Could drugmakers have charged a billion dollars a pill before?
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If you look at most of the other countries who have public healthcare, they have a huge bargaining tool with big pharma and healthcare providers. They can say “we have millions and millions of potential customers for you, but we get a say in what you charge them, because they’re not going out and getting private health coverage (most of the time).”
It’s similar for us here in the US because Medicare is covering a LOT of people, but not everyone in the country. So our bargaining with healthcare companies and pharmaceutical companies suffers. They don’t have the bargaining power of a country that is basically saying “you can have millions of customers or ZERO, take your pick!” With Medicare, they have some of that public pull on the companies to negotiate prices, it’s just not as strong as entire countries.
So can drug makers charge a ton for a pill? Yes. But if people can’t afford it or they start dying, that’s also not good for the drug maker. They need to be able to sell their products at an affordable price, though they get to cheat because we will pay more than we can afford because it’s our life or death. Like gasoline, if we use it, we can’t just stop, we have to come up with a replacement, and in the medical field, there isn’t always a replacement.
The pharmaceutical companies can charge whatever they want for the drugs, a billion dollar a pill or more if they want. However at that price nobody is going to buy their pills. So they charge as much as they think people are willing to pay for the medicine.
The insurance companies have been in some better position to negotiate with them then patients. They can threaten to not cover a drug, recommend patients use other drugs or therapies which are covered, not to get any treatment at all, or if they do take the drug then they are in no position to pay for it. The pharmaceutical companies have therefore been forced to lower the drug prices to somewhat reasonable prices, for patients with full medical insurance coverage with the insurance companies that have reach a deal. But not for the rest, and the prices are not as low as they can be since insurance companies need some treatments to be covered.
Medicare do act like a medical insurance company in many ways but cover a lot more people then other insurance companies. So this is the largest group of people that the pharmaceutical companies sell drugs to. Medicare will negotiate drug prices just like private insurance companies but have a lot more weight behind their threats. In addition to this while insurance companies can negotiate a discount on drugs the federal government is not allowed to buy drugs on discount. So whatever price medicare is able to negotiate is the list price for that drug both for people with medicare, without insurance and with any other insurance company.
New pharmaceuticals are essentially created for the US market. It is the only market in the world where the developers can make profit to recoup the costs of developing and bringing new drugs to to market (and pay for the drugs that failed the regulatory requirements).
After a new drug is created and approved for the US market the pharma company can go to Canada or the UK and negotiate a price for the drug that is the cost of manufacture plus a very small markup.
Medicare is health insurance for people over 65, which, unsurprizingly, use lots of medical services and consume lots of pharmaceuticals. If Medicare negotiated a price it would probably have a small markup and not compensate for the lost development costs for the failed pharmaceuticals.
No. This is rebates. Prior to this, individual PBMs and Insurers negotiated the rebates themselves, AND also determined where the profits to the rebates went.
The best rebates are based on the volume of the drug sold by the entity, so large PBMs are able to get larger rebates than smaller insurers. By nationalizing the pool and having a single entity negotiate the rebate directly with the manufacturer should lead to the best price overall.
Most companies had to negotiate separately their Medicare rebates from their Commercial programs [company coverage, COBRA, ACA], so their rates are not as good as the national rate.
Companies also determine where the money from the rebates go, some put the money back into the member’s program, which tends to reduce premiums in future years. This is the way the Federal rebate program is set up. Other companies have their rebate operations set up so the rebate income is purely profit, and goes to the shareholders of the company.
Well let’s put it this way. I live in the UK. My wife has medication that she takes monthly. Due to the deal that the NHS has with Big Pharma, my wife pays £9.80 for a 3 month supply. That’s 90 pills.
The same drug, from the same manufacturer in the US you are looking at $63 dollars for a pack of 7. So in order to get 90 pills you would pay $810.
Now the cast to manufacture the drug is so low that they still make a profit selling it to the NHS at 10c per pill. They were able to negotiate better prices from the manufacturer because they buy in bulk. The average American who does not have the financial backing of a social care provider ends up paying $9 per pill.
There is absolutely no reason other than greed for the $8.90 difference. You guys are getting screwed big time by your country not having socialised Medicare.
could?
before?
lol…
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