Cancer Doctor Leading the Attack on Astronomical Drug Prices | Hacker News Reader

Cancer Doctor Leading the Attack on Astronomical Drug Prices

bloomberg.com

162 pointsdatashovel111 comments

Whenever something like this comes up, R&D is held up as the "cost center", whereas initial discovery (hit) or optimizing it into a "lead" molecule is a fraction of the cost of turning out a "drug", even manufacturing is a comparatively small expense. The majority of the cost lies in the clinical trials process. That is where a potential drug can fail and take everything down the drain. That is why the "fail-early, fail-fast" mantra has been ingrained into big pharmacy like gospel truth. However, there is no reliable predictor of "late stage" clinical trial failures for a candidate drug molecule. And trials can fail from a drug having statistically insignificant improvements in a group of target patients, all the way to, having a high (how high?) propensity for adverse effects in the patient group.

So, the solution? More fundamental research to explore indicators of late stage failure, coupled with "cheaper" clinical trials to justify a lower development cost that is enforced by legislation to bypass greedy execs/shareholders. Now, those "cheaper" trials, that is whole 'nother can-o-worms for a different thread, because it involves our willingness, as a society, to accept such risks as are part of the discovery process.

"Cheaper" trials are already par for the course in the developing world. And there are, as you mention, all kinds of down sides. But don't worry Big Pharma is not going to be sitting forever in the west. The rest of the world's governments, have had enough of their BS while trying to keep their populations alive. The consequences can be seen in IP law in the developing world and the rise of serious local competition. Bottom line - if you need access to medication\treatments that's costing a bomb, check out the options available in the developing world. You will be amazed.

Some of the trials from big western pharmaceutical companies are actually being outsourced to smaller labs in Asian countries with less restrictive laws, especially when testing with large mammals.

Isn't marketing/advertising a huge cost center as well?

Also don't forget to take into account the price insensitivity of some buyers.

If I had a pill that could save 1 million people I wouldn't price it at $100, since I'd only make $100m. If I price it at $1m per pill, only 100 people could afford it, so that also only makes me $100m. But if I price it at say, $100k, I can get about 300k people to pay for it, which nets me $30b.

This is all aside from how much the drug cost me to make.

This is a real scenario... it's called sovaldi, and it basically cures hepatitis c. Except it costs $80k for the full course. There are around 100 million people (globally) who have the disease.

Few things:

- Usually drug prices are dropped / negotiated with foreign governments for developing countries - Drug price often starts high but drops as government / FDA criticizes and once they milk health insurance companies to pay for it

It's not an ideal system at all, but just wanted to correct the notion that the prices start high and stay that way / poor people don't get access to it!

At $1,000/pill, it's not something you can just handle on your own out of pocket. It also doesn't cover even half of the HepC genotypes. However, for the genotypes it does cover, it works very, very well compared to the previous course of treatments.

I went through the treatment last year because I had great insurance and they covered the drug. This was something I thought about every single time I had a conversation about that drug. I'm cleared of HepC because of Sovaldi/ribavirin, but I can only imagine all of the people who will deal with HepC for far longer than they need to because of the ridiculous cost. Upon reading the Wiki article on Sofosbuvir (generic name for Sovaldi), it sounds like things are already moving in the right direction, but there's still a ways to go before the cost comes down.

There are economic forces at play that actively discourage pharma from trying to identify who will benefit most from the drug. First of all, there is a huge priority on being first to market. They stand to make hundreds of millions if their drug is approved before their competitors, and they can be the sole option for even 6 momths. Doing prolonged preclinical research to delay registration trials and FDA approval makes no sense to them. Secondly, the fact is that they make more money if we just give the drug to everyone. It takes 3 doses or so before doctors can work out if a drug works or not. So if we give 100% of cancer patients at least 3 doses, they profit more than if we give it to just the 30 - 60% that could benefit the most.

So although you are right that encouraging or forcing companies to come up with companion biomarkers that predict efficacy is a good way to reduce cost, in reality it is not so simple.

The hype about these latest immunotherapy drugs is so massive (and much of it is justified) that pharma has everyone over the barrel, they will charge the earth and get away with it.

The problem is not the high cost of drugs, the problem is the lack of R&D into processes and drugs that are not patentable. Like Stem Cells or Vitamin C. I'm not saying that these have any medical value, it's just no one is willing to invest because there is no ROI. What might be interesting is force everyone to buy life insurance and then have the life insurance industry underwrite the R&D.

Or, you know, increase public funding for research...

It seems to me that plenty of publicly funded research ends up simply pushing ideas which are subsequently developed and patented by companies. Perhaps I misread the situation, but that doesn't seem like it's in our best interests

That's why public funding should be directed at under-funded areas, like "processes and drugs that are not patentable".

Or, improve the independence and targeting of the research. For instance, having medical groups, patients associations, etc of X disease invest in research for X through crowdfunding.

Experiment [0] looks like a good example/PoC for this.

[0] https://experiment.com/

This also includes the interesting area of drugs which are already been patented and licensed but find new uses once out of patent for different conditions, Naltrexone being a prime example. google Dr Ian Zagon's work at Penn State if you are interested in his work on Naltrexone, OGF and opiod receptors generally.

Or the pharma industry has become like Hollywood where it prefers to rehash a known drug, get a new patent on it, and make a few extra billion dollars for relatively low cost, instead of trying to innovate and "risk" more money in multiple projects that may or may not succeed.

Also, more profitable to spend money on advertising to maximize the return on existing treatments, than on trying to develop new drugs.

The current pharmaceutical market unfortunately seems to behave in odd ways.

It behaves in perfectly rational and understandable ways that correspond directly with the way it's incentivized. Developing new drugs is expensive, getting them approved is more expensive, and there's no guarantee it will work or be approved.

As a corporate entity, drug companies are capable of deploying investors' capital in a variety of ways. If they neglected the ways that actually made money, they would be short on investors pretty quickly.

Just curious, what would you think Vitamin C might treat?

You mean processes we don't know about? Probably they're out there. In general since a few animals including man lack the enzymes needed to make vitamin C themselves one might imagine that all the rest are indeed benefitting in various ways from that inbuilt metabolic advantage.

"current evidence favors the hypothesis that the multiple gains and losses in the ability to synthesize vitamin C are random, as would be expected for a neutral trait." - http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3145266/

Are there any risks to taking 1000mg per day? I've always wondered that.

No clue. Here's what happened to me.

I'm a 6'5" 300 lbs male. I was taking upwards of 7g a day of vitamin c. Past that, I would get heavy flatulence, explosive diarrhea, and general gastronomic distress. I felt no change on my inside for doing excessive C, nor did I have any size effects other than the ones I noted for going past that.

One case, when I got sick, I was taking C. I wanted the illness to quit quickly, because I didn't want to be sick. So I took 8g C, 2 tablets of echinacea, and a NSAID. What happens was worse than any cold ever thought about being.

I killed off all my flora and fauna in my intestines. With this brought massive burning diarrhea (from the unneutralized stomach acid). I had this situation for 5 days straight. I was on the toilet at least 20x a day, day and night. Finally, day 6 had the formation of stool, which I cheered at. Day 7 and I was somewhat back to normal.

According to the NHS (http://www.nhs.uk/Conditions/vitamins-minerals/Pages/Vitamin...), 1000mg is the typical cut-off for where vitamin C becomes toxic (which is dramatically higher than the 40mg a day most people actually need).

Probably not, but there's not much point in doing so, as you'll pee it all out anyway.

Not just lack of R&D. After expenses for FDA clinical trials is $150 million+. Nobody can afford that if they don't have a patent letting them recoup expenses.

My go to example for this is http://en.wikipedia.org/wiki/Helminthic_therapy. That is the treatment of autoimmune diseases by infecting people with parasites which suppress your immune system in a targeted way for their own protection. I personally know someone who successfully treated his Crohn's disease with hookworm for 5 years and counting now, and the main problem he has is that if he ever needs antibiotics he needs to get reinfected because antibiotics will kill the hookworm.

But it is illegal to receive this treatment in the US because the FDA has never approved it.

I really think medical trials is something that the world government should sponsor so that treatments are accessible to everyone. Maybe each country contributes some small percent of their GDP.

And that's a traditional game theory solution. If I pay less, I still get full access to new drugs.

Well that already happens. Lets make it more obvious who contributes what.

a company did conduct clinical trials of a helminthic therapy for crohn's, it didn't do well: http://www.drugs.com/clinical_trials/coronado-biosciences-ha...

Thank you for that information.

I note it wasn't hookworm, which is what helped my friend.

New Zealand's Pharmac has generally been quite successful in keeping costs down, which is of course why it's under constant attack by the US State Department and is likely to be required to be effectively destroyed when New Zealand signs up to the TPPA.

The same used to be true for India, till it folded. pretty sure both pressurization tactics and bribery were at play.

Pharmac works fairly well in NZ - although it's not nirvana, there still are issues around what drugs they fund (Pharmac provides the drugs they select at cheap prices, but if they choose not to fund a drug because they don't consider it cost effective enough, you have to pay full price yourself).

However, I'm not so sure it's a good model for the world or for the US market, because it's actually quite selfish. NZ is able to get drugs cheap because the US consumers are paying extremely high prices which cover the development costs. If everyone was buying drugs at the price we pay in NZ, there would be far less incentive to develop new drugs.

With NZ being such a small market we can get away with it without having any impact on the development of drugs, but we're lucky that the Americans are picking up the development tab for us and we would have a problem if they stopped doing that.

If it would be such a big problem for Big Pharma they would stop selling drugs in NZ. Just to set an example for other countries if not for anything else.

"Big Pharma" isn't a monolithic entity with greater coordination powers than New Zealand. (The very largest pharmaceutical company, Johnson & Johnson, has $70B in revenue compared to NZ's $180B GDP.) Furthermore, NZ can make a credible commitment to act irrationally for a long time through the democratic process, while individual pharmaceutical companies are driven by shareholders to maximize profits with a time horizon set by interest rates.

> NZ is able to get drugs cheap because the US consumers are paying extremely high prices which cover the development costs.

Any source for this? I heard quite often that the marketing budget is more or less the same as the development cost. Further, a lot of the costs is burdened by others.

Seems like you assume that there's a reason that the costs are so high or must be so high. Could be a easy "can get away with it".

There's been numerous explanations that e.g. companies force more expensive medicine than needed. E.g. cheaper is available, but to get a unique medicine from the company, you also are forced to get all the expensive stuff that they have.

The marketing budget is really high but the two biggest contributors to that are teaching doctors how to use drugs and handing out free samples of otherwise very expensive drugs. The first is necessary and the second isn't what most people outside of accounting would think of as a cost. Advertising is only a fraction of drug marketing costs.

> NZ is able to get drugs cheap because the US consumers are paying extremely high prices which cover the development costs.

And sometimes it's the opposite, with European pharmaceutical companies covering all their costs in their home market then selling the same drug at over 5x the price in the US while only having to cover marketing costs.

> NZ is able to get drugs cheap because the US consumers are paying extremely high prices which cover the development costs.

This is an oft-repeated canard with no evidence ever presented.

Moreover a pricipal reason drugs are cheap is because Pharmac aggresively substitute generics once patents expire; this is not "selfish", it is exactly how the patent system is supposed to work.

Australia used to do the same until their US FTA requried that they "voluntarily" stopped using generics on patent-expired drugs. The price of medicine has soared there since.

Headline doesn't match article: Saltz's beef is with the US spending too much on the very sick, which is getting in the way of truly universal health care coverage for the generally healthy.

He wants the US government to use its market power to discourage the progress of ever more expensive treatments until we solve the problem of getting everyone access to affordable health care.

We all have "access", as in I can potentially drive a car down to the upper end cancer facility in Indianapolis or the Mayo clinic in Chicago.

"Is it affordable?" is a whole different question. And simply put; No.

Access usually means obtain. For example, if i hand a person a calculus book, have i given them access to knowledge of calculus? If they can read, yes. If i hand another copy to a blind person, have i given them access to the knowledge of calculus? Not really, no. If my intention is access to knowledge of calculus, i need to take extra steps. Maybe a brail version, maybe just read to them.

I think you might be fuzzy because of login prompts. Technically you're using computer resources. clearly i have access to the machine in some way. Similarly, i have access to the Mayo clinic. I can walk in and talk to people. But, with the computer i can't get to the good parts, i can't open files. Also, with the hospital, i can't get to the good parts, i can't get healthcare without extra stuff.

This isn't a slight against the clinic, I know they do charitable work. I think they charge so much, in part, to offset the costs to those who can't pay.

However, access can be compared to areas that which do not have it.

For example, if I was in northern India and get injured, I do not have access to emergency room care. Nor do I have access to a hospital. I may have access to a local doctor, but (s)he may have very limited tools and even less amount of drugs to work with.

If I am injured in this country, I do have a reasonable access to emergent care. But the costs are exorbitant to the point that many people default on those bills.

And then I would also go to the argument that there is no informed consent on the bills for treatments. We, as a public, are supposed to go in for a problem and choose the appropriate solution with no regard for cost. Our solution is that we then get the "bill we deserve". There is no breakdown for "issue X is average cost Y".

In choosing what treatments can potentially cause harm, we have the idea of informed consent. We cannot make a choice, medically speaking, unless we know both the pros and cons of said argument. This somehow, does not transfer over to harms of money and reduction on standard of life.

That's criminal.

(And yes, I chose the Mayo clinic because they are a top of the line medical center. And they charge for it as well, when the client can bear it or has good insurance. I also know they do a great deal of charity work.)

The vast majority of people are Okay with Doctors making as much as they do and anyone in Medical field has a higher average income. Most people have no problem keeping the minimum wage low also.

From reading his NYT opinion piece, it sounds like he just wants the cost of a drug to be part of the treatment discussion - http://www.nytimes.com/2012/10/15/opinion/a-hospital-says-no...

It's difficult for most people to make rational decisions about cost and effectiveness when they're looking at a terminal cancer diagnosis. Doctors should be helping patients understand both the monetary costs of these drugs and the often nasty side-effects when telling them it has a X% higher survival rate.

Starts with a culture shift : society should care about its citizens health. It's just not the case in many countries, especially in the US. I guess the maths are simple : keeping more people alive and healthy is less profitable for the people involved..

Keeping it's citizens alive, healthy and able to work is very profitable for a country since more able bodied citizens means a better economy.

Most companies only care about how much insurance they have to pay and their bottom line they have no reason to keep an eye on the big picture.

If an employee gets sick for too long or dies they will just fire him/her and get someone else to replace them.

The citizens health is a big picture thing that only a government has the incentive of maintaining.

"Incentive"? Really? You mean a president looking to be reelected for another 4-year term has an incentive (as opposed to a moral imperative) to prevent future illness in people who're 20 today where the symptoms will become visible 30-50 years down the road?

What is that incentive, and how is it stronger than the incentive to create jobs or lower prices right now for people who vote today by allowing some environment-destroying industry to expand, said expansion being the cause of future illness (a hypothetical or maybe not entirely hypothetical example)?

> What is that incentive

Those people are and will be paying the pensions of the current voting population.

QED.

Or even simpler: these are not people from the Government perspective. We are talking about tax payers here. You'd rather have more taxpayers than less, right?

If a Government needs to spend $100k in tax payer money to save somebody's life and this somebody pays back $200k in taxes, this is good business, isn't it?

But the people who're governing young taxpayers now will no longer be governing those taxpayers when they get older and will suffer from diseases caused by today's policies - policies which will raise the standard of living of the same taxpayers today. And a future government will simply blame past governments for the problem (rightfully, though not very usefully.)

"The government" (why the capital G?..) as an organization might have an incentive to protect taxpayers' health but individual people making up said government do not have the same incentive. I think they call it the agency problem.

(Some people go as far as advocating benevolent dictators with a hereditary right to rule; of course in reality few dictators are benevolent, and a hereditary right to rule prompts people to kill off ruling families. I conclude that setting up incentives such that everything works out smoothly is rather damned hard.)

> But the people who're governing young taxpayers now will no longer be governing those taxpayers when they get older and will suffer from diseases caused by today's policies

That's definitely a problem. Problem with democracy though and not capitalism. The policies are designed to have 4 year lifespan because elections are held every 4 years. Actually, it is quite a big flow when you think about it. Politicians are not only incentivized to look short-term at their policies but also to design them in the way where long term negative effects are desirable if one can be sure that the opposition party will take over after next elections.

That's why Western democracies are watching places like China carefully where you can design long-term policy and still benefit from capitalism. I believe that the main reason behind the US to introduce more and more authoritarian policies (i.e. militarization of police force) is because they see that it works well for China. I mean marrying soft authoritarian form of government (like in China) with capitalism might be superior (economically and socially more effective) compared to having liberal democracy combined with capitalism.

In the UK at least, universal healthcare through the NHS was created largely because it was seen to be the morally right thing to do:

The collective principle asserts that... no society can legitimately call itself civilised if a sick person is denied medical aid because of lack of means.

I think it is worth noting that the book by Aneurin Bevan, the founder of the NHS, from which that quote comes was called "In place of fear" - that's what we had before socialized medicine (NB not claiming that the NHS is perfect, it clearly isn't - but compared to a lot of the alternatives it's fantastic).

Of course, we do deny some care because the NHS can't pay for every treatment for everyone - but at least they try to decide this in a fairly sensible evidence based manner.

The problem is not just with cancer drugs, it's with drugs of all types.

There's a scorpion antivenom that routinely costs $12,000 or more per vial in the United States. That same antivenom, with the same level of purity, is available over the counter in Mexico for $100/vial. [1] Yet, if you were to go there, fill your trunk with scorpion antivenom, then bring it back to the U.S. and try to sell it at a 100% markup (which would be a pretty sweet profit for you, but would also drive the cost way down), the Feds would confiscate it and likely throw you in prison.

The drug Sovaldi, a treatment for hepatitis C, costs $85,000 for a course of treatment in the U.S., and only $1,500 in India. This has one executive coming up with insane plans like docking a cruise ship carrying the drug in international waters off Miami, and ferrying U.S. patients to the boat to be treated. [2]

Of course, there are laws on the books that allow pharmaceutical companies to get away with these prices...because, if there weren't, these would be felony violations of the Sherman and Clayton Acts.

Real health care reform would involve wiping those special protection laws off the books and taking legal action against the companies engaging in these practices, with prison sentences for the people involved. Unfortunately, what we've wound up with is a "Patient Protection and Affordable Care Act" that neither protects patients nor makes care affordable.

[1] http://www.nydailynews.com/news/national/arizona-woman-feeli...

[2] http://www.bloomberg.com/news/articles/2015-06-01/hepatitis-...

Prices are high because of long and expensive development times, massive amounts of regulation, very high risk and relatively short patents to recoup these costs. Not to mention the costs of the other 5 drugs that failed final trials. Demand is also understandably very high. I do think there should be harder discussion of cost/benefit though to bring some sanity into the system. What else could be done with that money, rather than a marginal outcome for one person? It's a hard conversation. This is especially relevant in something like the NHS where direct tradeoffs must be made.

R&D are surely contributing to the high price. But as can be seen in the yearly financial statements of these companies, they are not that high, as they want us to believe.

Take Europe for example. As far, as I know in Germany the producers can pretty much dictate the price (ok, the have to discuss with the insurance companies, but they just can raise their fees so they have no real interest in saving money). After the German price is decided neighboring countries (Belgium for example) take these, cut of about half of that and dictate this as the maximum price for the drug.

Looking at the financial statements, the regarding companies still make a lot of money in Belgium of these drugs. But way more in Germany.

So I really do not believe the story being told, that the R&D costs and the risk are the reasons for these astronomically high prices.

And - when your life is at stake, your are more then willing to pay every price necessary - so your bargaining position is not quite great and your market power is drastically lowered.

Actually no, in Germany the drug companies can't take any price, because the insurers are negotiating as one party with the drug companies. But yes, drug prices in Germany are relatively high. Why would private companies leave money on the table unless forced by regulation? They have to squeeze every profit they can out of the health care system.

The situation in Germany is way better than in the US, where these negotiations are a lot more favorable to the companies, because they can "negotiate" with individual insurance companies and even patients. But especially in the latter case, there's not a lot of "negotiation"...

Had also mentioned the negotiating part - but the history shows, that there isnÄt that much interest from the insurance companies to really keep prices low, as they are able to always get more money from their "clients" via our regulators.

So even here, where the system is probably better then in the US, it could be improved massively via regulation, without killing all profits or even the investments on R&D by the companies.

But the political will seems to be missing.

this is because of over-regulation. Destroy regulation, i.e. patents, and then then tell me drugs aren't cheap.

I think the argument for patents, as incentive for development, is quite strong. There is no alternative system in place yet.

Also you probably underestimate the value and purpose of pharmaceutical regulation. Most rules revolve around production quality, scientific soundness, safety monitoring and so on. Come to think of it, the degree of safety in pretty much any drug on the legal market is quite astounding, despite exceptions and accidents.

Sorry, but there is imho to little regulation going on here. The market seems rigged against patients - esp. patients with terminal (or at least grave) illnesses that are pretty wide spread. These people are hey are prone to be exploited and there are enough of them. Mostly pharma does not dev drugs for wide spread illnesses that mostly occur in poor countries for example. Or grave illnesses, that only affect very, very few people.

But dev a "new" cancer drug and you got your license to print money (lot of people get cancer, a lot is payed by insurance, and people and their loved ones want healing).

I'm missing your point. Most diseases is characterized that way - lots of people get them, healthcare paid by insurance, people want healing. Cancer is not special.

That's simply not true. Yes, development costs are high, but not that high.

The real reason the drugs are priced so high is that people/insurers pay it. I wouldn't even call it a free market, since the patent protection is involved. Essentially it is extortion. Eventually we might get a situation where drug companies raise costs for patented drugs, not only cancer ones, slowly to the breaking point where even less people can afford insurance anymore. Why wouldn't they? The insurers are very disinclined to refuse life saving treatments to their patients.

With biologicals the cost of actually producing the drugs can be high. The only way to bring that down is to drive forward the necessary technology.

> Eventually we might get a situation where drug companies raise costs for patented drugs, not only cancer ones, slowly to the breaking point where even less people can afford insurance anymore.

Aren't American drug prices already optimized around that breaking point?

considering that the cost of healthcare in the US is increasing rapidly, but also the ratio of insured citizens, no, I wouldn't say a breaking point has been reached.

> since the patent protection is involved

While I'm no fan of software patents, why would I spend billions developing a new drug when I can wait for somebody else to do it, then just copy it?

Because these drugs are mostly monoclonal antibodies, you have to actually develop your own. You can work out what the target is, but because the antibody has extremely high specificity for a specific target, and is high molecular weight, you can't just synthesise it, you need to grow it (An absolutely fascinating process in and of itself)

There have been examples of other drug companies targeting the same target as an existing high value monoclonal antibody drug, however I am aware of at least one example where the 'knockoff' monoclonal antibody actually had harmful effects compared with the original.

The only way you can actually copy the drug is to steal a cell from their lineage and produce your own

I am interested to learn about the case with the knockoff having harmful effects. Could you guide me in the right direction?

Off the top of my head it was a VEGF antagonist, so avastin knockoff. I'll try dig up the paper when I'm off mobile

So I have just spent about half an hour looking.

I honestly can't remember where this knowledge comes from. My feeling is i learned it on my oncology term 12 months ago. It may have even been a ipilimumab biosimilar. Unfortunately google is mostly saturated with success stories and papers relating to monoclonal antibodies and wherever I heard about the writeup of the failure has vanished into the nether-regions of google.

Apologies. If anything comes up, put a contact email in your details and i'll reach out to you.

There are proposed models that would reward a company for developing a drug for a specific purpose. It would allow them to recoup a part of their R&D up front. Rewards could be offered by the government, NGOs or insurance companies. Would also help with the development of drugs for rare conditions that are currently not worth the research costs.

And why spend billions developing a new drug when you can just tweak an existing one that's about to fall out of patent and then bribe doctors, or fund dubious studies, to encourage them to use the "new" patent-protected one? If patents = billions then people will optimise for patents, not cures.

Why should $30.9bn of tax money be infused to an industry if the public don't gain any benefits from it?

I am all for a fair market where those who spend money on development can recoup costs, but the current system is a bit silly. First they get to use tax funded research for free, then get extra funds from NiH, then they demand 20 years monopoly with some extra years of exclusivity added from doing test trials. And when that is done, try some Evergreening schemes to extend exclusivity into infinity.

The people who are hurt by all this also just happens to be sick people, people who die because they can only afford a inferior treatment. It things like this that calls for patent reforms so the public can get what it pays for, and where investing into medical research could become a low risk/low reward instead of high risk/high reward system.

I'm not against drug patents, I am only stating that they prevent the drug market from being a free market by a considerable margin.

To take a random example, AstraZeneca has 50,000 employees and R&D centres around the globe. They produce a sucessful blockbuster drug every, say 5 years roughly? So you could say that development costs are on the high side of high.

Also, if you had those mouths to feed and you had no cast iron plan of when your next blockbuster was coming you would seek to maximize short term profit also.

I don't want to defend profiteering but I don't see the issue being all that black and white.

I don't think anyone can genuinely make that call without the actual numbers. And I wouldn't trust those that are not truly independent. I agree that it is not completely black & white, but I would be surprised if someone is not profiting from it heavily - and possibly the wrong people paying for this (ethically / morally).

too much regulation. No patents, no approvals, and you don't need 50k+ employees and years to find out a drug doesn't work. Under current system we wouldn't be able to approve aspirin for goodness sake. It just wouldn't go through FDA:

http://www.medicalprogresstoday.com/spotlight/spotlight_inda...

Haven't we had enough of high prices and stagnation in pharma already?

So says a Koch mouthpiece, at least. Your source likely isn't really interested in keeping medical care costs down - they oppose letting Medicare negotiate drug prices, push fracking, etc. It's an industry group like the AEI.

http://www.sourcewatch.org/index.php/Manhattan_Institute_for...

http://en.wikipedia.org/wiki/Manhattan_Institute_for_Policy_...

without the actual numbers.

Profit margins in the pharmaceutical industry are the highest[1] of all industries, only rivaled by the banking sector.

The top 3 pharma companies spend twice as much money on marketing as on R&D.

[1] http://www.bbc.com/news/business-28212223

You do realise how marketing works? The idea is that the money spent on marketing is more than recuperated. You could argue that without the money spent on marketing, that R&D budges would be significantly lower.

Marketing has next to nothing to do with R&D because most R&D is accomplished before market entry of a drug.

It looks as if revenues of one drug fuel investment into new drugs, and that may be true but it is misleading. There are a lot more sources of capital than just one particular companies own revenues.

Margins and marketing budget allow us to assume significant market power in favor of the pharma companies.

It would be interesting to know exactly what the marketing money is going towards. Is the money going to doctors so they push the drugs? or to pharmacies so they push their drugs over others? or to consumers?

What is all that money being spent on?

Doctors go to medical conferences to learn about new developments. Pharma companies were/are giving away all kinds of free stuff to doctors (e.g. coffee machines). Moreover they were/are paying for the cost of going to those conferences, sometimes abroad (essentially a sponsored "holiday"). The pharma companies are also giving drugs for free to doctors for a while, ostensibly to test for side effects after the drug has already been approved. The doctor gets compensation for participation in this "research" (no doubt this money is in the R&D budget rather than the marketing budget). The net effect is that a doctor gets paid to use a particular brand. Doctors in hospitals get some drugs for free. When the patient leaves the hospital, he/she will of course continue with the same drug rather than switch to a different brand. The total cost for the patient can be far higher than with some generic brand. These are just some of the marketing strategies pharma companies use.

I'd just like to add that after chatting to some pharma. reps (who coincidentally are VERY well spoken, no doubt they've received training in this) that have told me if they can get even just 1 patient on their life long drug (as seems to be the trend for pharmacy research) , it'll more than pay off for the free lunch they bought you.

I really don't understand this. Say you have late-stage melanoma, and you go to an oncologist. Either there is a good treatment for your disease, or there is not, judged objectively by the doctor from clinical data. Where is the room for marketing in this?

Doctors are busy. They don't have time to read each and every journal article on the latest and greatest treatments. Sales reps can come in and highlight the key differentiators for their drugs (the FDA also makes them call out the negatives).

Sales reps also help with a lot of the non-sales aspects as well (getting reimbursement for the doc, helping patients who can't afford the drug).

You are correct that if you have the best drug out there by far sales reps don't really drive that much in sales. However, it's tough to convince marketing that they don't need sales reps at all, so even for the best drug they hire them.

Doctors are actually required to keep up on their discipline with annual retraining requirements, right? They are not to be forgiven for being behind in treatments.

In reply to Joe (the reply button appears disabled for me). Yes doctors, as with professionals in other fields are encouraged to keep up to date with the literature.

However they're exquisitely busy people, and no one is paying them to spend the time to keep up to date. Sure, there are programs that encourage it (usually called 'Continuing Medical Education') but they're often very weak, easily ignored and there is a lot of pushback by doctors themselves against them). If you take a look at the volume of information coming out every day, coupled with the fact most of the papers just plain suck, you'll realise how it's pretty much impossible to stay afloat.

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Ill be frank as well (junior dr here). They buy you lunch weekly, often for the whole establishment (your practice, the hospital, etc.). In the ye olde days they erherm..'sponsored' vacations for doctors to for example, Hawaii. It could be like a 1 week vacation, where they'd require you to spend half a day learning about their drug and going through their marketing spiel with you. In return they'd host your flights, accomodation and food (trust me the food is good).

Not all marketing is TV ads or sales jobs to doctors.

In this hypothetical case, marketing $$ were spent to discover that existing late state melanoma treatments were lacking in some important respect (efficacy, side effects, cost...), and that there was a sufficient market to continue the expensive process of developing a potential treatment.

A lot of that marketing is just a zero sum game, like pepsi vs coke.

[emphasis mine]

>>> That's simply not true. Yes, development costs are high, but not that high.

>>>The real reason the drugs are priced so high is that people/insurers pay it

That's a bold statement. Honest question: Do you have any data to back this up ?

Agreed in part, I differ in how much blame I put on the insurance mechanism.

What I see as the main structural problem is the offer of pretty much blanket protection from the market that the people/govt give to the pharma companies. Many shills continue to argue that this is necessary for pharma to make progress.

The problem is that this entirely quantitative question: how much protection should pharma companies receive that would still not get in the way of real progress?) is given a blanket answer by fiat. No one knows the answer to this quantitative question, and neither is that dollar amount a constant of nature. Any mechanism addressing this problem should have a fast feedback loop.

Rather than subverting the market, one should actively create an efficient one where the people/govt and the pharma companies negotiate the level of protection that they can both agree on. Patents are a mechanism that largely nukes this negotiation in completely favor of the pharma companies.

A parting thought borrowed from Upton Sinclair : if the justification for patent protection are high dev costs, it only ensures that the dev costs will be kept high to enjoy the (dis-proportionate) protection.

no patents, but also no regulation. Now, this is what gave us antibiotics and aspirin. The current over-regulated system can give us only stagnation.

It is not clear that the FDA has anything to do with the pharma crisis. In fact, since the pharmco crisis began in the late 1990s and the FDA was founded in 1963, the two are completely unrelated. Since closely held pharmaceutical companies are doing better than public ones I'd point the finger at Wall Street, but that would be oversimplifying a complicated problem.

I think that "big pharma" companies act a lot like banks, and small companies act a lot like venture-capital backed startups.

Incidentally, both mechanisms allow spending a couple of hundred millions (or even billions) of Dollars for a potentially even bigger profit.

A third way is government financed research, which may be a competitive option in some cases.

It also gave us a lot of snake oil, the list is too long. Let's choose one: Pearl power ( http://en.wikipedia.org/wiki/Pearl_powder )

> In medieval Europe, pearl powder was widely perceived to have therapeutic qualities. It was used to treat the insanity of Charles VI of France (1368-1422), and the fever of which Lorenzo de Medici died in 1492.

the cost of pharma is directly related to the costs of failure and the legal system. Failure from the R&D spent on so many solutions that never make it to market and the legal system from the ease of suing for complications or misuse.

   > This is especially relevant in something like the NHS
   > where direct tradeoffs must be made

You say this like you're unaware of NICE and the guidelines they publish.

That's a whole extra discussion - the pressure they get put under by families and groups to approve very expensive and relatively ineffective drugs is immense. Meanwhile people are having to take charity collections to pay for MRI machines.

It's an interesting plan from a game theoretic perspective to set an explicit upper price for drugs(in dollars per year of lfe or whatever). It certainly changes the price negotiation for drugs in the pipeline, and ultimately informs the incentives of drug development going forward.

I might be wrong as I don't know how to in detail read financial statements, but at the end of the day if they were making too much money (and by to much I mean unproportional) it would be obvious there would it not?

I work in the medical industry and can say I don't know any poor doctors. Even socialists. And maybe they are rich compared to their individual r&d in study, I am not saying I support $200k a year for drugs, but shouldn't this be part of a bigger question.

The researchers in R&D are making significantly less than your typical clinician. It's not a career path you take if you're prime motivation is money (or job security).

"Cancer Doctor" - really?

Oncologist. But 'cancer doctor' is a term more people would know instead of 'oncologist'

Personally I don't think we can truly call ourselves civilised whilst we persist in valuing our fellow humans' health and their very lives in terms of financial currency.

If we want companies to keep making drugs, we either socialize them and pay them from our taxes, or we let them make profits.

Drug research and production is extremely expensive. And so are the recalls and the lawsuits.

This routinely happens everywhere on the planet. We could protect our citizens from being in car accidents, getting murdered, etc. But those all cost money, and we have made a decision to not spend more money(to hire lots of police, to build lots of public transport) to prevent those deaths.

Everything costs resources. Whether you account for that in terms of money or some other method is irrelevant.

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