A New Pricing Game for Drugmakers in Europe

BusinessWeek: "AstraZeneca (AZN) recently set the price of its new Brilique blood thinner, which it hopes will become its next blockbuster drug, at €1.69 ($2.38) per pill in Germany. Whether it will be allowed to maintain that price in Europe's largest drug market remains to be seen. The British drugmaker, insurers, and German regulators are bracing for a yearlong battle over the medicine's value, the first test of a new pricing law in Europe's biggest economy.

What makes the legislation so wrenching for Big Pharma is that drug companies previously needed to show only that a drug was safe and worked better than a placebo. Now the onus is on companies to prove not just that a drug works but that it is actually worth more than older therapies. If a drugmaker can't convince German regulators that its compound has greater efficacy or additional benefits, then it cannot charge more than rival medicines already on the market.

Cost Benefit Analysis And Intergenerational Choices

A crew of retired Japanese engineers is putting together a team of old people to do repair and cleanup work in the extreme radiation at the earthquake-damaged Fukushima plant:

Volunteering to take the place of younger workers at the power station is not brave, Mr Yamada says, but logical.  Mr Yamada has been getting back in touch with old friends via e-mail and even messages on Twitter, “I am 72 and on average I probably have 13 to 15 years left to live,” he says. “Even if I were exposed to radiation, cancer could take 20 or 30 years or longer to develop. Therefore us older ones have less chance of getting cancer.”

This is the sort of utilitarian argument that economists make when doing cost-benefit analysis using QALYs. Most non-economists (unlike Spock from Star Trek) are uncomfortable with this kind of logic.  But this is one of the main focuses of health economics.  A 2011 conference said that

Health economics is concerned with the rational allocation of scarce resources in order to optimize health outcomes. Its core methodology revolves around cost-effectiveness evaluation, and its most celebrated invention is the QALY, which allows decision-makers to evaluate the costs and benefits of alternative uses of resources from the perspective of a healthcare system or society as a whole.  But in the United States, cost-effectiveness and the QALY play almost no role in decision-making, and the very idea of rational allocation of scarce healthcare resources is politically explosive.

Yglesias said that elderly Japanese volunteering to work in radioactivity is

...a reminder that America’s current policy of financing the health care needs of elderly people much more generously than we finance the needs of the non-elderly is slightly insane.

The US government invests far more in medical care for the elderly than on the young who get a much higher benefit/cost ratio.  American senior citizens are the only age demographic that gets universal socialized health insurance and it is extremely popular. Why does America spend so much more government revenues on the elderly rather than on anyone else?  Medicaid is aimed at the poor, but its spending also goes disproportionately to the elderly too.