They rely on the government mandating that health insurance companies cover the shots. This drives up the price.
"A new study in 2020 estimated that the median cost of getting a new drug into the market was $985 million, and the average cost was $1.3 billion, which was much lower compared to previous studies, which have placed the average cost of drug development as $2.8 billion.[4]"
PrEP repurposed Truvada, an existing blockbuster drug that had already reaped immense profit for Gilead for use in HIV treatment by the time the trials for PrEP began. The trials for PrEP were funded by the government, not Gilead. Gilead, however, got to retain all profits earned from PrEP.
If the knowledge was not restricted by IP law, then any drug company could use it, and compete for new drugs based on it. As such, it would not provide any of them with a competitive advantage, and so would not be reflected in what they could charge.
What universities typically produce is not a chemical that can serve as an actual drug, but is only a starting point for a long and expensive process of producing such a chemical. And then, it's often found that the target of the class of potential drugs isn't actually a good one. One can't determine that until drug candidates are available to test on real patients.
Remember you need to include all the failed attempts at finding useful things at university labs to see how much governments spend on research (just like you did failed pharma attempts), and if you add that up you see governments actually contribute a massive part of the cost to bring medicines to market.
What they produce is necessary to even begin the work pharma does, currently it is basically a gift from the people to the pharma industry.
The pharma industry COULD do their own foundational research, but the university system cannot bring a drug to market.
You can't use an "in theory" argument for one side but not the other.
In theory governments could bring medicine to market, in practice they don't/can't.
In theory pharma industry could do foundational research, but in practice they don't/can't.
You act like the solution would be “oh well, no meds for anyone then!” and not “let’s expand university programs to meet that need”.
Citation neeeded - have they ever done so? Would the shareholders accept it? Would they be able to manage borderline autistic PHD types detached from reality, and would these scientists want to work there?
What companies don’t have is PhD students. They are numerous, smart, very cheap, and work very hard.
> They are numerous, smart, very cheap, and work very hard.
Yeah, this is a good reason to hire such people, but they generally don't do foundational research work at companies, and if they do it is extremely narrow.
Just like government work the problem is the environment, Governments hires management and planning types just like companies do, but that doesn't mean they can scale up like a company can. Same with foundational research, private companies aren't a good place to do that.
I'm not quite sure why pharma is the exception.
In other fields, either there's some tangible hope of profit down the road, or at least you can attract talent and prestige. Not so much here.
Academics focus on drug discovery because it's better aligned with academic incentives and timelines (see this commentary for a brief description [0]). Drug development costs (including clinical trials, extensive and repeated med chem, etc) are borne mostly by drug companies.
Fair data on this is hard to come by because the two main sources have clear conflicts of interest (academics and pharma industry publications). One study Derek covered before (data from 1995-2007) shows only 24% of drug scaffolds were first found at a university and transferred to a biotech or pharma for development [1]. You can break this down further to highlight any story you want to support ('university ID'd drugs more innovative' vs. 'pharma ID'd drugs help more people') but they key point is that combining all the US research leads to only 24% of drug scaffolds that make it to market.
I think everyone acknowledges that outside of finding the scaffolds and the basic biology, pharma is paying the vast majority of clinical trial costs. [2] gives a figure of total NIH funding of clinical trials at 10% of overall (e.g. pharma covers 90%).
I think an argument could be made that the NIH training grants (which pay grad students in the biomedical sciences) subsidize the work force substantially, and might have a higher impact than direct research grants. I couldn't find quantitative data on this with a quick search, but I think this is often overlooked in the discussion.
Finally, a less quantitative pieces make me think the impact of the NIH/government funding is overstated even given the above numbers. In my own field (microbiome), academic research has been almost inimical to the production of quality drugs. For every disease there exists a paper suggesting that a certain gut microbe changes the likelihood/severity/X about that disease. Academic labs have incentives to publish significant results fast, and in the microbiome this has led to a) abysmal signal to noise ratio with very high likelihood of failure to replicate, and b) an epistemic closure about what types of microbiome data matter and how they should be pursued as drugs that is totally divorced from the reality of how drugs are developed. Much of the knowledge base is polluted by low-quality research that has been done for the purpose of publishing. While the NIH spends ~40 billion a year on external research grants [3], I think you have to heavily discount this for the amount of just pure "grad student needs to graduate gotta publish" material that gets produced.
[0] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10812233/ [1] https://www.science.org/content/blog-post/where-drugs-come-n... [2] https://www.fiercebiotech.com/research/report-industry-not-n... [3] https://www.nih.gov/about-nih/what-we-do/budget
Then industry turns that into a specific molecule that can enter the human body in a standard way and doesn't produce too many side effects.
Then industry figures out how to produce that molecule at scale reliably in a sufficiently pure form.
And at the same time industry is shepherding the drug through clinical trials.
Your analogy would only be relevant if the US government paid $300M for the FDA approval and Bayer got to pocket 100% of the markup.
Actually not in the contrary - you are right. It’s just that the failures often cost a small fraction. They don’t get to 95% testing and approval before “nope, not even close”.
There are of course lots of chemicals ruled out early, but that's before you have something you'd call a drug.
37% fail in Phase 1. Of those that make it through, 69% of those fail in Phase 2, and of those, 42% fail in Phase 3.
So, of 1,000 possibles, you have 630 make it through Phase 1, and 195 that make it through phase 2, i.e. 80.5% of your drug candidates didn't even make it to Phase 3, that "most expensive phase".
A more accurate phrasing would be that 42% of the drugs that made it through Phase 2 fail to make it through Phase 3.
$ 3.7 billion for Phase 1 failures (370 drugs)
$ 43.5 billion for Phase 2 failures (435 drugs)
$ 82 billion for Phase 3 failures ( 82 drugs)
$113 billion for Phase 3 successes (113 drugs)
Published estimates of trial costs from a 2011 systematic review ranged over an OOM.[1]
A 2017 report focused on 7 top-20 companies and 726 studies from 2010-2015 found " median cost of conducting a study from protocol approval to final clinical trial report was US$3.4 million for phase I trials involving patients, $8.6 million for phase II trials and $21.4 million for phase III trials". [2] These are not all that far off from another 2016 study on cost drivers of pharma clinical trials in the US using means and breaking down costs by therapeutic area. [3]
Plugging the first study's numbers into your 1000-drug profile, we'd have:
$ 1.3 billion for Phase 1 failures (370 drugs)
$ 3.7 billion for Phase 2 failures (435 drugs)
$ 1.8 billion for Phase 3 failures ( 82 drugs)
$ 2.4 billion for Phase 3 successes (113 drugs)
That sums to $9.2 billion spent against 113 successful drugs, or about $80 million per successful drug. This implies the full cost of a successful drug is almost 4x what was spend on its development.
One limit here is we're working with medians, not means, and I wouldn't be surprised if this is an underestimate of clinical trial costs.
Roche has had pretty stable net income (profit) of $9.2-$15.2B/year from 2011-2023 against revenue from $49.9-$72B/year in the same time period. Using this estimate, ignoring inflation, if they ran 1,000 clinical trials per year it would account for a maximum of about 18% of their costs and they'd get 113 new drugs out of it annually.
Obviously that is not what's happening: there are an average of 53 FDA new drug approvals per year across the entire industry. If Roche was the only pharma company running clinical trials, the total cost of those trials would be more like $4B, so a max of about 10% of their annual costs. In reality this estimate makes it seem like it must be substantially lower.
The Congressional Budget Office[4] says total pharma R&D spending in 2019 was $83 billion. With 53 new drug approvals per year on average, that implies about an average cost of about $600 million per drug in R&D spending, compared with the $80 million estimate obtained above.
So this makes it sound like running clinical trials account for only about 10% of total R&D spending. Given that Roche's costs alone look to be in the tens of billions per year, as compared to $83B or so annually for R&D across the industry, it also looks like R&D is only a part of the story on cost drivers for pharma companies. Google is not being helpful on this question (almost all the conversation is on R&D cost, it seems), but my guess is it's costs of manufacture, legal, sales, etc.
[1] https://www.sciencedirect.com/science/article/pii/S016885101... [2] https://www.nature.com/articles/nrd.2017.70.pdf [3] https://pubmed.ncbi.nlm.nih.gov/26908540/ [4] https://www.cbo.gov/publication/57126
Marketing. At least 7 of the top 10 pharma companies globally have marketing as a multiple of R&D for their spending (sometimes up to 7x). IIRC, at the other 3, it still exceeds R&D, less egregiously.
The big issue with "Marketing" spend is that though these numbers are global, there are only two countries in the world where you can advertise prescription medicines to consumers: the US, and New Zealand (and the latter, if I recall, is trying to phase it out, and only allowed it after being bullied by the US on a Trade Agreement).
So you end up with "US Marketing spend at many pharmaceutical companies grossly outpaces their global R&D spend" (and while a not insignificant portion of R&D happens in the US, most of those companies also have a notable R&D investment in Europe).
Marketing wouldn't go to zero without that, of course, but it'd be a huge sea change.
R&D is a sunk cost. Presumably acquiring an active company with a portfolio is an investment.
If you're looking at the total amount spent by "the economy" (drug development costs X% of GDP), sure. If you're looking at "why are drug prices so high", it probably doesn't make sense to to include costs funded from other places (which in this example I assume would be research grants ie taxes, and venture capital funds).
In reality many failures are early or first round failures. Not free but a small fraction of the price of getting to market.
So to you example a 90% failure rate may only require a 2x or 3x return on your successes to “break even”.
https://www.nature.com/articles/nrd.2016.136
"They found that the probability of success was 63% in Phase I trials, 31% in Phase II trials, 58% in Phase III trials and 85% during the regulatory review process"
42% failure rates in phase 3 is enormously high. By then you've pretty much spent 90%+ of all the cost of getting a drug approved.
[1] Which isn't to say there's zero cost for Phase 1 or Phase 2, but it's a lot lot less than Phase 3 trials.
[2] 1,000 drugs, 63%, 630 of which make it through Phase 1. In Phase 2, 195 drugs, 31% of 630 succeed and make it through to Phase 3, and then 82 drugs (58% of 195) make it to regulatory approval.
So despite attrition that reduces candidates by 9x by phase 3, costs have increased by 8x.
[1]https://www.sofpromed.com/how-much-does-a-clinical-trial-cos...
Perhaps you prefer: A company must think it's likely that they'll have a good return on all development costs, not just the costs of drugs that happen to be successful, to continue to invest.
> if profits are high, the industry expands to try more kinds of drugs, stopping when the attempts on the margin are just profitable enough (on average).
Of course, something like pharmaceutical products, with exclusive sales of specific products, few sellers, strategic conduct relative to other industries (insurers), and heavy regulatory influence is not guaranteed to converge to normal profit.
A 2022 study invalidated the common argument as is for high medication costs that research and development investments are reflected in and necessitate the treatment costs, finding no correlation for investments in drugs (for cases where transparency was sufficient) and their costs.[20][21]1. Pharmaceuticals actually don't do all their own research. Universities find the drugs and what they can treat, pharmaceuticals research the product viability. They make medicinal products, they're not research labs
2. The research is often majority funded by the government, i.e. your taxpayer dollars. So the costs are often socialized, but of course the revenue is not.
IntelliJ actually develops they're stuff, they don't just take existing code, test it a bit, and then make a product. And IntelliJ is a truly private company, pharmaceuticals are not because they get huge sums of money from the gov.
Here's a 2019 article that came up in a Google search: Taxpayers funded this HIV research. The government patented it. Now a company profits https://www.latimes.com/business/la-fi-gilead-sciences-truva...
Of course, the people who worked to commercialize it deserve pay for their work, so the question is exactly how much.
Or an argument against exclusive rights being in private hands.
Subsidies for oil, not so much.
Your bend over backwards justification of greed over human life is rather insane.
Further: omit things like your last sentence from your comments; they hurt your case.
It hurts people more to deny them medical care, and that is what makes it so enraging, I would say reasonably so. Becoming angry at such absurdity is a reasonable response. I toned it down from something much harsher. It is a truly deranged position to advocate for denying access to health care breakthroughs, and then act like that's doing people favors, calling it expanding access when you want to deny it.
It makes little sense to me to advocate an explicitly inhumane action, then say I'm doing an ad hominem when I call it what it is. What do you call an opposing view which happens to be ad hominem to humanity in general? Misanthropic, I guess. Your sibling comment says hey now, I didn't say any of that, after having said all of that.
https://news.ycombinator.com/newsguidelines.html
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...
>You can reasonably argue they they should get more
>Like I said, it is reasonable to argue that the public deserves more return
>it is reasonable to argue that people should receive more benefit for their tax money
That brings us to six. Can I just add that I think a reasonable argument might be made that the public is entitled to a greater benefit from their contribution to drug research? Or is it supposed to be 77 times 7 times?
It certainly has gone off the rails, but I am entitled to defend myself at least as much as you are entitled to tell me to stop. I haven't done anything wrong. I am finished now though
Pardon the snark, but come on. Before you get to the point of throwing insults, take a moment and determine whether I've actually argued for the positions that you believe would make me weird and/or insane. And then don't do it regardless, but definitely don't do it if I've only ever said a very specific thing very precisely and very explicitly.
Just a reminder that on-patent Truvada cost $4,500 for a 30 day supply of a drug that needs to be taken every day.
If the R&D cost (including amortised failures and whatever) for some hypothetical drug is $1B and the manufacturing cost is $100M for 100M doses. The drug should cost about $11 + a reasonable markup in a fully private system.
If the R&D costs are fully funded by taxpayers, it should cost $1 + a reasonable markup.
The public doesn't "get" anything if it still costs $11 (+markup) and a company is allowed to take a 1000% profit margin because they're only risking the $100M for the manufacturing.
As soon as you move into humans you can add another 2 or 3 zeros to your burn rate.
It is not politically feasible for the public sector to fund later stages. The numbers are just too big. Just think of the campaign ads that would run around $200M late stage failure funded by the government.
The reason why mega giant pharma companies exist is because they make enough money and are capitalized enough to withstand multiple $100M failures without going belly up.
Their only contribution was that they donated the actual pills used in the trials - in other words, the unit price of 30 pills per person for the duration of the trial.
PrEP has been pure, risk-free profit for Gilead.
I just want to point out that the government has assumed the role of telling everyone how to take risks for its economy, and literally all you have to do is do that, successfully, and it will privilege your rewards by reducing risk on profits or reducing taxes
This is not controversial when you look at the state’s role in these outcomes
And even then it's a dishonest claim. Half of that $1.1 billion is the amount of money they paid to acquire another biotech company in a firesale. It's beyond disingenuous for them to claim all of that towards the amount they spent developing Truvada, since they received way more assets in that sale than just the patent for one drug.
You are quoting a corporate press release that was written in response to an editorial criticizing Gilead, which was based on my colleagues' work.
This is a great example of how easy it is to fall for propaganda, because not a single thing in your link refutes what I said! They spent money developing Truvada as a treatment for HIV, then made that money back in record profits for nearly a decade. Only then did clinical trials for PrEP begin, and for those, Gilead donated only the production costs of Truvada (which are minimal). They did not spend any money in actually conducting the trials - which, as pharmaceutical companies are generally very quick to point out - is where most of the costs of bringing a drug to market are.
Gilead is claiming that, when it spent half a billion dollars to acquire a biotech company that went bankrupt, 100% of the money in that transaction should as "R&D related to Truvada". This is preposterous. Neither the SEC nor the IRS would endorse that accounting, which is why you're seeing it in a press release and not their 10-K.
That's a ridiculous claim even when you're talking about the development of Truvada, but that's not even the question at hand. The actual topic is how much was paid for the development of PrEP, which came nearly a decade later, and for which Gilead paid nothing but the per-unit costs of production.
Debatable.
> according to these firms' annual reports, 16 percent of revenues was taken as profit, and • 31 percent went for marketing and administration. That's nearly three times as much as their R&D spending.
https://www.bu.edu/sph/files/2015/05/Pharmaceutical-Marketin...
Maybe doctors should be able to send out email blasts to people, but I'm guessing that's not HIPAA friendly. Also, I've had online ads aimed at oncologists served to me for different medications.
I think the fact that there are both TV ads for cancer medications and online ads aimed at oncologists says a lot about the fact that a ton of doctor's aren't keeping up with what's new, even in something as critical and limited in scope as specific cancers are.
Tax shareholders on their gains and rebate customers if the company doesn't adjust the price.
If we’re not willing to question the degree to which big pharma ought to profit off of controlling access to scientific miracles, the least we could do is use taxes to subsidize the cost - “I can’t afford it” should not be a reason to not be on PrEP.
Anyone should be able to walk into a CVS and walk out with 2-1-1 dose, as easily as they’d pick up the morning after pill, or a bottle of aspirin.
Look, random example https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10370755/ - explain why if they are not motivated by profit, how is it possible that the outcome of this paper happens?
If you speak to anyone in the field, their goal to get to a point where you having a patent or two giving you a passive income stream. You can't do it if you just public domain your work.
But as for your other point, yes, researchers are different from people in other industries because of the high barrier of entry into the field through years of schooling, and the uncertainty of the work. Anyone that’s motivated primarily by money wouldn’t go into pharma research, they’d go into CS or finance straight off university.
Of course, that doesn’t mean they don’t want money. If you can do a job you love and get rich off it that’s the dream. And there’s no reason the public sector can’t pay enough to motivate researchers.
Careful with generalizations like this, you're not far from "all CS people are neckbeards" with this "all researchers are good people". My rule of thumb is "every large enough group of people is very similar to any other". This comes from the Central Limit Theorem.
Regarding you thinking researchers don't get paid from patents, here you go:
> “Recently, our organization at OpenTheBooks.com forced NIH to disclose over 22,100 royalty payments totaling nearly $134 million paid to the agency and nearly 1,700 NIH scientists,” Adam Andrzejewski, the group’s founder and CEO, wrote in a May 9 report. “These payments occurred during the most recently available period (September 2009 – September 2014).”
The article is mostly about a specific claim they made about Fauci but you can see even just at the NIH there's a lot of money being made personally by researchers or ex-researchers like this. Which is not inherently bad, but we should keep it in mind.
https://www.factcheck.org/2022/05/scicheck-some-posts-about-...
Ok, I’m happy about your theorem, but there’s a reason only tall people play in the NBA.
And like, are you even reading what you’re posting, or are you just googling for articles that support your position? We’re talking about private pharmaceutical companies and you’re linking an article about a public research institution.
Nobody would develop drugs under today's ridiculously expensive process without some kind of very large incentive, so those life saving drugs wouldn't exist without those high prices. But obviously the system is terrible. Costs could be lower to reduce the need for the price gouging incentive, and there are other incentive structures that could be used instead of granting monopolies that wouldn't have as many terrible side effects. (Price gouging is far from the only issue with patents.)
Sure, an individual country can decide to break that patent, but if they do that they’re punished by the WTO. And large pharmaceutical companies have a large influence on the WTO through lobbying, and the revolving door from public and private executive positions in rich countries in Europe and the US.
So it’s not like these companies aren’t culpable either.
One more thing, you say that no one would develop drugs without some kind of very large incentive.
The incentive to governments is making sure their citizens don’t die. Even ignoring the ethical side of it, you can’t tax a dead person, so it’s in the governments best interest to develop drugs, and charge as little as possible for them for its own citizens.
And the same people that wrote those legislation are also the ones running big pharma.
Of course they’re working for money, they live in society.
Health insurances in the US mostly only cover Truvada. Some cover Descovy but not many.
The problem is that we're being told that the cost of insulin is $270 per vial, or that Daraprim used to estimate its cost per dose at 90% of $13.50 and then Shkreli decided to raise it to $750.
In fact, it still costs $750 today.
As an employer, hiring single-person LLCs provides such a strong advantage in this universe over hiring employees. The former can't charge you more than a small percentage. The latter can charge as much as they want. I suppose we would all be like Uber drivers.
Figure out what a middle-class lifestyle costs and pay you 10% more?
I bet he could cover all those workers' salaries and still live a comfortable life. But he (and every other CEO) doesn't.
So you'd suggest that those workers who got laid off should have taken a pay cut instead?
So you'd suggest regular workers should take a pay cut?
If you poked at the data a bit, you might find it interesting to learn that drug companies spend more money on advertising than R&D