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Comment by interlocutor | Hacker News Reader

It is not just insulin. Prices of all drugs have been rising in the US, from 2x to 3x at a minimum, to 1000x in some cases.

The reason is insurance. When individuals are paying for drugs, drug companies can only charge what individuals can afford. When insurance is paying for drugs, drug companies charge what insurance companies can afford, and insurance companies are able to pay much higher prices (and they recover their costs by raising premiums.) You can't blame pharmaceutical companies for not leaving money on the table.

The fact that Medicare is legally not allowed to negotiate drug prices (a big handout by Bush administration to Big Pharma) isn't helping either.

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If that'd be the case then any country with a single-payer healthcare system would suffer from similarly inflated drug prices as the US, but that's simply not the case [0].

What's stopping US insurers from pressuring drug companies into price agreements? Shouldn't that be also in their best interest, instead of just passing the costs along to the patients? If that's all they are doing, what do you actually need them for?

In Germany, price agreements between drug manufacturers and insurers happen plenty of times, and it usually works out because drug companies take reduced profits over no profits, any time of the day. Patients still have the option to buy the "fancy version", paying out of their own pocket, but the vast majority of patients are completely fine with whatever their insurance covers.

[0] https://www.commonwealthfund.org/publications/issue-briefs/2...

Insurance companies in the US have to pay out a certain percentage of the premiums they take in (80% last I checked) [0]. So they're also incentivized to let prices climb; their 20% for "administration and profit" is inflated when prices are inflated.

[0] https://www.healthcare.gov/health-care-law-protections/rate-...

That makes sense if it’s a monopoly, but presence of many insurance carriers and variety of plans introduces some price checks.

Insurers routinely exclude drugs that they think are overpriced, they also switch to generics the day a drug goes off patent, sometimes forcibly.

In the US, three pharmacy benefit managers (PBMs) control >70% of the market. [1] In an oligopoly, higher prices aren't such a bad thing.

[1] https://www.fda.gov/NewsEvents/Speeches/ucm599833.htm

"Capturing the Benefits of Competition for Patients" Speech by Scott Gottlieb, MD Commissioner of Food and Drugs March 7, 2018

> Shouldn't that be also in their best interest, instead of just passing the costs along to the patients?

But aren't those cost actually being passed onto the employer via the employees health care plan?

Here is Australia, where we have universal help care, we have a system call PBS and it's role is to define the drugs that get subsidized under that universal help scheme.

To keep those cost down it tries to pick generic versions of these drugs.

When Australia join a free trade agreement with the USA a side affect of joining that agreement was a weakening of the PBS.

We now have a situation where drug companies are able to manipulate the PBS for their gain, coming at the expense of the tax payer:

https://theconversation.com/the-tricks-companies-use-to-get-...

> When individuals are paying for drugs, drug companies can only charge what individuals can afford.

Insurance companies are consumers’ only venue for price negotiation.

Sick people in urgent need of a drug will likely not shop around, they will pay the asking price, sign up for any financing plan offered if the sticker price seems too high, or just charge it to the credit card.

The fact that Medicare is legally not allowed to negotiate drug prices (a big handout by Bush administration to Big Pharma) isn't helping either.

That's entirely untrue.

Medicare pays for drugs either through Part B or Part D. In Part B, Medicare takes a discount by fiat, they get the same discount as commercial insurers.

For Part D, Medicare push the drug purchasing to private companies who can negotiate, lowering the cost of premiums.

Saying "Medicare can't negotiate" is technically true if you twist the meaning of the words, I guess?

So what you're saying is that private companies can negotiate on Medicare's behalf, but that they can't negotiate themselves. Sounds like they can't negotiate to me.

What would they negotiate for? They aren't directly paying for the drugs.

"Oh hey, can you charge this other guy less money for me?"

> What would they negotiate for? They aren't directly paying for the drugs

They are in Part B, by your own description, but instead of negotiatinh they just get the deal that commercial insurers (who each have less leverage than Medicare would) get.

And in Part D they are subsidizing the actual payors, and it wouldn't be entirely unheard of for a participant in that role to negotiate costs for services purchased by the subsidized payors, each of which had less negotiating power than the central subsidizer.

In terms of Part B, commercial insurers play no role at all. What happens is the drug companies send in their sales to Medicare and they crunch an average price and pay that. Think of it as Medicare riding on the coattails of the commercial plans.

For Part D, I see your point, but research has found that the Medicare price that insurers negotiate for drugs is often less than what commercial plans pay, so they are doing a good job on behalf of Medicare.

One thing to keep in mind can you really call it a "negotiation" when one of the parties represents a sovereign entity? CMS (Centers for Medicare and Medicaid) gets even more discounts above what I described earlier. For example, the 340B discount knocks 23.1%+ right off the top. Same thing for Medicaid. There is no negotiation here, the gov't simply says, "we get this discount or we ban you from participating in public programs".

> One thing to keep in mind can you really call it a "negotiation" when one of the parties represents a sovereign entity?

Yes, sovereign entities negotiate all the time; being a monopsony is probably more relevant than being sovereign, but arguably only a monopsony can negotiate on fair terms with a monopoly supplier.

Balance of power makes those less negotiations and more fiats.

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