Aug 29, 2020 crunchicrant -

The crazy US pharmaceutical market

Pharma generates nearly half its global sales from the 5% of the world’s population who live in the US.

Annual revenues to Pharma per resident:

US	$1,500
Europe	$400

Why such a difference?

It is because:

in the US, pharmaceutical companies can set their prices at a level that maximizes their revenue – so they do.
in Europe, single payer (or regulated multi-payer) insurers are permitted to negotiate negotiate with pharma – so they do.

_{There are ‘problems’ with both approaches:}
_{In the US, the market tension of a seller asking a price for its service versus a buyer paying a price for that service is there in theory, but is played out over such a complex system that it fades completely – to the point that the tension is gone and in practice, the seller sets the price.}
_{In Europe, the (usually single payer) insurer is making decisions about the value of drugs on behalf of society as a whole, which may be at odds with the value individuals place on the drugs (though most healthcare systems allow individuals to purchase health services (including drugs) privately – and so outside the insurance system).}

_{What is clear is that the European system results in dramatically lower pricing of drugs – and there is no evidence that European health is compromised.}

It is argued that absent the high prices charged by pharma in the US market, global pharma would be a fraction of its current size and research & development (“R&D”) into new drugs would be stunted, compared to today’s levels. That is right – the world has much to thank the US for.

This is all about priorities, and the priority question may be, for the US: Social Security pensions/Medicare for retirees as promised OR continued pharma largesse/great R&D: pick one.

(or in the real world: find a middle ground)

Crunchicrant feels there is a better way that the whole pharmaceutical game can be played: society needs there to be R&D and drug testing and approvals, and resource should be lavished on those activities (extravagant fortunes made by successful researchers): manufacture and distribution – these are ordinary, low risk low return, activities. One place pharma has let society down (Purdue, Cephalon, Insys) is that distribution plays too important a role in its success.

Are we coddling far more corporate bulk than we need to? A project for Crunchicrant’s future.

(The status quo suits the industry just fine. Pharma is one of the heaviest lobbiers in Washington DC, spending nearly $1 per US resident per year – but look at the table at the head of this page. How cheap it is, to subvert the interests of the American people!)