by Michael Keane
Recently, there was a meme that asked why methadone is able to be provided for free while cancer drugs cost a fortune. With the healthcare debate in full force, situations that involve cost and pricing are more likely to find the spotlight. There are some reasons that are part of why this type of action happens and some actions that can take place in order to assist in this issue.
On the methadone side of the equation, it is perceptively better for the government to get addicts back to a certain level of health. The drug also was created in the 1930’s and 1940’s and therefore the production cost is quite low. But it is interesting to see how the massive rise in opioid deaths (quadrupled since 1999)1 has caused the government to pay for methadone and other opioid drugs at a much higher level. This rise in cost has been noticed by hospitals and the general public with some starting to wonder if their is a better use of funds for rehab drugs, namely not using what can only be considered a proliferation of opioid treatment drugs.
On the cancer side, there are two big areas (of many) that can be addressed. The first major comparison is the realization that, unlike methadone, it takes nearly a fortune to get any successful cancer drug to the market. There are also many drugs which fortunes are spent on that never get to the market. To initially recoup these costs, prices are generally set fairly high. But because the public is becoming more and more aware of the pricing, there are efforts within the government and drug manufacturers to work on the time a drug can get to market. This will affect the cost structure for the companies that will hopefully be passed down to the patient.
The second, is that investors like you and me demand a certain return on our capital investment in the company creating the newest and greatest cancer drug. Yes, part of the fault belongs to us. If you, like me, have a 401k or pension level retirement account, the likelihood that ownership of shares in the drug companies that charge these high prices is very high. We as investors are either ignorant to or have recognized and demanded through expectation of higher stock prices and dividends that the companies charge high prices for their cancer drugs. If you are a fund manager, please take note. The wild thing is that the unfortunate circumstance of the growth in profits from the increased pricing is in the end hurting our financial value overall. This is due to the fact that the personal cost of the drugs are overwhelming the growth in profits we see in our portfolios. In fact, the majority of the positive effect from the higher prices continues to be given to the executives of these companies. You regularly hear of the millions that the executives make in bonuses while you and I might make an extra few dollars per year in dividends. This process isn’t working.
One simple way to change to pricing structure is stop owning the shares of the companies charging these higher prices. If this done on a massive scale (aka retirement fund, pension fund), and they no longer have the capital to build their drug database, changes in pricing can occur. Just last year Mylan was discovered to basically fleece customers with EpiPen pricing. Once it was found out and basically only when funds started looking at selling shares, the company moved to better align pricing. Another is to create a list of highest priced drugs. If society made a public list of the most egregiously priced drugs, the companies might pay attention and lower prices. Getting this to work will take work. But if we are truly fighting for our families and friends, this might not be a bad action to take up.
Thank you
2- Wikipedia/methadone
