9 ms·

It costs a quarter to manufacture each pill but the manufacturers charge several dollars for that pill. But they don't just price gouge. Drug companies need to

It costs a quarter to manufacture each pill but the manufacturers charge several dollars for that pill. But they don't just price gouge. Drug companies need to file patents on their drug almost as soon as they sketch they come up with drug. From there they need at least 8 years to get through the FDAs approval process, so the manufacturers don't get nearly as much exclusive time with their IP as other industries. (They started getting around that by slightly tweaking the formula to last longer and calling it XL.) Plus they have to recoup the money they sank into other drugs that never made it to market. Sure, they can write down those losses, but a write-down ain't a refund. If the government wants to start lowering drug prices, they can start by creating a special patent for the drug industry—call it a research patent—that can get converted to a regular patent when it gets FDA approval, and then give the drug companies the patent for the standard 20 years plus a renewal if they work the patent. The next step: they can shorten time to market. We have evidence that the FDA errs too conservatively and doesn't approve (or delays) drugs that would have turned out totally safe and helped people. I remember they granted special approval to bring in a meningitis vaccine that Europe had for a while when an east coast school saw an outbreak. The vaccine still hadn't cleared the FDA, but I guess FDA special clearance is better than doing nothing. If it's safe enough for Western Europe, it's probably safe enough for Americans.

jedberg 10y ago
I agree with your overall point but > If it's safe enough for Western Europe, it's probably safe enough for Americans. Tell that to all the thalidomide kids in Europe. That's probably the best example of where the FDA saved a lot of lives.
skybrian 10y ago
Seems like your proposal would reduce the incentive to get drugs to market quickly?
- StClaire 10y ago
  The regulatory process overwhelms those incentives anyway. If you can cut down on the 8 to 10 years to market you might see more drug companies pop up chasing a long shot
dethswatch 10y ago
>It costs a quarter to manufacture each pill but the >manufacturers charge several dollars for that pill. What are the manufacturing costs for software?
- koolba 10y ago
  Shhh! Our whole racket is based on pricing our services on value while pricing our cost of goods on production inputs. It's not "fair" to let other industries do that right?
  - deleted 10y ago
    [deleted]
  - akiselev 10y ago
    If the US government forbid any federal or state agency from even negotiating software prices with volumes in the tens of millions (ala Medicare/Medicaid), the vast majority of pure research feeding the industry was publicly funded, and the market was as economically opaque and uncompetitive as healthcare then yes the two industries would be comparable.
  - drewrv 10y ago
    Pricing based on value provided to the customer makes a lot of sense for phones and web apps and cheetos. But how much do you value being alive? The "value" of a lifesaving drug is essentially unbounded, most people will pay anything to stay alive. That's one of the reasons healthcare is an edge case where the typical rules of capitalism don't work. So yes, it is unfair to have some industries price their products based on "value".
    - koolba 10y ago
      > Pricing based on value provided to the customer makes a lot of sense for phones and web apps and cheetos. > But how much do you value being alive? The "value" of a lifesaving drug is essentially unbounded, most people will pay anything to stay alive. That's one of the reasons healthcare is an edge case where the typical rules of capitalism don't work. > So yes, it is unfair to have some industries price their products based on "value". The problem with that logic is that taken to the extreme it means that everyone is entitled to every possible treatment, regardless of cost, and the rest of society must be the one that bears it. If a treatment exists to extend the life of a terminally ill person for 1 more day at a cost of $100K should the rest of us pay for it? How about $1M? The numbers are purposely ridiculous but it's not that far out of reality. At some point you need to draw the line and make the (not fun) decision of what's in and what's out. I'm convinced the bulk of this could be solved with some common sense planning: - Create an opt-in single payer plan at the federal level - Use the existing Medicare booking codes for identification and list prices for covered treatments (prices to be paid to service providers) - Service providers could opt in or out of the plans but couldn't do so on a per patient basis (i.e. similar to Medicare) - Only include medication and treatments that are out of patent protection - Only include medication that has at least N providers (was going to put three but may not exist for all generics) Anything else would be purely out of pocket and not covered by the plan. Fyi, that last one means that if we started today, you'd have access to everything up to approximately 1997. I'm not a doctor and honestly don't know much about the medical field, but I'm pretty sure that pre-1997 medications should cover the vast majority of healthcare use cases.
deepnotderp 10y ago
This is great, we're trying everything except what the real problem is! Look at the Martin shkreli situation, there was another one like that before too. How did patents play a role there? High profit margins are not a bad thing, as long as people can still afford them. What we need is the proper type of regulations, I agree we need to streamline the fda process, but that alone is not going to solve things. There are a few options I've heard, such as a special Patent for drugs which after ten years becomes a fair terms license Patent. Another one is that he government could exercise March in rights.
- criddell 10y ago
  I like the march-in rights idea. It sounds similar to eminent domain. If eminent domain can be used to expropriate private property for public use, it seems like there could be something similar for intellectual property.
  - refurb 10y ago
    And what do you think the impact on biotech VC money will be? Would you invest in a company if the gov't could confiscate the intellectual property?
    - criddell 10y ago
      I think the impact would be similar to the impact eminent domains laws have on real estate investment. What do you think the impact of withholding drugs from those that can't afford them could be?
      - refurb 10y ago
        Eminent domain in real estate means the property owner gets reimbursed for the fair value of the property taken. If the gov't is willing to fork over a few billion dollars to drug manufacturers, then yeah , no impact to VC investment.
- StClaire 10y ago
drzaiusapelord 10y ago
Martin Shkreli gouged on off-patent medicine. Pretending patents are the problem is short sighted. >It costs a quarter to manufacture each pill but the manufacturers charge several dollars for that pill. Is Trump writing checks to pay for R&D, salaries, etc? Of course they cost more than are to manufacture, that's the basics of business. Unless we move to a heavily regulated single-payer system then these problems will continue. SP will negotiate with drug companies from a powerful position and be able to push down costs via policy. We keep seeing success with SP and socialized healthcare in Europe and elsewhere and somehow keep pretending the problem is too much regulation (?) or patents. Yet somehow Europe manages to thrive with those very same issues! >We have evidence that the FDA errs too conservatively The FDA has had public whistleblowers to stop dangerous drugs from getting approved. Its extremely arguable whether the FDA is either too conservative or too liberal or easily gamed by political pressure.
- klodolph 10y ago
  Martin Shkreli gouged to drive down the company's stock price. The problem with Shkreli had everything to do with market manipulation and almost nothing to do with drugs in particular.
  - drzaiusapelord 10y ago
    The drug was then unaffordable regardless of intent. You can't separate the two. Again, your solution doesn't stop this.
    - klodolph 10y ago
      > Again, your solution doesn't stop this. I'm honestly quite confused here. What solution, exactly, are you talking about? I don't remember proposing a solution. In the Shkreli case, the drug price was raised in September 2015, and a cheap replacement was available on the market in October 2015 from a different company.
      - drzaiusapelord 10y ago
throwaway91111 10y ago
Given a glance at the mental health medications I see, reduced time to market is the last thing that would help. I don't believe Western Europe is any better in quality of drug vetting.
deleted 10y ago
[deleted]
perseusprime11 10y ago
Still does not address how generic drugs with the same chemicals cost a fraction of those from Big Pharma.
- StClaire 10y ago
  Generic manufacturers don't spend money on R&D
  - cmdrfred 10y ago
    Yes they do. They have to prove that their version of the drug works in the same manner as the original via clinical trials.
    - eh78ssxv2f 10y ago
      But do they invent the right medicine formula for the disease?
      - cmdrfred 10y ago
        Public universities have done that for most of the significant discoveries in the past few decades.
    - refurb 10y ago
      At an absolute fraction of the cost of a new drug. All they need to do is prove their drug formulation has the same bioavailability as the branded drug. The cost of doing that is measured in a few millions of dollars.
maxerickson 10y ago
Single doses of many cancer treatments cost $10,000 or more. That's where the spending is concentrated, not in daily maintenance meds that cost a buck or two.
- akiselev 10y ago
  Do you have data to back this up? Cancer treatments cost a lot per dose because they usually have relatively tiny markets (in any given year), are some of the most complex to develop, and treat an acute disease without the potential for long term customers. Also, much of the cost of cancer treatment is the cost of complications, clinical face time, and end-of-life care, not the drugs. If I remember correctly, the average number of prescriptions for someone aged 65-79 is about four times the national average and since they treat chronic conditions due to aging, people take them until the day they die. Since Medicare isn't allowed to negotiate bulk prices for the prescriptions, the pharmaceutical companies pretty much get to charge whatever they want for critical drugs. Just one of my 80 year old neighbors heart medications costs >$3000 per month and she's been taking it for almost 20 years, along with half a dozen other drugs. Cancer pills may cost a lot but the sheer scale of our aging population is much more relevant to overall healthcare costs.
  - maxerickson 10y ago
    Isn't the modal number of prescriptions 0? As far as Medicare, they don't pay "whatever", they pay what everyone else pays or less. I shouldn't have just said cancer drugs. Lots of specialty and small market drugs have enormous prices. Meanwhile, statins cost $0.30 a day: https://www.goodrx.com/lipitor https://www.goodrx.com/lipitor
    - akiselev 10y ago
      Do you mean the ideal number of prescriptions is zero? Medicare does pay less than other insurers but only because of a general law blacklisting companies that charge the government more than other customers (on the assumption that the govt will always be the single biggest customer but more susceptible to political influence). Drug companies keep this in mind when negotiating with insurers so it's nowhere near as effective as the NHS, which can't pass its costs onto consumers except through new legislation and negotiates for the entire UK population at the same time.
akiselev 10y ago
We already have a system for "research patents." It's called the Patent Term Restoration Program [1] and it allows the FDA to grant 5 year extensions for patents on approved drugs, up to 14 years of exclusivity from the date the marketing application is approved. Giving pharmaceutical companies the full 20 years after approval, regardless of how long it took, would create a perverse incentive to patent early just to protect existing patent marketshare. It would also be extremely unfair to everyone else like the aviation/aerospace, semiconductor, and energy industries where it can easily take 5-10 years to get from patent to product and cost just as much. It's much better to subsidize research (which the public does on a massive scale already) and drive down the regulatory burden of approval, which we can do without decreasing safety by some targeted reforms of the FDA (mostly by giving it more power to organize clinical trial infrastructure and enforce transparency and trial integrity). Giving pharma more power is not the answer. [1] https://www.fda.gov/Drugs/DevelopmentApprovalProcess/SmallBusinessAssistance/ucm069959.htm https://www.fda.gov/Drugs/DevelopmentApprovalProcess/SmallBu...
paulsutter 10y ago
Peter Thiel associate Jim O'Neill is under consideration to run the FDA. He wants to go to a progressive approval scheme that could significantly shorten the time to market for new treatments: https://www.forbes.com/sites/patrickcox/2016/12/14/trumps-fda-chief-may-implement-progressive-approval-for-drugs/ https://www.forbes.com/sites/patrickcox/2016/12/14/trumps-fd... https://www.bloomberg.com/politics/articles/2016-12-07/trump-team-is-said-to-consider-thiel-associate-o-neill-for-fda https://www.bloomberg.com/politics/articles/2016-12-07/trump...
e40 10y ago
We have evidence that the FDA errs too conservatively and doesn't approve (or delays) drugs that would have turned out totally safe and helped people. I'd like to see evidence for that. My impression, from all that I've read on the subject, the truth is quite the opposite. The FDA's funding has steadily been cut over the years and the restrictions on drug trials have been more lax over time. For example, drug trials have famously small sample sizes and are completely run by the companies themselves.
- refurb 10y ago
  completely run by the companies themselves That's an odd criticism. Who would run the trial if not for the sponsor?
  - e40 10y ago
    Here's a perfect example, from a slightly different domain, of why companies can't be trusted to do their own testing: https://news.ycombinator.com/item?id=13874668 https://news.ycombinator.com/item?id=13874668
  - e40 10y ago
    It certainly could be the case that disinterested 3rd parties could be involved, at some level, to remove the possibility of bias.
afpx 10y ago
It seems like you're knowledgeable on this subject. Could you explain the '8 year' approval process and what that means? I was recently reading some information that suggested that the FDA approval process is more like 8-10 months. I couldn't find the source that I read, but here is one similar: https://www.pharmacist.com/article/trump-calls-fda-slow-and-burdensome-its-faster-ever https://www.pharmacist.com/article/trump-calls-fda-slow-and-...

jedberg 10y ago

I agree with your overall point but > If it's safe enough for Western Europe, it's probably safe enough for Americans. Tell that to all the thalidomide kids in Europe. That's probably the best example of where the FDA saved a lot of lives.

skybrian 10y ago

Seems like your proposal would reduce the incentive to get drugs to market quickly?

StClaire 10y ago
The regulatory process overwhelms those incentives anyway. If you can cut down on the 8 to 10 years to market you might see more drug companies pop up chasing a long shot

dethswatch 10y ago

>It costs a quarter to manufacture each pill but the >manufacturers charge several dollars for that pill. What are the manufacturing costs for software?

koolba 10y ago
Shhh! Our whole racket is based on pricing our services on value while pricing our cost of goods on production inputs. It's not "fair" to let other industries do that right?
- deleted 10y ago
  [deleted]
- akiselev 10y ago
  If the US government forbid any federal or state agency from even negotiating software prices with volumes in the tens of millions (ala Medicare/Medicaid), the vast majority of pure research feeding the industry was publicly funded, and the market was as economically opaque and uncompetitive as healthcare then yes the two industries would be comparable.
- drewrv 10y ago
  Pricing based on value provided to the customer makes a lot of sense for phones and web apps and cheetos. But how much do you value being alive? The "value" of a lifesaving drug is essentially unbounded, most people will pay anything to stay alive. That's one of the reasons healthcare is an edge case where the typical rules of capitalism don't work. So yes, it is unfair to have some industries price their products based on "value".
  - koolba 10y ago
    > Pricing based on value provided to the customer makes a lot of sense for phones and web apps and cheetos. > But how much do you value being alive? The "value" of a lifesaving drug is essentially unbounded, most people will pay anything to stay alive. That's one of the reasons healthcare is an edge case where the typical rules of capitalism don't work. > So yes, it is unfair to have some industries price their products based on "value". The problem with that logic is that taken to the extreme it means that everyone is entitled to every possible treatment, regardless of cost, and the rest of society must be the one that bears it. If a treatment exists to extend the life of a terminally ill person for 1 more day at a cost of $100K should the rest of us pay for it? How about $1M? The numbers are purposely ridiculous but it's not that far out of reality. At some point you need to draw the line and make the (not fun) decision of what's in and what's out. I'm convinced the bulk of this could be solved with some common sense planning: - Create an opt-in single payer plan at the federal level - Use the existing Medicare booking codes for identification and list prices for covered treatments (prices to be paid to service providers) - Service providers could opt in or out of the plans but couldn't do so on a per patient basis (i.e. similar to Medicare) - Only include medication and treatments that are out of patent protection - Only include medication that has at least N providers (was going to put three but may not exist for all generics) Anything else would be purely out of pocket and not covered by the plan. Fyi, that last one means that if we started today, you'd have access to everything up to approximately 1997. I'm not a doctor and honestly don't know much about the medical field, but I'm pretty sure that pre-1997 medications should cover the vast majority of healthcare use cases.

deepnotderp 10y ago

This is great, we're trying everything except what the real problem is! Look at the Martin shkreli situation, there was another one like that before too. How did patents play a role there? High profit margins are not a bad thing, as long as people can still afford them. What we need is the proper type of regulations, I agree we need to streamline the fda process, but that alone is not going to solve things. There are a few options I've heard, such as a special Patent for drugs which after ten years becomes a fair terms license Patent. Another one is that he government could exercise March in rights.

criddell 10y ago
I like the march-in rights idea. It sounds similar to eminent domain. If eminent domain can be used to expropriate private property for public use, it seems like there could be something similar for intellectual property.
- refurb 10y ago
  And what do you think the impact on biotech VC money will be? Would you invest in a company if the gov't could confiscate the intellectual property?
  - criddell 10y ago
    I think the impact would be similar to the impact eminent domains laws have on real estate investment. What do you think the impact of withholding drugs from those that can't afford them could be?
    - refurb 10y ago
      Eminent domain in real estate means the property owner gets reimbursed for the fair value of the property taken. If the gov't is willing to fork over a few billion dollars to drug manufacturers, then yeah , no impact to VC investment.
StClaire 10y ago

drzaiusapelord 10y ago

Martin Shkreli gouged on off-patent medicine. Pretending patents are the problem is short sighted. >It costs a quarter to manufacture each pill but the manufacturers charge several dollars for that pill. Is Trump writing checks to pay for R&D, salaries, etc? Of course they cost more than are to manufacture, that's the basics of business. Unless we move to a heavily regulated single-payer system then these problems will continue. SP will negotiate with drug companies from a powerful position and be able to push down costs via policy. We keep seeing success with SP and socialized healthcare in Europe and elsewhere and somehow keep pretending the problem is too much regulation (?) or patents. Yet somehow Europe manages to thrive with those very same issues! >We have evidence that the FDA errs too conservatively The FDA has had public whistleblowers to stop dangerous drugs from getting approved. Its extremely arguable whether the FDA is either too conservative or too liberal or easily gamed by political pressure.

klodolph 10y ago
Martin Shkreli gouged to drive down the company's stock price. The problem with Shkreli had everything to do with market manipulation and almost nothing to do with drugs in particular.
- drzaiusapelord 10y ago
  The drug was then unaffordable regardless of intent. You can't separate the two. Again, your solution doesn't stop this.
  - klodolph 10y ago
    > Again, your solution doesn't stop this. I'm honestly quite confused here. What solution, exactly, are you talking about? I don't remember proposing a solution. In the Shkreli case, the drug price was raised in September 2015, and a cheap replacement was available on the market in October 2015 from a different company.
    - drzaiusapelord 10y ago

throwaway91111 10y ago

Given a glance at the mental health medications I see, reduced time to market is the last thing that would help. I don't believe Western Europe is any better in quality of drug vetting.

deleted 10y ago

[deleted]

perseusprime11 10y ago

Still does not address how generic drugs with the same chemicals cost a fraction of those from Big Pharma.

StClaire 10y ago
Generic manufacturers don't spend money on R&D
- cmdrfred 10y ago
  Yes they do. They have to prove that their version of the drug works in the same manner as the original via clinical trials.
  - eh78ssxv2f 10y ago
    But do they invent the right medicine formula for the disease?
    - cmdrfred 10y ago
      Public universities have done that for most of the significant discoveries in the past few decades.
  - refurb 10y ago
    At an absolute fraction of the cost of a new drug. All they need to do is prove their drug formulation has the same bioavailability as the branded drug. The cost of doing that is measured in a few millions of dollars.

maxerickson 10y ago

Single doses of many cancer treatments cost $10,000 or more. That's where the spending is concentrated, not in daily maintenance meds that cost a buck or two.

akiselev 10y ago
Do you have data to back this up? Cancer treatments cost a lot per dose because they usually have relatively tiny markets (in any given year), are some of the most complex to develop, and treat an acute disease without the potential for long term customers. Also, much of the cost of cancer treatment is the cost of complications, clinical face time, and end-of-life care, not the drugs. If I remember correctly, the average number of prescriptions for someone aged 65-79 is about four times the national average and since they treat chronic conditions due to aging, people take them until the day they die. Since Medicare isn't allowed to negotiate bulk prices for the prescriptions, the pharmaceutical companies pretty much get to charge whatever they want for critical drugs. Just one of my 80 year old neighbors heart medications costs >$3000 per month and she's been taking it for almost 20 years, along with half a dozen other drugs. Cancer pills may cost a lot but the sheer scale of our aging population is much more relevant to overall healthcare costs.
- maxerickson 10y ago
  Isn't the modal number of prescriptions 0? As far as Medicare, they don't pay "whatever", they pay what everyone else pays or less. I shouldn't have just said cancer drugs. Lots of specialty and small market drugs have enormous prices. Meanwhile, statins cost $0.30 a day: https://www.goodrx.com/lipitor https://www.goodrx.com/lipitor
  - akiselev 10y ago
    Do you mean the ideal number of prescriptions is zero? Medicare does pay less than other insurers but only because of a general law blacklisting companies that charge the government more than other customers (on the assumption that the govt will always be the single biggest customer but more susceptible to political influence). Drug companies keep this in mind when negotiating with insurers so it's nowhere near as effective as the NHS, which can't pass its costs onto consumers except through new legislation and negotiates for the entire UK population at the same time.

akiselev 10y ago

We already have a system for "research patents." It's called the Patent Term Restoration Program [1] and it allows the FDA to grant 5 year extensions for patents on approved drugs, up to 14 years of exclusivity from the date the marketing application is approved. Giving pharmaceutical companies the full 20 years after approval, regardless of how long it took, would create a perverse incentive to patent early just to protect existing patent marketshare. It would also be extremely unfair to everyone else like the aviation/aerospace, semiconductor, and energy industries where it can easily take 5-10 years to get from patent to product and cost just as much. It's much better to subsidize research (which the public does on a massive scale already) and drive down the regulatory burden of approval, which we can do without decreasing safety by some targeted reforms of the FDA (mostly by giving it more power to organize clinical trial infrastructure and enforce transparency and trial integrity). Giving pharma more power is not the answer. [1] https://www.fda.gov/Drugs/DevelopmentApprovalProcess/SmallBusinessAssistance/ucm069959.htm https://www.fda.gov/Drugs/DevelopmentApprovalProcess/SmallBu...

paulsutter 10y ago

Peter Thiel associate Jim O'Neill is under consideration to run the FDA. He wants to go to a progressive approval scheme that could significantly shorten the time to market for new treatments: https://www.forbes.com/sites/patrickcox/2016/12/14/trumps-fda-chief-may-implement-progressive-approval-for-drugs/ https://www.forbes.com/sites/patrickcox/2016/12/14/trumps-fd... https://www.bloomberg.com/politics/articles/2016-12-07/trump-team-is-said-to-consider-thiel-associate-o-neill-for-fda https://www.bloomberg.com/politics/articles/2016-12-07/trump...

e40 10y ago

We have evidence that the FDA errs too conservatively and doesn't approve (or delays) drugs that would have turned out totally safe and helped people. I'd like to see evidence for that. My impression, from all that I've read on the subject, the truth is quite the opposite. The FDA's funding has steadily been cut over the years and the restrictions on drug trials have been more lax over time. For example, drug trials have famously small sample sizes and are completely run by the companies themselves.

refurb 10y ago
completely run by the companies themselves That's an odd criticism. Who would run the trial if not for the sponsor?
- e40 10y ago
  Here's a perfect example, from a slightly different domain, of why companies can't be trusted to do their own testing: https://news.ycombinator.com/item?id=13874668 https://news.ycombinator.com/item?id=13874668
- e40 10y ago
  It certainly could be the case that disinterested 3rd parties could be involved, at some level, to remove the possibility of bias.

afpx 10y ago

It seems like you're knowledgeable on this subject. Could you explain the '8 year' approval process and what that means? I was recently reading some information that suggested that the FDA approval process is more like 8-10 months. I couldn't find the source that I read, but here is one similar: https://www.pharmacist.com/article/trump-calls-fda-slow-and-burdensome-its-faster-ever https://www.pharmacist.com/article/trump-calls-fda-slow-and-...