A large amount of research is currently publicly funded. Either via public academic research or directly. When that research bears fruit it is often given away almost at-cost (or below cost when you take into account the larger research landscape) to pharma companies who then privately profit off of it.
Pharma companies are profiting off of your tax dollars and then turning around and profiting off of you too. Sure, the benefit exists, but this whole model is broken as all heck.
We should just scarp for-profit pharma development as an industry, increase public funding of research, and drug production factories should be a modest profit venture (e.g. 20% of the wholesale cost). Looking more like the generics industry today, where they produce, they don't develop.
Why do we need a private business to develop drugs at a 40%-1000%+[1] margin when the taxpayer could do it at nearly 0% margin? We've chosen to make it this way, other countries haven't, and we see plenty of drugs developed via public institutions around the world.
[0] https://www.bbc.com/news/business-28212223
[1] https://economictimes.indiatimes.com/industry/healthcare/bio...
1) Academic medical research is simply not well tooled, right now, to do the later stages of drug development. What pharma does well and academia does not, is basically optimization of candidates. They do it through high-throughput screens and medicinal chemistry. Those things are very expensive and not publishable, so...academics don't do them. And everyone with the expertise works in pharma.
2) Clinical trials are freaking expensive. My institute has developed several drug candidates and the same process necessarily applies every time. The public-funded researcher basically HAS to either sell the patent to pharma or start a company and raise the many millions required to do a trial. The amount of money required is way out of range of current grant funding. If they want to see their drug get to patients, and of course they do, there is literally no other way right now except partnering with pharma.
When I get a chance to talk to politicians about how to fix this, I always make the same pitch. Step #1 should be to give a huge wad of money to the FDA. Say $1B/yr. Then you tell the FDA: every year, pick the 50 most promising drug candidates. Publicly fund the clinical trials, and the public will own the patent. Give some cash to the inventor and the institute to incentivize them to do this scheme and not sell to pharma.
Politicians, both left and right, look at me like I'm from Mars when I propose this. Those on the left think high drug costs are all about greed and not our broken system, and those on the right have unwavering faith that "free" markets will always solve everything.
And with insulin specifically, there is another problem: diabetics won't take the generic insulin that has been off-patent for years now. They must have the fancy and more convenient version. Mark my words, the fact that Americans must always have the absolute best thing, cost be damned, will become a major issue if we ever get single-payer.
A huge reason I found is your doctor won't ever recommend it. Most diabetics may very well just be blissfully ignorant (I was until recently) that it's even an option, save for Wal-Mart very heavily marketing their "Reli-On" branded insulin produced by Novo Nordisk.
I wonder if PCPs (not endocrinologists) are even aware it exists. I've had many PCPs in the past few years, from one of the best health care centers in the US, never recommend it as an option, and seemed to forget it even existed. I guess when you recommend Eli Lilly's biologic-developed analogs for decades and decades, you damn near forget about the old school insulin out of habit.
I recently switched, WITHOUT a doctor's approval (none would recommend it). I have to be more careful, but my costs of using purely generic everything plummeted to below 1997-era insured levels Increasingly insurance co-pays have gotten far more expensive for the biologics, and increasingly plans don't even cover the biologic-process analogs anymore (where my costs would be $560/mo for just the insulins that aren't covered by my current plan, or $130/mo if I paid another +$230/mo for a better single-person insurance plan -- only a $170/mo net reduction).
My uninsured "no prescription required" OTC costs for all my diabetic supplies (two insulins, sharps container, lancets, test strips) are $69/mo, and $18/mo (prescription required) for generic syringes now. It required taking everything in my own hands and telling every PCP I had to #$%& their hat.
You might as well say "infected people won't have amputations like we've been doing forever. They must always have the fancy and more convenient antibiotics instead."
The fact is, because of intrinsic differences in the types of insulin, a regimen of NPH and/or R can not help but have a significant increase in diabetic complications (including amputations, as in my statement above) than a basal/bolus regimen of Lantus/Levemir and Novolog/Humalog -- all of which have been available for something like 20 years and all of which have seen predatory price increases.
Do you think they actually believe any of this nonsense? I would have assumed the rehearsed political phrasing is just the public veneer over something to the effect of "and if I endorse this, X lobby group(s) will steer Y amount of PAC funding to my primary opponent and eat me alive".
This would be abused like any other slush fund. Plus there’s a natural adverse selection bias as all the “really good” patents will go the private route.
The real answer to all of this is to pass a law that drug prices in the USA have to be less than anywhere else on earth. Let that kick off a race to the bottom amongst the world’s countries. Let them eat the cost of constant marketing in the first world.
Some will argue that’s not fair to the millions in less affluent nations. I say who cares? A governments’s foremost job is to protect its own citizens.
The current pharma pricing system milks the American consumer so as to subsidize the rest of the planet. It’s long past time to end that.
What do you think the FDA knows about running clinical trials? They are obviously experts when it comes to regulatory aspects, but what about trial recruitment, monitoring, supply chain, etc? And what about the educational side? Doctors need someone to talk to, to explain the data, to answer a multitude of questions.
It would take FAR more than $1B per year to have the FDA so all that. The Pharma industry spends $70B plus on R&D each year and they already have all the infrastructure.
And don’t for one second believe that getting a drug to market is as simple as funding clinical trials. There is a ton of upkeep once approved - phase 4 trials, manufacturing tweaks, educating physicians and customers.
2019 FDA budget was $5.7B. I’d guess you’d need closer to 20x to replicate the work the pharma industry is doing, just on the R&D side, let alone everything else.
I think the FDA is whats making drugs prohibitively expensive. First by disallowing the importation of drugs, second by putting a very conservative standard on the commercialization of drugs.
You are right about something, the policy is unappealing for either side. The right doesn't want to give more money to the FDA, and the left doesn't care about giving a gov institution pocket money, they want to outright outlaw profits as a whole.
Call yourself Elon because you are on Mars :)
I mean I doubt they pay hundreds of dollars just to sport the Mylan brand like like a Gucci purse..
That's not even a lot of money, in the U.S. context.
i really believe pharma advertising should be banned
The TV ads you see for drugs add up to $6 billion, which is a small fraction compared to industry R&D.
Incidentally, I have had two occasions where I wanted to search for a product by its physical dimensions. One was for furniture and one was for a refrigerator. I haven’t seen a search engine that lets me start by searching by physical dimensions: length, width, height. On these occasions, I had a specific physical space that I needed to put something into.
If I asked my GP for a specific medication they'd look at me like an alien.
I think it may be a win-win if the U.S. prohibited television medical advertising.
[1] https://economicdynamics.org/meetpapers/2011/paper_868.pdf
[1] https://www.drugs.com/sfx/orlistat-side-effects.html
[2] https://time.com/4317182/abilify-aristada-aripiprazole-sex-g...
[3] https://www.health.com/condition/depression/medications-depr...
You need to look at return on capital. Right now the return on capital in pharma is below the cost of capital and it's trending towards zero. The inevitable result is significantly lower funding for research. https://endpts.com/pharmas-broken-business-model-an-industry...
Perhaps the marketing and R&D departments compete internally for budget. They certainly do at every other company I've worked at.
And drug marketing is peculiar. One would expect demand to be largely inelastic, so it's odd to see marketing spend on par with that of soft drinks in the industry. Nor can we safely assume that whatever portion of demand is driven by marketing is beneficial from a public health perspective, given that overtreatment is known to be a serious problem in the USA, and that a significant motivator for overtreatment is patient pressure on health care providers.
[1] https://blogs.sciencemag.org/pipeline/archives/2019/05/28/wh... [2] https://blogs.sciencemag.org/pipeline/archives/2014/11/11/ma...
In an industry with high fixed costs, marketing may in fact reduce the cost per consumer. Using software as an example, you can't just take the marketing costs per customer and subtract that from the price. If 1,000,000 in marketing brings in 3,000,000 in extra revenue, that marketing didn't cost customers anything. It could even allow the software company to charge less per copy.
There are some real differences between software and medicine. And I'm not sure increasing users of a drug is a good thing in many cases. But I doubt prilosec commercials are increasing the price I pay.
I do not believe this is generally true.
In any case, it clearly doesn't apply to insulin provision for diabetes patients - a captive market.
The US is one of like 2 countries that even allow TV commercials for drugs, yet all those other countries (and their Not for Profit or universal healthcare systems) work better than the US.
If I'm told to ask my doctor if [DRUG] is right for me, shouldn't they already be aware of the option and if beneficial brought it up vs staying quiet and endangering my health? The marketing budget is way out of line.
But to jump on to your main point — people don’t realize just how much their tax dollars have already paid for the development of these drugs.
Having a healthy competitive market to take these things the last mile is good — but these companies are incredibly deceptive when it comes to how much they’ve benefited from public investment.
R&D money spent is cyclical, and GlobalData's report may just be a down cycle where pharma is just trying to recoup past R&D costs. There's also a large number of drugs that are not approved from past years. Pharma has to recoup those costs, too.
From purely a health econ standpoint, that recovery window offered by the patent system is the main reason we are where we are today.
Insulin replacement was developed a century ago, being first discovered by a government entity (U of Toronto). Private companies commercialized the treatments in the 1940s and 1950s, developing long acting forms that could be administered in a single injection per day. Since then, pharmaceutical companies have made continuous improvements with fewer side effects: https://www.hopkinsmedicine.org/news/media/releases/why_peop...
Note that nobody is proposing to give people the versions of the drugs developed by public entities, or even the long out-of-patent earlier versions of the drugs. That’s strong evidence of the fact that the improvements developed by private companies were really important.
Moreover, the only thing stopping companies from making cheap generic insulin is the government itself:
> Patents on the first synthetic insulin expired in 2014, but these newer forms are harder to copy, so the unpatented versions will go through a lengthy Food and Drug Administration approval process and cost more to make. When these insulins come on the market, they may cost just 20 to 40 percent less than the patented versions, Riggs and Greene write.
Instead of “scrapping” the industry, wouldn’t it make more sense to, as a first step, get rid of regulatory roadblocks that prevent competitors from producing out of patent drugs?
Moreover, as to your claim that “other countries” do things differently—your only example is India, which does essentially no pharmaceutical R&D. Western European countries also rely on for-profit pharmaceutical development. Pharmaceutical spending as a percentage of GDP is about 2% in the US and Japan, 1.8% in Canada, and 1.5-1.6% in Germany or France: https://data.oecd.org/healthres/pharmaceutical-spending.htm. European countries negotiate hard on drugs like insulin, but for the most part they pay a lot too.
As to your broader point of “why do we need private businesses to do this?” It’s a mistake to mix up the products being made with the process by which the products are developed. Just because people need drugs more than search engines doesn’t mean that the government is more qualified to develop drugs than search engines. It’s two completely different things. Drug development is high tech work. If the government could do it well, while squeezing out the profit margins, there would be no reason for the government not to run Google or Netflix.
After all, why do we need a “private business” like Apple to develop iPhones with 50% margins “when the tax payer could do it at nearly 0% margin?”
What's your solution for drugs that aren't out of patent?
I agree we don't need a state-run version of Google or Netflix, but how does their being "high-tech" in any way preclude that? NASA seems like a great counter-example.
The original research for the synthesis of insulin was actually done in Europe by a private citizen (not a government entity). That research was followed up on by a surgeon with a private practice in Canada, and only after a time was it taken to the U of Toronto. The work leading to a manufacturable insulin process was done in collaboration with another private citizen (not affiliated with the U of Toronto). The trio only decided to patent the discovery upon literal threat by Eli Lilly to steal it for sale. They then sold it to the U of Toronto for a single dollar because of a strong belief that it would have been ethically bankrupt to profit from the manufacture and distribution of such an important drug. Funny you left that out!
But anyway, to your main point, it's interesting you neglect to mention that the main manufacturers of "generic" insulin (there's actually no such thing, but that's a topic for a different time) are the same companies who manufacture the name brands. They do this for pure price discrimination reasons; the new "generics" you reference (Admelog/Insulin Aspart) are exact chemical duplicates of their higher priced cousins. They prevent other companies from creating their own "generics" through a process called "evergreening" where they change patents in small, insignificant ways while still maintaining the patent on the core product. They then force other manufacturers into pricing and distributorship deals in order to license these patents to prevent cannibalization of their own products. Most of these deals include strict price controls. Have you ever wondered why those regulatory controls are so strict? Maybe it's because of regulatory capture as a part of this complex system to artificially inflate drug prices. That would require more than a skin deep analysis relying on middle school free market ideology though.
This isn't even getting into the "manufacturer rebate" programs most drug companies have for, again, pure price discrimination and marketing reasons. Or the fact that for the same exact chemical formula insulin costs have increased over 10x in the past 20 years. This also doesn't address the fact that we're seeing 20% year over year increases in insulin prices while drug manufacturers post profit increases almost in lock step. Feel free to read their quarterly earnings reports, they state in plain black and white that they purposefully price insulin in accordance with how expensive it is to treat diabetes _without_ the drug. To quote John Lechleiter, the CEO of Eli Lilly, “Yes, they [referring to insulin] can be expensive, but disease is a lot more expensive”. I believe that's called "extortion", I wonder if getting rid of regulatory roadblocks can solve that problem.
There's also no such thing as insulin "side effects"... lower quality/old synthesis method insulin just doesn't work as efficiently which means you have to use more of it or can't use it in modern insulin pumps. Most insulin manufactured today is biologically identical to the insulin manufactured 10 years ago. Most of the quality of life improvements occurred long before the recent price surges.
But then again your post compares iPhones and Netflix with a drug that over a million Americans have to take in order to survive, so I doubt any of this will reach through your armor of specious and unserious speculation.
Twenty years to hold monopoly production rights is an obscene amount of time.
Yes, reducing that twenty to say five will reduce capital investments in drug research, but it will also alter the structure of those investments.
Investing in improvements at the margin might make sense when you can collect 20 years of royalties, but if you can only collect 5 then it'll more often make sense to fund cures and use that 5 year monopoly to cure as many people as you can before the drug goes generic.
What is way more common is that scientists from around the world, mostly funded by public money produce research that might implicate a particular pathway or target for a particular disease. Scientists in companies see those publications and try to verify the result, then make a drug for it. The process of making the drug, testing tens of thousands of compounds, making sure efficacy and safety margin are maximized, running clinical trials, and producing the drug with good yields is almost always done by companies.
The government can do stuff like funding studies on new uses for off-patent drugs, fund various parts of that development, and reduce regulatory burden to tilt the economics for companies to make drugs for a disease, but that mostly happens to do stuff that wouldn't happen in the normal system in which companies have to make money making drugs.
Disclaimer: I work in pharma, but in biology, not anywhere near the budget-making
other countries haven't
Ummm... you do realize that most big pharma companies are European, right? Bayer is German, GSK is British, etc...
I see no reason that pharma manufacturing can’t be done just regular contract manufacturing. The Zika vaccine is a prime example. The US developed the ZIPV vaccine at public expense, and then, for some mind boggling reason, they offered an exclusive license to Sanofi. Imagine if Apple outsourced iPhone manufacturing by giving Foxconn and exclusive license! The US could have solicited bids to manufacture the vaccine and accepted more than one, thus resulting in multiple sources without any IP exclusivity.
What, never seen corruption at work? Somebody at Sanofi, or connected to them, was connected elsewhere, and hey, there's your license :) (No, no cash payment.... but my kid really wanted to get into Harvard, maybe a limited endowment/scholarship? You know somebody, right?)
We humans are predictable.
When a company like Pfizer acquires said company, none of the R&D spending of the smaller company gets absorbed into Pfizer's balance sheet.
In 2006, the pharma entire industry spend 12 billion in marketing, but 58.8 billion on r&d. Simply looking at individual large companies' doesn't do this justice.
http://phrma-docs.phrma.org/sites/default/files/pdf/marketin...
Publicly funded research should be given away, royalty-free, to the public. Universities aren't in the business of...business.
Why not apply this principle to everything else? Food, software, etc.
otherwise known as the lets-keep-the-status-quo-because-i-can-afford-it argument.
>It’s no coincidence that the US has the best pharma companies and develops some of the most effective drugs in the world
lol best pharma companies according to share values or according to how many people they help?
https://www.intelligencesquaredus.org/debates/blame-big-phar...
Good arguments from both sides.
> Pharma companies are profiting off of your tax dollars and then turning around and profiting off of you too.
> the taxpayer could do it at nearly 0% margin?
Adds lots of nuance to blanket/false statements.
I don't hate the idea of bounties, but someone has to decide what bounties to offer, and the current system for deciding that is whether money can be made in that area. It's not perfect, but at least broadly it means that there is an incentive for treatments for conditions that affect a lot of people and ones with a high cost of disease without treatment.
The thing I could see easily being missed by bounties (or maybe worse, being subject to being lobbied by pharma companies with a drug in the chamber) is drugs that start for one indication, but pivot or expand to another, and drugs that are second or third in class. There is undoubtedly some value to a second in class drug that is more efficacious and safer, and line extensions are also helpful for expanding the use of a drug in market.
Having said that, there is a reasonable argument to be made that the FDA and the patent situation stifles innovation and that most definitely should be looked at.
Pharma companies are profiting off of your tax dollars
Another way to do it would be to form a consortium like SEMATECH [1].
If the government didn't tax and regulate companies and people so highly they would have more left over to join voluntary associations and do the same thing.
Billions of people elsewhere in the world plus Americans in 20+ years when patents expire if far greater than ~40 million people in the US in the present
Net effect of this is yet to be seen, since it doesn't go into effect until 2021, but one possibility is that insurance companies will only cover variants of insulin that are cheaper than the allowed maximum, or the value that they calculate allows maximum extraction of value. Or, alternatively, the price of insurance will rise to spread the cost among all covered people.
The fundamental problem is that insulin should be a commodity, but it is not. Baseline human insulin is actually available fairly cheaply; ~$25 for a month's supply. But pharmaceutical companies have developed and sell a variety of faster-acting and longer-release insulin analogs of increasing price; and although many of them have technically fallen out of patent protection, generic makers have been slow on the uptake and manufacturers have done various tricks (relabeling, etc.) to ensure that they can maintain their effective monopoly.
There's something deeper that is wrong here that is preventing the market from working as it should be working; that is, generic makers making fast-acting insulin cheaply and driving the price down to the marginal price of production.
> Provides that insurers that provide coverage for prescription insulin drugs must limit the total amount an insured is required to pay for a covered prescription insulin drug to $100
This will create way more problems than it solves. It continues to hide the true cost from the consumer. This doesn't affect the pharmaceutical companies or insurance companies at all. What it will due is just make the insurance companies charge everyone a little more. The corporations are not affected whatsoever.
Easy to make something unallowed on paper. Much harder, and more meaningful, with Skin in the Game, to actually go out and do what they may think their rules will accomplish.
Or just set price controls (in the case of insulin)
Can they? The insurance companies are mandated to buy it now
[1] http://www.ilga.gov/legislation/publicacts/fulltext.asp?Name...
[2] http://www.ilga.gov/legislation/BillStatus.asp?DocNum=667&GA...
That's what we don't have in the US. You can certain make the case that we should, but that's a separate argument. Now we have a situation where we have a flat out price control, and it's going to have unintended consequences written all over it.
All these arguments for "look at Europe" doesn't fly in health economics. There are not subtle differences in the US legally, infrastructurally, and culturally.
My worry here is that the price control seems to act as a disincentive for selling in the price controlled market. So long as there are 49 other states where margins are greater, it seems like those orders will be fulfilled first.
[EDIT] to the downvoters: no, seriously, please post an example of, say, an OECD member state other than the US that doesn't use either explicit or implicit (single primary buyer setting prices, that is, monopsony) price controls as a major part of their healthcare policy. I assume you know of at least one, and I'd really like to know if I'm wrong about this.
In general marginal costs to make drugs you already know how to make are usually low, so you can and do see a lot of free riders on the expensive part (R&D). It would be surprising if Illinois can't just join them.
That said, ideally if you're trying to contain costs by fiat you want these to be negotiated by governments and healthcare providers.
SB0667 - Illinois 101st General Assembly
PRICING-PRESCRIPTION INSULIN
http://www.ilga.gov/legislation/billstatus.asp?DocNum=0667&G...
If people foregoing insulin because of out of pocket cost is a problem in Illinois, fixing it could have positive effects, including positive fiscal effects. So net cost is probably quite small.
Price ceilings don't work, I don't quite understand how people are elected when they don't understand high school level government/economics.
Would be nice if there were actual price controls at the federal level.
> “Health care is a right for all, not a privilege“
Insurance has to be free too!
There are lots of things wrong with Missouri. Our justice system is brutal to poor people and basically corrupt. Still, our cities are quite violent relative to other cities in USA. The "Department of Natural Resources" has rules to protect the environment, but very few of them are ever enforced against those who are willing to ignore them. (The one time I followed this trail all the way down the rabbit hole, the "Chief of Compliance and Enforcement" claimed that the courts always overrule him when he does choose to do his job, so this issue could be related to the first.) Important infrastructure is allowed to deteriorate while vanity projects get top priority. As a state, we'll vote for Trump again later this year, even though it's clear at this point that his previous anti-war rhetoric was nothing but lies. And so on...
https://www.businessinsider.com/insulin-prices-could-be-much...
Rights are defined as part of the social contract we create in living close proximity to each other. If the collective people define what their rights are through democratic representation, then it's up to those who have the monopoly on violence to enforce it.
The "Stand in the school house door" is one historical example of this in play: https://en.wikipedia.org/wiki/Stand_in_the_Schoolhouse_Door
People don’t pay for insulin in any of them and yet, society functions just fine.
Pharma had their chance to be reasonable. That time has passed.
Not to say that we shouldn’t appropriate intellectual property when necessary (eminent domain or not respecting a patent, as has happened in India and Canada), it’s just not necessary in this case. That doesn’t make us Venezuela, that makes us pragmatic.
In that case, charging people even $100 a month is unconscionable. It needs to be free, just like food, housing, entertainment, and all the other inalienable rights.
In a free society and a free market, anyone with the knowledge and means to produce insulins would be free to do that.
The high prices are a direct result of the government preventing competition through patent law. Without patents, the price would tend to fall as companies compete on price, more efficient manufacturing, distribution, etc.
- Protect people without insurance. Usually they're the most vulnerable.
- Don't just force someone to pay for the Insulin. These companies making them don't need to become richer. Take it from them forcefully.
There actually is a capitalist solution to the problem of high medicine prices. That is for pharma companies to have to post a price of their patents. And when somebody is willing to pay that price they do get the patent for exactly that price. After that you tax the value of the patents at a somewhat high percentage. This way, if the price of the medicine is to high relative to the posted value the state or perhaps the insurance companies could just buy the patent. On the other hand if the price of the patent is too high relative to the price of the medicine there is no real problem. In the case where both are too high but it is not the case that one is higher than the other the state should just funnel the money that comes in through the tax back to whoever needs to buy the medicine at a the high price.
Insulin is NOT rocket science, and it's necessary for some people to live. It's almost as simple to make as beer. It is unreasonable that people don't have access to such a simple life saving drug.
Fuck the pharma companies. Fuck the patent system for keeping it this way. Congratulate the legislature who is tackling this problem.
I agree, though, that it should also become harder to get patents. If a useful invention depends on more than one or, at most, two patents the patents mainly serve as friction to innovation. A corrollary of this is that software patents should not exist. Perhaps there could also be a process where it is asserted that a medicine can only depend on one patent. Whenever it depends on more than one it should be adjudicated which of them is the innovative one and the other ones should not apply. This will solve the cross licensing problem that you notice.
What needs to happen is, again and again with health care issues, transparency.
Manufacturers should be required to declare and with audits prove how much they're spending to manufacture everything. Then everyone can see the price they're being charged and figure in their head what sort of markup they are being charged.
Then we can start to push back on the companies need to recoup primarily marketing costs and dividends and bonus programs and all the other padding that they have built up over decades of never being held accountable.
I really am surprised that I am getting more downvotes than upvotes here. I think people are too emotional about this. I also note that a post dropping f-bombs is not getting downvoted which it really should be. It is not very mature.