SciGuy: Drug Costs

[anonymous]

When asked a question pertaining to increasing drug prices, Eli Lilly CEO John Lechleiter's response was:

“Over many years the percentage that we spend in healthcare on medicines has remained about the same. It’s currently about 12 or 13%...".​

Its important vet the accuracy of this statement, in light of the following:

1. Healthcare cost growth has far outpaced the inflation rate (figure below)
2. Wage growth has been essentially flat for years
   
3. Not that long ago, Rx costs were touted as being <10% of healthcare costs, so indeed, even within the already soaring healthcare cost spiral, drug costs have increased 20% to 30% (according to John's numbers).

Many might construe John's answer as evasive, almost misleading.

Throw in on top of that all the expired/expiring patents, and the need to make up that revenue somehow (in a vacuum of new drug approvals) ... soon CEO's will be touting that Rx costs are still roughly the same, about 15% of total healthcare dollars.

http://www.foxbusiness.com/business-leaders/2015/10/22/eli-lilly-ceo-our-drug-prices-are-fair/

 

[anonymous]

When asked a question pertaining to increasing drug prices, Eli Lilly CEO John Lechleiter's response was:

“Over many years the percentage that we spend in healthcare on medicines has remained about the same. It’s currently about 12 or 13%...".​

Its important vet the accuracy of this statement, in light of the following:

1. Healthcare cost growth has far outpaced the inflation rate (figure below)
2. Wage growth has been essentially flat for years
   
3. Not that long ago, Rx costs were touted as being <10% of healthcare costs, so indeed, even within the already soaring healthcare cost spiral, drug costs have increased 20% to 30% (according to John's numbers).

Many might construe John's answer as evasive, almost misleading.

Throw in on top of that all the expired/expiring patents, and the need to make up that revenue somehow (in a vacuum of new drug approvals) ... soon CEO's will be touting that Rx costs are still roughly the same, about 15% of total healthcare dollars.

http://www.foxbusiness.com/business-leaders/2015/10/22/eli-lilly-ceo-our-drug-prices-are-fair/

Just amazing how truth gets distorted in the corridors of big pharma corporate centers, not to mention the studios of CNBC. I would venture to say that places like Denmark not only minimize health care costs, but also generate some taxpayer relief, by instituting a simple "fat tax" which helps to eliminate the bulk of obesity-related conditions such as diabetes, cancer, and of course, obesity itself. What are your thoughts, patent guy?

Fine job of culling the salient data here and possibly exposing what might be regarded in less overnourished circles as corporate hyperbole and rationalization for more government handouts.

 

[anonymous]

Pharma pricing exists in a vortex of distortion--no free market forces exist. Endless begging at the public trough for tax abatements and market restrictions, only to then send jobs and revenue offshore. The biggest expense is salary cashouts for bldg 74 dwellers. Cut there first. End government subsidies that perpetuate the government/Pharma complex. Allow true market forces to take hold.

 

[anonymous]

Pharma pricing exists in a vortex of distortion--no free market forces exist. Endless begging at the public trough for tax abatements and market restrictions, only to then send jobs and revenue offshore. The biggest expense is salary cashouts for bldg 74 dwellers. Cut there first. End government subsidies that perpetuate the government/Pharma complex. Allow true market forces to take hold.

I was surprised JL didn't mention that LLY raises drug prices each quarter according to how it plans to meet earnings. At least that is what it did for Cymbalta. Need another $15 million top line revenue...raise Cymbalta price as needed.

 

[anonymous]

Pharma pricing exists in a vortex of distortion--no free market forces exist. Endless begging at the public trough for tax abatements and market restrictions, only to then send jobs and revenue offshore. The biggest expense is salary cashouts for bldg 74 dwellers. Cut there first. End government subsidies that perpetuate the government/Pharma complex. Allow true market forces to take hold.

Could not agree more. Cut the generous public support, and let the company operate as a legitimate business for a change. Look at Silicon Valley, you don't get all of these special deals from state and local government --- just the opposite!

I really don't get it... just drive along any Indiana interstate ("Crossroads of America") and be amazed at the shoddy construction, waysides that smell like a sewer, constant visual billboard ugliness.... this place needs to get cleaned up - put the tax money where it belongs: schools, parks, roads, urban revitalization, not lavish corporate subsidies.

 

[anonymous]

I was surprised JL didn't mention that LLY raises drug prices each quarter according to how it plans to meet earnings. At least that is what it did for Cymbalta. Need another $15 million top line revenue...raise Cymbalta price as needed.

Just how are revenues lately? Not sure if it's even possible to raise the prices of diabetes drugs, too much competition.... of course, we can always license Sanofi's portfolio if we are really really really nice to them.