Diablo,

Your assumption about the laser surgery COULD be correct. However, it isn't NECESSARILY correct. The equipment and training for laser surgery is expensive and has to be worked off as a business cost. This takes time to pay off for each machine in the practice and contributes to the cost of the procedure. In addition there is routine maintenance, upgrades for new technology, additional training for new techniques, etc. All of which cost more money.

Translation: I've got mine, baby

#18 | Posted by nullifidian at 2009-08-30 11:18 AM

Isn't it the Left that is always saying they don't understand why the Right votes against their best interests. Now you say this.

Make up your mind. Pick an argument and stick with it. Are the collective Right selfish (I've got mine), or not (voting against their interests)?

This ideological schizophrenia from the Left is dizzying in its absurdity.

Well, the GOP had the option of saving a few hundred billion on pharmaceuticals when they shoved through Medicare Part D but decided to make it illegal to negotiate prices.

Bullshit. Negotiations are NOT illegal.

What the Democrats never tell you in this talking point is that drug prices are ALREADY heavily negotiated in Medicare Part D... just not by the government. Instead it is negotiated by their Part D private insurance plans.

Fierce Price Negotiation

Medicare beneficiaries already benefit from drug prices that have been fiercely negotiated by their Part D private insurance plans.

"We are seeing large-scale negotiations with drug manufacturers, but they are conducted by private drug plans, not by the government," Michael Leavitt, U.S. Secretary of Health and Human Services and the president's point person in opposing the move toward government negotiations, told The New York Times on November 13.

Those insurance companies come to the table with phenomenal negotiating capabilities. About 75 percent of the 38 million Medicare beneficiaries are covered by just 12 Part D plans. That means a few large carriers dominate the market.

In addition to senior citizens, those carriers also provide coverage for millions of people under the age of 65 through the private sector. That's clout.

I couldn't agree more, but that is hardly an endorsement of the present system nor an argument against reform...

You chose to only address and focus your response only on the last of of the five myths covered in that article. Why did you ignore the other ones?

Yes, so fierce are the price negotiations that they cost a hell of a lot more than they do in Canada.

While in Canada they have actual price control, in the US we are raped.

Canada has lower prices because they CAP prices. That is the opposite of negotiating. Instead it is DICTATING. The problem is this: If the cap is set too low then the drug company is forced to raise prices elsewhere (where they aren't capped) to avoid a loss.

This is the top 10 on the 2008 Fortune 500 list of the most profitable industries. Note that 10% - 15% is usually considered an average net profit margin.

1 Network and Other Communications Equipment....28.8%
2 Mining, Crude-Oil Production..................23
.8%
3 Pharmaceuticals...............
................15.8%
4 Medical Products and Equipment................15.2%
5 Oil and Gas Equipment, Services...............13.7%
6 Commercial Banks.........................
.....12.6%
7 Railroads.....................
................12.4%
8 Entertainment.................
................12.4%
9 Insurance: Life, Health (stock)...............10.6%
10 Household and Personal Products..............10.2%

As you can see, the Pharmaceutical industry is doing well, but not extraordinary. On average they are only making $0.158 on every $1 in net profit (what is left after all expenses).

The capping you are talking about which Canada engages in reduces that net profit margin. The only reason remains in the average range is BECAUSE prices are inflated in the US to make up for the loss.

Or you can just keep listening to the noise coming out of Lush Rimjobs mouth. Either or.

I don't listen to Rush. Period. I don't have anything against him per se, but he is an entertainer, and one I am not particularly interested in.

I form my opinions by actually looking at facts, and not just the misleading ones like the apples and oranges comparison you provided. Your examples are crude and uninformative since they don't provide the context of methods of price reduction, company profits, etc. not to mention the cherry picking of examples.

Sorry for the formatting on the table in my last post. Fortunately you can still see the info.

Ugh... forgot to include the link to the Fortune 500 list. Here it is:

Reported profits do not really tell us how much the cost of the drugs really are compared to how much we pay for them.

True. For that you would need the Gross Profit Margin.

Advertising, which illegal in most nations costs a certain percentage and so do huge salaries for executives but those numbers are "costs" deducted before profit is computed.

Again, this is true. However the proposals being offered don't attempt to do the obvious thing (which I would actually support) and ban drug advertising except in medical industry publications. This would go a ways to reducing costs. Sadly, all that the Democrats keep bringing up is profits which is demonstratively a bogus argument, and all they propose as a fix is capping or similar methods that will actually only cause problems because it doesn't address the root of the issue.

If Canada's "caps" on drug prices were too low the drug companies would just not sell them the drugs.

Not true. I truly don't mean this as an insult Danni, but you really do need to take some business courses. Your mistake isn't an unreasonable mistake to make, but it is a mistake none-the-less.

What the drug companies accomplish by selling out at lower prices in capped countries in increase the volume of sales. Then by raising the prices here to make up for the lost profit margins in the capped areas they come out ahead as if the price were uniform everywhere.

We should be trying to get the absolute lowest prices we could and we should not worry about the poor drug companies who have been ripping us off for years.

Danni, again you are resorting to hyperbole and debunked rhetoric. I have just demonstrated that the companies are making reasonable profit margins and shown where the real problem lies.

Unfortunately the countries that cap prices are basically saying "Who gives a shit about you as long as we get ours". Their cap raises our prices to compensate just so the company can make a reasonable profit. Your suggestion of "negotiation" which ultimately means capping will damage the industry. This will only have the effect of reducing innovation and quality.

The best way to bring down prices is address the advertising issue. This will create a shakeup in the industry and many things would have to change. Furthermore I would restrict or ban physician partnerships.

The point being, your idea of "negotiation" is going to simply cut the throat of the industry, and ultimately the consumer.

it is a consumer/corporation divide and the corporations are definitely winning.

The net profit margins say otherwise since that is a measure of profit after all expenses. The profit margins are average for the pharmaceutical industry as I have shown.

Danni, after some careful thought I decided to create an example to illustrate the point of how selling at a loss in one place and raising the price in another to compensate can increase the over-all profits.

Say I have a company that makes Widgets (you gotta love generic business class examples). My total costs in production, advertising, etc. equals out to $1.50.

I start selling to Store A at $2.00 per unit giving me a $0.50 net profit. That is a 33.3% markup or 25% net profit margin. I sell 100 units to Store A for $200 and my total profits are $50.

I want to increase my business so I approach Store B. They say they will refuse to buy unless I sell to them for $1.50 which means I make nothing. I go ahead with the deal taking the hit at Store B. They buy 100 units for $150 dollars and my total profits are $0. That is a 0% markup and 0% profit margin.

To compensate, I raise the price to Store A by $0.50 for a total of $2.50 per unit. They grumble, but continue to buy 100 units for $250.

All totaled, my expenditures were $300 and my sales were $400 for a profit of $100. Even though I made no profit in one of my markets, my over all net profit margin didn't budge and remains at 25%.

Notice that if I had only sold in the one market I would have only made $50 of profit, but by expanding, taking the hit of capped prices and compensating elsewhere I have doubled my total profits.

That is what is happening to us. The thing is, the drug industry not making an unfair net profit margin. However some markets are capping prices forcing them to raise elsewhere to compensate.

#63 | Posted by vernon at 2009-08-31 08:35 PM

Thanks. Originally the negotiation examples gave me pause, but after doing some research and some fact checking it became obvious there were major holes in the argument. Of course having done well (Dean's List and President's List) in my college business courses years ago helped in figuring out what was really going on.

I know Danni is extremely partisan more often than not, however I have seen her admit she is wrong from time to time. I will give her the benefit of the doubt and let her make of it what she will.

I am not naive though, she does seem at times to be Scotchgard treated to be fact-resistant.