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(preparing for an onslaught of down votes, but here we go.) It's awesome to see a 'hacker' building a $30 EpiPen. But looking only at the materials cost for a

by mikekij 10y ago

(preparing for an onslaught of down votes, but here we go.) It's awesome to see a 'hacker' building a $30 EpiPen. But looking only at the materials cost for a medical device ignores the millions (sometimes billions?) of dollars spent on R&D, IP licensing, and (perhaps most significantly) regulatory compliance. The pricing system for devices and drugs is definitely screwed up in the US, but Mylan's 36% gross margin on the devices doesn't seem criminal. Perhaps they're padding their cost numbers. And perhaps there are IP shenanigans at play that I'm not aware of. But one needs a thorough understanding of the total costs to invent, develop, achieve regulatory clearance for, and market a medical device in order to assess the morality of the pricing.

CamelCaseName 10y ago
Unfortunately it seems that the media, and many commenters only talk about the marginal profit and ignore all those fixed costs. What's more, is that Mylan's costs would probably be much higher if they had to contact every school or district individually and sell them on this rather than show them legislation, meaning either a reduction in their gross margin (which is not huge) or an even further increase in prices. And of course (gross) profit margins don't take the risk of failure into account.
steamer25 10y ago
> R&D, IP licensing, and (perhaps most significantly) regulatory compliance I'm going to call the R&D costs a wash because that cost should also be factored into the price of the diabetic injector that forms the basis of the $30 homebrew design. From your list, that leaves IP licensing and regulatory compliance which are both imposed by the state. I believe we would still see plenty of (and actually probably more) innovation with a much more relaxed IP policy that favored small, incremental improvements and the diversity of product variations that competition would bring. In short, copyright terms should be 5-10 years max and should only be granted in cases where there's proof of significant research. Simply, if the ability to monopolize your 'idea' for the better part of a decade doesn't incentivize you sufficiently--it's likewise not worth depriving the public over it. With regards to regulatory compliance, I believe we're seeing a case of the perfect becoming the enemy of the good. Imagine if the state extended the good-Samaritan policy to all medical providers--legally protecting anyone who exercises good-faith and due-diligence towards improving the health of their fellow man. Also, replace the old-west era FDA with information-age search engines, customer reviews and a plethora of private Consumer Reports -type organizations. In this scenario, there are several auto-injectors available on the market ranging from a $30 model which has failure rate of 50% to a $600 model that's been tested out the wazoo and only fails 1% of the time. Even under this very pessimistic scenario (50% seems pretty conservative to me), many lives are saved because there's a long tail of people who can't afford the $600 model but more than half of them end up surviving an episode of anaphylaxis because they can access the low and mid -range models.
- mikekij 10y ago
  I agree with everything above (except the R&D costs thing). The only issue is that Mylan is operating in the current regulatory environment, not the one you described. So at least part of the outrage about the cost should be directed at the regulatory framework we're working in, as well as the distribution channels and methods. I think this is what Mylan's CEO was attempting to convey on Bloomberg, although with questionable success.

by mikekij 10y ago

CamelCaseName 10y ago

Unfortunately it seems that the media, and many commenters only talk about the marginal profit and ignore all those fixed costs. What's more, is that Mylan's costs would probably be much higher if they had to contact every school or district individually and sell them on this rather than show them legislation, meaning either a reduction in their gross margin (which is not huge) or an even further increase in prices. And of course (gross) profit margins don't take the risk of failure into account.

steamer25 10y ago

> R&D, IP licensing, and (perhaps most significantly) regulatory compliance I'm going to call the R&D costs a wash because that cost should also be factored into the price of the diabetic injector that forms the basis of the $30 homebrew design. From your list, that leaves IP licensing and regulatory compliance which are both imposed by the state. I believe we would still see plenty of (and actually probably more) innovation with a much more relaxed IP policy that favored small, incremental improvements and the diversity of product variations that competition would bring. In short, copyright terms should be 5-10 years max and should only be granted in cases where there's proof of significant research. Simply, if the ability to monopolize your 'idea' for the better part of a decade doesn't incentivize you sufficiently--it's likewise not worth depriving the public over it. With regards to regulatory compliance, I believe we're seeing a case of the perfect becoming the enemy of the good. Imagine if the state extended the good-Samaritan policy to all medical providers--legally protecting anyone who exercises good-faith and due-diligence towards improving the health of their fellow man. Also, replace the old-west era FDA with information-age search engines, customer reviews and a plethora of private Consumer Reports -type organizations. In this scenario, there are several auto-injectors available on the market ranging from a $30 model which has failure rate of 50% to a $600 model that's been tested out the wazoo and only fails 1% of the time. Even under this very pessimistic scenario (50% seems pretty conservative to me), many lives are saved because there's a long tail of people who can't afford the $600 model but more than half of them end up surviving an episode of anaphylaxis because they can access the low and mid -range models.

mikekij 10y ago
I agree with everything above (except the R&D costs thing). The only issue is that Mylan is operating in the current regulatory environment, not the one you described. So at least part of the outrage about the cost should be directed at the regulatory framework we're working in, as well as the distribution channels and methods. I think this is what Mylan's CEO was attempting to convey on Bloomberg, although with questionable success.