Hacker News Reader

Comment by phaemon | Hacker News Reader

Nope, drugs sales in the EU alone are enough to cover pharmaceutical R&D costs worldwide. What they aren't enough to cover is Marketing costs, but that's OK since most EU countries don't allow direct marketing of drugs.

That's what the US covers. Not quite so noble sounding that you're covering the cost of advertising though, is it?

View on HN

> Nope, drugs sales in the EU alone are enough to cover pharmaceutical R&D costs worldwide. What they aren't enough to cover is Marketing costs, but that's OK since most EU countries don't allow direct marketing of drugs. That's what the US covers. Not quite so noble sounding that you're covering the cost of advertising though, is it?

I usually avoid responding to comments that are this snarky, because it's generally a strong indicator that the person isn't actually having a discussion in good faith. But I'll bend my own rule to say:

1) EU sales of pharmaceuticals are nowhere near enough to sustain the level of R&D we see globally.

2) Direct-to-consumer advertising is only one part of "marketing". Even in the US, it's not the majority of money spent on marketing. Marketing absolutely does happen in the EU, and it's a necessary part of the entire R&D lifecycle.

1) Yes they are

Pharmaceutical R&D spending in 2015: USA $47B, Europe: $33B.

Total drug sales Europe 2015: $190B

It doesn't make any sense to look at marketing as a discrete component you can separate from everything else. Drug companies don't want to spend money on marketing, obviously. They do it because it increases sales by more than what they spend on marketing. That's typically good for the consumer, because that means the fixed development cost can be amortized over a larger number of buyers.

It's worth noting that most technology companies spend more on sales and overhead than R&D. For 2014-2015, the ratio between R&D spending and SG&A spending was 0.59 at Pfizer, 0.75 at Google, 0.56 at AstraZeneca, 0.43 at Apple, and 0.58 at Microsoft. Apple wouldn't be able to sell cheaper iPhones by reducing its advertising expenditures...

Marketing is mostly a zero sum game. To be successful, you have to spend more than the next company.

If all companies reduced their marketing spend equally by 50%, nothing of value will be lost.

No, not all of marketing spend is zero-sum --- even in our own industry. The alternative to many purchases isn't some other product or service, but rather nothing (and, in theory, a poorer outcome).

> No, not all of marketing spend is zero-sum...

That's why I said "mostly". The first 10% of marketing spend may well be useful. The last 10% is the case of being louder than competitors, and is zero sum. Where the line is in a particular market varies and is subjective.

A lot of these products don't have "competitors" in the conventional sense. Their competition is an objectively inferior last-generation treatment, or in some cases no treatment at all. In other cases, there are many "competing" drugs, but they're not all efficacious on every patient, and doctors need to try different things to see which works.

Obviously there are abusive cases where pharma companies are spending marketing dollars to promote products that aren't even marginally better than the alternatives. But it seems to me like there are broad cases in the industry where --- whatever other criticism you might want to level about marketing spending --- marketing simply isn't ever zero-sum.

I agree that marketing is not a zero sum game, but I mostly disagree with your first paragraph above, at least as it happens in the US.

You're probably aware of the egregious cases of Daraprim[0], Acthar[1] (there are at least 5 cases from the last 10 years that I've read about, these two come to mind). They are only unique in the sense that there was no "slow boiling process", but rather an immediate extreme hike. Many other out-of-patent medicines experienced slower but significant hikes, such as the Epipen[2] are happening all over the place.

You should also read the Epipen article paragraph about the public-facing marketing, which is deceiving and life endangering, and about the policy-facing marketing, which is also not in any way compatible with your description.

It is my impression that your first paragraph is fantasy.

[0] https://www.washingtonpost.com/news/wonk/wp/2017/08/01/what-...

[1] http://www.nytimes.com/2012/12/30/business/questcor-finds-pr...

[2] https://www.nytimes.com/2017/06/04/business/angry-about-epip...

I'm not sure what companies jacking up the price of their products because there are no substitutables and the market clearing price is nosebleed high has to do with marketing expenses.

Per my first paragraph, I was commenting on your first paragraph about "competition" (or lack of it), I agreed about marketing not being a zero sum game.

My point is that marketing expenses are far from just informative - e.g., in the case of Acthar and Epipen, they go towards convincing doctors and policy makers that a specific brand is superior or magical, when no such evidence exists; and it is my opinion (which would take me forever to find the facts for, I admit) is that a significant part of the marketing budget, perhaps upward of 50%, goes to such deceitful practices; another one that comes to mind is Oxycontin[0], which was marketed deceitfully, and is a major contributor to the opioid epidemic.

[0] https://www.theverge.com/2018/2/11/17001926/oxycontin-purdue...

The examples you're citing are all cases of abuses that occurred due to lack of competition, so I am completely lost as to what you're trying to argue here.

I just have a very simple point to make about pharma marketing costs. It was not my argument that there aren't abusive pharma companies; clearly, there are.

acthar, epipen and even oxycontin have $10 competitors which have been shown to be at least as good for their use cases. The belief that they do not (which is encoded into some medical recommendations and public policy) is a testament to how effective that marketing is.

In fact, oxycontins claim to fame is its uniqueness in how long it acts for and therefore reduced addiction potential, which does not actually work this way.

The “non competition” belief is itself a marketed reality for many drugs.

My healthcare provider always opts for the generic drugs. When that's not an option they negotiate hard with big pharma.

It amuses me how in the ostensibly capitalist US nobody cares about efficiency. You would think that the insurance companies in the US would care about profits, instead billions are being wasted every year. It wouldn't even be so bad if healthcare was actually the best in the world so people would get what they pay for but it is not even close...

Reply on news.ycombinator.com