Drugmakers Play The Patent Game To Lock In Prices, Block Competitors | Hacker News Reader

Drugmakers Play The Patent Game To Lock In Prices, Block Competitors

npr.org

70 pointsilamont24 comments

Yes, the "free-for-all" sucks. Shkreli-style and worse profiteering on illness, misery and bankrupting people.

And this reminds me: there are long off-patent generics costing $10 USD/pill ($300/mo). Isn't this crazy, even considering regulatory and medium-overhead operations?

Doesn't this seem like a reasonable social-enterprise opportunity for non-hospital-/non-insurance-owned, employee- & customer-owned co-op generic pharmaceuticals for the US market at a minimum? Fixed margins on products based on production costs and overhead... but with enough investment so it can't get "DRAM price war"ed butt-kicked.

>>"And this reminds me: there are long off-patent generics costing $10 USD/pill ($300/mo). Isn't this crazy, even considering regulatory and medium-overhead operations?"

The worst part, you can get the same drug for pennies outside USA. The drug that probably US companies or research invented.

Or in some cases, the same prescription for your cat or dog at a fraction of the price, in the states. For the same pills.

> The worst part, you can get the same drug for pennies outside USA. The drug that probably US companies or research invented.

I have direct personal experience with this, as an American living in the Netherlands. My youngest kid recently had worms appear in her poo. I called up the doctor's office and got a straightforward direction over the phone: go to any pharmacy, ask for mebendazole, give her one pill directly and one more after 2 weeks. No prescription necessary, no doctor's visit necessary unless worms persisted after the second dose.

I went to the pharmacy. The medication - 2 doses - was 90 cents. Problem solved.

Out of curiosity, I looked up the medication online. It's generic now, having been first marketed in the early 70's. It's considered one of the two standard de-wormers for humans and is on the WHO list of essential medicines.

In America, it costs somewhere between $200 and $400 per dose (i.e. double that for a course of treatment.) Why? Because one generic maker (Impax) has cornered the US market. And it would have required a doctor's visit and prescription to acquire.

US health care is so fucked.

Mebendazole didn't use to be so expensive in the US. This is another Martin Shkreli type situation.

In the United States a single dose was about 18 USD in 2015.[3] In 2016 the price increased to 440.00 USD per dose in the U.S. as Amedra Pharmaceuticals acquired the rights from Teva in 2013.[8] In 2010, Amedra also bought the U.S. Marketing rights to the only other interchangeable anti-parasitic medication, albendazole, from GSK. The result of these acquisitions created a monopoly these medications and the price increased dramatically.[18]

https://en.wikipedia.org/wiki/Mebendazole#Cost

The only issue with that from my limited knowledge of the generics industry is that it doesn't account for legal spend by generics firms. The patent wars are waged in courtrooms by generics firms fighting branded firms. The big generics firms have massive legal budgets and expertise on all the arcana of patent law.

You could certainly try to make a small scale manufacturing firm to sell some expensive generics drugs at cost, and that could be a good idea (some hospitals are doing it), but these types of firms would probably not be able to develop "first inclass" generics without legal and administrative expertise

Until the last few years, you really wanted to be the first genetic. These first generics get 180 days of market exclusivity I think as an incentive to do all the grunt work of challenging patents. If you were later to market it was really hard to make money

Which has led to a situation where some generics markets have found themselves with only a few generics makers. These manufacturers have realized it and have been increasing price. So a co-op could be viable for markets like this. But you would need to do some r&d work for each generic you develop to show it is bioequivalent and get your manufacturing facility registered with fda, etc

However I don't think it accounts for much of the higher per capita rx drug spend in the US (unfortunately can't find source)

If anyone is interested, an executive from Bristol-Meyers-Squibb was convicted of fraud a while back and his punishment was to write a book about how he ended up in jail.[1] The judge thought it would give him time to reflect, but his main argument was that he wasn't guilty.

Regardless, it goes into a ton of detail around the negotiations a branded and generic drug company go through. What I found most interesting was the comment from the CEO of Apotex (huge generics company from Canada). To paraphrase "I don't make any money from the drugs, all my profit comes through winning court cases".

Since the book was written as a part of this CEO's trial, it's a part of the court records and was publicly available at the time (not sure if it still is - I think he is now self-published). It's titled "The First Question" and is by Andrew Bodnar.

[1]http://www.expertbriefings.com/news/bristol-myers-squibb-exe...

A stupid accusation. The current situation is by 2017, a successful new drug costs 1.5B $ and 14 years in average, at the same time, more than 95% drug researches fail at different stages. In addition, the patent period counts far before the clinical trials ( begin from the molecular compound finding), usually the patent will only protect its drug less than 10 years. The drugmakers have to earn enough money in less than 10 years to cover all the cost spending on its own research and other failed researchs.

Yes, they can make enough profit. Without that, what else can support them to continue research new drugs? by you?

Seems like we're running into incrementally diminishing return with the current approach in drug research.

I'm not sure where that $1.5B figure came from but the caveat I've always heard that came along with it is that drug companies pay less than 10% of the actual research costs. The rest is made up from government grants and university research. They mention the total costs to make themselves sound like victims.

That is simply not true. The $1.5B is cost spent to get a single drug approved and includes cost of failure, i.e. Spend on drugs that end up not getting approved. The data that supports this comes from a sampling of pharma company r&d spend

The NIH funds about $30B in research each year, NSF about $7B. The top 15 pharma companies spend ~$70B on r&d a year. VCs invest $10-15B / year as of the last few years. Globally all pharma companies spend over $200B on r&d

Is it known why that costs so much and that the cost isn't artificially inflated to justify the patents or other reasons?

Clinical trials up to FDA standards are expensive.

This is the seminal and oft-cited source of those estimates for cost of drug development. The data comes from internal financial records at pharma companies. This is a 2010 paper and costs have since increased:

https://www.nature.com/articles/nrd3078

Bottom line is that it is expensive to develop drugs because most of them fail. You need to spend millions of dollars on dozens of drugs that don't work in order to get one drug approved.

The single biggest cost driver is cost of Phase 2 failure. Basically when a drug that works in animals doesn't work in people. It costs $40-50M+ and takes 5-7 years to get through phase 2 and over 60% of phase 2 studies fail

This is because biology is hard. So the fundamental reason drugs are expensive is because biology is hard

You can also look at high level financial metrics compared to new drug approvals to get an orthogonal way of assessing r&d productivity. The top 15 pharma companies spend a combined $70B on r&d per year. In 2017 only 49 new drugs were approved and only like 40% of those were developed by big pharma (the rest were developed by startups that were acquired by big pharma, or developed by mid size pharma). Even if all 49 of those drugs go on to make $1B a year, that will still not return a profit to even just the top 15 pharma companies

Also most of those drugs are developed for cancer or rare disease bc the economics of developing drugs for those conditions actually work. For things like cardiovascular disease, stroke, or psychiatric disease, where the economics don't work out, you see very few new drugs despite massive need for better treatments. This has nothing to do with patents and everything to do with the cost of r&d. If pharma companies could develop a new heart drug for cheap and get some lame patent protection to give them a monopoly they would do it

The linked article is behind the paywall. From you comment I still can't take out _why_ this costs so much. It sounds like development cost X because phase of development cost Y. I find it strange that you can say that something called "phase 2" costs precisely $40-50M+. What does it involve that it cannot cost $1M or $100k? What's so hard about biology that makes it expensive? What I am seeing is just words but no substance or maybe I don't understand something? I would love get more insight.

I wrote a blog post on the drug development basics that contains some of the charts from that paper

https://www.baybridgebio.com/blog/drug_dev_process.html

It actually costs an average $40M (as of 2010) to do a phase 2 study. That's an average, not a precise cost. The cost entails designing a study, getting regulatory approval, recruiting hundreds of patients, paying for multiple doctor visits for each patient, manufacturing the drug, process engineering, administrative costs, getting hospitals and healthcare facilities onboard to treat patients, lab tests for all the patients, development of custom biological assays to measure the drugs activity, payments to lawyers and consultants, plus paying dozens of employees for a few years

There is an additional $30-40M needed just to get to phase 2 plus the $40m or so for the phase 2 study.

The why is biology hard question is beyond the scope of this post, and I'm not a biologist (though i work with them). But I think a lot of it has to do with the fact that biologists can't directly study human biology -- you can't just delete a gene in people and see what happens, or stick a bunch of random chemicals in somebody. Even if it wasn't ethically, financially and logistically challenging to do that, you couldn't always even see what you want to see. You can't watch changes in live human organs at the level of watching specific molecules, you can't see where all the molecules go and how they impact all other systems in the body in real time. You just have snapshots of specific things, like analysis of blood samples, or imperfect models, like animal or cell models that seek to replicate specific biological phenomena

Contrast that with something like computer science, where you can directly play around with the thing you want to study -- computers. Or chemistry -- you can be in a lab and work directly with the chemical matter you want to study. Not that those are easy, but you at least can poke around directly at the stuff you want to learn about

They'll spend more than $1.5B on advertising for that wonder drug.

you 4-6 years to recoup a couple billion in cost and have to make a profit. how do you do that without any marketing and sales?

I would love to see a break-down of those 1.5B. How can one company even organize the spending of that kind of money?

You can go to the SEC EDGAR website and search for 10-K filings for large pharma companies -- Roche, Novartis, Pfizer, Merck etc. they summarize their financials including r&d spend. Most big pharma companies spend $5-12B / year on r&d and it can take 10 years to get approval

The related trend is called the Eroom's law: https://en.wikipedia.org/wiki/Eroom%27s_law

https://pbs.twimg.com/media/CUGxcfOUEAAuseO.png:large (graph, "Overall trend in R&D efficiency" from https://www.nature.com/articles/nrd3681 )

or https://www.google.com/search?q=eroom%27s+law&source=lnms&tb...

plain text version: https://text.npr.org/s.php?sId=652546095

Also is not the only game they play which puts profits over lives. They spend massively on lobbying to keep the War on Drugs going, blocking drugs--like marijuana--from competing with theirs.

https://www.theguardian.com/us-news/2017/apr/03/big-pharma-m...

This article is sort of light on substance and talks a lot about the evils of useless patents without really looking at the broader financial picture, or looking at the real bad actors

The real bad actors are companies like Martin shkrelis, or some generics companies that take advantage of regulatory loopholes to sustain monopolies long after the patent expiry. Epipen is the most well know example; acthar gel is another. However for these drugs patents aren't really as much the issue, it's more a regulatory gray area bc FDA has not provided a clear path to developing genetic versions of "complex" drugs

The "lifecycle management" patent games mentioned in the article largely no longer work. In general an insurance company won't pay a lot more for a caramel tasting biofilm vs a lime flavored one, or for other trivial innovations that don't improve clinical outcomes. Drug companies file the patents and try to squeeze out gains, but it isn't really that viable of a strategy anymore

The only time this actually results in a company being able to charge high prices after the primary patents expire is when there is a new patentable innovation that actually makes patients healthier. A good example is Raptor Pharmaceutical and their drug Procysbi. The drug treats cystinosis, a rare genetic disease that affects young children, impairing growth, and can cause rickets, blindness and acidosis and lead to complete kidney failure by age 10

A generic drug, cysteamine, was used to treat the disease. However it was not a great drug for patients, I think it required 4x day dosing so kids had to wake up like twice in the night to take their meds, resulting in a lot of missed meds, and it also smelled bad (again these are kids taking the drug, if it smells bad they will fight taking it).

Procysbi was an improved formulation of cysteamine that was easier for patients to take -- they didn't have to wake up in the night to take it. They did a clinical study showing it was just as effective as cysteamine with less nausea and vomiting but they did not design the study for superiority (ie they did not measure whether improved adherence led to better outcomes), although all but 1 patients chose to stay on Procysbi after the study

The company that developed Procysbi charged like $200k / year for it. It was a much better drug for really sick patients, and the company did actual research, but the generic was $8k a year.

By the way, the disease affects 500 people in the US / year, and the company treated a significant portion of that population for free during its clinical studies

The drug made 500 sick kids healthier, and would never have existed if the company could not charge a high price (again, total market size of 500 patients)

I think it's clear that I support this type of work but I understand that some people might rightly view this as unfair. However I think this example is a much better example of the "lifecycle management strategies" that actually work today than the ones referred to in the article

For more about Procysbi see here: https://camargopharma.com/2013/05/raptors-procysbi-costs-mor...

Reply on news.ycombinator.com