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Comment by phkahler | Hacker News Reader

>> They're priced this way because they're 80-90% cheaper than the previous treatment.

Your statement is true. But it also hints at another problem, which is that the default is to price life saving treatments as high as the market will bear. It's a pricing model in line with extortion, the only exception being that the extortionist doesnt have to threaten to kill you - the virus or whatever condition is already making the threat for them.

I was about to summarize by saying "sometimes a free market can mimick evil" but I just remembered it's not a free market at all. These treatments have government granted monopoly status via patents. That's why they are priced so high.

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I think it's the "right" price, you want to incentivize companies to try to develop drugs that will do the maximal amount of good.

Like, you could imagine a system where you don't have a free market at all, the government would directly fund both medical treatment (like in Europe) and medical research (like nowhere right now, but you could imagine nationalizing the drug companies). So then, before the hepatitis-c drug exists, you are paying $500k for each liver transplant, and you try to figure out how much money should be allocated to that drug research program. You'd want to fund it at roughly the expected cost saving, multiplied by the probability that the drug development is successful.

In the actual system, if the drug companies try to develop the drugs, and then charge about the same price as the cost of the previous treatment during the time they hold the patent, then their expected payoff (so how much money they will put into research) is the cost of the previous treatment times the probability that they will be successful---so this high price is basically what we would want to allocate anyway. And if the drugs are paid for by the government, their expected spending over all the drugs is similar to optimal amount of direct research funding.

I’m not sure that assertion is borne out by the data: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2866602/

I think two big missing factors in your analysis are (1) profit — US drug companies pocketed something around $30 billion dollars this year, and (2) inefficiency - something like $20 billion dollars went into deg marketing in the US for example, which seems to me like almost a complete waste.

Just measuring profit ignores all the companies who went under because their drug didn’t work. You’re just counting the winners.

And marketing includes things like paying a sales rep to answer doctors questions. Are you saying they shouldn’t do that.

I was under the impression that the biggest driver of marketing costs for drugs was providing free samples of the drug to doctors, with training doctors coming second and advertisements a distant third.

Depends on the drug and the market. Not all drug have a free sample program, but yes, it can add up since they account for the full price, not cost of goods.

Personnel can be a big chunk as well, since the fully loaded cost of a sales rep can be $400k per year and for primary care drugs, it’s not unusual to have 1,000 reps.

> I think it's the "right" price, you want to incentivize companies to try to develop drugs that will do the maximal amount of good.

So the only incentive to do maximal good is more money. And people wonder why I laugh when it's claimed that we live in a civilized society.

Well, the only financial incentive to do good is money. But that is a tautology, not an observation. There could potentially also be other types of incentives, but I don’t see how they are supposed to apply here.

How much drug research have you personally done? Is your time more valuable than that of others?

You have to make a distinction between a person and a corporation. Now I feel I should say, I'm not in favor of the "Citizens United" ruling before I start down this path.

The mandated motivation for a corporation is to maximize share value for it's shareholders. That's it, as creepy as it is. CEO's (well "good" sociopathic ones) compartmentalize everyone's jobs so they only do the little bit of bad that they are comfortable with and can distance themselves from the corporate wrongdoings, as a whole.

A singular person, or even a small group of people, have entirely different dynamics and motivations and would, normally, never make these type of decisions themselves. Singularly, they wouldn't be able to run successful multinational, billion dollar corporations either.

It's somewhat unfair to look at a single person who works at one of these companies and say that they are the downfall of society anymore than you could point to a singular person in Roman history and say, "There. That guy. He caused the downfall."

> The mandated motivation for a corporation is to maximize share value for it's shareholders.

That's actually not the case. It became dogma in the 1980s but there is no legal mandate for this.

With new drugs you can make the argument that development costs need to be recovered while they are still under patent protection. Time and cost of development is high, 10 - 15 years and several billions, and a successful outcome is not guaranteed. This is the order of magnitude of a flagship space program of a large nation.

Where you really have no excuse is the price for old drugs that get bought up by venture capital. Wilson's disease is treated with triethylenetetramine. The price had always been ~ USD 600 for 100 pills until the manufacturer became bought out by Valeant, who then raised it to 20 kUSD for 100 pills. There was the usual protestations by Hillary Clinton and other politicians, but the price is still where it is. Where is the revolution?

Do development costs really need to be recovered through sales? I thought most of this research was done on federal grants.

The early research is done on federal grants. What costs real money is late-stage development and especially clinical research, startups and universities are not at all equipped for that.

The financing model is problematic. Return on investment is much higher and faster in IT, besides there is a mismatch between what the market favours and where future clinical needs are (the antibiotic crisis, neglected tropical diseases).

Isn’t the solution then to build a national infrastructure for late stage trials as opposed to putting life-saving drugs behind a ludicrous paywall, whose price is determined by the opaque malfeasance of the healthcare system in the US?

Late-stage trials are enormously costly and negative results are common. To publicly fund them, we'd have to be ok with governments spending billions and getting nothing for it. And after the fact there'd be a long line of people saying how $treatment was obviously never going to work and only an idiot would ever have let it go forward for stage 3 trials.

I'm not opposed to the idea, but I think you'd struggle to make it politically achievable.

The government mostly funds basic research, but then there is a lot of work to turn promising leads into products. Googling a bit, in 2017 the pharma companies spent $70 billion on research while the NIH spent $38 billion.

> I thought most of this research was done on federal grants

And if not, why not? There may be folks who think public research grants shouldn't exist, but since they do, what else would be worthy of such support if not public health research?

  It's a pricing model in line with extortion

This common attitude is why I fear that we won't see true cures for anything, except perhaps from government labs.

This class of HepC drugs (Solvaldi et al) are cures. Not chronic treatments, but cures. The developer only has that one course of treatment to make all the revenue they ever will on that patient.

So what happens when they are told that they can't charge prices commensurate with the result? They'll abandon a cure model for treatments that have ongoing chronic purchases to provide revenue streams over time.

Imagine this category of HepC drugs being marketed as a $999/month regimen for life rather than $50K for a one time cure. They would face far less friction. Happy now, consumers?

This is why new antibiotic research was abandoned, by and large.

If everyone in the United States with Hepatitis C was treated at a cost of $50K it would be $150 billion dollars.

That's over 8 times what Viagra pulled in over the past 20 years.

I'm not sure where the line between reasonable profit-taking and extortion lies, but it's probably somewhere south of the GDP of Kuwait.

$150B would be the same as the lifetime sales of Lipitor, which was not even a cure.[1]

[1] https://www.kiplinger.com/slideshow/investing/T027-S001-the-...

And the cure they "created" was in reality from a university or government lab. Paid for by the citizens.

Ain't regulatory capture and 'release' great?

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