UKC

https://www.telegraph.co.uk/news/2018/05/15/trump-threatens-use-us-trade-ta...

One can only hope this signals the end of the 'special relationship' with the idiots across the Atlantic.

All politics is local

How is his wall getting on?

I hear the Mexicans aren't keen on paying for it.

"Single-payer government-run health services like the NHS are able to use their negotiating muscle to pay far lower prices"

..hence why Sunderland NHS could only find an offer on loo rolls of 66p each!! I think Donald Trump needs to look at NHS procurement a little closer..

Sounds like he needs to introduce a socialist style health care system, if it's so good at negotiating lower prices.

Does this say more about NHS negotiating or more about extortionate greedy USA medical insurance companies?

Interesting that the Telegraph chose this headline, they could have sound it differently.

Typical of Trump's moronic zero sum view of economics that he looks at this issue and comes to 'solution' he does .

Having the majority pay for a resource, that will be of benefit to the majority, is socialism. That's nearly the same 'ism as communism.

If one mentions, to some Americans, that by that metric the US army is a socialist institution, they get quite animated.

Neither. And it’s much more complicated than that. Drug procurement in the US is performed piecemeal and by a whole range of parties from individual hospitals and pharmacies, to pharmacy benefit managers to drug distribution wholesalers to medical insurance companies, the latter being buyers, not sellers, of drugs, so your comment is completely off the mark. The collective negotiation by the NHS leads to huge economies of scale and hence much lower prices.

However, and the Donald actually talks some sense when he highlights the bizarre contrast in prices, the high prices in the US underpin the vast cost of global drug development. Without those huge drug prices, big pharma would be unable to fund the research into new therapies. A new drug for an orphan (very rare) disease can cost billions to develop and hence up to $1m for a single course of treatment.

Unequal market forces have driven us to a situation where the US is paying a disproportionate contribution to the cause of drug development. Novartis, Roche, Astra Zeneca, Glaxo, Teva, Takeda are developing and banking profits outside the US based on an unequal pricing structure that penalises US purchasers, more fool them for their distributed bargaining approach. So entrenched is the model today that the problem for Trump is that he can’t meet his manifesto pledge to forcibly depress drug prices without damaging the development of vital cures. He recently received an education in these economics during negotiations with Pfizer and other US-based firms. Consequently, in his zero sum game world, the logical approach is to persuade other nations to carry some of the weight that we have been freeloading, as he would see it.

The above is a simplified summary but it may help in seeing the other side of the story.

Isn't that how a capitalist society works with market forces?

Surely an expert like Trump can appreciate this?

Apples and oranges. Drug procurement isn't managed by individual Trusts and, as Trump correctly implies, the monopoly on UK drug purchasing means the NHS does pretty well at driving down prices.

My point is that he does get it. With the agreement of most economists, he realises that the US has been the loser on drug pricing owing to its distributed and market-led purchasing model (the UK by contrast is a centralised non-market health economy). As with other aspects of the US economy, Trump is picking up where he sees the US is "paying more than its fair share". Other examples would be defence spending on NATO and the forced transfer of intellectual property and technologies to China in return for market access. The fact that in this instance it's their own stupid fault is being conveniently sidelined in his address. It's more palatable to his voters to frame American stupidity as foreign skullduggery.

Given that the big 4/5 drug companies spend more on marketing than R&D, it's debatable whether American patient's are subsiding drug development or paying for a cycle of greed perpetuated by the presence of so many competing market forces in the American healthcare system.

Big pharma isn't blameless but they can hardly be blamed for a multiplication of effort. The excessive marketing spend, most of it US-focused, is a direct consequence of a system with hundreds of thousands of purchasers, each individually needing persuasion.

Expensive. So sad

You are Trump.  I claim my five pounds!

Lemming is a great guy but he's been cailming our pounds for TOO LONG. It's harassment. It's TIME to bring it BACK.

This sounds as if you swallowed the pharma propaganda hook, line, and sinker. 

Yes, bringing a drug to the market is expensive and takes time. Nevertheless, every single of the big, supposedly research biased pharma corporation spends way more on marketing than  on research. Actual innovation is more likely to come from publicly funded research institutes, and the first steps of development by smaller venture capital funded companies.

CB

Yeah, fine. There's multiplication of effort in marketing. That doesn't support the argument that the amounts paid for healthcare by American patients subsidises international pharmaceutical costs; especially not the costs in the rest of the Western world. Primarily, what American patients are paying for is the American healthcare system. Not better outcomes, not more R&D, but a system where multiple layers of players prioritise profit.

Not only this, arguably big pharma distorts the market. They persue only drugs which enable them to maintain their profit margins, so diseases that primarily effect poor people are ignored, markets and research are manipulated to ensure profits are kept high (for example, statins), drugs which cure are ignored. As an example of the last, don't look to pharmaceutical companies if you want to see cutting edge research to avert the looming antibiotics crisis.

I'm not anti big Pharma, but you have to recognise they are businesses. Trump's argument only works if you base it on some bizarre zero-sum understanding of the drugs market which is, frankly, bollocks.

I agree with much of what you say, especially about the selectivity of drug research spending. But pharma companies are, as you say, businesses, so how do you expect them to behave? Like research institutes or charitable foundations?

However, what you imagine to be multiple layers of profit turn out on investigation to be tiny incremental margins on top of the big pharma drug charges. Have a look at the accounts of the major pharmaceutical wholesalers, whose operating margin is typically around 1%. That's operating, not profit margin. Their overheads come off that tiny 1% skim on the drug prices. It's the drug companies that are responsible for virtually all the cost of the drug to insurers/end users and that's why it's to big pharma that Trump has been aiming his ire, with some success this year in the form of frozen price increases.

That's because the big pharmas have reached the size where they can't support a pipeline organically and it becomes more economic to let others do the initial graft and they buy in (at no small expense) to promising developments to feed their pipeline. Of course this cost becomes part of the development cost of the therapy and is a big contributor to drug prices. Even bigger, ironically, is the cost of failed molecules. This has to be added to the wholesale cost of successful therapies in order to keep the pipeline going and the business from collapsing.

No, the reason drug prices are so high in the US and, when comparing within Europe, Germany, is that it is possible for the suppliers to drive a hard bargain concerning prices if the end user, i.e. patients, can put the intermediate supplier (health insurers) under pressure. If you have multiple insurers they have to offer their patients any treatment at almost any price, otherwise their customers will switch insurer.

Conversely, a single negotiator like the NHS can put the big companies under pressure because of any given class of pharmaceutica they will buy only one or a few individual drugs, thus inciting competition between companies. This is MUCH more relevant than any volume rebates.

Of course, the price you pay for that is that the NHS/NICE must decline buying some novel drugs for price reasons every now and then (that will be available elsewhere), else the threat would lose its credibility.

Still, this is the one good thing about the NHS.

CB

If nothing else, it demonstrates the ludicrousness of believing that plucky Britain will be able to get much better trade deals by going it alone, without the deadweight of another 27 countries slowing us down. 

Firstly, I don't expect them to behave any differently. 'Expecting' businesses to do anything other than seek profit is a fool's game; that's their job. It's not a bad thing; if not properly regulated it has bad consequences - such as this - but that's not the same thing.

What I am explicitly arguing against is Trump's worldview or the idea that the increased costs of American healthcare represent them subsidising healthcare for other countries, especially other Western countries. The 'multiple layers' is not about layers of profit being heaped on the end user; but about multiple organisations creating an environment where profit motives are dominating. American Big Pharma is enabled by a permissive FDA, both in terms of how they can bring drugs to market and advertise them, dispenseries that sell on physician prescribing habits, a piecemeal insurance model which provides no check or balance on the prices drug companies are charging and hospitals that are looking to drive a profit out of the services they provide. 

Again, this point can be boiled down to something as simple as the marketing budget. The need to generate and maintain a market share is driven by all of the above. GSK's R&D budget for 2015? $5bn. GSK's marketing budget? $15bn. Novartis and Pfizer and in the same ballpark, Roche is notable in that it only spends about $2bn more on advertising than drug research.

Now there are multiple caveats to this. It's a big market, America's a big place, these things are complicated. There is an interesting argument to be had as to whether America subsidises the costs of drugs in, say, India and whether this is a bad thing. But the idea that American drug prices mean that they are paying to improve healthcare universally, worldwide, by driving R&D, as opposed to just paying the higher overheads associated with their ridiculously inefficient healthcare system, let alone that Big Pharma is a myopic and highly inefficient driver of healthcare improvement? Again, Trumpy is talking bollocks based on an illogical and highly simplistic worldview.