The True Cost of an Expensive Medication
theatlantic.com
theatlantic.com
Be very careful when proposing price controls on new drugs. You may wind up with no new drugs.
A better solution would be to address the drivers of high cost in new drug development, and reduce regulations that grant monopolies on older drugs out of patent.
Add to that, profit margins are insane - they are the highest in almost any business, equal to that of banks. [0] Pfizer saw a 42% profit margin in 2013.
This industry is insanely profitable, despite spending a ton on R&D, and more on marketing. Multi-billion dollar fines are just part of doing business.
Nature abhors a vacuum, especially such a profitable one. There's no shortage of companies willing to make that margin on billions in revenue.
Drugs are vastly overpriced, and the old line about how it's necessary to recover costs (along with long, exclusive patent rights) is false.
I'm not sure what you're getting at. The idea with marketing is to spend $X to get $X+Y in sales, otherwise you wouldn't do any marketing.
So if drug companies stopped marketing, they'd have less money than they do now.
And as for "the most profitable industry". Do you know how many biotechs go under because their drug fails? How many banks does that happen to? You can't just look at the ones that succeed and say "that's typical". It's called survivorship bias.
And as for Pfizer's 42% profit, you're cherrypicking. Note that in your source, most companies have a profit of 10-20%. Which is pretty decent considering the risk involved with R&D. Pfizer had a profit of 42% because it spun off it's animal health division in Nov 2014. It was a one-time windfall.
If the only options were to have a marketing budget of eleventy quadrillion dollars or a marketing budget of zero dollars, and no other possibilities, you might have a point.
Do you really need much marketing to sell a life saving drug? You'd think it'd kinda sell itself...?
Didn't we just read an article here about how doctors don't/can't keep up on all the research?
In that environment, it makes sense to spend money to get the drug in front of doctors (drug salespeople) and their patients (TV ads.)
Here there is no need for a big marketing budget to get sales done. Not every market behaves like a regular consumer market. I think most markets are more complicated than the idea of spend $X to get $X + $Y. Especially for pharma, this has been a far more complicated relationship with the market.
Profit margins might resemble other markets, but I think that when it comes to healthcare profit is a very complicated concept...
Sam Peltzman in the book "Regulation of Pharmaceutical Innovation" shows with statistics how the rate of new drug development dropped massively alongside the increase in costs of such development.
Profits kind of have to be high to attract and justify investment. Modest profit margins can't attract multiple billions of dollars which will be tied up without return for 10+ years at a time.
Don't forget to include risk in your cost calculations.
(re: Pfizer, you cherry-picked that number. https://www.stock-analysis-on.net/NYSE/Company/Pfizer-Inc/Ra... shows wildly swinging profit margins year-by-year, almost certainly driven by the decades-long drug development and regulatory clearance cycles.)
From what I understand, Sovaldi saves money over the long term, it actually costs less then competing treatments. It's just gives people a mental block because it's packaged into a magic little pill.
Funny, you would think easy to take, less side effects, and lower cost would make for good headlines and a higher price. Maybe if they packaged it into 15 pills a day people wouldn't be as upset. Like Beats putting weights into their headphones to make them feel more expensive.
Sovaldi sounds to me like exactly the kind of grand slam we want our pharma industry hitting more often. High risk science developing straight up cures that work for the vast majority of patients who take them, offered at a lower cost than the current treatment regimen, with fewer side effects. The age old joke is that pharma develops treatments, never cures. Well, here's a honest cure and it sounds like it's priced relatively appropriately for what they've accomplished.
If you want a lot more drugs that are this effective against nasty and prolific diseases like HepC, then I think you want public and private insurance paying a lot for Sovaldi.
One obvious way to make it cheaper is if there was a way to get countries other than the USA to pay their fair share for the breakthrough.
https://www.nice.org.uk/news/press-and-media/nice-guidance-r...
Call it the "We actually care about human life price control" or something. They can use it as marketing ammo as well. Proving they actually care is good for business.
See how this works?
When you have a disease that might cripple or kill you you bet you are willing to bankrupt yourself to cure it. The regulations are absolutely necessary. Currently companies are utilizing this and charge significant amount of money for a cure. On top of that they prefer medication that doesn't treat the sickness and instead just keeps it under control, because that way they make more money.
It is easy to sympathize with pharmaceutical companies unless you have to get one of those diseases.
From the article:
There’s a drug called Sovaldi that works astonishingly well to cure people with the liver disease Hepatitis C. The rub? It costs $1,000 per day for all 12 weeks of treatment.
12 x 7 x $1,000 = $84,000
I saw the bill for my family member's liver transplant. The total cost for the transplant was over $500,000 and that doesn't include the pre-transplant and post-transplant treatments and hospitalizations. At $84,000 for a cure, Sovaldi is an absolute bargain.
Of course, not everybody has $84,000. That's why we have insurance. Unfortunately, the payers in this article, state Medicaid programs, are in many cases heading down a path to insolvency. That's the bigger issue.
In private insurance markets, most drug makers provide significant discounts to incentivize payers. These discounts often amount to 50% or more. So you can't address the issue of access to treatment without acknowledging that insurers, not drug makers, ultimately decide which patients have access.
Gilead has a program that provides Sovaldi free of charge to patients who are uninsured or have been denied treatment. For those who cannot obtain Sovaldi, there are a variety of other Hepatitis C treatments available, so it is unlikely that somebody with a need will go untreated, even if their payer won't give them access to the treatment they prefer or which may be most effective.
This is a much more complicated issue than the article here suggests, and it's easier to find a scapegoat than to honestly address the complexities of this market.