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Comment by frgtpsswrdlame | Hacker News Reader

We just need shorter patents. For example drug companies spend far more on marketing than they do on R&D and a substantial amount of the research that generates new drugs comes from government funded research (>50%). Also, it's been demonstrated that taxpayer funded research drives private R&D up. So if I was dictator, I'd make it illegal to advertise drugs on tv/radio/web, double the current government budget for drug development R&D and make medical patents expire much more quickly. (And maybe something to allow Americans to buy drugs from overseas markets? Not sure on that one yet)

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The government does not pay for development, they pay for a portion of basic research across all research areas (and it's nowhere near 50% of all research funds or drug research funds). The entire NIH budget is about 32 billion. Large pharma companies spent around 50 billion on R&D in 2010: http://www.nature.com/nrd/journal/v9/n3/full/nrd3078.html

The incredibly expensive pharma and device development costs are shouldered by industry. The government does not have the risk tolerance or patience for development.

Right now a significant portion of the patent lifetime is spent with the drug in clinical trials unable to be sold. Shortening the patent lifetime would increase prices until the drug went generic, not decrease them,as companies would have less time to get ROI.

The industry is much more complicated than you are making it out to be, and trying to make it unprofitable would not help innovation.

* >Right now a significant portion of the patent lifetime is spent with the drug in clinical trials unable to be sold.

>And for most new drugs, patents expire approximately 12 years after market introduction.

https://hbr.org/2014/11/the-real-cost-of-high-priced-drugs

Also:

>Once a company has good data, the FDA approval process is moving faster than ever. According to the agency’s most recent progress report, the standard review process now takes a median 10 months, down from nearly 13 months in 2005. Companies can shave another two months off if they get a priority review. In fiscal year 2014, the most recent data available, 92 percent of drugs were approved on first pass, up from 60 percent in 2005.

https://www.statnews.com/2017/01/31/trump-pharma-reality-che...

* >Shortening the patent lifetime would increase prices until the drug went generic, not decrease them,as companies would have less time to get ROI.

Hence why I also consider opening up the drug market to other countries. If drugmakers need to make all their profit front-loaded then they can at least spread it geographically so Americans don't have to suffer under these prices.

* >and trying to make it unprofitable would not help innovation.

Here is a comparison between the biotech industry and the S&P 500 starting from approximately the lowest point of the recession. Now come on, do you really think this industry is struggling? How is it that these companies get away with telling investors one thing ("business is great, invest!") and the public another ("regulatory overreach is killing us!")?

https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&...

* >The government does not pay for development, they pay for a portion of basic research across all research areas (and it's nowhere near 50% of all research funds or drug research funds). The entire NIH budget is about 32 billion. Large pharma companies spent around 50 billion on R&D in 2010: http://www.nature.com/nrd/journal/v9/n3/full/nrd3078.html

I'll admit, it looks like my number of over 50% came from 1995. Also, I spent a long time tracking down this 50 billion number and it's original source (took a bit). It looks like it was originally published here(and other PHRMA industry reports):

http://www.phrma.org/sites/default/files/pdf/2015_phrma_prof...

So PHRMA is an industry group and I was interested in their methodology which is also very hard to find but lo and behold:

>In 1991, Joseph DiMasi and colleagues from the Tufts Center for the Study of Drug Development published a widely quoted, comprehensive study of drug development costs. Using project data from confidential surveys, the study estimated cash outlays of around $169M to successfully bring a drug to market during a period beginning in the 1970s. PhRMA relies on this research as the foundation for their statements about the cost of drug development. However, PhRMA uses different assumptions about a "hidden" expense called "opportunity cost" that boosts this estimate to the $500 million mark.

>PhRMA's assumptions begin with DiMasi's original estimate of R&D outlays with opportunity cost set at 9% and a 12-year development period. A review of the Tufts study performed by the US Office of Technology Assessment (OTA) subsequently calculated opportunity cost at a higher rate, which pushed the estimate towards $360 million. According to Public Citizen, this figure, when adjusted for inflation and rounded up, became PhRMA's $500 million.

>But Public Citizen says the OTA report also offers an alternative analysis of development costs. R&D expenses are tax deductible, but DiMasi's 1991 figures didn't consider the discount this offers. If the original Tufts estimate is reduced by 34% in tax savings and opportunity cost is subtracted, Public Citizen says the actual cash outlay for bringing a new drug to market during the seventies and eighties was actually closer to $65 million. Public Citizen also stresses that, during the nineties, accelerated approval times and special tax credits further reduced the cost -- and the risk -- of researching and developing new drugs.

http://www.thebody.com/content/art13514.html

>Notably, as in the Center's previous estimates, nearly half the cost of drug development was accounted for not by research expenditures but by the cost of capital. The analysts justified that assumption by noting that during the years a company spends developing a new product, it incurs opportunity costs by not using those dollars for other purposes. That argument is plausible, and such calculations can be an appropriate component of such analyses. However, nearly half the total cost of developing a new drug ($1.2 billion) was ascribed to this cost of capital, with only $1.4 billion attributed to funds actually spent on research. These capital costs were assessed at 10.6% per year, compounded — despite the fact that bonds issued by drug companies often pay only 1 to 5%.

>The Tufts calculations also explicitly do not take into account the large public subsidies provided to pharmaceutical companies in the form of research-and-development tax credits or substantial payments received from the federal government for other research activities, such as testing their products in children. Perhaps most important, because the calculations are based only on products that the companies described as “self-originated,” the $2.6 billion figure does not consider drug-development costs borne by the public for the large number of medications that are based on external research that elucidated the disease mechanisms they address. One recent analysis showed that more than half of the most transformative drugs developed in recent decades had their origins in publicly funded research at nonprofit, university-affiliated centers.4

http://www.nejm.org/doi/full/10.1056/NEJMp1500848#t=article

* >The industry is much more complicated than you are making it out to be

You're right, the industry is very complicated, so please be careful not to let industry pull the wool over your eyes.

EDIT: I didn't realize how big this post had gotten. I need to get back to work, crap!

> >And for most new drugs, patents expire approximately 12 years after market introduction.

The length of a drug patent is 20 years, 8 of which by your statement are spent in development. So yes, almost half the patent duration is spent with the drug off the market. This is burden almost no other industry has to deal with. My original statement is completely valid.

> Hence why I also consider opening up the drug market to other countries. If drugmakers need to make all their profit front-loaded then they can at least spread it geographically so Americans don't have to suffer under these prices.

Other countries place more stringent price ceilings on the cost of pharmaceuticals, which is why there is such a disparity between what we are paying and what others are paying. If we want to spread the cost burden geographically, countries benefiting from these products should be pressured to remove their price ceilings, which would lower costs in the US. Opening up the markets to other countries is just regulatory arbitrage, not spreading of cost burden.

Also, if I'm interpreting this correctly, nothing you posted suggests that the government is the primary backer of pharmaceutical research. We can argue over whether the research costs are 50 billion or 30 billion or whatever, but your original claim is still incorrect unless the numbers are off by literally an order of magnitude.

* >The length of a drug patent is 20 years, 8 of which by your statement are spent in development. So yes, almost half the patent duration is spent with the drug off the market. This is burden almost no other industry has to deal with. My original statement is completely valid.

And yet they seem to be doing just fine, check that stock price chart above. Part of this is because 12 years is already pretty long, they're obviously making their money back. Also, there are all sorts of strategies these companies use in order to avoid true patent expiration.

>The problem is, these modified drugs don’t offer enough of an advantage over generic versions of the original molecules, says Jim Keon, president of the Canadian Generic Pharmaceutical Association. So the sophisticated lifecycle plans brand-name companies have for their products — rolling out new versions when patents near expiry — are created primarily to help bottom lines rather than patients. And the argument that this is necessary to earn enough money to reinvest in new R&D doesn’t hold much weight, suggests Keon, if that research only results in more “me-too” drugs. “They have to recoup R&D costs, yes, but the question is: Is it useful R&D? If the R&D is just to tweak a product to get more monopoly protection without really providing an improved medication, then maybe it doesn’t deserve a patent,” says Keon.

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3680578/

>Nexium illustrates the drug makers’ strategy. Many chemicals come in two versions, each a mirror image of the other: an L-isomer and an R-isomer. (The “L” is for left, the “R” is for right.) Nexium’s predecessor Prilosec is a mixture of both isomers. When Prilosec’s patent expired in 2001, the drug maker was ready with Nexium, which contains only the L-isomer.

http://sm.stanford.edu/archive/stanmed/2005summer/drugs-meto...

>AstraZeneca somehow managed to convince the US Patent Office that Nexium was substantially different from Prilosec, and thus should be granted its own patent, along with 20 years of protection

http://acsh.org/news/2017/01/18/nexium-dark-side-pharma-1054...

* >Also, if I'm interpreting this correctly, nothing you posted suggests that the government is the primary backer of pharmaceutical research. We can argue over whether the research costs are 50 billion or 30 billion or whatever, but your original claim is still incorrect unless the numbers are off by literally an order of magnitude.

I admitted that was a tad misleading, here's the fact I was thinking of. I should have linked it earlier.

>An internal National Institutes of Health (NIH) document, obtained by Public Citizen through the Freedom of Information Act, shows how crucial taxpayer-funded research is to top-selling drugs. According to the NIH, taxpayer-funded scientists conducted 55 percent of the research projects that led to the discovery and development of the top five selling drugs in 1995. (See Section III)

http://www.citizen.org/publications/publicationredirect.cfm?...

* >Other countries place more stringent price ceilings on the cost of pharmaceuticals, which is why there is such a disparity between what we are paying and what others are paying. If we want to spread the cost burden geographically, countries benefiting from these products should be pressured to remove their price ceilings, which would lower costs in the US. Opening up the markets to other countries is just regulatory arbitrage, not spreading of cost burden.

I'm fine with the US or US industry "exerting pressure" on other countries to remove pharmaceutical price ceilings as long as we allow our citizens to buy overseas drugs first. Otherwise I don't see why Americans should suffer like this. American citizens alone bear the cost of R&D for the world because every other country sets price ceilings? Also, I'll just once again point out that our drug development industry is not struggling! It's doing great right now, they spend lots of money on dividends and stock buybacks and advertising and still make fantastic profits. They're fine.

And yet, prilosec is an OTC medication which anyone can buy for about 10 dollars, so who gives a shit. So what if a reformulation leads to a new patented product if the old formulation becomes a generic and is readily available? Also, reformulating to reduce dosage requirements to improve adherence is a legitimate product improvement so I don't see why it's problematic at all to seek another patent.

Yup. I'm a huge proponent of basic research and I think we can do more of it. But saying basic research "leads to" drugs is also misleading. Basic research typically only establishes that a compound has basic efficacy in a cell model or an animal model. There's a lot more work that needs to be done to validate that the compound works in a human.

> American citizens alone bear the cost of R&D for the world because every other country sets price ceilings?

Yes, pretty much. We subsidize drug development for much of the world.

> Also, I'll just once again point out that our drug development industry is not struggling! It's doing great right now, they spend lots of money on dividends and stock buybacks and advertising and still make fantastic profits. They're fine.

The whole stock market is doing great right now. By this logic everyone should drop the price on all goods because their stock prices are going up.

> We just need shorter patents.

This is nuts. By the time a major drug is ready for market, out of a 20 year patent there are usually only 5 years left. How much shorter do you think it should be? When they are operating under that kind of deadline, they don't have time for word-of-mouth marketing.

For software, sure, I'm really willing to hear arguments that 20 years is too long. But drug patents lifetimes are already very small. If something is too expensive, wait a few years.

>If something is too expensive, wait a few years.

Isn't that the point? In medicine, you often can't just wait it out. Healthcare is not a normal market.

>By the time a major drug is ready for market, out of a 20 year patent there are usually only 5 years left.

>And for most new drugs, patents expire approximately 12 years after market introduction.

https://hbr.org/2014/11/the-real-cost-of-high-priced-drugs

>When they are operating under that kind of deadline, they don't have time for word-of-mouth marketing.

Word-of-mouth marketing isn't really "slow" if the drug is very effective.

> In medicine, you often can't just wait it out. Healthcare is not a normal market

Then you pay.

I have family members who are only functional because of prescription drugs. When I see someone on HN talk about how "oh, it will probably be okay if we mess with this market, I read this really cool article online that said so," I see them no different than someone who decided on their own to start tinkering with grandpa's iron lung, because "oh, it will probably be okay." You don't know what you are messing with. Stop it.

>And for most new drugs, patents expire approximately 12 years after market introduction.

I don't know what the HBR's source is because they don't tell me. I am telling you to find any drug you see newly on the market, particularly one you see on tv since you worry about marketing budgets, and look up when its patent expires.

Why is one length of patent good for all drugs. Create the cure for cancer I can see you getting 30 years, add a antacid to an existing drug you should get 5.

Perhaps they should be different, but people get most upset about the awesome drugs that cure things completely being under patent for so long. They don't care about that antacid drug so much. You would find yourself very short on allies with your proposal.

All the money going towards marketing would instead go towards lobbying, towards getting the government agency in charge of deciding "what really counts" for deciding that this drug should be one of them. When the US government was looking at how to create incentives for invention, they did look at rewards systems, and this was the common problem. Using the market system, for all its faults and ways it could be improved, at least sends proper price signals to producers and consumers.

You are probably right. We might have to accept less innovation in order to make the products affordable.

We are being asked to make the same hard decisions that each generation before us has made. And we are doing it while being far richer and having a greater repository of knowledge than them. Something's wrong with us if we quit where they preserved in worse conditions.

WHO is far richer, and WHO should pay for it? Are we fine with these companies spending 1/4 of their combined profits and marketing on R & D, as J&J does? At best, this is a remarkably inefficient way to drive innovation.

The largest 10 pharmaceutical companies spent a combined $32.5B more on sales and marketing than R & D. No problem here? People are skipping dosing to stretch their meds further. Some people can't afford meds at all.

>Then you pay.

And if you can't afford it? Does society pay? Do we let them die? I'm interested in your answer.

>I have family members who are only functional because of prescription drugs.

Me too.

>I don't know what the HBR's source is because they don't tell me.

And I don't know where your 5 year number comes from because you didn't provide a source.

When I see someone on HN talk about how "oh, it will probably be okay if we leave the market alone, I read this really cool article online that said so," I see them no different than someone who stood by a river and watched their grandfather struggle against the current, because "oh, it will probably be okay." You don't know what you are talking about. Stop it.

> And if you can't afford it? Does society pay? Do we let them die? I'm interested in your answer.

The same thing that happens with the people whose lives could be saved right now if we stopped funding roads, or basic research, or investing in the city's water system, or educating first-graders, or researching drugs, or enforcing the property rights of rich people, or a bunch of other things that aren't going to pay off for years and are not associated with one's political party. It's not that the parties being funded are all completely honest and trustworthy, but that the money still needs to be spent. Drug research is one of the small number of things society does that actually add to the public good forever. Every year amazing drugs that do amazing things go off-patent. It's an amazing system and our children should be awed by how much stuff they will have. "Hepatitis C" will be like "polio" for them.

There is no reason to think the years 2010-2025 are some magic perfect ground where the drugs from pre-2010 are completely unsuitable and all the drugs that will be invented in year 2025 and beyond are unimportant or will still be found if a bunch of people who understand neither biochemistry nor economics rebuilt the economic system around it.

Every generation has the option to quit investing in the future. There are always people who want to stop all the painful sacrifices that are required right now, and just live off of yesterday's accumulated sacrifices and then go to sleep.

There will always be some procedure that keeps people alive but that costs Too Much Money. It's how most countries have kept their health care costs under control without noticeably impacting QALYs. There should be no doubt that there are people who died sooner because of these decisions, but the system works and doesn't bankrupt them. If "but we can't let someone die for a reason as stupid as money" is your terminal argument, be thankful you weren't in charge, or else society would have gone bankrupt a long time ago. These are hard decisions but adults need to make them, and generally adults do make them and things work out.

> When I see someone on HN talk about how "oh, it will probably be okay if we leave the market alone

I think there's a lot that can be improved about the market. I have a lot to say about that, but you are trying so hard to be cute and using children's arguments that goodwill can no longer be assumed. Good night and good luck.

Unfortunately I'm one of those guys who just really enjoys having the last word lol.

>The same thing that happens with the people whose lives could be saved right now if we...

I'm just looking for an answer to the question. Right now society pays for treatments that can't be afforded. Furthermore, I'm actually pro drug development when most of your response seems to think I'm not. I actually think that the current system does not support R&D like it should.

>I think there's a lot that can be improved about the market. I have a lot to say about that, but you are trying so hard to be cute and using children's arguments that goodwill can no longer be assumed. Good night and good luck.

I'm a mirror, you're glue... :P But seriously, I am citing my sources, there's even a huge post in here a bit upstream you can read with all sorts of sources debunking a couple industry claims. The point of turning your quote around is to show that those sorts of diatribes aren't particularly useful.

I think it would probably work out better to have a 15% excise tax on all pharmaceutical chemicals and preparations, charged on the wholesale price, collected at the shipping dock of the manufacturer or at the port of entry. This would go exclusively to fund a "research royalty" to the individuals who conduct drug research into utility, safety, and efficacy.

I don't have any specifics as to how that would be distributed, but it should likely emphasize the importance of replication and value purity of the methods over whether the results are positive or negative.

Right now, there are significant financial incentive that may bias research studies towards positive results. The patent system is magnifying those incentives.

I'm a proponent of these ideas. Patent duration as a function of private capital spent? It would have to be immune to "profit-shifting" but maybe that could be a good alternative.

You are getting close to advocating for "cost plus" which sounds really good to outsiders who are concerned about "too much profit" but have stunted every industry into which they have been deployed, and end up driving prices as suppliers look for ways to increase how much they spend. (The more they spend, the more profit they can make.) Look at the aerospace industry.

I'm not concerned about too much profit. I'm just concerned about stifling competition for too long. Patents feel like crony capitalism in some industries.

After posting I did consider the lone software engineer who comes up with a great idea, creates an app, and his app is then copied by Google who has much better marketing and distribution resources.

If patent duration was a function of investment in R&D, this software developer would be SOL because he invested little into his "eureka" idea.

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