, within reason. But we also must take into consideration other factors when discussing something as essential as healthcare/drugs, such as the needs of those of lesser means; in accordance with that, the free-market view of healthcare must be mitigated, to an extent, to accommodate for those pressing needs. In the same way, pharm companies' bloated profits must be mitigated, to an extent, to help make the provision of necessary items like prescription drugs affordable to those of lesser means (this can also proceed via a push for bringing generic drugs to market faster, but ideally both should be done).
Ok, let's assume that these other industries have R&D costs comparable to pharmaceutical companies (which they don't). Let us also assume that they attempt to recoup these costs by raising prices (anyone who's seen the price of Microsoft's suite of programs can testify that it's outrageously expensive). First off, the profit margin they realize are nowhere near as large as those of drug companies; since I'm obviously not opposed to the profit motive in principle, I do not begrudge companies the realization of profits in line with the majority of businesses (i.e., 4-6% after tax profit margins)-- obviously businesses need to stay solvent and continue to innovate (although even this "innovation" is overrated in big pharma's case, as noted earlier by myself and eggplant). I believe it's "different" for two reasons: One, because if these other companies like IBM or Microsoft were realizing margins in excess of 18%, I think you'd see heavy pressure, both public and governmental, to lower the exorbitant prices on their goods; secondly, I feel these situations to be different because of the fundamental nature of the drug market, which is health and wellness. If somebody isn't able to purchase MS Excel or Word, they'll live; if they can't afford to purchase certain drugs, they may not live. As such, different pressures must necessarily be brought to bear on these industries in terms of keeping their pricing affordable. Necessity versus luxury and all.
Further, while many companies abuse patents, none do so to the extent of pharmaceutical companies. In many cases, drug patents extend for 15-20 years before generic (read: affordable) alternatives are permitted to be brought to market. When you have ostensible collusion among the drug companies to keep prices outrageously high, and continued attempts at suppressing both generics as well as any industrious attempt by consumers to circumvent pharma's stranglehold on the market (internet purchasing etc.), then you have an indefensible situation imo.
Fine, ignore the direct-to-consumer advertising, then-- it's the least of our troubles, really. Look at it this way:
If the maximum realizable profit margin was capped at, say, 8% (still nearly double the average non-pharm company's), and the R&D cost spread around to various nations (so that it wouldn't cut into those profits), then I believe we would be able to have drugs here in the states at 40-60% of their current price. This seems more than reasonable, as there would still be enough money floating around to "innovate" (twice as much money, nearly). I'd also like to see them implement a law stating that drugs cannot be sold for more than 150% of their cost in other industrialized nations here in the states. So if a drug costs $40 for 100 pills in Canada, it cannot cost more than $60 here, no exceptions. Currently, that same $40 Canadian drug (made by American companies on the backs of American taxpayers via R&D costs and NIH funding) would likely run you around $100-150. I don't think that that's a defensible situation, and I'm sure you don't either.
Whatever has to be done to fix it should be done imo. And soon.
EDIT: Btw, my stance on drugs is exactly analogous to my stance on healthcare in general. In short, I believe that market forces should not be removed from the health sector (via socialization etc.), and people should pay according to their ability to pay; there is a LOT to be said for capitalism and market forces, within reason. But we also must take into consideration other factors when discussing something as essential as healthcare/drugs, such as the needs of those of lesser means; in accordance with that, the free-market view of healthcare must be mitigated, to an extent, to accommodate for those pressing needs. In the same way, pharm companies' bloated profits must be mitigated, to an extent, to help make the provision of necessary items like prescription drugs affordable to those of lesser means (this can also proceed via a push for bringing generic drugs to market faster, but ideally both should be done).
Phoenix
Member
Loki said:
Just to be fair and put things in perspective I pulled Microsoft's information (http://money.cnn.com/news/companies/research/research.html?pg=fi&osymb=MSFT&sid=) and they are spending 21% of their profit on R&D and about 38% of their profits on SI&A. So as a percentage, Microsoft spends a good bit more than Pfizer (and I will admit that I'm just take two sample companies).
Microsoft's goods cost 18% of their profits. On average Pfizer's is costing 14% (this years not used because of the merger costs). So yes, Pfizers goods cost less to make as a whole. Very valid point.
You might want to look at Microsoft's numbers again.
I'm not ready to tackle that piece because of course the priority is to make sure that drugs are cheap and affordable. However in order to do this we are talking about adopting policies that certainly deal an unfair burden to the pharm companies. Essentially we'll be saying - yeah suck up your risks and costs, but your product has to be cheaper... deal with it. The ONLY time we've allowed this at the governmental level is in terms of a government regulated monopoly and certainly there WILL be some downside to this action.
I'll reject this one out of hand because there are NO controls on software companies enforcing their patents. At least for pharm companies there IS a time period after which generics must be allowed on the market. With software or other IP patents there are NO limits. Microsoft can choose sue any new competitor in the space for years and years and years.
Sounds like another industry - the entertainment industry as a whole.
I'll have to pick this one up tomorrow.
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