Crazy idea: all pharmaceutical research should be publicly funded and publicly-owned. No private ownership of drug patents, period.
"But this will disincentive research!" Maybe. Or, tax people more in order to fund the research. The tax revenue would go directly to researcher salary, equipment, expenses. Even a large tax increase can't be worse than today, where people have to pay huge $$$ anyway, of which a large cut goes to executives, shareholders, the marketing machine, etc.
I believe by and large, people that go into pharma research do it because they're interested in the science and the cause, not because of any privatized profit motivation. Which is to say, people will still go to grad school in the same fields and continue carrying on the research work (so long as the facilities and equipment is available, which we can solve). The downside is that many senior executives would be displaced or be forced to accept lower compensation.
Someday in the distant future, people will look back and be as shocked that private companies profited from medicine, as we're shocked today about the for-profit firefighters in ancient Rome.
The reality is that governments have demonstrated limited interest in effective biomedical R&D. Europe does not invest proportional to their population or economy, their governments are happy to outsource it to the US (and Asian) private sector. And there is the longstanding issue that what governments do fund is biased by political fashion and not the areas of research that will maximize benefit. There has been a huge growth in private foundations that fund biomedical research that governments should fund but do not.
Also, pharma researchers will accept massive pay cuts "for the science and the cause" as soon as Silicon Valley software engineers take massive pay cuts "to make the world a better place". I have many friends in biotech and they are as interested in maximizing their paycheck as software engineers, it would be naive to expect anything different.
You're missing the part of the picture where private interests have lobbied to strangle public efforts consistently to make sure they look good by comparison.
You're also missing the part where most research is done via public grants and only the translational part is done by private industry. I looked up the profits compared to R&D at a big phrama company, and the dividends paid to shareholders were about on par. Their bellyaching is vastly overstated.
I'm a software engineer, and I took a 50%+ paycut to make the world a better place. One more anecdata vs. yours.
Many software developers do take massive pay cuts to make the world a better place. People like Linus Torvalds could be much, much wealthier if they wanted to. Jason Scott is probably the single most important digital archivist alive right now; he's currently running a podcast to help himself get out of debt while he works for a company that doesn't offer a pension plan.
I'm not just talking about fringe developers either[0]. A huge portion of our modern tech industry is built on the backs of people who made a conscious choice to prioritize public good over their own good.
I've nothing against developers who make money, but my takeaway from the tech industry has actually been that pure profit-driven motivations are simply not enough to build sustainable, resilient technology. I really hope it's not naive to expect at least some small portion of the population to be charitable because my experience has been that it's often the charitable people who end up getting crap done.
Pharma research may be different, because that comes with equipment costs. You need access to that equipment. But if that's the case, the software industry is maybe a bad example to compare it to.
Generally agreed on government funding though; maybe I'm too pessimistic but I just can't see the US government investing serious effort into drug research.
Don’t look at anecdotes, look at the numbers. How many brilliant Stanford graduates are going to work for the advertising industry every year instead of something that’ll make the world a better place? There is no correlation between brilliance and altruism.
> There is no correlation between brilliance and altruism.
That's not really relevant to what was being discussed above. The question isn't whether smart people are altruistic, it's whether there's a correlation between altruism and effectiveness. The question is whether charitable individuals are capable of building better products than profit-driven individuals.
And given that depending on who you ask anywhere from around 60-90% of modern businesses run Open Source software, it does appear that statistically (not just anecdotally) there are parts of the tech industry that are better served by non-commercial, charitable entities. If that wasn't the case, businesses would use closed source software instead.
When Heartbleed came out, nobody suggested "well, maybe we should just all switch to a proprietary for-profit solution instead of using SSL," because a good, proprietary, for-profit alternative doesn't exist and probably never will. It's just not the type of technology that Silicon Valley is good at building.
Note that this is something that seems obvious in hindsight, but it was up for debate early on in the software industry. Companies like Microsoft went so far as to compare Open Source to communism. There was a strong belief that people opening up licenses, giving away software for free, and even (the horror) requiring other licensees to give their software away for free would remove any incentive for businesses to innovate and that in the long run it would strangle new technologies.
Most open source development is done by for profit companies. Not through altruism, because software just happens to be an input into more profitable businsss activities. If Google licenses Android to smart phone manufacturers, maybe it gets $5-10 once every two years. But by giving it away for free and creating an Android user, Google makes that much every month.
The fact that many companies incorporate Open Source into their profit models does not diminish or remove the enormous number of unpaid, volunteer hours that have gone into those projects.
It's simplistic to the point of insulting to claim that the Free Software movement can be completely encapsulated by Capitalism. You have to ignore vast swaths of the history of the Internet, Linux, and the origins of Copyleft itself. You have to either ignore efforts by organizations like Mozilla or the Internet Archive, or claim that those efforts aren't important.
Richard Stallman's original announcement of GNU included the following message: "I consider that the golden rule requires that if I like a program I must share it with other people who like it. I cannot in good conscience sign a nondisclosure agreement or a software license agreement. So that I can continue to use computers without violating my principles, I have decided to put together a sufficient body of free software so that I will be able to get along without any software that is not free.
If I get donations of money, I may be able to hire a few people full or part time. The salary won't be high, but I'm looking for people for whom knowing they are helping humanity is as important as money."
This is the environment that Linux came out of - people who decided they cared about something more than they cared about money. You don't have to be an absolutist like Stallman, but you also can't pretend that absolutists like Stallman haven't played important roles in building our modern computing world.
It’s a huge flaw in thinking to assume that the money is going to “senior executives.” There are a thousand employees making $150,000 (costing the company $150 million) for every “senior executive” making $15 million. (This is, by the way, true at most companies. Apple computers wouldn’t be cheaper if you cut “senior executive” salaries.)
Back when the HIV epidemic started, President Reagan and his administration took the view that HIV is a deserved punishment from god for homosexuality and promiscuity. Now what are the chances that that administration would have invested even $1 in developing drugs for AIDS? Do we want to live in that kind of world?
It’s also a really glaring one, because so many people are affected and the private sector made such a huge improvement in the decades it took for public opinion to turn around.
I’d bet drugs for depression, sexually transmitted diseases like herpes, cervical cancer, etc., would be treated similarly.
You do that and in in a few decades, after a few rounds of negotiations, most of your research money will go to funding ex-researchers pensions. For an example, take a look at where California's tax revenues go.
In addition, public funding tends to more risk averse. Private industry generously rewards innovation. Public funding tends to reward not rocking the boat.
The drug industry is generally happier to develop new drugs against targets that are well established and for conditions that physicians are trained to prescribe for. That's why we are now at fifth-generation statins, and also why "first-in-class" compounds are so rare.
For something really new you need to find the target, devise an assay and make a case for use. It's a billion-dollar gamble. Statins on the other hand, they are well established.
A more correct statement would probably be: private industry sometimes generously rewards some innovation, as long as that innovation can be captured, monopolized, and monetized.
There are many innovations, both realized and that one can imagine, that would absolutely not be rewarded but would be nonetheless hugely significant in health and well-being.
As example, consider the whole “Is curing patients a sustainable business model?” question raised by a Goldman Sachs analyst. [1]
It’s clearly a market where large expenses are required to make progress. I’m thinking the discoveries should be made public goods through rewarding breakthroughs somehow. Or, devote some fraction of the National gdp to research. We’re talking at least the amount the market currently allocates, but preferably more.
> I’m thinking the discoveries should be made public goods through rewarding breakthroughs somehow.
Maybe the people who create new medicines could be given a temporary monopoly to recoup costs and make some money, and in exchange their research becomes part of the public domain? I'm just spitballing here, but something like that might work...
Public/Private hybrids are not uncommon. Let research universities and private drug companies compete for grants. The rub is to make it ok to fail, and reward treating causes not just symptoms.
You are right though, it does require some government intervention to incentivize long term gambles with huge up front costs. NASA and The Manhattan Project are no different. Spend lots of money now, knowing you wont reap benefits for years. Our current system of using temporary intellectual property ownership of the formula is broken.
Did Rome suffer from more fires than similar cities in that era? Something tells me it's the other way around...
On average, group behavior can best be studied when assuming average humans have selfish, rational motivations. It's possible to create incentives in the public sector but you can imagine it would be much like academia -- a focus on pushing out high volumes of papers, getting grants, and theoretical/laboratory breakthroughs without any consideration of bringing them to market.
Most of the breakthroughs in medicine used by countries around the world were invented in the US and originally held by US companies -- the US has effectively subsidized and enabled foreign socialized healthcare systems by being a global exporter of medical technology. So the US adopting a state run medical system would likely have an interesting effect on the global medicine market, in a way much different than any other country (i.e. a massive reduction in global progress).
Most people advocating that seem to think the US system is a failed example of a 'free marketplace,' which is an embarrassingly incorrect belief but a product of significant misinformation littering both sides of the argument these days. The US healthcare system is in most ways further from a free market than that of any other country I know of. First of all, we have universal healthcare but only for the elderly (medicare) and the poor (medicaid), which creates an artificial demand imbalance that pumps the prices up for non-participants in those programs, which is even worse than a singular universal system. Then look at the ridiculously overpowered IP law in the US (especially in pharmaceuticals), the oppressive occupational licensing (harder to become a doctor here than anywhere else so naturally we have an artificial shortage of people qualified to do mostly very basic things), FDA-imposed pharmaceutical monopolies, inability to opt-in to experimental treatment (which also means malpractice insurance is always a significant expense), amongst others. This is not a free market, and even if we adopted universal healthcare tomorrow, it does not fix all the other problems listed.
They are also not meant to do R&D. For one thing they don’t pay market rate, so their access to top talent is non-existent. For another, there’s no accountability and no “fear of death”, since the government essentially can’t run out of money. Why try to use resources wisely if you can just tax people, or if that doesn’t work, print more money, and thereby tax their children and grandchildren. No, I’d much rather this risk was compartmentalized.
Another issue is, you’re de facto giving the rest of the world a free ride on US taxpayer largesse. Even better free ride than what they’re getting now: paying a dime on the dollar for newest genetic drugs without spending any money on their development. I’d go along with that in the poor countries like India, but I see no reason whatsoever why I should be paying 5-6x as much as some dude in Western Europe, all while he tries to lecture me about their “free” healthcare. I’d much rather I paid less and they paid the same as me.
But there is a lot of beneficial R&D that, were governments not paying for it, would never have been done. Surely the kind of R&D that is beneficial but would never get done privately should be picked up by government? Without that, less modern computers, less modern aerospace, less modern medicine, less modern lots of things.
I would suggest anyone who is interested in reducing drug prices listen to this econtalk episode with Robin Feldman[0]. They discuss her book "Drug Wars how big pharma raises prices and keeps generics off the market"[1]
In the episode they discuss all sorts of shenanigans that pharmaceutical companies pull. If you want real reform you need to look at weak patents, eliminating "reverse payments" to generic companies, and obstruction to bioequivalence testing. Drug companies routinely manipulate the current laws, specifically Hatch-Waxman in order to stifle competition from generics.
I'm going to go on a bit of a rant. I agree blocking access to drugs for bioequvalence is bullshit. Drug companies can do it by claiming that the law doesn't allow them, but it's BS.
The reverse payments I see nothing wrong with. Imagine you're a drug company holding a patent. A generic company decides to try and invalidate it. You think there is a 50% chance they'll win. The generic company agrees.
You have two options: 1) spend a ton of lawyers and still possible lose, 2) go to the generic company and agree to let them produce the generic 5 years before patent expiration.
With the 2nd option, you're basically agreeing to split up the pie evenly rather than risking it all.
In every case where reverse payments are made, the drug goes generic earlier then if they went to court and got the patent upheld.
Eliminate reverse payments and what you're doing is making lawyers rich. In many cases the branded drug company would win and block generics for many more years than if a reverse payment was made.
the US actually has more generic drugs as a % of total rx than many OECD countries. Yes pharma companies actively try to protect patents in ways that try to game the system, but it's actually much harder to do than it used to be bc payers are much more aggressive / consolidated. The bigger issue is probably generic drug price inflation and the high cost of developing innovative drugs. Very hard to solve the latter without stifling innovation
Here’s the rub with developing something as important as a medicine. If it works, people often _need_ it to prolong their life or improve their health. What drug companies are selling... isn’t like what other companies are selling. We ought not look at it through our normal understanding of goods in a free market.
Take, for example, Sovaldi, a drug which cures Hepatits C. After discovering this drug and confirming its efficacy and safety, the next question should be, IMO: how fast can we possible scale production to quickly stop liver damage and cure those suffering. Instead we have Medicaid setting absurd rules (https://www.chlpi.org/wp-content/uploads/2013/12/Annals-of-I...) whereby sufferers must get sicker before they are eligible to be cured. That is seriously fucked up.
Edit: to be clear on why states must do this: Gilead Sciences is charging $84,000 for a course of treatment and there isn’t enough money to treat every patient. Gilead offers the same treatment in Egypt for $900. (https://www.reuters.com/article/us-hepatitis-egypt-gilead-sc...)
> If it works, people often _need_ it to prolong their life or improve their health. What drug companies are selling... isn’t like what other companies are selling.
It is very much like many other products. If you don't have food you will die of starvation, if you don't have shelter you will die of exposure, etc.
The real issue is drug patents. Nobody is complaining about the price of ibuprofen any more than they complain about the price of eggs. But the patent system is doing what it's supposed to here -- twenty years ago any patented drug didn't exist, and it nominally only exists now because the inventors judged it to be sufficiently profitable to conduct the research. If you make it less profitable, you'll get less research.
There is no drug research fairy. If you don't want the money to come from high insurance premiums that pay for high drug costs, it has to come from somewhere else. And just devising some other method (like taxes) of extracting the same money from the same general public isn't really going to change much.
That is around 90 Billion dollars. I'm not sure where you got that number exactly, but phrma member companies list their combined 2016 R&D expenditures at 65.3 billion[0] so it seems plausible. For context that is around the GDP of Slovakia or Sri Lanka. (65th and 66th biggest world economies)[1]
I don’t understand how comparing it to the GDP of small foreign countries adds context. The important context is what I stated: it’s about $300 per person. That means that it’s a very small portion of our ~$10,000/year per capita health care expenditures. Anyone who knows how much their health insurance costs per year can immediately see how much of that funds their share of pharma R&D. The answer will almost always be “not very much.”
I’m not sure how that’s related. My point is that pharma R&D is not a significant cause of high insurance premiums or high health care costs in general.
> My point is that pharma R&D is not a significant cause of high insurance premiums or high health care costs in general.
It's the same issue across the industry. There are patents on medical devices, diagnostic tests, imaging equipment, etc. It's a major source of costs. And nobody is claiming that it's the only one.
Pharma R&D itself is not a major source of costs. It’s around 2-3%. Sure, you could potentially make an improvement there, but its role in our massive health care costs is vastly overstated.
That is total healthcare expenditures including things like doctor/nurse/lab tech salaries, medical devices, administrative overhead, etc. The amount spent on pharma is ~$1K per capita.
Those companies charge exactly the same as the US companies when selling to the US. Much like US companies charge the same as European companies when selling to Europe.
> But drugs are produced in other countries, too, and they manage to do so without charging what US companies do.
It's a global market. Companies can develop drugs in other countries and recover a sizable chunk of their investment by selling in the US market.
In other words, the other countries aren't paying their fair share of the research costs, and that is causing a global underinvestment in medical research.
> We ought not look at it through our normal understanding of goods in a free market.
This is the biggest flaw in how we think about many important issues. Market economics isn’t something you decide to apply or not based on public policy. Instead, its the framework of actions and consequences against which you must determine public policy. If your policy is to have private companies develop and commercialize medicines, then you need to ensure functioning markets from drugs. That means avoiding antitrust issues, but also avoiding free-rider problems that result for drugs being easy to copy.
You can, of course, do something else, such as having the government pay to commercialize drugs. What you can’t do is eat your cake and have it too, by deciding that you can somehow “opt out” of market dynamics for industries you deem to be of public importance. It’s like saying that “supersonic flight is important, so we ought not to look at it through our normal understanding of aerodynamics.”
We don’t “get out of market economics.” We choose to find those things through government. But we’re still slaves to market forces. E.g. the government prices water too low and thus encourages waste of water resources.
My coworker's dad had this happen to him. He got Hep C through a blood transfusion for a routine surgery. The insurance company waited until he was almost dead before starting the treatment. Now his liver is in such bad shape that if he has any alcohol it will kill him. Ridiculous, especially since they were going to pay for it anyway.
Doctors should be the ones making the medical decisions, not the faceless employees working with spreadsheets at insurance companies. Our system is backwards and needs to be overhauled.
In a for profit company, the point of the people evaluating your policy against needed care is essentially to find ways to deny you as much care as possible. In a universal system, the motivations aren't organized around whether a profit will be made or not and so the public (rather than private) bureaucrats will at least not be actively trying to kill or otherwise immiserate you. As an additional check on their behavior, the organization is directly accountable to elected representatives, very unlike the private system.
And Charlie Gard would have disagreed with Stephen had the court not decided that he should die.
There is another high profile ALS sufferer in the US: Jason Becker, a super virtuoso guitarist popular in the 80s, tragically afflicted at the very peak of his ability. Still alive, still writing music, but can’t move anything but his eyes or breathe. No one sentenced him to death or anything.
He's lucky they let him live. Sometimes the insurance companies don't let you live. Yet idiots talk about how the government will decide who lives and who dies if we have universal healthcare. These same idiots are clearly not aware that companies are making such life and death decisions every day for their customers, placing profit above human life constantly.
This is the kind of society half of America wants to build, one where the value of human lives is much less than the value of corporate profits. Well, we're already there and it's some fucking disgusting shit indeed. It's really fucking nasty when the insurance company says we're not paying for your dad's hospital stay anymore despite what the doctors want and then he dies the first full day he's out of the hospital. Might as well just let all the murderers out of jail. I'm sure they would if someone could profit from the ensuing mayhem like insurance companies currently profit off of murder.
One possible solution: have the government buy the rights for cost + some preset mark up. Then make it a government program to produce and transmit. Could earn some serious well wishing abroad by making it available for cost/free for developing nations. That’s how to lead the world.
Medicaid should consider medical tourism. Sure it’s absurd to have to ship patients halfway around the world to literally take some medicine but it would be cost effective...
English patients in the south-west are already taking the trip across the channel for much quicker operation appointments that they'd get with the NHS. For the near future that won't come at an extra cost for the patients.
The free market solution would be to send your patients to Egypt to get treated. Ecnonomy class flight + drugs = $2000 (maybe $3000 from Hawaii).
The biggest issue with American health care is if you have something acute that needs immediate treatment. Then you're f*ed. But for 95% of non-acute cases, travel to Latin America, travel to Europe, travel to North Africa, or Asia and get the drugs + plane ticket at out of pocket prices lower than your co-pay.
I know this is ecologically terrible in terms of CO2, but it's what I would be doing in that case.
Of course the only reason Gilead feels comfortable charging $900 to Egypt is that they believe they have the market fairly well segmented. If that market segmentation where to disintegrate then the prices in Egypt would rapidly rise (and prices in the US would no doubt fall).
I spent several years stationed in Yuma, AZ, and a lot of people would come to Yuma to do just that. They can't afford a procedure in the US, or they're waitlisted to oblivion in Canada, so they fly into Yuma, take a shuttle across the border, and have it done in Algodones.
As always, you need to be smart, but people are willing to take the risk of complications if it means the difference between a modest expense and facing a medical bankruptcy.
The same thing applies with dental work. All of my wife's root canals were done in Mexico.
One of the biggest reasons is that the US essentially subsidizes drugs for many other countries, such as Canada, that impose price controls, and threaten to allow other manufacturers to provide the drugs in their countries if the companies don't accept the imposed price. This enables these countries to get access to new medicine without paying the cost of developing the new medicine. Its time to end the trade war on medicines.
This argument always strikes me as kind of odd. As far as I can tell, it boils down to "other countries like Canada are better negotiators than us, and our companies give them better prices."
But if that's the case, it just seems like really good evidence that squeezing drug companies and making aggressive demands drives down drug costs and encourages them to move R&D costs out of the country. Why wouldn't the US be all over that?
I dunno, I just always feel like I'm missing something when I see this. Other countries have better health care than us, but we can't use their tactics, even though they seem to be working really well, because... we're nice, and we don't want their drugs to cost more?
If we accept that having R&D based out of the US is a bad thing, then why are we fighting to keep it here? Shouldn't we increase regulation until all the pharmaceuticals move to Canada?
I think the argument is that the drugs would simply not be developed at all. Personally I'm inclined to call the bluff as it's not clear that the profit motive has led to the most effective drug development—there's a huge sales culture in pharmaceuticals that incentivizes prescription drugs beyond the balance that doctors and patients would naturally arrive at.
What if you framed it in terms of the damage Walmart (arguably) does to markets? I mean, they force suppliers to take losses “because of their negotiating power”, right? So maybe every retailer should band together with them and force all supplier profit margins to the same bare minimum for all products. Otherwise you’re leaving money “on the table”, right?
I think you will find that this is what Big Pharma and their sockpuppets in Washington want you to believe.
Through reading up on the 'opioid epidemic' you realise that a lot of this 'innovation' is not that great. Slow release tablets? There is no big deal there. Furthermore a lot of this 'research' is backwards, i.e. create a molecule that can be patented, see how much of it kills rats and then try and find some medical benefit for this 'new molecule'. If it treats cancer then is that because it kind of prolonged someone's life by a week even if the others in the trial were essentially killed by the 'new molecule'?
This went on with AMGEN and Johnson + Johnson with the EPO drug that Lance Armstrong so enjoyed. They sold this drug into many, many 'off label' side markets - could the same molecule be good for stroke victims too? No trial data, but with profits to be made this sort of thing happens.
You can market a drug a dozen ways even if it is only paracetemol. Back pain? You can buy this tablet. Hangover? This one mixed with caffeine. Kids version? Brightly coloured with a lower dose per pill. Easy.
Then there are those drugs sold with the 'dating website' business model. The 'dating website' business model is to have a few success stories but have everyone else paying their subscription as long as possible. Statins are sold like this, the Big Pharma scam is to have people on these things for life.
The rest of the world - Canada included - care about healthcare more than money. In the UK healthcare is a service, not a business first and foremost. The NHS has to balance the books but not be putting profit before people. In the US it is backwards.
The rest of the world would do better without U.S. Big Pharma stifling innovation and sponging off their citizens.
are you sure that the cost of development is the real issue?
the last numbers I saw, 2015, showed marketing budgets for medicine to be often times twice what was being spent on R&D in the US. currently, only four countries allow this time of marketing: New Zealand, Brazil, Hong Kong, and United States.
it sounds like the US isn't necessarily subsidizing drug R&D, and instead is subsidizing marketing.
> the last numbers I saw, 2015, showed marketing budgets for medicine to be often times twice what was being spent on R&D in the US.
The marketing expense isn't necessarily avoidable.
Suppose it costs $50M to research a drug and patients will pay $1000 for a course of treatment. If you do no marketing then you get forty thousand customers and can't recover your R&D. If you spend $100M on marketing then you get two hundred thousand customers and more than recover both your R&D and your marketing expense.
Spending more on marketing can allow them to do R&D they otherwise couldn't by providing more customers to spread the R&D costs over.
...except, at least in NZ where they do some of that marketing, the drugs are purchased via the state body Pharmac, which will not pay the inflated prices that the drug companies charge in the US.
The reason for the advertising in NZ is that Pharmac will often fully fund generics, if you want to buy the brand name drug you have to pay extra on top. For instance, I just got a new prescription for inhalers, the pharmacy told me if I wanted ventolin it would be $5 but the generic was fully subsidised.
sure, my point (which I probably was not very clear about) was more that the cost of marketing in NZ still isn't going to ratchet up profitability to the level of the US with their higher prices
Surely though the best marketing is the effectiveness of the product, if it's a good product then doctors will prescribe it.
I don't know if it's true or not, but looking at US movies/tv shows it seems like everyones taking medication which I doubt they actually need. Here I don't know very many people who actively take regular medication, I know that people who move here complain at how doctors are stingy with prescriptions, yet life expectancy is longer than the US.
Surely though the best marketing is the effectiveness of the product, if it's a good product then doctors will prescribe it.
That's true for very few physicians. The ones that are leaders in their field and do research know the ins and outs of new drugs, but your average doctor knows very little.
That is true, but setting aside time to do research is a much bigger hurdle than taking 10-15 min to listen to someone give you the highlights.
And in case anyone was wondering, doctors are very skeptical of drug reps and always verify anything they say before believing it. But it gives them a starting point.
"always verify". Well that's obviously not a true statement but (not singling you out) I wonder why there is such a compulsion to defend the honor, as it were, of medical doctors.
It's not exactly the same as pharma, but in the medical device field salespeople are commonly in operating theatres. Clearly the surgeons doing this do not have time to "verify" what they are being told.
https://www.washingtonpost.com/national/health-science/why-i...
Americans would do well to stop idolizing doctors and realize that huge numbers of them are lazy, incompetent shills who routinely do a lot of preventable damage.
But then those 160,000 other patients are either getting medication that they don't need or are getting medication which is inferior to something else which they should have gotten but has inferior advertising. I'd rather pay more and either only use the medication when I need it, or get the most effective medication.
One of the reasons why the US spends so much more than the rest of the world is because of the share amount of prescription drugs that people have. Here it's extremely hard to convince a Dr that anything other than paracetamol and rest is required for most ailments, yet life expectancy is higher than in the US.
> But then those 160,000 other patients are either getting medication that they don't need or are getting medication which is inferior to something else which they should have gotten but has inferior advertising.
Yes, if the advertising is total bullocks that is what happens. But getting rid of the advertising still doesn't make the price of the drug go down for the people who actually need it.
And it's at least theoretically possible for the advertising to help patients who otherwise wouldn't have known about the drug, e.g. because they asked a doctor about it years ago and there was no treatment then even though there is one now.
Yes of course the advertisements are total bollocks. That is the claim. You are making these very strident back-of-the-envelope "economics" arguments without realizing that the economic ideal for the health care industry is to provide therapies that make people sicker, thereby ensuring their return for more therapies.
it costs aver $2.7B to get a drug approved based on the most accepted estimates. biggest cost is cost of failure. r&d is hard, highly regulated and expensive
I'm not arguing that it isn't expensive, but when, for instance Johnson & Johnson spends $8.2B/yr on R&D, and spends $17.5B that same year on marketing those same drugs, it's hard to argue that the cost of R&D is the major issue here.
edited to add: especially when you look at the US R&D tax credit, available under section 41 of the tax code.
as another commenter said, that marketing spend also includes JNJs massive consumer products business and med device business
Also, pharma increasingly buys new products through acquisitions rather than develop them in house these days. So you have to look at the balance sheet, not just the p&l. Note that JNJ spent $30B buying actelion last year among other smaller acquisitions
First off spending more on marketing than R&D is bullshit. That's only true if you add up S&GA which encompasses a lot more than just marketing.
Second, marketing is costly since a lot of it is done in person. Hiring thousands of sales reps doesn't come cheap. It's not due to DTC commercials since only a small number of products actually have those.
Finally, you don't market something unless you bring in more money than you spend. So marketing pays for itself.
That's not true. If the US had a centralised health system like other developed countries they would have the same bargaining power. In NZ we have Pharmac who bulk purchases drugs for the country, they can get good deals because they operate in a free market and can play the pharma companies off each other.
Don't blame other countries for your own governments inability to bargain.
Pharma companies still have patents and exclusivity deals. They will price the drug at a point where it's profitable, and countries will buy those drugs if they work.
it's not about negotiation at all. NZ has a population of 5M. The largest private health insurer in the US, United Health, cover 40M people. They can, and do, negotiate drug prices.
It's the insurer who negotiates with the drug companies directly.
And they do negotiate hard! United healthcare has over 100 products on it's exclusion list which means they told the drug company "no, we won't pay for your drug."
How do you propose to force other countries to pay more for medicines than they do currently?
What I find odd is that no-one is forcing these companies to sell their products at a lower price - if they weren't profiting, they wouldn't sell their product.
Trump want's the rest of the world to pay more for US pharmacuticals by stopping the free market (which is how those countries get good deals, by going out to tender), but he doesn't want to do anything to make things better in the US because of the free market.
Assuming that's true do you think that removing other countries ability to bulk purchase drugs would cause the prices in the US to actually drop?
Also given a capitalistic marketplace you'd think US drug consumers would also band together to bulk purchase and drive down the rates. You'd be crazy to make a law to prevent that kind of thing.
The example of Humira is a terrible one: as a monoclonal antibody, to produce the exact molecule would require another company getting its hands on the plasma cells that produce it.
It is not as simple as copying the chemical steps to produce the drug, as in Lipitor.
Complicating this, there is evidence that not all Monoclonal antibodies that act on the same receptor are made equal - some might be antagonists whereas others are agonists.
We have compulsory copyright licensing for sound recordings - if you pay the statutory license fee (9.1 cents per song or 1.75 cents per minute) to the original publisher, you can press records of their song, whether or not the original publisher approves.
Why not have compulsory patent licensing for drugs?
More generics isn't really the solution. The US actually has more generic prescriptions as a percent of total prescriptions than most developed countries and US spend on drugs as % of healthcare spend is similar to other OECD countries. The cost comes from high priced innovative meds. They are high priced bc they are expensive to develop -- $2.7b to get a drug approved per most accepted estimate. Most of that is cost of failure. So the issue is if we cut those prices we stop innovation. R&d in most disease areas has already slowed dramatically bc it's too expensive / risky
> Over time, Big Pharma learned how to game the law. As the patent for the original drug approached expiration, companies added wrinkles — a new coating for the pill, a time-release version, and so on — that they then patented. If the patents were approved, and they usually were, the exclusivity clock would start ticking all over again.
This is so misleading. When this happens, only the new "wrinkles" are patented. The drug itself becomes free for everyone to use.
> Hatch-Waxman worked exactly the way it was supposed to for a long time. For many high-priced drugs, once the generics flooded the market, the price went down by as much as 90 percent. Statins are a good example: The price of generic Lipitor is about $19 for 90 tablets, while the price of branded Lipitor is $165 for 30 tablets. The market share for the branded drug often dropped by 75 percent or more. Over time, Big Pharma learned how to game the law. ... The rheumatoid arthritis drug Humira is a perfect example of what has happened.
Humira is not an example of "gaming" Hatch-Waxman. Hatch-Waxman assumes that the secret sauce is a drug's chemical formula. It creates a process for generics to be created when the patent on that formula expires. Humira is what's called a biologic, where the secret sauce is not only the active ingredient, but the process of manipulating bacterial cells into manufacturing the drug: https://www.bloomberg.com/view/articles/2017-09-07/why-the-b.... AbbVie has another five years left on those patents.
The Hatch Waxman equivalent for biologics ("BPCIA") was only enacted in 2010: https://www.fda.gov/drugs/developmentapprovalprocess/howdrug.... Because the law is so new, it will take time before the generics industry figures out how to navigate the new process.
The article's list of policy recommendations is also ignorant:
> First, shorten the patent exclusivity period to 10 years. (Drug companies say they need the longer time to recoup their research and development costs, but the truth is most companies spend more on marketing than R&D.)
Drug companies have similar SG&A (overhead) to R&D ratios as tech companies: https://news.ycombinator.com/item?id=16585194. The point, though oft-repeated, is completely nonsensical. Nobody wants to spend money on marketing. If drug companies could recoup their investment faster by spending less on marketing, they would.
> Second, outlaw the practice of paying companies to keep generics off the market and similar forms of gamesmanship.
Yeah, my understanding with Humira is that to make generic version would essentially require a clone of the cell line that produces it. Abbot is under no obligation to give that to anyone else.
Anecdote. I take Humira for psoriatic arthritis. It works well for me. I have variously paid $0, $30, $180 for a 4 week supply. The insurance companies require that I use a specialty pharmacy to dispense this. Those companies appear to exist to put as many road blocks in the way of refills as possible. Long phone calls every month, shipping problems that cause a weeks delay, then all subsequent doses are delayed, then randomly need a pre-auth from my rheumatologist, before you know it insurance has managed to avoid paying for this medication for 3 months of the year
> Nobody wants to spend money on marketing. If drug companies could recoup their investment faster by spending less on marketing, they would.
This doesn't pass my sniff test. The original article's point isn't that companies are marketing just so they can flush money down the toilet. Of course it's profitable. The article's point is that we as a society want them to spend more money on R&D; and our current strategy seems not to be working.
Companies would prefer to spend no money at all. If they could recoup their investment by spending no money on marketing, research, development, or production, they would. So a good company does the next best thing: they find the least costly, most efficient way to make money and prioritize that.
If companies are investing the majority of their resources into marketing, that at least suggests that they view marketing as the most efficient way to make money. Since we as a society would prefer that R&D be the most efficient way for them to make money, it may very well be reasonable to look for ways to decrease the cost of R&D and/or to increase the cost of marketing.
Shortening the exclusivity period of a patent might be an effective way to decrease the value of marketing, since marketing returns likely benefit from exclusivity.
Shortening exclusivity would increase the need for marketing, because companies would have to get the word out to consumers and doctors much more quickly.
Again, that might be true, but it rings multiple alarm bells when I actually think about it.
First, it assumes that the profit margins of a company remain constant. Again, companies want to make money. Period. So say that you're a pharmaceutical company and you're currently getting back 250% of your costs for a drug over the exclusivity period.
If we double that exclusivity period, you are not going to decrease the price you charge or the amount you invest into marketing so that your return on investment remains 250%. At least, not if you're a good business owner. You're going to double down on the exact same strategy and make 500% return. If I later halve your exclusivity period, you won't stay at 500%. You'll go back to 250%.
The fact that a company has less time to do marketing does actually suggest to me that marketing becomes a less bulletproof, desirable strategy for making money - which is exactly what the author wants. It might still be a bad idea; maybe pricing becomes the most efficient way to generate profit, or maybe the drug industry has such tight margins that there is no efficient way to generate profit and everyone closes up shop.
But it seems at least somewhat reasonable to say that if you expect the cost of marketing to remain constant, and the return per dollar to go down severely, you invest less into the now inefficient strategy.
The other reason that I have difficulty accepting this claim at face value is because I can think of markets where it just isn't true: for example, mobile apps. Nobody smart is investing huge amounts of money into marketing a mobile app. What they're doing is churning out five apps a week on the hope that one of them goes viral.
The lack of exclusivity in that market means that constant development is basically a requirement to keep your head above water.
Now, do we want our drug industry to look like the mobile app market? The mobile market is so opposed to long-term investment that the majority of games and apps developed there are rushed-to-market crap. So we probably don't want our drug research to operate the same way.
But I don't think it's immediately unreasonable that there might be a middle ground we could hit between 20+ years of exclusivity and 4 days of exclusivity.
If we take the somewhat liberal assumption that pharma's marketing budget is ecomically optimal at present - eg marginal costs equal marginal revenue, how is making marketing more expensive helping anyone? All it will do is decrease revenue/drug which will have a knock-on effect on marginal revenue of R&D: reducing gross R&D expenditure and thus approved drugs.
In the end, you can have more new drugs (new antibiotics, orpan drugs, etc.), or cheaper drugs(Less qualified, fewer, off label usage, not qualified for efficacy, etc.) There are different ways to make either happen but short of attacking an inefficiency in the system there's no free lunch. Equipment costs money and scientists need to eat.
> If we take the somewhat liberal assumption that pharma's marketing budget is ecomically optimal at present - eg marginal costs equal marginal revenue
Do we take that assumption?
Sure, if we take the assumption that we're operating at perfect efficiency already, then I suppose there's no need to mess up an already good system. And maybe we are; I've even seen a few articles suggesting that we're suboptimal, that pharma is bleeding money at the moment. In which case, maybe the takeaway is the opposite, that we should extend exclusivity to 25 years or something.
But that's a very different claim to make. I suspect that the author of the linked article would claim that pharma is not at all optimal, and I suspect that any entrenched industry in a large market being optimal is the exception rather than the rule.
I think it's generally a mistake to assume that things cost a lot because they have to. Often in a free market it is because of large (solvable) inefficiencies or bad business practices, which is exactly what enables newer industries and businesses to out-compete and displace older ones.
> Over time, Big Pharma learned how to game the law. As the patent for the original drug approached expiration, companies added wrinkles — a new coating for the pill, a time-release version, and so on — that they then patented. If the patents were approved, and they usually were, the exclusivity clock would start ticking all over again.
I don't understand how that would ever work.
Time-release version of X, now with new coating: patented
Old version of X, with no time-release and without new coating: patented expired, correct?
If so, what stops the generic manufacturer from just manufacturing the old version of X?
There is nothing to stop them. The only reason why "evergreening" works is because doctor's write scripts for the "new" drug.
Sometimes it's worth it! If you need to take a drug three times a day and the new version is only once, that can improve patient adherence and outcomes.
However, sometimes the added value is minuscule. In that case insurance companies should just say "we're not paying for it since the added cost is not worth it".
> Sometimes it's worth it! If you need to take a drug three times a day and the new version is only once, that can improve patient adherence and outcomes.
For the moment, let's ignore that case by simply calling the improved drug a new drug.
> However, sometimes the added value is minuscule. In that case insurance companies should just say "we're not paying for it since the added cost is not worth it".
I'm still lost.
1. Doctor writes prescription for "B", which is really "A" with an insignificant change and a price bump.
2. Patient goes to pharmacy and looks at their copay for "B." Whoa! they say-- that is surprisingly high.
Wouldn't the pharmacist then have the responsibility to jump in with their expertise at this point? Say: "B" is just a slightly altered "A" to get you to pay more, so call your doctor and ask them if you can take "A."
I find that kind of astounding. In the UK you pay a flat fee per prescribed medication, and multiple times I've had doctors prescribe me larger amounts on my repeat prescriptions so that I have to pay the flat fee less often - completely unprompted by me.
Docs will do that in the US too sometimes, but one challenge is that the "fee" you owe with private insurance differs from plan to plan. Doctors can't track the hundreds of different plans, so they don't know if the more expensive branded drug will cost you $10 more per month or $100 more per month. If you share that info with your doctor they are more than happy to work with you.
Isn't it simply a matter of asking, "Is there a generic for this, doc?"
Both $10 and $100 are greater than $0, the patient almost certainly always wants $0, and a doctor can do that math without referring to your plan.
Or is this a case of this particular method being combined with N other methods such that the doctor has trouble getting the correct information to the patient?
Edit: By $0 I mean "$0 more than the cheapest generic." :)
I'd go a step further... you cannot sell a drug unless there is another company prepared to sell a generic version. It's a national security issue. Dual vendor required.
Also, no blocks on re-imports from foreign nations.
Under a pure market approach, if a drug is not profitable it will not be produced ans sold. If you have a rare disease, you would probably prefer a mixed approach like a mix public and private medical research.
I agree with you and in a pure profit oriented you will always have rare diseases without remedies. You may even have curable patient that are non-economical to save for for-profit health-care company.
Imagine you have only pure market that provides 80% total availability for disease remedies. If you want to cover the 20% uncovered case by bringing a non-profit player, you may threaten some of the pure market player. At the end you may have a 60% coverage by for-profit and 40% by non-profit.
The end solution may seems to be less economically efficient but it covers more of the population and I think it is a good thing.
The title posted here makes no sense at all. It's not the original and it has nothing to do with the article. The moderators should really change it as it implies somehow that the high cost of drugs is the fault of the American people, not the horrible patent laws that we have no control over or the actual drug companies exploiting ill people for mass profits.
"But this will disincentive research!" Maybe. Or, tax people more in order to fund the research. The tax revenue would go directly to researcher salary, equipment, expenses. Even a large tax increase can't be worse than today, where people have to pay huge $$$ anyway, of which a large cut goes to executives, shareholders, the marketing machine, etc.
I believe by and large, people that go into pharma research do it because they're interested in the science and the cause, not because of any privatized profit motivation. Which is to say, people will still go to grad school in the same fields and continue carrying on the research work (so long as the facilities and equipment is available, which we can solve). The downside is that many senior executives would be displaced or be forced to accept lower compensation.
Someday in the distant future, people will look back and be as shocked that private companies profited from medicine, as we're shocked today about the for-profit firefighters in ancient Rome.