5 ms·

We just need shorter patents. For example drug companies spend far more on marketing than they do on R&D and a substantial amount of the research that generates

We just need shorter patents. For example drug companies spend far more on marketing than they do on R&D and a substantial amount of the research that generates new drugs comes from government funded research (>50%). Also, it's been demonstrated that taxpayer funded research drives private R&D up. So if I was dictator, I'd make it illegal to advertise drugs on tv/radio/web, double the current government budget for drug development R&D and make medical patents expire much more quickly. (And maybe something to allow Americans to buy drugs from overseas markets? Not sure on that one yet)

zebrafish 10y ago
I'm a proponent of these ideas. Patent duration as a function of private capital spent? It would have to be immune to "profit-shifting" but maybe that could be a good alternative.
- danielweber 10y ago
  You are getting close to advocating for "cost plus" which sounds really good to outsiders who are concerned about "too much profit" but have stunted every industry into which they have been deployed, and end up driving prices as suppliers look for ways to increase how much they spend. (The more they spend, the more profit they can make.) Look at the aerospace industry.
  - zebrafish 10y ago
    I'm not concerned about too much profit. I'm just concerned about stifling competition for too long. Patents feel like crony capitalism in some industries. After posting I did consider the lone software engineer who comes up with a great idea, creates an app, and his app is then copied by Google who has much better marketing and distribution resources. If patent duration was a function of investment in R&D, this software developer would be SOL because he invested little into his "eureka" idea.
Thriptic 10y ago
The government does not pay for development, they pay for a portion of basic research across all research areas (and it's nowhere near 50% of all research funds or drug research funds). The entire NIH budget is about 32 billion. Large pharma companies spent around 50 billion on R&D in 2010: http://www.nature.com/nrd/journal/v9/n3/full/nrd3078.html http://www.nature.com/nrd/journal/v9/n3/full/nrd3078.html The incredibly expensive pharma and device development costs are shouldered by industry. The government does not have the risk tolerance or patience for development. Right now a significant portion of the patent lifetime is spent with the drug in clinical trials unable to be sold. Shortening the patent lifetime would increase prices until the drug went generic, not decrease them,as companies would have less time to get ROI. The industry is much more complicated than you are making it out to be, and trying to make it unprofitable would not help innovation.
- frgtpsswrdlame 10y ago
  * >Right now a significant portion of the patent lifetime is spent with the drug in clinical trials unable to be sold. >And for most new drugs, patents expire approximately 12 years after market introduction. https://hbr.org/2014/11/the-real-cost-of-high-priced-drugs https://hbr.org/2014/11/the-real-cost-of-high-priced-drugs Also: >Once a company has good data, the FDA approval process is moving faster than ever. According to the agency’s most recent progress report, the standard review process now takes a median 10 months, down from nearly 13 months in 2005. Companies can shave another two months off if they get a priority review. In fiscal year 2014, the most recent data available, 92 percent of drugs were approved on first pass, up from 60 percent in 2005. https://www.statnews.com/2017/01/31/trump-pharma-reality-check/ https://www.statnews.com/2017/01/31/trump-pharma-reality-che... * >Shortening the patent lifetime would increase prices until the drug went generic, not decrease them,as companies would have less time to get ROI. Hence why I also consider opening up the drug market to other countries. If drugmakers need to make all their profit front-loaded then they can at least spread it geographically so Americans don't have to suffer under these prices. * >and trying to make it unprofitable would not help innovation. Here is a comparison between the biotech industry and the S&P 500 starting from approximately the lowest point of the recession. Now come on, do you really think this industry is struggling? How is it that these companies get away with telling investors one thing ("business is great, invest!") and the public another ("regulatory overreach is killing us!")? https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1490212800000&chddm=797115&chls=IntervalBasedLine&cmpto=INDEXSP:.INX&cmptdms=0&q=INDEXNASDAQ:NBI&ntsp=0&ei=H5TSWMGIEtHO2AbO4pmADg https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&... * >The government does not pay for development, they pay for a portion of basic research across all research areas (and it's nowhere near 50% of all research funds or drug research funds). The entire NIH budget is about 32 billion. Large pharma companies spent around 50 billion on R&D in 2010: http://www.nature.com/nrd/journal/v9/n3/full/nrd3078.html http://www.nature.com/nrd/journal/v9/n3/full/nrd3078.html I'll admit, it looks like my number of over 50% came from 1995. Also, I spent a long time tracking down this 50 billion number and it's original source (took a bit). It looks like it was originally published here(and other PHRMA industry reports): http://www.phrma.org/sites/default/files/pdf/2015_phrma_profile.pdf http://www.phrma.org/sites/default/files/pdf/2015_phrma_prof... So PHRMA is an industry group and I was interested in their methodology which is also very hard to find but lo and behold: >In 1991, Joseph DiMasi and colleagues from the Tufts Center for the Study of Drug Development published a widely quoted, comprehensive study of drug development costs. Using project data from confidential surveys, the study estimated cash outlays of around $169M to successfully bring a drug to market during a period beginning in the 1970s. PhRMA relies on this research as the foundation for their statements about the cost of drug development. However, PhRMA uses different assumptions about a "hidden" expense called "opportunity cost" that boosts this estimate to the $500 million mark. >PhRMA's assumptions begin with DiMasi's original estimate of R&D outlays with opportunity cost set at 9% and a 12-year development period. A review of the Tufts study performed by the US Office of Technology Assessment (OTA) subsequently calculated opportunity cost at a higher rate, which pushed the estimate towards $360 million. According to Public Citizen, this figure, when adjusted for inflation and rounded up, became PhRMA's $500 million. >But Public Citizen says the OTA report also offers an alternative analysis of development costs. R&D expenses are tax deductible, but DiMasi's 1991 figures didn't consider the discount this offers. If the original Tufts estimate is reduced by 34% in tax savings and opportunity cost is subtracted, Public Citizen says the actual cash outlay for bringing a new drug to market during the seventies and eighties was actually closer to $65 million. Public Citizen also stresses that, during the nineties, accelerated approval times and special tax credits further reduced the cost -- and the risk -- of researching and developing new drugs. http://www.thebody.com/content/art13514.html http://www.thebody.com/content/art13514.html >Notably, as in the Center's previous estimates, nearly half the cost of drug development was accounted for not by research expenditures but by the cost of capital. The analysts justified that assumption by noting that during the years a company spends developing a new product, it incurs opportunity costs by not using those dollars for other purposes. That argument is plausible, and such calculations can be an appropriate component of such analyses. However, nearly half the total cost of developing a new drug ($1.2 billion) was ascribed to this cost of capital, with only $1.4 billion attributed to funds actually spent on research. These capital costs were assessed at 10.6% per year, compounded — despite the fact that bonds issued by drug companies often pay only 1 to 5%. >The Tufts calculations also explicitly do not take into account the large public subsidies provided to pharmaceutical companies in the form of research-and-development tax credits or substantial payments received from the federal government for other research activities, such as testing their products in children. Perhaps most important, because the calculations are based only on products that the companies described as “self-originated,” the $2.6 billion figure does not consider drug-development costs borne by the public for the large number of medications that are based on external research that elucidated the disease mechanisms they address. One recent analysis showed that more than half of the most transformative drugs developed in recent decades had their origins in publicly funded research at nonprofit, university-affiliated centers.4 http://www.nejm.org/doi/full/10.1056/NEJMp1500848#t=article http://www.nejm.org/doi/full/10.1056/NEJMp1500848#t=article * >The industry is much more complicated than you are making it out to be You're right, the industry is very complicated, so please be careful not to let industry pull the wool over your eyes. EDIT: I didn't realize how big this post had gotten. I need to get back to work, crap!
danielweber 10y ago
> We just need shorter patents. This is nuts. By the time a major drug is ready for market, out of a 20 year patent there are usually only 5 years left. How much shorter do you think it should be? When they are operating under that kind of deadline, they don't have time for word-of-mouth marketing. For software, sure, I'm really willing to hear arguments that 20 years is too long. But drug patents lifetimes are already very small. If something is too expensive, wait a few years.
- frgtpsswrdlame 10y ago
  >If something is too expensive, wait a few years. Isn't that the point? In medicine, you often can't just wait it out. Healthcare is not a normal market. >By the time a major drug is ready for market, out of a 20 year patent there are usually only 5 years left. >And for most new drugs, patents expire approximately 12 years after market introduction. https://hbr.org/2014/11/the-real-cost-of-high-priced-drugs https://hbr.org/2014/11/the-real-cost-of-high-priced-drugs >When they are operating under that kind of deadline, they don't have time for word-of-mouth marketing. Word-of-mouth marketing isn't really "slow" if the drug is very effective.
  - danielweber 10y ago
    > In medicine, you often can't just wait it out. Healthcare is not a normal market Then you pay. I have family members who are only functional because of prescription drugs. When I see someone on HN talk about how "oh, it will probably be okay if we mess with this market, I read this really cool article online that said so," I see them no different than someone who decided on their own to start tinkering with grandpa's iron lung, because "oh, it will probably be okay." You don't know what you are messing with. Stop it. >And for most new drugs, patents expire approximately 12 years after market introduction. I don't know what the HBR's source is because they don't tell me. I am telling you to find any drug you see newly on the market, particularly one you see on tv since you worry about marketing budgets, and look up when its patent expires.
    - cmdrfred 10y ago

zebrafish 10y ago

I'm a proponent of these ideas. Patent duration as a function of private capital spent? It would have to be immune to "profit-shifting" but maybe that could be a good alternative.

danielweber 10y ago
You are getting close to advocating for "cost plus" which sounds really good to outsiders who are concerned about "too much profit" but have stunted every industry into which they have been deployed, and end up driving prices as suppliers look for ways to increase how much they spend. (The more they spend, the more profit they can make.) Look at the aerospace industry.
- zebrafish 10y ago
  I'm not concerned about too much profit. I'm just concerned about stifling competition for too long. Patents feel like crony capitalism in some industries. After posting I did consider the lone software engineer who comes up with a great idea, creates an app, and his app is then copied by Google who has much better marketing and distribution resources. If patent duration was a function of investment in R&D, this software developer would be SOL because he invested little into his "eureka" idea.

Thriptic 10y ago

The government does not pay for development, they pay for a portion of basic research across all research areas (and it's nowhere near 50% of all research funds or drug research funds). The entire NIH budget is about 32 billion. Large pharma companies spent around 50 billion on R&D in 2010: http://www.nature.com/nrd/journal/v9/n3/full/nrd3078.html http://www.nature.com/nrd/journal/v9/n3/full/nrd3078.html The incredibly expensive pharma and device development costs are shouldered by industry. The government does not have the risk tolerance or patience for development. Right now a significant portion of the patent lifetime is spent with the drug in clinical trials unable to be sold. Shortening the patent lifetime would increase prices until the drug went generic, not decrease them,as companies would have less time to get ROI. The industry is much more complicated than you are making it out to be, and trying to make it unprofitable would not help innovation.

frgtpsswrdlame 10y ago
* >Right now a significant portion of the patent lifetime is spent with the drug in clinical trials unable to be sold. >And for most new drugs, patents expire approximately 12 years after market introduction. https://hbr.org/2014/11/the-real-cost-of-high-priced-drugs https://hbr.org/2014/11/the-real-cost-of-high-priced-drugs Also: >Once a company has good data, the FDA approval process is moving faster than ever. According to the agency’s most recent progress report, the standard review process now takes a median 10 months, down from nearly 13 months in 2005. Companies can shave another two months off if they get a priority review. In fiscal year 2014, the most recent data available, 92 percent of drugs were approved on first pass, up from 60 percent in 2005. https://www.statnews.com/2017/01/31/trump-pharma-reality-check/ https://www.statnews.com/2017/01/31/trump-pharma-reality-che... * >Shortening the patent lifetime would increase prices until the drug went generic, not decrease them,as companies would have less time to get ROI. Hence why I also consider opening up the drug market to other countries. If drugmakers need to make all their profit front-loaded then they can at least spread it geographically so Americans don't have to suffer under these prices. * >and trying to make it unprofitable would not help innovation. Here is a comparison between the biotech industry and the S&P 500 starting from approximately the lowest point of the recession. Now come on, do you really think this industry is struggling? How is it that these companies get away with telling investors one thing ("business is great, invest!") and the public another ("regulatory overreach is killing us!")? https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1490212800000&chddm=797115&chls=IntervalBasedLine&cmpto=INDEXSP:.INX&cmptdms=0&q=INDEXNASDAQ:NBI&ntsp=0&ei=H5TSWMGIEtHO2AbO4pmADg https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&... * >The government does not pay for development, they pay for a portion of basic research across all research areas (and it's nowhere near 50% of all research funds or drug research funds). The entire NIH budget is about 32 billion. Large pharma companies spent around 50 billion on R&D in 2010: http://www.nature.com/nrd/journal/v9/n3/full/nrd3078.html http://www.nature.com/nrd/journal/v9/n3/full/nrd3078.html I'll admit, it looks like my number of over 50% came from 1995. Also, I spent a long time tracking down this 50 billion number and it's original source (took a bit). It looks like it was originally published here(and other PHRMA industry reports): http://www.phrma.org/sites/default/files/pdf/2015_phrma_profile.pdf http://www.phrma.org/sites/default/files/pdf/2015_phrma_prof... So PHRMA is an industry group and I was interested in their methodology which is also very hard to find but lo and behold: >In 1991, Joseph DiMasi and colleagues from the Tufts Center for the Study of Drug Development published a widely quoted, comprehensive study of drug development costs. Using project data from confidential surveys, the study estimated cash outlays of around $169M to successfully bring a drug to market during a period beginning in the 1970s. PhRMA relies on this research as the foundation for their statements about the cost of drug development. However, PhRMA uses different assumptions about a "hidden" expense called "opportunity cost" that boosts this estimate to the $500 million mark. >PhRMA's assumptions begin with DiMasi's original estimate of R&D outlays with opportunity cost set at 9% and a 12-year development period. A review of the Tufts study performed by the US Office of Technology Assessment (OTA) subsequently calculated opportunity cost at a higher rate, which pushed the estimate towards $360 million. According to Public Citizen, this figure, when adjusted for inflation and rounded up, became PhRMA's $500 million. >But Public Citizen says the OTA report also offers an alternative analysis of development costs. R&D expenses are tax deductible, but DiMasi's 1991 figures didn't consider the discount this offers. If the original Tufts estimate is reduced by 34% in tax savings and opportunity cost is subtracted, Public Citizen says the actual cash outlay for bringing a new drug to market during the seventies and eighties was actually closer to $65 million. Public Citizen also stresses that, during the nineties, accelerated approval times and special tax credits further reduced the cost -- and the risk -- of researching and developing new drugs. http://www.thebody.com/content/art13514.html http://www.thebody.com/content/art13514.html >Notably, as in the Center's previous estimates, nearly half the cost of drug development was accounted for not by research expenditures but by the cost of capital. The analysts justified that assumption by noting that during the years a company spends developing a new product, it incurs opportunity costs by not using those dollars for other purposes. That argument is plausible, and such calculations can be an appropriate component of such analyses. However, nearly half the total cost of developing a new drug ($1.2 billion) was ascribed to this cost of capital, with only $1.4 billion attributed to funds actually spent on research. These capital costs were assessed at 10.6% per year, compounded — despite the fact that bonds issued by drug companies often pay only 1 to 5%. >The Tufts calculations also explicitly do not take into account the large public subsidies provided to pharmaceutical companies in the form of research-and-development tax credits or substantial payments received from the federal government for other research activities, such as testing their products in children. Perhaps most important, because the calculations are based only on products that the companies described as “self-originated,” the $2.6 billion figure does not consider drug-development costs borne by the public for the large number of medications that are based on external research that elucidated the disease mechanisms they address. One recent analysis showed that more than half of the most transformative drugs developed in recent decades had their origins in publicly funded research at nonprofit, university-affiliated centers.4 http://www.nejm.org/doi/full/10.1056/NEJMp1500848#t=article http://www.nejm.org/doi/full/10.1056/NEJMp1500848#t=article * >The industry is much more complicated than you are making it out to be You're right, the industry is very complicated, so please be careful not to let industry pull the wool over your eyes. EDIT: I didn't realize how big this post had gotten. I need to get back to work, crap!

danielweber 10y ago

> We just need shorter patents. This is nuts. By the time a major drug is ready for market, out of a 20 year patent there are usually only 5 years left. How much shorter do you think it should be? When they are operating under that kind of deadline, they don't have time for word-of-mouth marketing. For software, sure, I'm really willing to hear arguments that 20 years is too long. But drug patents lifetimes are already very small. If something is too expensive, wait a few years.

frgtpsswrdlame 10y ago
>If something is too expensive, wait a few years. Isn't that the point? In medicine, you often can't just wait it out. Healthcare is not a normal market. >By the time a major drug is ready for market, out of a 20 year patent there are usually only 5 years left. >And for most new drugs, patents expire approximately 12 years after market introduction. https://hbr.org/2014/11/the-real-cost-of-high-priced-drugs https://hbr.org/2014/11/the-real-cost-of-high-priced-drugs >When they are operating under that kind of deadline, they don't have time for word-of-mouth marketing. Word-of-mouth marketing isn't really "slow" if the drug is very effective.
- danielweber 10y ago
  > In medicine, you often can't just wait it out. Healthcare is not a normal market Then you pay. I have family members who are only functional because of prescription drugs. When I see someone on HN talk about how "oh, it will probably be okay if we mess with this market, I read this really cool article online that said so," I see them no different than someone who decided on their own to start tinkering with grandpa's iron lung, because "oh, it will probably be okay." You don't know what you are messing with. Stop it. >And for most new drugs, patents expire approximately 12 years after market introduction. I don't know what the HBR's source is because they don't tell me. I am telling you to find any drug you see newly on the market, particularly one you see on tv since you worry about marketing budgets, and look up when its patent expires.
  - cmdrfred 10y ago