Putting my investor hat on, I generally believe that making rich people pretty is a far less risky investment than making sympathetic sick people healthy - I won't become public enemy #1 by charging a fortune for Botox 2.0.
(None of this is meant as commentary on the specifics of this guy - the media has decided he's a villain, prosecutors can boost their career by targeting him, and I have no way to determine the truth of the matter.)
Citation needed. Extremely needed.
Counter-anecdote: https://en.wikipedia.org/wiki/Jonas_Salk
edit: wording
Here: http://www.investopedia.com/university/economics/economics3....
NB: the higher the price, the higher the quantity supplied
s/counterfact/counter-anecdote/
Or are you simply claiming that a small number of examples exist, therefore my claim doesn't follow as a hard and fast rule but merely as a trend?
In this thread I'm claiming that if you make it harder to make a profit off lifesaving drugs, people will probably invest their money elsewhere and produce fewer such drugs. Reduced demand (or price ceilings) lower quantity produced.
In the other thread I claimed that if you consider alternate sellers of medical labor, you can get a lower price. Increased supply lowers price and increases quantity provided.
Both of these claims are just classic Econ 101.
If medical tourism was not an option for me I'd have paid full price in the US and considered myself extremely lucky to have the option to trade money for the ability to do sex positions besides "girl on top, me not moving". I hardly think I'm alone - how many people would be willing to give up all medical procedures invented since 1970 in return for lower prices?
It's just another wealth-begets-more-wealth story, your jump off point is already one of considerable privilege, one that relatively few people in the US have.
$5k is not a lot of money even for lower middle class USians. (Lower class USians have medicaid.)
It's true that many Americans live up to the limit of (or beyond) their means. Even if someone earning $25k cuts his consumption down to $20k, he'll still be living a vastly better life than almost everyone in India. It's true that being born in the US, and being able to trade 20% of your income one year for the ability to walk again, is a massive privilege.
It can't be this drastic. Remember, the medicines are being invented by people who I believe to some significant extent are motivated by the desire for research and to improve the human condition. Witness all of the smart doctors who join, voluntarily, organizations such as Doctors Without Borders and go to the harshest places in this world to provide medical treatment for all.
I am not attacking you or your enjoyable write-up earlier but I had to comment on this false choice. I observe this same dogmatic behavior when people compare agile vs "waterfall" - it just makes no sense to me because I just don't think the world is ever this black and white.
I.e., what I'm disagreeing with is the contention that "medication and care where you live is too expensive".
(Jacquesm is also assuming I lived in the US last year when I had my surgery, but in fact I was homeless and spent most of my time overseas.)
Either a free market fundamentalist (ie no explotative patents) or a dyed in the wool regulator should be able to agree this is not how the market should work.
If we want to claim that folks buying up drugs don't help, do we also believe that tech startups getting exits doesn't promote the creation of more tech startups?
For limited application drugs (so annual sales smaller than Prozac... which is most of them), this effectively means there will only be one supplier.
I don't know a way to fix this that will satisfy most interested parties.
In order to get your generic approved you have to prove that it's biologically equivalent to what's on the market. Shkreli's distributor would only sell directly to end-users and would refuse to sell it to anyone doing equivalence studies on it. Thus it was effectively impossible for anyone else to prove bioequivalence and bring a competing product to market.
The only way to eat the incumbent's lunch in a worthwhile way would be to start out larger, so you can absorb the startup costs, and find a way to produce at lower marginal cost.
The FDA approval process for generics is part of the problem there. It should be enough to do a chemical analysis showing that the molecules are the same. The current FDA requirements are akin to having to prove that your new vodka can get someone drunk just as well as vodka from other vodka makers. The active ingredient is ethanol. Ethanol made by you and ethanol made by AB InBev is chemically indistinguishable. As long as you can accurately report concentration, for the purposes of dosing, you shouldn't have to prove that ethanol still gets people drunk when you are the one making it. You should only need to prove that the amount of ethanol in your vodka matches the amount printed on the label.
So if your doctor prescribes 9.3 g ethanol, taken orally, once daily, your "compounding pharmacist" can give you a 1 oz. shot of any 80-proof beverage. It doesn't matter if it's name-brand top shelf or generic rail, so long as it's 40% alcohol by volume.
A few years back the FDA approved a generic version of Wellbutrin. They didn't ask for bioequivalence testing and as a result, the formulation dumped all the drug into the body, drug levels spiked and patients got sick. The FDA eventually made the company reformulate the drug so that it was truly interchangeable with the branded drug.
You could have dropped the pills into an artificial stomach and measured concentrations at 20 minute intervals. That tests chemical equivalence. You don't need to test bioequivalence until after that. If your synthetic stomach setup does not show chemical equivalence, that's when you need to get the animal test subjects.
Part of the problem here is that the FDA bundles several different tests into one.
- Does the molecule do harm to a human body? What are the side effects?
- Is the drug effective for a specific medical condition?
- How does a higher or lower dosage affect the observed results?
- How effective is a given delivery mechanism?
Take a look at this article about how manufacturers extend exclusivity by tweaking the delivery mechanism: http://www.pharmaceuticalcommerce.com/index.php?pg=manufactu...
No, it wasn't free-market at all. Much of Shkreli's strategy relied on the barrier to entry created by FDA regulations. He priced the drug just low enough that it wouldn't be worthwhile for another manufacturer to get approved.
Nothing free market here. It's rent seeking, pure and simple.
I'm still waiting for someone to explain to me the difference between a limited-oversight hands-off free market and a competitive criminal oligarchy.
Because variations on the criminal/sociopath thing keep happening so often when you get limited regulation and religious regard for profit at any social cost that they seem to be an inevitable outcome - a kind of moral Gresham's Law, where the crazy assholes always drive out more reasonable actors.
> There are many people who...
Yes, there are many people who are Lawful-Evil. That has no bearing on whether Evil is acceptable, provided it is Lawful.
Anyway, the distinction between inventing the drug and buying the patent is an artificial one. If you're going to allow creating monopoly rights--and that you can debate--then making the rights tradable will make the market more efficient.
With drugs in particular, acquisition of promising drug candidates is a major input to the pipeline at the big drug companies. It enables separation of concerns: small startups to develop the drugs and big experienced companies to bring them to market. Creating an artificial distinction between inventors and acquirers precludes that efficient division of labor.
Google buys innovative startups all the time. Why should pharma be different?
> acquisition of promising drug candidates is a major input to the > pipeline at the big drug companies. It enables separation of > concerns: small startups to develop the drugs and big > experienced companies to bring them to market. Creating an > artificial distinction between inventors and acquirers precludes > that efficient division of labor.
I wonder how many small pharma startups are successful. Is this really "effective separation of concerns"? Seems more like standard capitalist market dynamics: allow small-fries to take all the risk -- those that sink disappear; those that succeed might get bought out.
Is this really the best way to drive innovation in pharma? But... that's a discussion about markets.
Also, without researching the history of every drug produced by any major pharma corp, I can't blithely accept whether acquisition of "promising drug candidates" is or is not a "major input" to their pipeline. I'm not denyingwhether this happens, just asking to what degree -- just saying "citation needed" for that particular point.
I'm certainly not denying that some small pharma companies are successful, and that some get bought up by large pharma companies. That wasn't my question, and I should have been clearer.
/s
Why should it? The free market is the most powerful incentive there is. Government control of the pharmaceutical industry has been tried before, in the Soviet Union and it was a mess.
Here's an excerpt from Michael Binyon's "Life in Russia" (1983)
"How often are foreigners asked by Russian friends to bring back drugs for sick relatives, and how often does the press complain that cheap, effective Soviet drugs are simply unobtainable! Take the case of a researcher who discovered an efficient drug to stimulate growth and spent fifteen years trying to get it on the market. In spite of repeated clinical tests, scientific endorsement and an urgent demand from people with deficiencies in growth hormones, the drug was unavailable. Instead manufacturers were producing a less effective foreign product which first came on the market twenty-two years ago.
What is on sale in the shops or in special kiosks is so outdated or so general in its effects that few people buy the product. Packets of good pills are so valuable that they are sold at special foreign currency counters in tourist hotels. Doctors issue prescriptions even if the hospitals have no supplies, leaving it to hapless patients to use their wits in trying to get hold of what they need. There are plenty of stories of dentists working without adequate supplies of anaesthetic, of polyclinics unable to supply a full course of treatment, of chronically sick people living from month to month, never sure whether their prescriptions can be renewed.
The drug industry suffers from none of the failings its Western counterpart is accused of: there is no risk of profit-taking at the expense of safety, no aggressive marketing of unnecessary drugs, no costly duplication of research laboratories. Instead, research, development, testing, approval, manufacture and promotion are organized as a public service. But the links between each stage are so weak that the time lag between research and retailing may be up to seven years. Responsibility for pharmaceuticals is divided between the Ministry of Health and the Ministry of Medication Industry. Everything used to come under a subdivision of the Ministry of Health, but because of poor results a separate ministry was created in 1967. The Health Ministry is still responsible for resarch, testing and licensing of new drugs. The new ministry deals with production and quality control. Most research is carried out in state laboratories, and if an effective product is discovered it is sent to the Ministry of Medication Industry which finds a suitable factory to try it out. Test batches go back to the Ministry of Health for clinical trials, and often, if approved, to another plant for mass production. A separate agency handles distribution and marketing, and quality control is the responsibility of an independent state inspectorate.
Theoretically each stage leads to the next with no waste or duplication. In practice the chain becomes a bureaucratic nightmare. The institutional separation means that each body operates according to its own terms with little concern for the total process. By the time the product gets to the chemists' shelves, it has often been rendered obsolete. Research institutes have no real leverage to press factories to put their results into production, and have little incentive to do so. As for the manufacturers, they cannot get back their initial production costs because of a rigid pricing system, and find it cheaper and easier to stick to the older and tested lines for which there is already a market.
The lack of advertising means that doctors are often unaware of what is available. Sometimes they prescribe drugs that have long been withdrawn from the market. Similarly, since brand-names play little part in the pharmaceutical industry, a factory manager is not too concerned about the name and reputation of his plant, and this breeds indifference.
The Russians have tried various remedies. The simplest is to import drugs."
Gilead spends almost a billion dollars PER QUARTER on R&D expenses. Amgen spends over a billion per quarter, Celgene spends 1.3 billion per quarter. Most of those discoveries that come from those expenditures will never see the light of day. So how else are they to recoup their costs? If the government started funding pharmaceutical development at the tune of 25 billion per year, how would that infrastructure suddenly be created? Would they also need to get into the manufacturing side as well? Manufacturing many drugs is not a trivial process. Then there's the marketing expense -- doctors would need to be aware of the new drugs. There's distribution involved. Getting the government into the pharmaceutical business would be a massive, massive expenditure and still result in lower quality than the private sector could produce because the competitive forces would be eliminated. See the success of pretty much any Iron Curtain industry compared to the US and Japan for examples of how this goes bad and ultimately results in lower quality. Can you name a single Russian electronics manufacturer that you can buy in the Frankfurt Duty Free shop?
Of course the argument would be "we can do it more efficiently than the Soviets" -- sure. That's the same argument Communists use to suggest that "this time it'll work." I'd rather trust my life to someone that will profit from my survival than to a government that is influenced by whatever political forces are at play. Then you have the issue of what drugs deserve public funding and what drugs do not. That becomes a political decision and not a market decision. That's very dangerous.
Consider the 2nd avenue subway in NYC. We've been building it since 1972. It's still under construction and is the most expensive subway ever. Compare to the Delhi metro: https://en.wikipedia.org/wiki/Delhi_Metro#/media/File:Delhi_...
What big projects of any sort have we done a good job with lately? The closest we've had to a success might have been our second attempt at building an ebay for health insurance.
When we run our current crop of big projects well, I'd think about expanding into more. Until then, lets not take chances with something as important as pharmaceutical research.
It also lists the Hudson Yards Redevelopment Project as an on-going $20 billion megaproject, which broke ground in December 2012 and appears to be doing well. It's the largest real estate development in U.S. history.
It's really not clear that government could develop drugs more cheaply. If you want to bring down the price of drug development, the primary thing you need to do is to discover which of your candidates is not promising and kill them much earlier in the pipeline. This sort of task is not one of government's core competencies (particularly if the legislature decides it wants a say in things).
Whatever the aesthetics of people getting rich from treating sick people, on the evidence, it's actually very effective.
I'm not sure how much it affects the argument, but the Fed is not a governmental agency. It's a stand-alone corporation whose officers are appointed by the government.
When you sever the external link between the product going out, and the money coming in, you destroy some of the positive or negative feedback loops that take into account what people actually want and what they can do.
There has to be a hard external link between the outputs and the inputs, or you end up with a situation where rent-seekers charge in and gum up the works, absorbing resources without doing anything economically useful in exchange. The instant you guarantee a cash flow independent of actual results, you create sinecures, and those offices fill up and never go vacant again.
You could end up with situations where the agency cures a disease, but spends 100 times more doing that than it would cost to develop an acceptably effective treatment and also create a foundation that could pay to produce and distribute that treatment to everyone who gets it any time within the next 5 billion years.
Yay, woo, we cured it. But our inability to effectively prioritize resources meant that 99% of that cure budget was not spent on researching diseases that have a far greater economic impact. Oops.
Someone has to decide whether the money is well spent. And if that someone isn't everyone, then there is an agency problem, and rent-seekers scramble over each other to be the someone, so they can easily profit from that decision-making power.
Now, before anyone goes shaking their pompoms for the free market, I should mention that we haven't actually had one in medicine for a long time, thanks to the godawful market distortions that currently exist in the healthcare sector of markets where most treatments are researched. But at least that market-side link in the feedback loop still exists to some tiny extent, no matter how weak or tenuous it may be now.
So an independent research agency would be great for about 15 years. After that, it will start to become a gigantic black hole of waste and inefficiency.
Of course there is some, such as disparaging attacks on why we should put shrimps on treadmills, to the other extreme where the government, following public demand, funded a lot of HIV/AIDS research.
Also, as counter-example, the US government funds research in tropical diseases, not because it's a great photo-op for the next election, but also not completely altruistically - the military wants to be able to go into tropics and not have many of its soldiers die.
So the evidence so far says that your supposition isn't the whole picture by far.
http://www.slate.com/articles/business/the_customer/2011/03/...
And they're not even really greedy people. We live in a country where even a PhD making $150k still has to stress about saving for college and faces potential bankruptcy from medical expenses. You don't have to be greedy to want to stave off that risk by getting a high-paying Wall Street job.
http://bigstory.ap.org/article/c1264e78de574d869519f169d5a1a...
Shkreli has foolishly attracted attention to himself by comically absurd price-gouging. Whether it is illegal or not, it was dick move and in the end probably not even likely to net much profit. It also has understandably destroyed the good-will of anyone other than Ayn-randian maniacs.
Now he's been arrested for what sounds like illegal and extremely irresponsible financial shenanigans that happened before all this stuff. Greedy, amoral business people that break the law are usually able to maneuver themselves around getting jail-time. Shkreli's going to have a much harder time with that (because as you noted the media has decided he's a villain) and its his own dumb fault.
Personality defects have consequences.
Let's not forget that there are people who invent stuff and do research outside of monetary concerns too. Not to mention state funded research, which is how we got most of the foundations of the core science/technology we have now (either that or heavily subsidized "private" research, including pharmas).
And let's also not forget that by several accounts, the costs of research for most of those life saving drugs are dwarfed by the costs of marketing and other BS the companies spend their money on, and not even for them (as life saving drugs practically advertise themselves anyway) but for non life-saving drugs like Viagra and co...
>the media has decided he's a villain
And for one, in this particular case, nobody can blame them!
Ummm.... no, they don't. I have a friend who works in the industry and you'd be surprised how cautious some physicians are. The decision to treat a patient with a new drug isn't "oh! it's better, let's use it!", it's much more complicated than that. Even great drugs need to be promoted.
Also, you can't compare the costs of marketing and R&D. You don't spend marketing dollars unless you think the return is greater than 1 (you make back more than you spent). If drug companies stopped marketing their drugs, they'd end up in a worse financial situation rather than a better one. That extra revenue means more R&D spend!
And yet somehow the word on new drugs still gets to doctors in the rest of the world where public advertising of drugs is illegal. Any ideas on how this miracle occurs?
Really? I've talked to a handful of physicians that think advertising to patients is actually a good thing. They've talked about patients who haven't seen a doctor in years coming in to have their cholesterol checked because they saw an ad on TV.
I don't know about you, but I'd prefer it if patients were more proactive when it comes to their health, not less.
I'd be a fuckton more surprised if there weren't hundreds of companies trying to sell drugs regardless of efficacy.
https://en.wikipedia.org/wiki/List_of_off-label_promotion_ph...
Either they couldn't be bothered, or in fact they tried to prove it, and failed. If J&J can't prove a drug works, the odds that it does actually work seems... low, given the amount of resources J&J have.
Agree about marketing, I think most people agree the purpose of the pharma industry is finding objective treatments for objective diseases, and not generating spurious demand. I think we could potentially optimize strongly for the first part if we heavily restricted the latter part.
Someone call NIH -- I think they believe that part of the annual $30 billion they hand out in extramural research grants is being used just for that.
Moreover, if you're advocating pushing private investment even farther out, there are undesirable side effects. It means that the decision about what to pursue stops being driven by what there's actual demand for, and becomes a matter of political policy.
We can already see the effects of this. Government investment in medical research is not proportional to the number of sufferers, or the expected gain in QALYs (Quality-Adjusted Life Years). It's clear that the investment is strongly slanted toward research on maladies that have distinct demographics - i.e., that are represented by organized voting blocs. Thus, you'll find far more money spent, proportionately, on research for HIV than for something that's pretty widely distributed like colon cancer. I believe it's wrong for politics to drive this so strongly.
My impression is that the cost of the final clinical trials account for a large part of the expense of bringing any single drug to market (but on the other hand a lot of other drugs fail before clinical trials) (some people think clinical trials are even 90%: https://www.manhattan-institute.org/html/stifling-new-cures-... ; see https://news.ycombinator.com/item?id=10752639 for some disagreement with this figure). My impression is that the general tendency is for the government to focus more on funding the less expensive but more risky earlier stages of research, and for companies to focus more on funding the more expensive but less risky (but still rather risky) clinical trials.
So the conclusion is that in order to do without private funding for drug discovery, the government would have to either (a) massively increase government funding for this, or (b) greatly lower the standards for how much evidence is required before permitting a new drug to be sold to patients (that is, to be content with companies selling a drug to patients, and billing patients/insurance companies/the government, without solid evidence that the drug actually works). Imo either or both of those may be a good idea; but those would both be huge systemic reforms and hence are unlikely to occur, and in the meantime we do in fact rely a lot on industrial funding to bring new drugs to market.
Lets also not forget that if you can't make money off lifesaving drugs,
you also won't bother to invent any new ones.
Well this is the smartest thing I'll hear today. Context, context, context. The story goes that the drug was already around, already invented, already profitable. Some rich people came along and bought the product for billions of dollars because they realized they could resell it at a much higher price. So yes, let's not forget that if you can't make money reselling AIDS medications at an inhumane price, you won't bother to. And let's also not forget how easy it is to come across as capitalist sheep when we ignore the basic facts of the story in order to support our own ideals.
One of the biggest costs is getting a drug approved and then sold
The FDA will prioritize Orphan drugs and other high priority drugs, and the US government will help pay for drugs that haven't even gotten full clearance through the FDA if they are considered high priority.
Sovaldi (the Hep C drug that cures 90% of cases at over $1000/dose) and Harvoni (94%) you can apply your argument to. And there is a reason why the FDA and US government supports the pricing even over patients screams.
Meanwhile, while the FDA did approve Zaltrap, it was not considered a priority drug, and they did not say a thing when Memorial Sloan Ketterring publicly announced they would refuse to perscribe because the clinical data made Zaltrap out to be as effective as many other off patent drugs, and at $11000/month, Zaltrap would bankrupt patients. In the end, Zaltrap's maker, Regeneron Pharmaceuticals, Inc., brought down the price.
(http://www.nytimes.com/2012/10/15/opinion/a-hospital-says-no... , https://www.advisory.com/research/oncology-roundtable/oncolo... )
if Tomorrow you were to invent a new antibiotic that would work against drug resistant bacteria (this is considered to be a high priority research area and any drug that is ready for approval will be fasttracked), you could charge whatever you want, no complaints, and the media will not consider you a villian as much as part of the spectacle of medicine.
If you re-invented botox for no reason, or stop others from being a provider in the market, then you get to be a villian
At the time of the price hike, someone, somewhere suggested that it looked like market manipulation, intended to drive down the stock prices of other small generic-drug makers by creating bad news for that sector, so as to profit from short positions in those stocks. That is what I was expecting when I first heard he had been arrested.
Take Gilead for example, which created Harvoni/Sovaldi for treating Hep-C. It's currently valued at about $150B. Before the release, it was a quarter of the price, so the value of Gilead's Hep-C franchise is in the order of $70-$80B at the very least. That's about the entire net worth of Bill Gates.