Corner of Berkshire & Fairfax Message Board

General Category => Politics => Topic started by: LC on February 04, 2019, 07:12:11 AM

Title: Another win for unabated capitalism
Post by: LC on February 04, 2019, 07:12:11 AM
https://www.reuters.com/article/us-usa-healthcare-catalyst/senator-sanders-to-ask-why-drug-once-free-now-costs-375k-idUSKCN1PT0ZJ?utm_source=applenews

https://www.statnews.com/pharmalot/2016/04/05/jacobus-pharmaceuticals-martin-shkreli/

There are around 400 people in the US that suffer from LEMS.

This is a drug that is not new, requires little to no R&D, no additional regulatory approval, and is not especially hazardous or difficult to produce.

Charging these 400 people $375,000 for the medication they require to maintain basic muscle control will generate this corporation $150,000,000 per year.

Gotta love fleecing the ill.
Title: Re: Another win for unabated capitalism
Post by: BRK7 on February 04, 2019, 07:45:49 AM
This calls to mind Charlie Munger's quote (I think he was referring to Greenspan at the time) about "overdosing on Ayn Rand." 

For all of the wonderful things that capitalism has done for us a society (and it certainly has), we must also acknowledge that it occasionally produces abhorrent results.
Title: Re: Another win for unabated capitalism
Post by: wachtwoord on February 04, 2019, 08:55:10 AM
The problem here is not capitalism, as any libertarian would tell you, but the rather absurd notion of patents. Discontinue patent protection (and copyright too please!) and the world will be a much better place.
Title: Re: Another win for unabated capitalism
Post by: Cardboard on February 04, 2019, 09:13:55 AM
"The problem here is not capitalism, as any libertarian would tell you, but the rather absurd notion of patents. Discontinue patent protection (and copyright too please!) and the world will be a much better place."

Right... So who would invest $10's to $100's of millions upfront to find a cure and get approval with all associated risk of failure involved and get zero return over "x" predetermined years?

And even if there was no patent law, then the recipe never gets disclosed. The competitor has to redo the entire research process to find the cure with possibility of never finding it.

"For years, patients have been able to get the same drug for free from Jacobus Pharmaceuticals, a small New Jersey-based drug company, which offered it through a U.S. Food and Drug Administration (FDA) program called “compassionate use.

What is that program and what was the cost to the U.S. government and tax payers? It wasn't free I can guarantee you.

True problem here is developing drugs for a very small number of users. It has nothing to do with capitalism or patents. It is a societal question: are taxpayers going to pay to help a tiny minority or you have this minority paying their own?

Cardboard
Title: Re: Another win for unabated capitalism
Post by: Castanza on February 04, 2019, 09:24:13 AM
(https://hoosierecon.files.wordpress.com/2016/08/prices2-1.png)

Guess which industries are heavily subsidized and which are not. Shrink government and solve problems.

The issue is not capitalism. It's government involvement in capitalism.

Congress is looking into a call made by a ref in an NFL game. Really? It's time people take a step back and see just how big and invasive government has come.
Title: Re: Another win for unabated capitalism
Post by: morningstar on February 04, 2019, 10:37:37 AM
This is a drug that is not new, requires little to no R&D, no additional regulatory approval, and is not especially hazardous or difficult to produce.

FDA 2 months ago: "The U.S. Food and Drug Administration today approved Firdapse (amifampridine) tablets for the treatment of Lambert-Eaton myasthenic syndrome (LEMS) in adults. LEMS is a rare autoimmune disorder that affects the connection between nerves and muscles and causes weakness and other symptoms in affected patients. This is the first FDA approval of a treatment for LEMS. “There has been a long-standing need for a treatment for this rare disorder,” said Billy Dunn, M.D., director of the Division of Neurology Products in the FDA’s Center for Drug Evaluation and Research."

According to the FDA, this is a newly approved treatment and the first available for the disease. It's not clear to me how this fits with your statement, but it feels like there is more to this story.
Title: Re: Another win for unabated capitalism
Post by: lschmidt on February 04, 2019, 11:14:39 AM
It's a very interesting story. Under certain strict criteria, medication can be dispensed without FDA approval for severe diseases for which there is no alternative treatment. I'm not aware of the specific rules. A drug company give away this compound for free for 20 years and had no funding or motivation to conduct clinical trials leading to FDA approval. Another company managed to snatch to prize of FDA approval. There were other nuances between the two nearly (but not completely) identical forms of the drug. A lot of nuances and possibly unintended consequences of the Orphan Drug Act. So in summary, not a new drug by any means, but a new FDA approval.
Title: Re: Another win for unabated capitalism
Post by: Cigarbutt on February 04, 2019, 01:17:38 PM
Coming up with a framework to develop and market drugs for rare or "orphan" diseases is very challenging whichever ideology one adheres to.
The US has relevant legislation since 1983. Over time, it has worked reasonably well but there have been problems. It's possible to consider a worse scenario than access to expensive drugs: having no access to the drugs.

In Canada, where capitalism is "tamed" in the healthcare sector, there are various "access" programs but, despite repeated calls by those who need access to an orphan program, the government has not, to this day, put in place such a program. To a certain extent, Canada relies on the US for basic clinical work in this specific area and drug approval is delayed and often many drugs never get approval because it is not always clear that drugs bring "substantial" benefits over alternatives.
https://nationalpost.com/news/politics/health-canada-gives-kiss-of-death-to-planned-policy-for-rare-disease-drugs

I'm not saying LC is wrong. Just saying that this is a difficult topic and there are tradeoffs.

@Castanza
Look up Baumol's disease (it's not really a disease) because some people come to a diametrically opposed conclusion when analyzing the graph that you provide.
Title: Re: Another win for unabated capitalism
Post by: LC on February 04, 2019, 03:31:09 PM
That's fair and I don't know a solution or even a better alternative, but I know that this kind of stuff is simply wrong.

And while COBF is generally evidence of the benefits of owning businesses operating in a predominately capitalist society (and all the money we're all making as a result) - the downsides need to be discussed as well.
Title: Re: Another win for unabated capitalism
Post by: Spekulatius on February 05, 2019, 04:30:54 AM
It seems like an unintended do sequence of the Orphan drug act, meant to foster research for rare diseases. I think Genzyme was the first company who benefited from it, as they developed Ceredase for the rare Gaucher’s disease. I was invested in the stock at various times, so I remember how surprised I was how much and how long they could generate revenue from this drug (and slightly improved versions of it).  I think at that point they were charging 30k/year, which was considered extremely high, now the bar is 10x higher.

I think think law has done some good, but is has developed into a license to rip off the healthcare system. It’s not capitalism that fails here, but poorly legislation/rules.  Somehow along the way, things went wrong. we can tell by the results.
Title: Re: Another win for unabated capitalism
Post by: NewbieD on February 05, 2019, 05:52:43 AM
Reading this thread makes me think an easy way to get rich must be to become a doctor here in Scandinavia, prescribe a bit of the medication in question to your friend, let him buy it for a few $ and travel to the us to sell on the black market..

It might not be so scalable, since these drug co's prices probably makes even the state-run apparatus here pretty cost conscious. But it could probably work for a while.
Title: Re: Another win for unabated capitalism
Post by: Castanza on February 05, 2019, 05:56:10 AM
(https://i.redd.it/xh7a1ghf1ne21.jpg)

A lot of drug cost in the us can be contributed directly to R&D. America is unequivocally a testing ground for new drugs. This premium is passed on to citizens here. It's not passed on to citizens in say the UK because their government has put caps on prices (in general terms).

I don't think the best action forward would be for the US to adopt said caps. They are not a permanent solution to the issue. Eventually the UK will be forced to renegotiate their terms and ultimately prices will rise.
Title: Re: Another win for unabated capitalism
Post by: wachtwoord on February 05, 2019, 05:58:01 AM
"The problem here is not capitalism, as any libertarian would tell you, but the rather absurd notion of patents. Discontinue patent protection (and copyright too please!) and the world will be a much better place."

Right... So who would invest $10's to $100's of millions upfront to find a cure and get approval with all associated risk of failure involved and get zero return over "x" predetermined years?

And even if there was no patent law, then the recipe never gets disclosed. The competitor has to redo the entire research process to find the cure with possibility of never finding it.


Do you have any proof to backup your claims? Extraordinary claims (no-one will invest to develop the drugs OMG OmG OMG) needs extraordinary evidence. I'm assuming at least the same as today but likely more as the opportunity for profit is far larger due to less regulation and government requirements and all wasted money on patent trolling and litigation as well as opportunities not pursued due to fear (legitimate or not) of treading on someone else's IP are avoided.

See I don't have any proof either, but than again I'm arguing for the absence of something while you are arguing for the existance of something (I see as societally detrimental).
Title: Re: Another win for unabated capitalism
Post by: Castanza on February 05, 2019, 06:28:14 AM
"The problem here is not capitalism, as any libertarian would tell you, but the rather absurd notion of patents. Discontinue patent protection (and copyright too please!) and the world will be a much better place."

Right... So who would invest $10's to $100's of millions upfront to find a cure and get approval with all associated risk of failure involved and get zero return over "x" predetermined years?

And even if there was no patent law, then the recipe never gets disclosed. The competitor has to redo the entire research process to find the cure with possibility of never finding it.


Do you have any proof to backup your claims? Extraordinary claims (no-one will invest to develop the drugs OMG OmG OMG) needs extraordinary evidence. I'm assuming at least the same as today but likely more as the opportunity for profit is far larger due to less regulation and government requirements and all wasted money on patent trolling and litigation as well as opportunities not pursued due to fear (legitimate or not) of treading on someone else's IP are avoided.

See I don't have any proof either, but than again I'm arguing for the absence of something while you are arguing for the existance of something (I see as societally detrimental).

Laissez faire has been proven to work time and time again as the best way to produce innovation and affordable prices across all industries. The issue here is absolutely IPs and collusion between big government and big pharma. Basically government mandated monopolies. remove regulation, remove entry into the market etc. If someone can do it cheaper they will.
Title: Re: Another win for unabated capitalism
Post by: rkbabang on February 05, 2019, 06:44:53 AM
The problem here is not capitalism, as any libertarian would tell you, but the rather absurd notion of patents. Discontinue patent protection (and copyright too please!) and the world will be a much better place.

Exactly.  And to the people who say no one is going to spend Billions to bring a drug to market without patents, the FDA is the main reason it costs Billions to bring a drug to market.  Where in the constitution does it give the federal government the power to regulate food and drugs?   Hmm, no, I can't find it either.

Title: Re: Another win for unabated capitalism
Post by: rukawa on February 08, 2019, 08:30:55 AM
The whole story of healthcare from beginning to end is a story of extreme stupidity and market failure. Humans are insane when it comes to healthcare. Accept it. Grafting government or markets onto this solves nothing. Healthcare without government is just a pure story of charlatans peddling idiotic ideas. We know what it looks like because we lived through it:

https://en.wikipedia.org/wiki/Patent_medicine

and we are STILL living through it:
https://respectfulinsolence.com/2013/10/25/chairman-mao-inventor-of-traditional-chinese-medicine/

I basically view the FDA as doing a lot more good than harm. In fact I regard almost any system that prevents humans from consuming healthcare as probably doing more good than harm e.g. copays and rationing. Our healthcare today is light years beyond patent cures and folk medicine but its still filled with an enormous amount of bullshit that has no rational basis.

The libertarian argument is that markets will somehow solve these problems. I just regard this as delusional. Where have markets solved these problems? Even conventional medicine I regard is filled with tremendous amounts of complete nonsense. Government has in many cases made things much much much worse. For instance, Psychiatric medications are quackery and without tremendous government funding and advocacy would not have the impact they have had which is mostly negative. Government has also funded huge bureaucracies like bioethics which has retarded research and vastly increased its cost by orders of magnitude with zero benefits.

And finally the science is just fucking awful. Scientists are fucking awful. All of it is junk. Scientists are careless, sloppy in their arguments, and whole fields are a ridiculous mess. Statistics everywhere its used, is used badly. The foundations of scientific reasoning today are a mess. And I regard this as purely due to the impact that government funding has had on science.

So government or markets...all I see is failure.
Title: Re: Another win for unabated capitalism
Post by: rkbabang on February 08, 2019, 09:08:08 AM
I basically view the FDA as doing a lot more good than harm.


Sorry, but the FDA food pyramid alone has killed more people earlier than they otherwise would have lived for their time than all of the snake-oil and quackery in all of human history put together.  It is the largest example of medical quackery in the 20th century.  Driven entirely by politics and money, rather than science.  Eat mostly breads and cereals, use lots of high omega 6 oils, and replace butter and lard with transfats.  Don't eat meat or eggs. Replace avocados with frosted flakes. Great idea.  Before the 1980s type I diabetes was called child onset diabetes, because type II diabetes was unheard of in children.  Now type II diabetes is more common in children than type I and there are grossly obese kids everywhere you look. 


Quote
And finally the science is just fucking awful. Scientists are fucking awful. All of it is junk. Scientists are careless, sloppy in their arguments, and whole fields are a ridiculous mess. Statistics everywhere its used, is used badly. The foundations of scientific reasoning today are a mess. And I regard this as purely due to the impact that government funding has had on science.

So government or markets...all I see is failure.

And yet we all live longer healthier lives than people did 100 years ago. Well "all" until this current generation which grew up with parents who believed in the food pyramid anyway.  We will likely see a dip in life expectancy until this government created fat-bad, grains-good, nonsense works its way out of the brains of the population.
Title: Re: Another win for unabated capitalism
Post by: wachtwoord on February 08, 2019, 01:40:49 PM
+1 rkabang . People say its hard to pick free market (distributed) or government (centralized) but it really isn't if you have the long term in mind. Kind of like value investing ;)
Title: Re: Another win for unabated capitalism
Post by: meiroy on February 10, 2019, 03:51:38 AM

LC, I think "unabated" is a wrong choice of words here.  Perhaps more appropriate would be crony/corrupt.  The system has been corrupted on many levels. That's why people like Ocasio Cortez win.

https://youtu.be/MHD-M1AG7Hs

I'm not saying everything she is claiming is wholly correct but it is indeed mostly correct.  She will get a ton of points for that.


Title: Re: Another win for unabated capitalism
Post by: Read the Footnotes on February 10, 2019, 08:48:46 AM
(https://hoosierecon.files.wordpress.com/2016/08/prices2-1.png)

Guess which industries are heavily subsidized and which are not. Shrink government and solve problems.

The issue is not capitalism. It's government involvement in capitalism.

This graph is really interesting to look at, but to me the most noteworthy elements are the sharply descending lines that show how much we have all benefitted from the progress of technology. Take the falling cost of televisions shown above and think about that for a moment. I don't know the specifics of the BLS methodology for this series (the only citation is that its from BLS), but the most challenging aspect of these data series is to account for the change in quality over time. So those very cheap televisions that are available to us today are likely much better in many ways than the televisions of 20 years ago, especially if you value the decrease in size and weight.

Technology has contributed heavily to decreasing the cost o of the descending price series (TVs, toys, software, wireless), but it likely CONTRIBUTED to the increase in education and healthcare costs which are much more technology intensive than they were twenty years ago.

The point of these discussion is usually to try to say that healthcare or education are unfairly taking advantage of demand inelasticity to inflate prices, which results in a poor deal for consumers. Undoubtedly there is some truth in that explanation. Undoubtedly government regulation and subsidy contribute to increasing the demand for education and healthcare and limiting the supply through regulation which combine to increase prices. But there are other issues such as the changes in the quality of education or healthcare, the costs of the inputs, the quantity of inputs and changes in the money supply which effect a price series. In fact, the price surveys such as this are often used as further data points to examine estimates of the money supply and its effects on prices, which can never truly be known, but only estimated. To evaluate the efficacy and value of the healthcare system is very difficult, and a simple price series should at most be one tiny data point among thousands.

There is an often repeated saying that may have little real value that you should expect real dollar equity returns of around 6-7% or nominal returns of 10-11%. The equivalent rule of thumb is to expect 3% inflation. If we had had 3% inflation over the past twenty years, we would expect prices to have moved even higher than this series tells us. On the one hand the government is known to have been managing the way CPI is calculated toward their own benefit and the were certainly increasing the money supply. On the other hand, technology including the creation of cheap energy from non-traditional oil and gas exploration has made a significant impact on the price series.

On the one hand the progress of technology is causing a lot of social disruption and frictional unemployment. On the other hand we have all benefitted enormously. Most of us would probably better off reflecting on how much things have changed for the better thanks to the progress of technology. This is one of the reasons that nostalgia is misspent. There are so many ways in which things have never been as great as they are now.
Title: Re: Another win for unabated capitalism
Post by: Read the Footnotes on February 10, 2019, 09:00:49 AM
(https://i.redd.it/xh7a1ghf1ne21.jpg)

A lot of drug cost in the us can be contributed directly to R&D. America is unequivocally a testing ground for new drugs. This premium is passed on to citizens here. It's not passed on to citizens in say the UK because their government has put caps on prices (in general terms).

I don't think the best action forward would be for the US to adopt said caps. They are not a permanent solution to the issue. Eventually the UK will be forced to renegotiate their terms and ultimately prices will rise.

Part of the shift in the composition of these histograms over time has to do with the fact that the model for successful drug R&D today has little in common with the methods used 40 years ago. Not that Costanza intended to make a point about changes over time, but you can actually see in the graphs that the US share has actually increased over time. The reasons are probably at least four fold.
1. The type of research that is likely to yield results is much more costly, requires more specific knowledge regarding disease states and takes longer. The most technologically sophisticated environments will do better under these conditions. The value of a network effect of sorts will increase as the challenges become higher.
2. The most generous compensation will attract the majority of the development. This gets us in to a bit of a chicken or the egg situation in our analysis.
3. Access to capital
4. Ability to manipulate the regulatory process, and incentivize adoption after approval
All of these contribute to the success of US drug development. The industry and their friends like to point to excellent educational system, or excellent companies, but the truth is more complicated.
Title: Re: Another win for unabated capitalism
Post by: Read the Footnotes on February 10, 2019, 09:07:02 AM
It's a very interesting story. Under certain strict criteria, medication can be dispensed without FDA approval for severe diseases for which there is no alternative treatment. I'm not aware of the specific rules. A drug company give away this compound for free for 20 years and had no funding or motivation to conduct clinical trials leading to FDA approval. Another company managed to snatch to prize of FDA approval. There were other nuances between the two nearly (but not completely) identical forms of the drug. A lot of nuances and possibly unintended consequences of the Orphan Drug Act. So in summary, not a new drug by any means, but a new FDA approval.

There are many other ways that you can manipulate the FDA's system to restart the clock and gain an additional 20+ years of patent protection for a compound that a lay person would never think of as a novel compound.

I won't list here the sorts of games that even pharma companies with stellar reputations regularly play. Besides, there are already too many people who know these tricks and take advantage.