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Comment by Neil44 | Hacker News Reader

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.

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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.

The reply button is disabled for a few minutes after a comment is posted to prevent flamewars. You can work around this by clicking on the permalink ("X minutes ago"). You can always reply from there.

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.

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.

   > 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.

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