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Comment by brohoolio | Hacker News Reader

I’m not sure what kind of R&D the $800 or whatever it costs now Epipen is paying for. R&D for lobbyists?

Or profits because the company gamed the market.

I don't know about Epipen, but it can cost billions to bring new drugs to market https://cen.acs.org/articles/92/web/2014/11/Tufts-Study-Find...

I don't know if it still the case but advertising costs were previously considered r&d so grossly inflating those numbers.

Do you a source?

As far as I know, R&D never included advertising.

R&D includes a lot of (most?) but not all advertising. It probably doesn't include things like running DTC ads on TV. But it does include things like:

- Paying doctors to prescribe the drug to patients for "research purposes."

- Paying doctors for their "valuable opinions" about the drug.

- Paying for advertising to recruit patients into clinical trials.

And so on.

I don't think there are any industry-wide statistics, so you'd have to look at the break down for each individual drug (where available). If you read pretty much any book on the pharma industry it will go into this, there are no shortage that you can find on Amazon.

For the first point you mean clinical trials? I wouldn’t call that advertising.

The 2nd point sounds like consulting fees, not advertising.

And the 3rd point is required to recruit for clinical trials. And the drug doesn’t even have a brand name at the point. Doesn’t seem like what the general public would call advertising.

> For the first point you mean clinical trials?

Usually post approval clinical trials. Since pharma companies wouldn't be allowed to pay doctors to prescribe their drugs for no reason, they just spin up new trials after the drug is already approved and pay doctors in exchange for getting the patients to do something nominal like filling out a survey.

> The 2nd point sounds like consulting fees, not advertising.

Consulting is a form of advertising, at least in the way it's actually done in the pharma industry.

I think the argument is that these activities are done in a specifically disingenuous way that achieves primarily marketing and sales goals rather than R&D goals.

Certainly return on capital investment is considered when deciding whether to invest in R&D.

New drugs and their acceptance by insurance companies is much more important to me, than price gauging. I invest in pharma companies.

The ability to raise the price for a single drug is really the last thing I want in a company I invest. I want long lasting customer base or high impact justifiable expenses, that US HMOs and EU governments will gladly pay(reason why I bought Gilead when I heard about their HepC cure). And Gilead's Truvada strategy, why I divested as a result.

^famed^gamed

I don't understand your point. Obviously it's going toward R&D of new drugs unrelated to the EpiPen. What does the price of an EpiPen have to do with how the money is spent?

Except the company that made EpiPen doesn't even make EpiPen anymore. Mylan bought the rights to make the drug in 2007, and then other companies bought it from Mylan. I forget who owns EpiPen now, but the current owner is very far removed from the original researchers who made that drug.

That's not how it works. You invest if it's worth investing, not if you just have the money laying around.

Paying a few billion dollars to a big pharma company is not going to make them invest more in research. They will instead pay the money out as dividends.

The goal of patents is to create incentives for future research, but if you change the rules by increasing the extent of EpiPen patents after the drug was created, where is the incentive?

> Paying a few billion dollars to a big pharma company is not going to make them invest more in research. They will instead pay the money out as dividends.

This is a misconception. No investor wants their money back. Investors want a promise of MORE money back in the future. If investors wanted their money back immediately, they wouldn't have bought stock in the first place!

The vast majority of investors prefer (ex: Tesla) a company to spend all their money asap on infrastructure, research, development, etc. etc.

Dividends are a last resort, only to be used if a company doesn't know what to do with its cash. Once a company starts paying dividends, it means that it has run out of ideas for how to invest into the future.

Besides: its more tax efficient to grow the stock price rather than to pay the profits back in cash.

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Even a big company will want to at least appear that it is growing even bigger, through R&D funds and what-not. If you start to give out a lot of dividends, investors will probably take it as a bad sign and flee.

Paying dividends is not giving investor's their money back. It is paying a return on the investment. Some companies like Amazon espouse the idea of perpetually trying to grow stock price, but that is not what every investor is looking for. Some investors are looking for an investment that will pay dividends every year going on forever.

You don't have to pay dividends, you can just do a stock repurchase.

Regarding investor preferences, they only want the money spent if it gives them a positive NPV. Pharma companies are already paying dividends, which means they have funds in excess of their NPV>0 projects, which is why they return them to shareholders.

Hell, half of the shareholder activism literature and the policy payout literature is about CEOs overinvesting and doing empire-building instead of returning the money to shareholders..

> Regarding investor preferences, they only want the money spent if it gives them a positive NPV.

Precisely. And cash rarely gives the best NPV. You put money into companies with the expectation that they make MORE money in the future.

> Pharma companies are already paying dividends, which means they have funds in excess of their NPV>0 projects, which is why they return them to shareholders.

And there you have it. It means that Pharma Companies are making more profits than they know how to reasonably invest into themselves. Which is PRECISELY why people get annoyed at them, especially when they have huge marketing budgets and $800 Epipens.

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There is a Christian Parable about the man with 1 Talent (where Talents were a unit of Gold in the time of Jesus). The man buried his gold, because he was too worried that he'd lose the gold.

The man's peers however invested the money and grew their Talents. The man with 10 Talents had 20 Talents at the end. The Man who started with 5 grew to 10.

The man who buried the gold ended with just 1 Talent (the only one he started with), and was therefore punished. The religious message here is not to hoard your Talents (ie: Gold), but to invest them and grow yourself, and your masters.

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I guess not everyone is a Christian. But if Pharma companies can't figure out where to invest the money, then perhaps they could at least return the money to their customers by lowering the price of their drugs.

Returning the money that they started with is... not growth. Companies are supposed to grow (through new R&D, improvements, etc. etc.).

To be fair, the master in that story was a bit of a jerk.

> You knew that I reap where I have not sown and gather where I scattered no seed?

He took what belonged to others. And, had the servant with 2 talents lost money instead of making it, I doubt the master would have responded to him with "Well, you tried. Good on you."

This depends on the investor. Stock market investor, the one who's purchase of stock doesn't provide the company with any funds, cares not how income is delivered. But you're right on one thing - investors want better future prospects, however those are achieved.

Mylan gross profit in Q1-Q3 2018 was $2.3 billion, and R&D expenses were $600 million [0].

If I'm reading this right (and I may well not be), there is a lot of money not accounted for by R&D expenses.

[0]: Nov 6, 2018. Mylan, NV. Quarterly Fillings. Accessed from http://investor.mylan.com/static-files/2909eb6c-4430-452e-94... via http://investor.mylan.com/financial-information/sec-filings

The EpiPen is one of the "hard to manufacture" drugs I mentioned. Although it is top of mind to many, it is not representative of the market.

EDIT: "hard to manufacture" is in quotes because it's what I said in my parent comment (though to be fair I said "costly to manufacture"), but I meant it as an umbrella term for everything that can't be substituted by generics

If it was hard to manufacture, why is it cheaper in Europe?

There are cheap generics all over. The only patent EpiPen has is the applicator. Generics require you to take a syringe and inject it by hand because the patent prevents competitors from using a similar style spring loaded applicator.

The epinephrine used in epipens is extremely cheap to produce.

EpiPen is just an epinephrine autoinjector which date back to the 1970’s. The medicine is much older and very cheap ~50 cents.

In term of cost syringe‘s cost ~15 cents and work fine in experienced hands, but auto-injection makes them slightly less error prone. It’s litterally over a 300x markup for a rare problem.

EpiPens used to cost under $100 for a 2-pack, but now they cost over $600 for a 2-pack. Epinephrine costs like $0.17 per ml, and an EpiPen dose is 0.3 ml.

http://mshpriceguide.org/en/single-drug-information/?DMFId=2...

I feel like it's probably worth, to combat the false exoticism, pointing out that "epinephrine" is just a medical industry name for what is generally known as adrenaline.

There are no "real" implications to calling it one or the other, but people think differently about "a substance I've never heard of" and a common household name.

EpiPen is one of the "hard to manufacture" drugs

Yeah it must be very hard to manufacture when the manufacturer's revenue is going towards paying off a $465 million settlement for deceptive business practices. https://en.wikipedia.org/wiki/Epinephrine_autoinjector#Price...

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