So $200/pill for something that costs them $0.25 to make. That's still obscene.
Generally I think (this is highly subjective and irrational, of course) that I'd be comfortable with a 10%-20% return-on-capital overall. Lower than that and I'd think that risky drugs couldn't get funding; higher and I'd think there's too much rent-seeking.
Perhaps some economists have studied what an optimal ROC might be for pharmaceuticals.
In any case, the gross margin per-pill doesn't really tell you anything about ROC. 99.875% is astounding, but what was invested to get to that point - including the drugs that never made it to market?
These guys are making 300% ROI in annual revenue from their one-time investment into R&D. In order for that to be fair (in line with your 20% average ROI target), they would need to be testing 15 new drugs per year, and if all of the others had failed, then it would be fair to markup the one that succeeded by this amount. But according to the Wikipedia page, the company has investigated less than 10 drugs in their entire existence, much less 15 drugs per year.
> Which is why there should be no patents in healthcare. Most research is already publicly-funded, production and distribution should be too. We could drown in cheap medicine, instead we artificially increase the prices by 5000% to fatten the pockets of already super-wealthy parasites.
If a company sells a pill for $100 that cost them $2 to manufacture, that's a 5000% markup. Indeed, they would need to recoup R&D expenditures, but I am arguing for a system where we don't need to, because R&D is paid for by the state, and we don't need to turn a profit once the product has been developed. Where's the logic flaw?
Europeans get some drugs for 50x cheaper than Americans because of collective bargaining. Isn't that definite proof there is unnecessary profiteering in the final price?
Have you ever wondered why this is the case?
In the "Golden Age" of pharmaceutical development -- from roughly 1930 through 1962 -- it cost orders of magnitude less, adjusted for inflation, was much faster, and outcomes were no worse.
I'd argue that the new (post-1962) Phases II and III -- drug efficacy studies -- are wholly unnecessary and are indeed unethical.
First, because you can't even presume to gauge a drug's "efficacy" without huge and exorbitantly expensive trials -- and, even then, trials can be inconclusive.
Second, because the FDA selectively ignores efficacy data. See, e.g,. flibanserin and certain Alzheimer's drugs that have been approved recently. This was scandalous, but not nearly scandalous enough.
Third, the statistically sound way to find both rare harms and true-to-life benefits is to watch how a drug behaves in millions of real patients, not in a few thousand volunteers. Modern electronic-health-record feeds, claims databases, and wearable data streams let regulators run near-real-time Bayesian safety signals across populations that dwarf any Phase III cohort; the surveillance network that caught rofecoxib’s cardiovascular signal in 2004 had orders-of-magnitude more patient exposure than the approving trials, and today’s infrastructure is far denser.
It would literally be 10x faster, 100x cheaper, and 100x easier to grant conditional approval after Phase I and then run postmarketing surveillance. You'd better signal-to-noise on both efficacy and harm at a small fraction of the cost and time. It's downright perverse to outlaw early access to promising investigational drugs, forcing patients to wait 8-12 years, and then foot them with a multibillion-dollar bill for ritualized trials that are unnecessary -- for the same ends could have been attained in far better ways.
However, I would raise two objections.
1. Without a Phase III trial that proves effectiveness, payers do not have sufficient motivation to purchase a drug that may or may not work. One solution would be to have the producer of the drug offer the drug for free/cheap until it demonstrates effectiveness, but that becomes a lot more expensive when you have a larger cohort. This is admittedly an implementation detail that could be sorted out, but it's a very important detail that would have to be addressed for this plan to work in the real world. The bigger problem is:
2. The best way to prove that a drug works is a large, randomized controlled trial. Your proposal is definitely an improvement over current trials in terms of making them larger, which would help to improve statistical power (and also get potentially helpful drugs into the hands of patients, of course). However, without the "ritual" of a Phase III trial, you lose randomization and you lose the placebo control. These are big losses that make statistical interpretation of results very hard because they open up the door to many potential confounders. As you mentioned, Bayesian signals can try to control for some of these confounders, but you can never be confident that you've considered every possible variable, whereas randomized placebos can eliminate almost all confounders.
So ultimately, I think that Phase III effectiveness trials are necessary in order to prove effectiveness because the statistics with post-market Phase IV trials will never be as "clean" as an RCT. And if we were to delete Phase III trials and skip straight to Phase IV, we would never again be able to confidently say whether or not a drug works. Thus, the ethical cost of making patients wait a few years for the Phase III trials to finish is outweighed by the benefit of being able to say with confidence that the drug works for the rest of eternity.
And, besides, I think it stands to reason that if time-to-market and drug development costs are reduced, prices will inevitably drop, and there'll be more competition in the market.
Right now, small firms are effectively priced out of the pharmaceutical market. The typical business model is to develop something to preclinical/Phase I and pray for a buyer or "partner" -- a larger firm that specializes in regulatory compliance and has pockets deep enough for continued development.
As for #2:
What makes you think you need a placebo control? And have you considered that in certain otherwise-fatal diseases, a placebo control might be grossly unethical in and of itself?
There's no way to eliminate confounders, anyway. Even in clinical trials, patients aren't kept in bubbles. (Some of them might even drink grapefruit juice!)
The problem with "proving effectiveness" is that it's inordinately difficult (sometimes actually impossible) and the costs are borne by patients and society. "Golden Age" drugs like penicillin and corticosteroids, among many others, didn't need efficacy trials. Drugs don't really need them today. With enough data derived from patient populations, we can do much better -- faster, too, and more ethically.