How Can I Get an Understanding of Why Legal Drugs are So Pricy, Without Attributing It to Greed?

January 30, 2005 10:13 PM

I thought of asking this question in response to this comment, but thought it was better off here:
Why are legal drug prices so expensive. As a biochemistry major, I see first-hand how expensive very simple reagents and machines are to create simple research. It seems somewhat reasonable that in my naive on little world, drug prices are somewhat justified by the cost of r&d. Are there any reports out there of where drug companies spend their money. i.e., can I see how much are sent on salaries, equipment, court fees, etc to get more of an understanding of drug company costs and profits, especially since I'll probably being getting a job at one in a few months. Also, info on why drugs (beyond their being greedy) are so expensive in The States (or so I hear) vs. other parts of the world would be useful, too.
posted by jmd82 to science & nature (56 comments total)

I work in the manufacturing sector of the biopharmaceutical industry. In my particular industry, the prices are extremely expensive because our raw materials are so expensive. Additionally, the manufacturing employees are not the only people on the payroll. We have many more people employed in support groups (labs, quality assurance, environmental monitoring, facilities engineering and maintenance, environmental health and safety, security, and so on) than we do in manufacturing. While drugs companies do tend to have higher profit margins than other industries, it is also true that they have much higher operating costs.

I've worked in this industry for nearly 10 years. If you have any questions that I might be able to answer re: working for a pharmaceutical company, feel free to e-mail me.
posted by kamikazegopher at 10:33 PM on January 30, 2005

Here in Canada, the maximum prices for patented drugs are set by a federal review board, so they're not terribly expensive compared to the US.
posted by Jairus at 10:41 PM on January 30, 2005

I would conjecture the following:

1.Drug prices paid outside the US are subsidized by governments (meaning the price paid is not the real price);

2.Governments outside the US demand lower prices.

3.Americans have more disposable income to spend on expensive drugs.

So, in effect the US market subsidizes the price of drugs (in terms of R&D) of the rest of the world. And truth be told, if US drug pricing policy was less free market than it is, a good deal of drug R&D, i.e., new drugs, would DISAPPEAR, because there would be no incentive to create new drugs.
posted by ParisParamus at 10:42 PM on January 30, 2005

Oh, also, I suspect that other countries may, to some extent, also piggyback on FDA regulation. The FDA approval process and regulatory framework is rigorous and expensive. If the FDA approves a drug, how much of an incentive does another country have to try and duplicate the same framework?
posted by ParisParamus at 10:49 PM on January 30, 2005

I expand the question: I am curious to know if boring drugs (long-known antibiotics, your over-the-counter aspirings, acetaminophens, and DXMs, etc) are substantially more expensive in the US compared to outside, or if it is just the newly discovered drugs, your Viagras, Levitras, and cures for this year's Newly Invented Mental Imbalance, that are overpriced in the US?

Mostly because I don't care if I can't afford the newest cure for whatever the TV tells people they have, as long as my Nyquil isn't overpriced. Because Nyquil cures 90% of what ails you.
posted by TheOnlyCoolTim at 11:03 PM on January 30, 2005

This is a highly contentious issue for which you, likely, won't be able to discern the 'objective' answer. That said, I posted a thread related to promotion by BigPharma. The links and discussion should be of some interest. R&D is likely a key component, evidenced by the fact that generics can be many times cheaper. But how much does R&D really contribute, is debatable. A figure shown in ads is average of $~800 million R&D per drug. That figure was corrected to $~400 million, and then again to a lower figure, which I don't recall right now. Furthermore, Pharma's accounting assemblage is private, meaning what R&D includes, and what marketing does ..etc is unknown to the public.

Over the last few years, there have been a spate of books covering this issue. I'm linking to a few of them, but I don't vouch for their quality. Some of them I've read, some not.

The $800 Million Pill : The Truth behind the Cost of New Drugs
The Truth About the Drug Companies: How They Deceive Us and What to Do About It
Powerful Medicines : The Benefits, Risks, and Costs of Prescription Drugs
On The Take: How Medicine's Complicity with Big Business Can Endanger Your Health

Three of the books have been authored by people in the medical industry.
posted by Gyan at 11:09 PM on January 30, 2005

From the other side, note that marketing expenditures are up to three times the research and development costs for big pharma. Among other egregious details about excess greed on the taxpayer's dime (cf. Medicare):

The drug industry’s top priority increasingly is advertising and marketing, more than R&D. Increases in drug industry advertising budgets have averaged almost 40 percent a year since the government relaxed rules on direct-to-consumer advertising in 1997. Moreover, the Fortune 500 drug companies dedicated 30 percent of their revenues to marketing and administration in the year 2000, and just 12 percent to R&D. (See Section X)...

These marketing costs are being funneled right back into the prices paid for prescription medicines. The result is an industry that has among the highest profit margins of any legal business.
posted by AlexReynolds at 11:11 PM on January 30, 2005

Much of the R&D is done by state and federally funded university labs as well.
posted by drezdn at 11:21 PM on January 30, 2005

I bought 500 aspirins for about $4.00 last week. But I don't think that sheds much light on your real question.
posted by ParisParamus at 11:22 PM on January 30, 2005

Side comment on drug prices.

For a chronic arthritic condition I have, my doctor said two drugs are recommended. The first, with little side effects is $1,000 a shot at 1 shot a week. The second is $4.50 for a ten week supply at 1 shot a week. But long term use causes liver damage and could cause enough problems that I would have severe cirrhosis possibly requiring a transplant.

So what do you do? I took the cheap route, hoping that once the expensive shot is on the market for a while, the price will drop. Drug patents are 14 years right?
posted by ..ooOOoo....ooOOoo.. at 11:36 PM on January 30, 2005

ParisParamus: The FDA approval process and regulatory framework is rigorous and expensive.

Debatable. One of the requirements for approved drugs is that companies conduct and report on postapproval long-term epidemiological studies. Around half of such required followups aren't conducted. I think what can be said for FDA approval is that they filter out drugs with acute toxicity and placebo-like efficacy. Toxicity due to chronic use is more iffy. Drugs that create problems due to chronic usage in, less than 2-3% of users are likely to get through, see Vioxx, fenfluramine..etc. If your calculus agrees on the notion of 'greater good', then you may not have problems.

The underlying problem here is mismatch between the capitalist environment of business, the probabilistic/statistical nature of progress and research, and the supreme valuation of health and life, which is publicly proclaimed to be invaluable, but in reality, of course, is some number. If you're some poor schmuck suffering from some rare disease that afflicts 400 people in the US, chances are you won't have any (affordable) treatment available. That's the dissonance between the emotional value of health/life and a healthcare industry embedded in a capitalist market-driven economy. A more fundamental problem is that you can never prove drugs to be safe for all. It would stagnate drug development. There's the law of diminishing returns on being sure drugs are safer for 99.5% of market instead of 99.0% and so on. From the perspective of revenue, PR and market viablility, there's a sweet spot, which is not at 100%. That won't change.
posted by Gyan at 11:39 PM on January 30, 2005

It's obviously a contentious issue, and with the farce that is accounting in large corporations we'll probably never really know.

But I think it's reasonable to consider advertising as a primary culprit:

This is old and probably outdated, but the situation has probably only gotten worse:

WASHINGTON (AP) — Major drug makers spend nearly twice as much to advertise their medicines as to research and develop them, says a consumer group that blames aggressive marketing for soaring drug prices.

Families USA also said Tuesday that drug makers sometimes spent three times as much on ads and compensation for executives than on research and development. The group analyzed data from the Securities and Exchange Commission, which regulates the stock market.

Also, I believe the United States is one of the only countries to allow drug companies to market directly to consumers (why this is possibly bad public policy is left as an exercise for the reader.)

The counter-argument is that by increasing demand for the drug through advertising, they can sell more of it and thus lower the cost of the drug through economies of scale. I don't this this is actually the case, but I'm not really qualified to judge one way or the other.
posted by adam at 11:44 PM on January 30, 2005

Drug patents are 14 years right?

There are calls and FDA-assisted tricks for patent laws to be raped to extend the patent further, increasing the "return on investment" for big pharma. This of course does not stop corporations from already repackaging existing products in new ways (e.g. different dosages) or patenting other development pathways for a particular active chemical.
posted by AlexReynolds at 11:49 PM on January 30, 2005

placebo-like efficacy

The FDA doesn't even block that thanks to off-label usage by psychiatrists. Read up on the Neurontin (real name: Gabapentin) scandal.

Essentially: Gabapentin is a drug used for treating epilepsy. It is very, very good for this, especially because it has functionally zero side effects. A month's supply at a relatively standard dosage is $150 (either you pay that or your insurance does). The one negative side effect is that getting off of it is sheer unadulterated hell. In other words you tend to get hooked. Bad.

Pfizer decided a few years back (and by few I mean 7-10) to make Neurontin their new wonderdrug, by pushing psychiatrists to prescribe it for all sorts of off-label uses related to mental health. To this end they hired newly graduated (and unemployed with huge student loan payments) doctorates of geology, astronomy, and the like to flood into psychiatrists' offices across the country. They would setup an appointment with the staff of Dr. such-and-such, saying "Hi, I'm Dr. so-and-so and I'd like to speak to Dr. such-and-such about a new drug for treating a wide variety of mental illness." Because the doctorates of geology never bothered to specify they weren't MDs, the staff and the psychiatrist were taken in - the doctors of geology would then sell the psychiatrists on prescribing Neurontin to treat a wide, wide variety of mental illnesses including bipolar disorder.

This was all well and good for Pfizer until a study came out after a few years of this sort of thing that demonstrated what the efficacy of Neurontin as a monotherapy actually was - 5%. Sugar pills (placebo) have a 6% efficacy. Then a few of the doctorates of geology had an attack of conscience and blew the whistle, and the whole house of cards quickly tumbled down into a hundreds-of-millions class-action lawsuit against Pfizer.

Speaking as one of the people ROYALLY fucked over for years by Pfizer with Neurontin because of the constant self-destruction I continued to engage in because I thought I was being treated (in really high dosages it does dumb you down enough to make you feel just a bit better) I'm inclined to say that large portions of your money are going towards paying executives to play golf while thinking up new ways to fuck over the sick, dying, and mentally ill to the tune of 1000% markup on fucking snake oil.

The truth though is, like a lot of the other people here have noted, that a lot of the money is pumped straight into advertising. So really the whole thing resembles a rather nasty religion more than your average international-corporation-dicking-over-the-third-world.

Sorry to convey so much anger, but I felt this was an excellent example of where that money goes, and to what purpose.
posted by Ryvar at 12:08 AM on January 31, 2005

jmd82, the answer to your question is quite simple.

It's called "what the traffic will bear."
posted by telstar at 12:24 AM on January 31, 2005

Ryvar, your anger is more than justified. I agree with you, Gyan and Alex. Prices are high because of greed. PP's contention that if prices were not high all drug research would stop (Gekko's "greed is good" argument) is incredibly sad, because I suspect he truly believes this. What a cold and cynical world he lives in. You know, some researchers would continue their work at reduced cost because they believe that saving people's lives is a worthy goal. Some cultures believe that spending tax money to subsidize that goal is, you know, noble. Much more so than developing nuclear weapons or waging unncessary wars. Ask any researcher who has watched a loved one waste away from cancer or AIDS or watched them self destruct because of some mental illness if their only incentive to make new drugs is money.


The underlying problem here is mismatch between the capitalist environment of business, the probabilistic/statistical nature of progress and research, and the supreme valuation of health and life, which is publicly proclaimed to be invaluable, but in reality, of course, is some number.

Well said Gyan. Capitalism simply has no place in certain industries, because some things are more important than money.
posted by sic at 12:58 AM on January 31, 2005

Brand-name drugs, in the States, are generally very expensive (for various reasons that are pretty well-covered above). Viagra is about $8 a pop, last time I checked (about a year ago). Antivirals used to treat HIV can be upwards of $20 a pill.

There is, however, a good deal of competition in the generic-drug field. Generics are usually quite inexpensive, especially if you compare it to the corresponding brand-name. Even when a generic is available, drug companies keep making the brand name (although in the pharmacy I worked at, they pretty much collected dust on the shelf).

Over-the-counter commodity drugs are dirt, dirt cheap. Aspirin, acetaminophen, ibuprofen, pseudoephedrine, and even newer generic drugs like loratadine (Claritin) can be had for pennies a pill.
posted by neckro23 at 2:07 AM on January 31, 2005

neckro: really? I thought clarinex or whatever they call it cost $1/pill?
posted by Ryvar at 2:35 AM on January 31, 2005

Brand-name Claritin is much more expensive, yes. I was specifically referring to the generic.
posted by neckro23 at 5:01 AM on January 31, 2005

Oh wow that's awesome. Thanks a heap.
posted by Ryvar at 5:13 AM on January 31, 2005

Calling advertising a cause of expensive medicine is false. While advertising may create dubious demand for a substance, it increases the market, and allows lower prices. How on earth does advertising for an RX differ economically from that for any other product?!
posted by ParisParamus at 5:57 AM on January 31, 2005

sic..if you're correct, please explain why most new drugs are developed in the US, where the profit motive is most in tact. Altruism loses out to self-interest--like wanting to raise and feed a family, and have a bit of fun. And that's a good thing.
posted by ParisParamus at 6:23 AM on January 31, 2005

it's one thing to argue government should help pay for drugs (I agree). It's another thing to say the evil capitalist system is responsible for high prices. That's just plain communist bullshit.
posted by ParisParamus at 6:31 AM on January 31, 2005

While advertising may create dubious demand for a substance, it increases the market, and allows lower prices.

This is a fascinating assertion. Can you back it up with any cases? In economics, increasing demand moves the supply/demand equilibrium point to the right, increasing prices.

How on earth does advertising for an RX differ economically from that for any other product?!

Well, in that average consumers aren't necessarily competent to make a decision about what drug is appropriate for them: we can't just decide "I need Vioxx!" and go out to buy some. We need to go through that pesky gatekeeper of a doctor, who we (historically) have entrusted to make that decision for us. This makes the whole purchasing process unusual, if not unique. Drug companies have been trying to short-circuit this for some years ("ask your doctor about Vioxx").

Of course, even before they were allowed to advertise directly to consumers, they poured (and still do pour) a huge amount of resources into marketing to physicians.

I suspect that other countries may, to some extent, also piggyback on FDA regulation

Some countries may, but among wealthy countries (and even many poor countries), they all have their own testing regimes. The fact that FDA testing isn't accepted as sufficient for releasing drugs in other countries has in fact been a bone of contention in trade negotiations.
posted by adamrice at 6:34 AM on January 31, 2005

"This is a fascinating assertion. Can you back it up with any cases? In economics, increasing demand moves the supply/demand equilibrium point to the right, increasing prices."

But increasing a market allows for R&D costs to be spread over more sales. It's basic mass production/economies-of-scale theory.

Others: talking about the stupidity upon which demand is based--the snake oil/lottery purchase dynamic is irrelevant. THe more buyers, the cheaper the product can be. If advertising enlarges a product's market, the product can be cheaper. And that's true for laundry detergent or Viagra.
posted by ParisParamus at 7:16 AM on January 31, 2005

"This is a fascinating assertion. Can you back it up with any cases? In economics, increasing demand moves the supply/demand equilibrium point to the right, increasing prices."

Also, what textbook are you reading? That only happens if there's no ability to increase supply, a problem that exists less and less with modern manufacturing.

The two problems one encounters with drugs is (1) too small a market (because a disease, however deadly, is rare); and (2) R&D costs (drugs just take a long time to create; some will prove toxic; some will prove ineffective).
posted by ParisParamus at 8:02 AM on January 31, 2005

The report, Profiting from Pain: Where Prescription Drug Dollars Go, shows that the nine publicly traded U.S. drug companies, which manufacture 50 of the drugs most often prescribed to seniors, spent $45.4 billion on marketing and advertising in 2001 and only $19.1 billion on research and development.
posted by tirebouchon at 8:03 AM on January 31, 2005

If advertising enlarges a product's market, the product can be cheaper. And that's true for laundry detergent or Viagra.

Can be cheaper. If you control a patent (monopoly) on a drug, and demand goes up, why would you start charging less?

And direct-to-consumer advertising does a disservice, in most cases, more than it helps. Vioxx, Celebrex, and all the Cox-2 inhibitors that have been getting all the heart attack news lately should have only been prescribed to a small subset of patients with risk of gastric ulcers or bleeding episodes. Granted, physicians shouldn't be prescribing them, but there was no reason for patients to demand them, either. They're only as effective as aspirin.

And healthcare is a funny thing--you can increase demand and profits by introducing a new drug into the market, even if it's no different than the ones already out there. Nexium (the purple pill) is the same thing as Prilosec. But Prilosec was going off the market, so the manufacturer just took the active isomer of prilosec and called it Nexium. New pill, new color, same effect and agent!

Same with Clarinex. Claritin was a blockbuster. But it was going generic. So the manufacturer introduced clarinex, the metabolite that your own body makes when claritin is metabolized.

Nexium and Clarinex have brought in billions for these companies; that's money in the health care system that could have gone to much better use. And it's fraudulent of the drug companies to tell consumers that these meds are better than anything already out there. But again, it's a great way to make money.
posted by gramcracker at 8:11 AM on January 31, 2005

Buying a certain laundry detergent may give you a rash. Buying a dangerous, under-tested drug or a drug that is provably less effective than another but was more heavily marketed to your physician can kill you.

You will never convince me that it is the same as buying laundry detergent.

It's possible that most new drugs are created in the US because it is the biggest consumer market for pharmaceuticals, the American pharmaceutical multinationals have grown so large that they dominate almost all markets, and, most importantly, the US has the laxest drug testing regulations amongst developed nations. By the way, creating the most new drugs isn't the same as saying creates the most effective drugs.

That's just plain communist bullshit.
Tee hee
posted by sic at 8:12 AM on January 31, 2005

corkscrew: even if that was true, what's your point? Why does spending less on R&D negate the necessity of R&D? Should the companies not spend on advertising so they will not have a market or profits? Do you think companies would rationally spend on advertising to depress their profits? Again, just look at the stats for new drugs, and where they're created. And consider that even drugs invented outside to US are R&D'd with the hope of tapping the US market.
posted by ParisParamus at 8:14 AM on January 31, 2005

I'm also of the opinion that American pharmaceutical marketing departments spend much time in "defining" new diseases to create markets for their drugs. ADD, anyone? Profit motive is not always a good thing.
posted by sic at 8:15 AM on January 31, 2005

PP: While, as you suggest, a larger market *can* lower product prices, patented drugs are monopoly markets - the manufacturer can charge pretty much whatever the market can afford to pay with no concerns about competition driving the price down.

In the UK, there's big money to be made sourcing what are known as Parallel Imports (PIs) for over the counter drugs where patented drugs are bought in another country at a cheaper price, shipped to the UK, relabelled and sold. Perfectly legal and annoys big pharma. I guess that's what's happening to some degree with all the US senior citizens heading over the border to Canada.

Although, to be fair, part of the pharmacist's incentive for sourcing these cheaper PIs comes because the UK health service remits the pharmacist based on some out-of-date price list that completely fails to reflect current market price. If they can source lower price drugs they make more profit.

Drug pricing, in the UK at least, is immensely complex, beset by all manner of legislation and surprisingly dynamic. Wholesale prices for popular over the counter medicines fluctuate on an almost hourly basis.

On preview: what gramcracker said. And some other suff.
posted by grahamspankee at 8:18 AM on January 31, 2005

"PP: While, as you suggest, a larger market *can* lower product prices, patented drugs are monopoly markets - the manufacturer can charge pretty much whatever the market can afford to pay with no concerns about competition driving the price down."

Well, no, since it's rare that a drug truly has no competition, at least for very long. Oxycontin comes relatively close, but there are other pain medications which can be taken more frequently. Please cite some medicines that have monopoly status, without cross-elasticity with no other product.

Look, I haven't owned a television in nearly two years, and one of the reasons is that I loath the stupidity of advertising. My point isn't that drug companies don't make lots of $; it's that if they didn't the drugs of modern medicine would not exist. WHY MUST METAFILTER BE SO FUCKING SOCIALIST?
posted by ParisParamus at 8:30 AM on January 31, 2005

..ooOOoo....ooOOoo..: You're referring to a TNF-alpha neutralizing antibody like remicade in your post, right? While I think that there's some room for price decreases on these, they'll never be cheap. Manufacturing monoclonal antibodies is an extemely expensive and complicated process, and may present a barrier to entry so high that the generics can't get in on it. Probably what you should hope for is a future variant with better targeting or residence, so that it uses less of the precious stuff for the same effect.
posted by monocyte at 9:11 AM on January 31, 2005

Drug patents are 14 years right?

Drug patents are 20 years, the same any other patent. However, drugs must be patented very early in the development process (lest another company develop and patent it), so the bottom line is that by the time a drug is approved, 6-8 years of its patent term has already gone by.

Patent expiration dates for approved drugs in the U.S. can be found in the FDA's Orange Book.
posted by DevilsAdvocate at 9:31 AM on January 31, 2005

ParisParamus:

I generally agree with your contention that advertising/marketing has a benefit to the consumers by motivating drug companies to invest into future drugs.

However, I have a problem with a few of the specifics:
1) Do sales people really have to fly first class to promote their products (I have friends that do this regularly)?

2) Do doctors really need to be taken out to retreats (called "workshops") on mountains for them to see the usefulness of a drug?

3) Do consumers really need to be convinced that if they feel a slight uncomfortableness in their ...., they should immediately go to their doctor and "ask if blah blah is right for you!"?

4) When was the last time you heard a drug company say "due to the increase in our sales, our cost per pill has drastically fallen, and in fact we have already subsidized all of our R&D costs for this product. Thus, we are decreasing the price of this product"?
posted by tuxster at 9:39 AM on January 31, 2005

Tuxster, I agree with your sentiments about 1-3, but alas, that's the nature of human conduct, including the stupidity/vanity of physicians, the gullibility of consumers, etc. Hey, look, People 'R Shallow. I'd love to see upgrades of the human condition, but I also think, in the mean time, drugs are good.

As for 4), I'm not sure. What likely happens is that price reductions take the form of drugs being offered to insurance companies for less. Which, of course, doesn't help poor blokes like myself who, at least this week, don't have any drug benefit.
posted by ParisParamus at 9:53 AM on January 31, 2005

Look, the bottom line is that the Pharm industry is incredibly profitable. This fact puts the lie to the contention that drugs are expensive because they are expensive to research, develop and produce. If that were the only reason that drugs were expensive, the profit for the industry as a whole would be much less. Drugs are expensive because profits are large.

Also, the Pharm industry operates on a model where each drug stands seperately. In other words, the profit on Viagra never lowers the price on any drug. Certainly not on Viagra, but also not on any of the other drugs that the company markets. The R&D costs therefore are not simply generic across the company, but linked to each drug. A drug may be expensive to develop, but then it is expensive to buy. A drug may be cheap to develop, but then it is expensive to buy. A drug may make a lot of money, but then it is still expensive to buy. You'll notice, all concern about socialism aside, that the constant is expensive drugs.
posted by OmieWise at 10:17 AM on January 31, 2005

Expensive compared to what? Particularly given that "even in the United States," the poor and the old get their medications subsidized, or for free.
posted by ParisParamus at 10:45 AM on January 31, 2005

Expensive compared to the level of profits that they generate.
posted by OmieWise at 10:48 AM on January 31, 2005

PP seems to think that the only alternative to Communism is Social Darwinism.
posted by goethean at 11:01 AM on January 31, 2005

particularly given that "even in the United States," the poor and the old get their medications subsidized, or for free.

HA HA HA HA HA HA. Can I move to your U.S.? Because here in mine, it sure doesn't go that way.
posted by dame at 11:13 AM on January 31, 2005

Ever hear of Medicaid and Medicare?
posted by ParisParamus at 11:14 AM on January 31, 2005

No Goethean. It's just that, having experienced the effects of mild socialism, such as that in France, I'm not so enthusiastic about moving in that direction--particularly given that, we're not Canada, and there's no adjacent "other" United State to call upon for innovation and risk-taking.
posted by ParisParamus at 11:17 AM on January 31, 2005

Do you know how little you have to make to get Medicaid? It's beyond poor. We provide very poor quality healthcare (including prescriptions) for the desititute and the old. The poor can fuck themselves.
posted by dame at 11:48 AM on January 31, 2005

What happened to the new big entitlement created by that evil socialist George Bush??
posted by ParisParamus at 12:07 PM on January 31, 2005

PP, you're too dogmatic. I'm as strong a supporter of market economics as anyone, but some markets are broken. Health care in general, and pharmaceuticals in particular, are two examples. People have relatively little control over their health care expenditures, and, even so, they are notoriously irrational in health care consumption. That's two strong reasons for traditional market efficiences to be absent.

Even at the retail level, the market for drugs is broken. PP, call up your local Walgreens and ask them how much 30 20mg fluoxetine would cost. Tell them you're self-paying. Then call another Walgreens, give them your insurance information, and ask how much they will bill your insurance company. Finally, call your local Costco and ask them the same questions. You'll be surprised at the answers. As recently as 10 months ago, Walgreens charged 1000% (yes, that was one-thousand, not one-hundred) more than Costco for fluoxetine. Why? Because Walgreens reportedly has a policy of setting the cost of a generic at a set discount from the retail version of the drug. Costco, on the other hand, sets prices like most retailers: they have a markup from their wholesale cost. The two pharmacies in this example could be others. Some, especially national chains, do what Walgreens does. Some, often local pharmacies, do what Costco does.

Now ask yourself: how can you say this is a functioning market when two stores, practically side by side, selling the same product, can differ so greatly?

And, by the way, in a perfectly efficient market, there is no profit. Outsized profits are a signal that a producer is exploiting some kind of inefficiency.
posted by Ethereal Bligh at 1:09 PM on January 31, 2005

Ethereal. You may be completely correct. I just get peeved when I hear making broad swipes at market economics, implying, at least in mind, that Europe or Canada does things better. Prices may be cheaper elsewhere, but I'm not convinced that other nations don't, in a number of ways, piggyback (or is it parasite?) on the US. I do agree that the US healthcare market, including RXs, is in need of fixing.
posted by ParisParamus at 1:28 PM on January 31, 2005

(...at least in my mind...)
posted by ParisParamus at 1:30 PM on January 31, 2005

Don't forget that that great entitlement that the Repubs drafted (without Democratic input) and that GWB signed, explicitly excludes market factors from drug pricing. The govt, in that case, is not allowed to negotiate prices with the Pharm industry. This is also called socialism, or, perhaps more appropriately, corporate welfare.

We don't live in a free market system, and we haven't for a long long time, so I'm not sure what it is that you are defending, PP, aside from the notion that debt is best socialized and profit best privatized.
posted by OmieWise at 1:37 PM on January 31, 2005

I'm defending the fact that Big Business is not Evil Business, even though regulation of Big Business is essential, and that Walmart IS evil (aesthetically, at least).
posted by ParisParamus at 2:34 PM on January 31, 2005

"debt is best socialized and profit best privatized."

So private investors who lose money don't really lose money? What are you proposing? That's very elegant language, but I don't think it offers much guidance. Or substance.
posted by ParisParamus at 2:46 PM on January 31, 2005

ParisParamus: I'm defending the fact that Big Business is not Evil Business

Not by definition. But, in practice, the poles haven't been that far apart. Competent people with self-interest and ambition will game (whatever) system as best they can. And it won't necessarily be for everyone's best.
posted by Gyan at 2:48 PM on January 31, 2005

Well, I'm not so sure. But I am sure is that this discussion has gone beyond AskMefi.
posted by ParisParamus at 3:13 PM on January 31, 2005

Two reasons - Ads during the superbowl cost lots of money, and because drug companies are trying to make a profit.
posted by pwb503 at 6:27 PM on January 31, 2005

monocyte, right in one. Thanks for the clarification.

DevilsAdvocate thanks for the link.
posted by ..ooOOoo....ooOOoo.. at 10:06 PM on January 31, 2005