That's what we don't have in the US. You can certain make the case that we should, but that's a separate argument. Now we have a situation where we have a flat out price control, and it's going to have unintended consequences written all over it.
All these arguments for "look at Europe" doesn't fly in health economics. There are not subtle differences in the US legally, infrastructurally, and culturally.
Along similar lines, I read a study nearly twenty years ago and I wish I could find it for these very recurring government vs market debates. The study evaluated prices between single payer countries and found that it wasn’t the collective bargaining that reduced prices in those countries. They observed that there was no correlation between the size of the single payer and pricing. Rather, it was that the pharma adjusted price to minimize counterfeiting and black markets. In countries where black markets and counterfeiting risks were high, the price was lower. Ironically the decision to lower gave some single payers added incentive to participate in arbitrage. One country would be so low the country itself decided they could arbitrage their Higher priced neighbors by selling off their excess through undisclosed side deals. You see a variant of this example playing out between Canada and US. The article talked about individual black markets and state backed black markets that would emerge as a result of these single payer deals... which were supposed to be confidential but of course the black markets allowed pricing information to leak causing everyone to demand lower prices... everywhere except the US which essentially subsidized all of these below market deals that give the appearance that collective bargaining is superior.
Edit: another thought comes to mind - has anyone compared the size of health insurers in the US and compared their purchasing power to government run single payers? I’d hazard a guess that United Health for example probably dwarfs entire single payers of some governments.
> Edit: another thought comes to mind - has anyone compared the size of health insurers in the US and compared their purchasing power to government run single payers? I’d hazard a guess that United Health for example probably dwarfs entire single payers of some governments.
Medicare alone covers more patients than NHS England does. (Very few countries in Europe actually have single-payer healthcare; the four UK countries are the exception, not the rule).
> You get a Medicare provider, with an insurance company that you work with.
Well, no, the majority of Medicare patients still receive their inpatient and outpatient benefits through Medicare. A (growing) minority receive their Medicare benefits through a private insurer.
> pharma adjusted price to minimize counterfeiting and black markets
I'd totally believe it. It occurs across all markets, with all actors. Market prices isn't simply supply and demand. It's many things like black markets.
Another example is public bonds in the US. Why are their yields under what it should be from the interest rates? It's because the earnings are tax free. The market has already adjusted for that.
> All these arguments for "look at Europe" doesn't fly in health economics. There are not subtle differences in the US legally, infrastructurally, and culturally.
Not to mention: European countries wouldn't be able to negotiate those prices if the US market didn't exist. Pharmaceutical companies - many of whom are based in Europe - know that they'll make most of their revenue from the US, which is not only the single largest market by number of patients[0], but also a disproportionately lucrative market, because the expected per-patient revenue is also higher.
If the Netherlands (a country whose population is lower than the state of New York alone) decides to "negotiate" a few extra Euro off the price of a particular drug, AstraZeneca doesn't care, because they know they'll more than make it up in the US market.
If the US passed a "most favored nation" law with respect to drug pricing, or allowed pharmaceutical imports from Europe/Canada (as has been proposed in the past), we'd see drug prices in the US drop dramatically, but drug prices in Europe would also increase.
[0] China and India are in a totally different category, because of their respective patent laws (whereas the US and Europe have harmonized patent treatment)
Further, in general, the drug release schedules are US -> Europe -> Asia. This is primarily for two reasons - the FDA approval process is the most rigorous in the world. It would not be outrageous to classify European drug approval process as "rubberstamping" if the drug has already received FDA approval. Essentially, the US pays the R&D of the drug costs for the rest of the world.
The second reason is that without price controls, the US price is the closest thing to a market price for that drug. Sorry, but ultimately the prices of the drug comes down to how much a life is, or more accurately, how it affects the quality of life. When price negotiations between pharma and European governments start, both sides use that data. It would be very interesting if the US went single payer to see how it would affect the European drug prices (my guess it goes up).
Side note: Asia has always been third due to underdeveloped markets and legal systems. Further Japan has in the past (I think they just got rid of it in the last 5 years) a law where drugs need to be tested on Japanese citizens before approval.
Real case: Romania. We put a price control in place, thousands of drugs are no longer available. My brother works for a distributor (they import and distribute, so they don't have any control) and told me the government report on 1200 drugs that disappeared from pharmacies in the past 3-4 years are the important ones, in total there are over 5000 they can no longer import because the controlled price is lower than the bulk price they can buy for.
Price controls are usually really bad. But medicine is a different case for many reasons I don’t want to get into now. Lots of countries do control prices of medical care without restricting supply.
The obvious counter to that and (feel free to interject if I'm wrong) is that it's because other countries have instituted price controls on pharmaceuticals that companies have to make up their profits on the US market.
My worry here is that the price control seems to act as a disincentive for selling in the price controlled market. So long as there are 49 other states where margins are greater, it seems like those orders will be fulfilled first.
Yes. Literally every other healthcare system in a state with an advanced economy. (I'd love to see a counter-example, I've gone looking and failed to find one)
[EDIT] to the downvoters: no, seriously, please post an example of, say, an OECD member state other than the US that doesn't use either explicit or implicit (single primary buyer setting prices, that is, monopsony) price controls as a major part of their healthcare policy. I assume you know of at least one, and I'd really like to know if I'm wrong about this.
This one is actually kind of complicated. Healthcare costs are weird.
In general marginal costs to make drugs you already know how to make are usually low, so you can and do see a lot of free riders on the expensive part (R&D). It would be surprising if Illinois can't just join them.
That said, ideally if you're trying to contain costs by fiat you want these to be negotiated by governments and healthcare providers.
