What good are whizzy new drugs if the world can't afford them?
economist.com
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The US should probably negotiate 'most favored nation' status so they get the lowest price offered among the OECD (maybe adjusted by national income per capita) such that there is less global free ridership - but even that probably won't do that much to shift the cost burden.
We should also invest in lowering the costs of drug design & trialing so we can lower the risk premium and startup cost.
I encourage you to read some econmetrics papers on governmental success rates as 'picking winners.' They are terrible allocators and would be more likely to try to build a pharma R&D center in Michigan and Wisconsin for general election concerns.
Except the cost of many drugs continues to go up, even as they're commercially available and R&D has been recouped (I also realize that R&D may be a bucket across multiple drugs, not just a 1:1 correlation, but nonetheless).
> We should also invest in lowering the costs of drug design & trialing so we can lower the risk premium and startup cost.
We already lower the costs of a lot of drug design by doing (some of) it at public universities.
A successful drug doesn't have to recoup its own R&D costs, it also has to recoup the costs of all the drugs that failed to make it to approval. It's not any different than VC investing. Just because one company in a portfolio returned 10x ROI, doesn't mean you can be like "alright guys, you made back all your money, now turn yourself into a non-profit".
Yes, it is a bucket. I would like your examples though.
> We already lower the costs of a lot of drug design by doing (some of) it at public universities.
Yes, we should do this more. Public funding is very rarely sufficient to go through the whole development -> market process.
It's not on these kind of diseases, this kind of work is usually done with public money, grants.
Money in big pharma is usually spent in researching weight loss and alternative drugs for common diseases. After all, the return of investment on these types of drugs is much higher.
For a big company to make a drug that costs 1 million dollars but only 1000 people in the world have it, and from those only perhaps 100 live in countries that can afford the drug might be a business opportunity but it's honestly not a huge profit which is why they will turn to public funding to research these.
Imo, if you use public money then the products should be free of intellectual property. Public money, public goods.
This isn't just some greedy behavior. Treating common diseases is how you reduce discomfort/misery the most, in aggregate. Aspirin for 100 million people who are 1.5 on the pain scale is more effective than some $50,000/pill analgesic for that one guy who happens to be at 11.
This kind of extreme utilitarian approach seems flawed when you view healthcare as a human right. Reducing pain from 1.5 to 1.4 to millions of people is not really as valuable as saving one person's life. That's my opinion at least.
Of course, developing a drug that could save thousands of lives or one life is a real problem that governments and pharmaceutical companies need to face. And I would agree that in this case a utilitarian view is helpful.
But on the other hand, companies are not making these decisions based on ethical frameworks. They're making them on a basis of shareholder profit maximization. When you talk about "reducing the pain" do you actually care about reducing pain or is that simply a positive externality to the profits you'll make.
people will pay a lot of money to save their life. to the extent that people cannot afford to save their life, government should subsidize.
Of course it seems flawed when you're delusional and view absurdities as human rights. Do you have a right to rollercoaster rides? Do you have a right to jazz music? What about a right to gold jewelry? If you have these rights, then all sorts of other sensible principles seem flawed.
> But on the other hand, companies are not making these decisions based on ethical frameworks.
Why would that be necessary? Why do you think that whatever outcome you want actually requires making decisions in that way? And how could you ever guarantee that the decisions were made "based on ethical frameworks" even if law mandated it?
How much % of research today is publicly funded but privately patented? The principle of "public money, public goods" sounds good, until you you start mixing public and private funding. If you make a drug that's based on public research (that costs say, $1B), and then spend another $1B bringing that to market, should anyone be able piggy back off your work and compete against you? Why would anyone want to be the first company to do that? This is basically the exact problem that intellectual property laws are trying to solve.
NIH has received almost $4.9 billion to date to fund important COVID-19 research on diagnostic tests, vaccines, and treatments. More than $940 million came from the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020, with supplemental funding coming from the U.S. Congress .
Edit: I guess that you could argue that it wasn't all for a single drug
> In this cross-sectional study of 356 drugs approved by the US Food and Drug Administration from 2010 to 2019, the NIH spent $1.44 billion per approval on basic or applied research for products with novel targets or $599 million per approval considering applications of basic research to multiple products. Spending from the NIH was not less than industry spending, with full costs of these investments calculated with comparable accounting.
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10148199/
The industry might spend more overall, but if you look at typical drugs they are typically publicly funded.
Edit: I think the main point people miss is all the research done by universities that is government funded. MRNA vaccines were made possible by decades of university research based on public funding, the private corporations just came in and did the easy part at the end. Novel medicines are mostly based on such research and hence mostly publicly funded, we would continue to make such progress regardless of private investments.
This includes amortized spending for failed drugs I think, but so does pharma spending so seems like a fair comparison.
I think we should publicly fund more drug development, but it is simply false that most drug development money is from government. I'm not sure which 'these kind' of diseases you are referring to.
Publicly funded research part is on the characterization of the disease and the mechanisms, not the actual design of the drugs themselves. A lot more intellectual effort goes into the actual development of the compound that can safely treat the patients.
Absolutely not. Take mebendazole, for instance. It's generic, it's on the WHO's list of most-essential medicines, but in the US there is only a single manufacturer (Janssen/Johnson & Johnson) who uses their monopoly to charge an outrageous $350 per tablet. In every other nation, the price per tablet ranges from $0.10 to $10.00.
given tropical diseases are so rare in the US though, there might not be enough liquidity to encourage good pricing
As for “free ridership”, the US only has so much military and economic power to compel the rest of the world to give them money because THEY own certain molecules and not anybody else. It is actually totally absurd to think the US can unilaterally set prices because of a self-inflicted victim complex. If the US wants less free riding it should spend less on research which is fundamentally impossible to profit from without mass scale coercion, or maybe should kick off some cooperative research funding agreements.
The TPP shakedown meant to force the global poor to pay tribute to US pharma in the guise of a trade agreement went down in flames and it went well below actually expecting poorer countries than the US to pay more for drugs - which is a bad pricing strategy anyways driven by envy since you will not achieve optimal profits if you price people out.
High drug prices do not encourage cornering the market on drugs, for obvious reasons?
> As for “free ridership”, the US only has so much military and economic power to compel the rest of the world to give them money because THEY own certain molecules and not anybody else. It is actually totally absurd to think the US can unilaterally set prices because of a self-inflicted victim complex.
Most developed countries have sufficient rule of law that they won't sell a drug if the creator refuses to sell it in the country. If that can't be enforced, that's too bad - as it will leave us all worse off in the long-run.
And US doesn't compel rest of the world to give money in fact it's the opposite. Almost all pharmaceutical company in the world would die if US refuses to increase their price like the rest of the world.
Lee Mendoza, R. (2019). Incentives and disincentives to drug innovation: evidence from recent literature. Journal of medical economics, 22(8), 713-721.
> While high and continuously rising drug prices are typically claimed as the price of scientific innovation, the reviewed literature finds that this link only partially accounts for the problem. High risk aversion owing to information asymmetries and vastly intractable uncertainties is prevalent among innovating firms. Predatory business models abound. Reverse predatory strategies also exist to maintain product exclusivity without much added clinical benefits, and to constrain generic competition. CEO compensation practices contribute to rising drug prices.
Feldman, R. (2020). Perverse incentives: why everyone prefers high drug prices-except for those who pay the bills. Harv. J. on Legis., 57, 303.
> Quite simply, incentives percolating throughout the prescription drug market push players toward higher prices. At the center lies the highly secretive and concentrated Pharmacy Benefit Manager (PBM) industry middle players who negotiate between drug companies and health insurers by arranging for rebates and establishing coverage levels for patients.
> Thus, one should not be surprised to see competitive distortions and sub-optimal outcomes.
> presents a full picture of incentive structures in which higher-priced drugs receive favorable treatment, and patients are channeled towards more expensive medicines.
> In exchange for financial incentives structured in different ways to appeal to hospitals, insurers, doctors, and even patient advocacy groups, drug companies ensure that lower-priced substitutes cannot gain a foothold.
Here is an extremely recent study by one of the most famous econometricists out there:
Asking for lower price is simply asking for fewer whizzy new drugs. If our medical system price goes down, so will drug price.
Nathan Rothschild, richest man in the world, died from an ailment that could be cured basically for free today using penicillin. But when penicillin came out, it was an expensive and "whizzy" new drug.
Insulin analogs are most prescribed and subject to pricing issues. Particularly important to those with insulin resistance.
With insulin it is not same, but new better or changed product. Similar insulin to past is not that highly priced.
Pick one - heck, pick any of the three - or all of them at the same time.
They do, you can buy it at Walmart cheaply.
Is the limitation really the payment model?
They're having trouble keeping up with demand, even at the current high prices.
It appears that the innovation has to occur at scaling the manufacturing.
If the expectations for returns on pharma become substantially lower, less money will be invested in pharma and they will have less money to invest in R&D.
I don't think Martin Shkreli is a challenge to that thesis.
Nothing to do with deploying more R&D in this case.
In terms of expectations on returns of your statement - I would be curious to see the case that increased expectations on returns correlates with positive outcomes. Sure more money in, but that does not equate to better meaningful and better results out.
> Sure more money in, but that does not equate to better meaningful and better results out.
I believe that spending more on R&D will cause more drugs to be developed. If you disagree, we can agree to disagree - I'm not sure it would be a productive conversation.
"I believe that spending more on R&D will cause more drugs to be developed."
More != better.
I'm not even sure who the 'somebody else' even is. Public capital markets are how we direct money towards promising things that people want.
I'm not sure who else would be funding pharma research if not people who are giving their money willingly.
Hmm... yeah. Shame, there's just... no other way.
Say, how often do you travel abroad?
No need to be snarky and sarcastic just because you are having trouble explaining your point.
Do you know why there are so many “Big Pharma”? It has to be big, because most of the smaller ones simply can’t survive for long. Developing drug is a difficult process. Whopping 90% of compounds fail during the three phase clinical trial period, $40k per patient in the trial, hundreds of millions of dollars per trial.
Every failed trial is a signal for career change for people who develops drugs. You think people will invest in such risky business without expecting a big reward? Asking for low drug price without lowering the clinical trial cost is assuming drugmakers can print money. Unfortunately biology doesn’t work like that.
A lot of us who develop drug are doing it because we believe this is a meaningful thing we can do in the world. They are just hidden behind investors like Shkrelli, who isn’t even anywhere near the actual people who make the drug. But we do need the money to develop the drug. A lot of it. I hope you understand.
The real solution is to lower the cost of the trial. And I maintain that the drug company isn’t in control of this.
You need to take into account of the fact that patent clock starts ticking as soon as you file it, whether the drug gets approved by the FDA or not. The drug development process itself eats away that exclusivity at about 12 years on average, so that 40% needs to account for the time when you don’t get another drug approved (remember the 90% failure rate).
Drug business is EXTREMELY hard, and investors aren’t running a charity. There needs to be high profit margin to motivate people who fund the discovery and development process for new drugs to come out.
As I keep saying, once we bring down the cost of clinical trial (which is totally artificial, and not under the influence of pharma), you will bring down the risk and cost of drug.
Again, you are pointing the finger at the effect of high medical cost rather than the cause. Ask yourself: why are doctors in US paid 3x the amount compared to UK? Do they raise price because of the drugs? No.
Traditionally, avant garde tech is very expensive and available in limited quantities, then prices come down and things become more broadly affordable.
Every drug was a whizzy new drug at some point. Most of them are now common and affordable. The people who the drug will help cheaply in 20 years will benefit greatly.
https://beta.economist.com/by-invitation/2024/06/14/what-goo...