Connect with us

International

The Drugs Don’t Work

The Drugs Don’t Work

By Russell Clark of the Capital Flows and Asset Markets substack

This week’s Economist has a leader, criticizing America’s…

Published

6 months ago

on

The Drugs Don't Work

By Russell Clark of the Capital Flows and Asset Markets substack

This week’s Economist has a leader, criticizing America’s new drug-pricing rules. I knew this was going to be a subpar article when the first line is “A quirk of American law long barred Medicare, the public-health insurer for the elderly, from negotiating with drug firms over prices.” To describe this as a quirk is a stretch. It is almost certainly the product of lobbying buy US drug companies, and at odds with the VA prescription system, also state funded, which is allowed to negotiate drug prices on behalf of its members.

Back in 2017, I published a note on the US healthcare system, explaining how exactly Medicare had come to be abused by many of the drug companies now complaining. I republish it now, as I am working on updating it, and having the old note on the website will be helpful, when I finish the update. I generally don’t like reposts, but this one is useful.

The US Healthcare system is truly extraordinary.  Per capita spending on healthcare is double the levels seen in most other developed countries.  This is in part driven by a very different set up.  Key differences are the private sector has far more freedom to market drugs directly to consumers, and Medicare, the largest buyer of drugs, is prohibited by law from negotiating lower prices.  The result is that the US has higher prices for drugs, and due to the extra spend, also has the most innovative drug market.  It can be argued that the US subsidises drug development for the rest of the world.  However, recent increases in drug prices seem to have been driven by regulatory changes due to the Affordable Care Act (Obamacare), rather than market forces. 

In 2016, total US health expenditures were USD 3.3 trillion.  US citizens directly paid (out of pocket) for USD 350bn, with the remainder paid by third parties.  USD 1.1 trillion was paid for by private health insurance, with Medicare and Medicaid paying USD 1.2 trillion.  Finally, USD528 billion was met by a mixture of other government programs, privately raised funds and charities.     

Of the total USD 3.3 trillion spent on healthcare, USD600 bn was spent on drugs, with half on prescription drugs.  The other half was spent on drugs used in procedures, and not procured via a prescription. While drug spending has doubled since 2007, we have seen a steady increase in the use of generics at the expense of branded drugs. 

However, even as we have seen volumes decline for branded drugs, we have seen an increase in total spend for branded drugs. 

Generic drug spend has also increased significantly in the last few years.  Both generic and branded drugs have seen price increases. 

The above graphs, would imply that all prescription drugs, both branded and generics have seen price increases.  However when we consult data from independent US advisory agency, MEDpac and from the Centre of Medicare and Medicaid Studies (CMS) a different picture appears. 

MEDpac looks at Medicare Part D (the part of Medicare that pays for prescription drugs) data from 2009 to 2014.  The most striking feature is how the average price for a prescription for a low cost beneficiary has fallen by 24% over the period, while the average drug cost for high cost beneficiaries has risen by 50% over the same period. 

One of the reasons for the increase in high cost beneficiaries has been the development of a new drugs that cure hepatitis C.  The main drugs used here are Solvadi and Harvoni, and according to data from CMS, total Medicare spending on these drugs in 2014 was 3.8bn USD from nothing in 2009.  Total high cost spending without the hepatitis C drugs would have still risen to 60.8bn USD, or a doubling of spending on high cost drugs compared to a 27% rise on low cost drugs.  Excluding the hepatitis drugs, we can see that drug spend rose 14% for Medicare in 2015 from 2014, while it rose 25% for Medicaid over the same period.    Given that volumes have been flat, and we have excluded the big increase from hepatitis C drugs, the growth in spending has been driven by drug prices. 

Drug cost increases at Medicare and Medicaid have been driven by long standing issues, that were exacerbated by the changes brought about by Obamacare.  Government run pharmaceutical plans such as Medicare and Medicaid are banned from negotiating drug prices with manufacturers.  This is at odds with other government run healthcare programs such as the UK’s NHS, which use their buying power to drive prices down.   

There are two big drivers to recent drug increases in my view.  There has been changes in how Medicare pays for drugs, creating an incentive for drug companies to raise prices.  The second has been the increase in the number of orphan drugs being developed, which has put upward pressure on drug prices.  Both factors now look to be coming under regulatory pressure. 

For Medicare Part D spending, high cost beneficiaries are defined as those beneficiaries who spend over USD6154 a year on drugs.  Spending in excess of USD6154 is 95% covered by Medicare.  However spending from USD2700 to USD6154 is not covered at all by Medicare.  Spending from USD 295 to 2700 is 75% covered by Medicare, while the first USD 295 is not covered at all by Medicare.  The gap from USD 2700 to USD 6154 is known as the Medicare Donut Hole.  Changes under Affordable Care Act, allowed for some drugs to be purchased at a 50% discount to list price, while the full list price could be counted towards Medicare Donut Hole.  Below graph shows the out of pocket spending for a given level of drug spending. 

For drugs with little or no competition, prices could be raised without effecting demand, as the drug consumer would potentially see marginal prices fall dramatically if this pushed them in to the top tier of Medicare benefits where costs are 95% covered.  This can be most clearly seen in the graph below where out of pocket spending on drugs fell even as health insurance spending on drugs rose.    According to the Medicare (a federally run health program for the old) drug spending dashboard, 29 of the 70 drugs details saw 50% price increase over 5 years.  Medicaid (state run health program that targets the poor) saw ever larger number of drugs with big price increases. 

The FDA is starting to take aim at rising drug prices, particular older drugs that have recently seen drug prices increase by speeding up the approval of generic drugs https://www.fda.gov/newsevents/newsroom/pressannouncements/ucm564725.htm 

This has a detrimental effect on the share prices of generic drug makers, as increasing competition is being priced in. 

Orphan drugs, are drugs that are designed for conditions with relatively small numbers of sufferers.  In the US this is defined as having less than 200,000 potential patients.  If orphan drug status is granted by the FDA, then 7 years marketing exclusivity is given as well as 50% tax credit on R&D, plus other grants.  The rising share of orphan drugs has also been a big driver of higher costs.  According to the EvaluatePharma Orphan Drug report 2017, the average cost per patient of orphan drugs is USD 140,000 vs USD 28,000 for non-orphan drugs.  The same report notes that orphan drug sales now make up nearly 20% of all drugs sales worldwide, up from 11% in 2008. 

There is an issue with the Orphan Drug Act, as highlighted by this blog post from the relatively new head of the FDA, Scott Gottlieb.  See here. (Note Scott Gottlieb stepped down as FDA head in April 2019) The post states that Orphan Drug status has been granted for many paediatric treatments.  There were pre-existing laws that were intended to stimulate paediatric drug studies.  However, the use of paediatric sub-groups to gain orphan status has actually led to less paediatric studies.  This would imply that the FDA is looking to greatly tighten up the issuance of Orphan Drug status.  Orphan Drug status has conveyed great benefits on the pharmaceutical industry.  Firstly, it allows drugs to be tested on smaller populations, greatly reducing costs.  Secondly, it has allowed some drugs to be granted orphan drug status, but then go on to be used for treatment of much wider patient population.  Thirdly, some large pharmaceutical companies have sought and received orphan drug status for the some of the best-selling drugs in the world.  These highly profitable drugs, then received favourable tax credits and exclusivity on marketing in this area for 7 years.  The Kaiser Health Network found that about a third of orphan drug approvals have either been repurposed for all users or have received multiple orphan drug status to market so different subsets of patients.  

Rising drug costs have been one cause of rising insurance premiums in the US, which have risen faster than income and inflation over the last 10 years.  The new head of the FDA is looking to foster competition to reverse these effects, and his efforts have already lead to weakness in generic pharmaceutical companies. Investors should exercise caution with branded pharmaceutical companies. 

Tyler Durden Thu, 09/07/2023 - 06:30

Read More

Related Topics:
Continue Reading

International

United Airlines adds new flights to faraway destinations

The airline said that it has been working hard to "find hidden gem destinations."

Published

2 hours ago

on

March 8, 2024

By

Since countries started opening up after the pandemic in 2021 and 2022, airlines have been seeing demand soar not just for major global cities and popular routes but also for farther-away destinations.

Numerous reports, including a recent TripAdvisor survey of trending destinations, showed that there has been a rise in U.S. traveler interest in Asian countries such as Japan, South Korea and Vietnam as well as growing tourism traction in off-the-beaten-path European countries such as Slovenia, Estonia and Montenegro.

Related: 'No more flying for you': Travel agency sounds alarm over risk of 'carbon passports'

As a result, airlines have been looking at their networks to include more faraway destinations as well as smaller cities that are growing increasingly popular with tourists and may not be served by their competitors.

The Philippines has been popular among tourists in recent years.

Shutterstock

United brings back more routes, says it is committed to 'finding hidden gems'

This week, United Airlines  (UAL)  announced that it will be launching a new route from Newark Liberty International Airport (EWR) to Morocco's Marrakesh. While it is only the country's fourth-largest city, Marrakesh is a particularly popular place for tourists to seek out the sights and experiences that many associate with the country — colorful souks, gardens with ornate architecture and mosques from the Moorish period.

More Travel:

"We have consistently been ahead of the curve in finding hidden gem destinations for our customers to explore and remain committed to providing the most unique slate of travel options for their adventures abroad," United's SVP of Global Network Planning Patrick Quayle, said in a press statement.

The new route will launch on Oct. 24 and take place three times a week on a Boeing 767-300ER  (BA)  plane that is equipped with 46 Polaris business class and 22 Premium Plus seats. The plane choice was a way to reach a luxury customer customer looking to start their holiday in Marrakesh in the plane.

Along with the new Morocco route, United is also launching a flight between Houston (IAH) and Colombia's Medellín on Oct. 27 as well as a route between Tokyo and Cebu in the Philippines on July 31 — the latter is known as a "fifth freedom" flight in which the airline flies to the larger hub from the mainland U.S. and then goes on to smaller Asian city popular with tourists after some travelers get off (and others get on) in Tokyo.

United's network expansion includes new 'fifth freedom' flight

In the fall of 2023, United became the first U.S. airline to fly to the Philippines with a new Manila-San Francisco flight. It has expanded its service to Asia from different U.S. cities earlier last year. Cebu has been on its radar amid growing tourist interest in the region known for marine parks, rainforests and Spanish-style architecture.

With the summer coming up, United also announced that it plans to run its current flights to Hong Kong, Seoul, and Portugal's Porto more frequently at different points of the week and reach four weekly flights between Los Angeles and Shanghai by August 29.

"This is your normal, exciting network planning team back in action," Quayle told travel website The Points Guy of the airline's plans for the new routes.

Read More

Continue Reading

International

Walmart launches clever answer to Target’s new membership program

The retail superstore is adding a new feature to its Walmart+ plan — and customers will be happy.

Published

2 hours ago

on

March 8, 2024

By

It's just been a few days since Target  (TGT)  launched its new Target Circle 360 paid membership plan. 

The plan offers free and fast shipping on many products to customers, initially for $49 a year and then $99 after the initial promotional signup period. It promises to be a success, since many Target customers are loyal to the brand and will go out of their way to shop at one instead of at its two larger peers, Walmart and Amazon.

Related: Walmart makes a major price cut that will delight customers

And stop us if this sounds familiar: Target will rely on its more than 2,000 stores to act as fulfillment hubs. 

This model is a proven winner; Walmart also uses its more than 4,600 stores as fulfillment and shipping locations to get orders to customers as soon as possible.

Sometimes, this means shipping goods from the nearest warehouse. But if a desired product is in-store and closer to a customer, it reduces miles on the road and delivery time. It's a kind of logistical magic that makes any efficiency lover's (or retail nerd's) heart go pitter patter. 

Walmart rolls out answer to Target's new membership tier

Walmart has certainly had more time than Target to develop and work out the kinks in Walmart+. It first launched the paid membership in 2020 during the height of the pandemic, when many shoppers sheltered at home but still required many staples they might ordinarily pick up at a Walmart, like cleaning supplies, personal-care products, pantry goods and, of course, toilet paper. 

It also undercut Amazon  (AMZN)  Prime, which costs customers $139 a year for free and fast shipping (plus several other benefits including access to its streaming service, Amazon Prime Video). 

Walmart+ costs $98 a year, which also gets you free and speedy delivery, plus access to a Paramount+ streaming subscription, fuel savings, and more. 

An employee at a Merida, Mexico, Walmart. (Photo by Jeffrey Greenberg/Universal Images Group via Getty Images)

Jeff Greenberg/Getty Images

If that's not enough to tempt you, however, Walmart+ just added a new benefit to its membership program, ostensibly to compete directly with something Target now has: ultrafast delivery. 

Target Circle 360 particularly attracts customers with free same-day delivery for select orders over $35 and as little as one-hour delivery on select items. Target executes this through its Shipt subsidiary.

We've seen this lightning-fast delivery speed only in snippets from Amazon, the king of delivery efficiency. Who better to take on Target, though, than Walmart, which is using a similar store-as-fulfillment-center model? 

"Walmart is stepping up to save our customers even more time with our latest delivery offering: Express On-Demand Early Morning Delivery," Walmart said in a statement, just a day after Target Circle 360 launched. "Starting at 6 a.m., earlier than ever before, customers can enjoy the convenience of On-Demand delivery."

Walmart  (WMT)  clearly sees consumers' desire for near-instant delivery, which obviously saves time and trips to the store. Rather than waiting a day for your order to show up, it might be on your doorstep when you wake up. 

Consumers also tend to spend more money when they shop online, and they remain stickier as paying annual members. So, to a growing number of retail giants, almost instant gratification like this seems like something worth striving for.

Related: Veteran fund manager picks favorite stocks for 2024

Read More

Continue Reading

Government

President Biden Delivers The “Darkest, Most Un-American Speech Given By A President”

President Biden Delivers The "Darkest, Most Un-American Speech Given By A President"

Having successfully raged, ranted, lied, and yelled through…

Published

5 hours ago

on

March 8, 2024

By

President Biden Delivers The "Darkest, Most Un-American Speech Given By A President"

Having successfully raged, ranted, lied, and yelled through the State of The Union, President Biden can go back to his crypt now.

Whatever 'they' gave Biden, every American man, woman, and the other should be allowed to take it - though it seems the cocktail brings out 'dark Brandon'?

Tl;dw: Biden's Speech tonight ...

  • Fund Ukraine.

  • Trump is threat to democracy and America itself.

  • Abortion is good.

  • American Economy is stronger than ever.

  • Inflation wasn't Biden's fault.

  • Illegals are Americans too.

  • Republicans are responsible for the border crisis.

  • Trump is bad.

  • Biden stands with trans-children.

  • J6 was the worst insurrection since the Civil War.

(h/t @TCDMS99)

Tucker Carlson's response sums it all up perfectly:

"that was possibly the darkest, most un-American speech given by an American president. It wasn't a speech, it was a rant..."

Carlson continued: "The true measure of a nation's greatness lies within its capacity to control borders, yet Bid refuses to do it."

"In a fair election, Joe Biden cannot win"

And concluded:

“There was not a meaningful word for the entire duration about the things that actually matter to people who live here.”

Victor Davis Hanson added some excellent color, but this was probably the best line on Biden:

"he doesn't care... he lives in an alternative reality."

*  *  *

Watch SOTU Live here...

*   *   *

Mises' Connor O'Keeffe, warns: "Be on the Lookout for These Lies in Biden's State of the Union Address." 

On Thursday evening, President Joe Biden is set to give his third State of the Union address. The political press has been buzzing with speculation over what the president will say. That speculation, however, is focused more on how Biden will perform, and which issues he will prioritize. Much of the speech is expected to be familiar.

The story Biden will tell about what he has done as president and where the country finds itself as a result will be the same dishonest story he's been telling since at least the summer.

He'll cite government statistics to say the economy is growing, unemployment is low, and inflation is down.

Something that has been frustrating Biden, his team, and his allies in the media is that the American people do not feel as economically well off as the official data says they are. Despite what the White House and establishment-friendly journalists say, the problem lies with the data, not the American people's ability to perceive their own well-being.

As I wrote back in January, the reason for the discrepancy is the lack of distinction made between private economic activity and government spending in the most frequently cited economic indicators. There is an important difference between the two:

  • Government, unlike any other entity in the economy, can simply take money and resources from others to spend on things and hire people. Whether or not the spending brings people value is irrelevant

  • It's the private sector that's responsible for producing goods and services that actually meet people's needs and wants. So, the private components of the economy have the most significant effect on people's economic well-being.

Recently, government spending and hiring has accounted for a larger than normal share of both economic activity and employment. This means the government is propping up these traditional measures, making the economy appear better than it actually is. Also, many of the jobs Biden and his allies take credit for creating will quickly go away once it becomes clear that consumers don't actually want whatever the government encouraged these companies to produce.

On top of all that, the administration is dealing with the consequences of their chosen inflation rhetoric.

Since its peak in the summer of 2022, the president's team has talked about inflation "coming back down," which can easily give the impression that it's prices that will eventually come back down.

But that's not what that phrase means. It would be more honest to say that price increases are slowing down.

Americans are finally waking up to the fact that the cost of living will not return to prepandemic levels, and they're not happy about it.

The president has made some clumsy attempts at damage control, such as a Super Bowl Sunday video attacking food companies for "shrinkflation"—selling smaller portions at the same price instead of simply raising prices.

In his speech Thursday, Biden is expected to play up his desire to crack down on the "corporate greed" he's blaming for high prices.

In the name of "bringing down costs for Americans," the administration wants to implement targeted price ceilings - something anyone who has taken even a single economics class could tell you does more harm than good. Biden would never place the blame for the dramatic price increases we've experienced during his term where it actually belongs—on all the government spending that he and President Donald Trump oversaw during the pandemic, funded by the creation of $6 trillion out of thin air - because that kind of spending is precisely what he hopes to kick back up in a second term.

If reelected, the president wants to "revive" parts of his so-called Build Back Better agenda, which he tried and failed to pass in his first year. That would bring a significant expansion of domestic spending. And Biden remains committed to the idea that Americans must be forced to continue funding the war in Ukraine. That's another topic Biden is expected to highlight in the State of the Union, likely accompanied by the lie that Ukraine spending is good for the American economy. It isn't.

It's not possible to predict all the ways President Biden will exaggerate, mislead, and outright lie in his speech on Thursday. But we can be sure of two things. The "state of the Union" is not as strong as Biden will say it is. And his policy ambitions risk making it much worse.

*  *  *

The American people will be tuning in on their smartphones, laptops, and televisions on Thursday evening to see if 'sloppy joe' 81-year-old President Joe Biden can coherently put together more than two sentences (even with a teleprompter) as he gives his third State of the Union in front of a divided Congress. 

President Biden will speak on various topics to convince voters why he shouldn't be sent to a retirement home.

According to CNN sources, here are some of the topics Biden will discuss tonight:

  • Economic issues: Biden and his team have been drafting a speech heavy on economic populism, aides said, with calls for higher taxes on corporations and the wealthy – an attempt to draw a sharp contrast with Republicans and their likely presidential nominee, Donald Trump.

  • Health care expenses: Biden will also push for lowering health care costs and discuss his efforts to go after drug manufacturers to lower the cost of prescription medications — all issues his advisers believe can help buoy what have been sagging economic approval ratings.

  • Israel's war with Hamas: Also looming large over Biden's primetime address is the ongoing Israel-Hamas war, which has consumed much of the president's time and attention over the past few months. The president's top national security advisers have been working around the clock to try to finalize a ceasefire-hostages release deal by Ramadan, the Muslim holy month that begins next week.

  • An argument for reelection: Aides view Thursday's speech as a critical opportunity for the president to tout his accomplishments in office and lay out his plans for another four years in the nation's top job. Even though viewership has declined over the years, the yearly speech reliably draws tens of millions of households.

Sources provided more color on Biden's SOTU address: 

The speech is expected to be heavy on economic populism. The president will talk about raising taxes on corporations and the wealthy. He'll highlight efforts to cut costs for the American people, including pushing Congress to help make prescription drugs more affordable.

Biden will talk about the need to preserve democracy and freedom, a cornerstone of his re-election bid. That includes protecting and bolstering reproductive rights, an issue Democrats believe will energize voters in November. Biden is also expected to promote his unity agenda, a key feature of each of his addresses to Congress while in office.

Biden is also expected to give remarks on border security while the invasion of illegals has become one of the most heated topics among American voters. A majority of voters are frustrated with radical progressives in the White House facilitating the illegal migrant invasion. 

It is probable that the president will attribute the failure of the Senate border bill to the Republicans, a claim many voters view as unfounded. This is because the White House has the option to issue an executive order to restore border security, yet opts not to do so

Maybe this is why? 

While Biden addresses the nation, the Biden administration will be armed with a social media team to pump propaganda to at least 100 million Americans. 

"The White House hosted about 70 creators, digital publishers, and influencers across three separate events" on Wednesday and Thursday, a White House official told CNN. 

Not a very capable social media team... 

The administration's move to ramp up social media operations comes as users on X are mostly free from government censorship with Elon Musk at the helm. This infuriates Democrats, who can no longer censor their political enemies on X. 

Meanwhile, Democratic lawmakers tell Axios that the president's SOTU performance will be critical as he tries to dispel voter concerns about his elderly age. The address reached as many as 27 million people in 2023. 

"We are all nervous," said one House Democrat, citing concerns about the president's "ability to speak without blowing things."

The SOTU address comes as Biden's polling data is in the dumps. 

BetOnline has created several money-making opportunities for gamblers tonight, such as betting on what word Biden mentions the most. 

As well as...

We will update you when Tucker Carlson's live feed of SOTU is published. 

Tyler Durden Fri, 03/08/2024 - 07:44

Read More

Continue Reading

Trending