4 ms·

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

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!
- Thriptic 10y ago
  > >And for most new drugs, patents expire approximately 12 years after market introduction. The length of a drug patent is 20 years, 8 of which by your statement are spent in development. So yes, almost half the patent duration is spent with the drug off the market. This is burden almost no other industry has to deal with. My original statement is completely valid. > 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. Other countries place more stringent price ceilings on the cost of pharmaceuticals, which is why there is such a disparity between what we are paying and what others are paying. If we want to spread the cost burden geographically, countries benefiting from these products should be pressured to remove their price ceilings, which would lower costs in the US. Opening up the markets to other countries is just regulatory arbitrage, not spreading of cost burden. Also, if I'm interpreting this correctly, nothing you posted suggests that the government is the primary backer of pharmaceutical research. We can argue over whether the research costs are 50 billion or 30 billion or whatever, but your original claim is still incorrect unless the numbers are off by literally an order of magnitude.
  - frgtpsswrdlame 10y ago
    * >The length of a drug patent is 20 years, 8 of which by your statement are spent in development. So yes, almost half the patent duration is spent with the drug off the market. This is burden almost no other industry has to deal with. My original statement is completely valid. And yet they seem to be doing just fine, check that stock price chart above. Part of this is because 12 years is already pretty long, they're obviously making their money back. Also, there are all sorts of strategies these companies use in order to avoid true patent expiration. >The problem is, these modified drugs don’t offer enough of an advantage over generic versions of the original molecules, says Jim Keon, president of the Canadian Generic Pharmaceutical Association. So the sophisticated lifecycle plans brand-name companies have for their products — rolling out new versions when patents near expiry — are created primarily to help bottom lines rather than patients. And the argument that this is necessary to earn enough money to reinvest in new R&D doesn’t hold much weight, suggests Keon, if that research only results in more “me-too” drugs. “They have to recoup R&D costs, yes, but the question is: Is it useful R&D? If the R&D is just to tweak a product to get more monopoly protection without really providing an improved medication, then maybe it doesn’t deserve a patent,” says Keon. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3680578/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3680578/ >Nexium illustrates the drug makers’ strategy. Many chemicals come in two versions, each a mirror image of the other: an L-isomer and an R-isomer. (The “L” is for left, the “R” is for right.) Nexium’s predecessor Prilosec is a mixture of both isomers. When Prilosec’s patent expired in 2001, the drug maker was ready with Nexium, which contains only the L-isomer. http://sm.stanford.edu/archive/stanmed/2005summer/drugs-metoo.html http://sm.stanford.edu/archive/stanmed/2005summer/drugs-meto... >AstraZeneca somehow managed to convince the US Patent Office that Nexium was substantially different from Prilosec, and thus should be granted its own patent, along with 20 years of protection http://acsh.org/news/2017/01/18/nexium-dark-side-pharma-10546 http://acsh.org/news/2017/01/18/nexium-dark-side-pharma-1054... * >Also, if I'm interpreting this correctly, nothing you posted suggests that the government is the primary backer of pharmaceutical research. We can argue over whether the research costs are 50 billion or 30 billion or whatever, but your original claim is still incorrect unless the numbers are off by literally an order of magnitude. I admitted that was a tad misleading, here's the fact I was thinking of. I should have linked it earlier. >An internal National Institutes of Health (NIH) document, obtained by Public Citizen through the Freedom of Information Act, shows how crucial taxpayer-funded research is to top-selling drugs. According to the NIH, taxpayer-funded scientists conducted 55 percent of the research projects that led to the discovery and development of the top five selling drugs in 1995. (See Section III) http://www.citizen.org/publications/publicationredirect.cfm?ID=7065 http://www.citizen.org/publications/publicationredirect.cfm?... * >Other countries place more stringent price ceilings on the cost of pharmaceuticals, which is why there is such a disparity between what we are paying and what others are paying. If we want to spread the cost burden geographically, countries benefiting from these products should be pressured to remove their price ceilings, which would lower costs in the US. Opening up the markets to other countries is just regulatory arbitrage, not spreading of cost burden. I'm fine with the US or US industry "exerting pressure" on other countries to remove pharmaceutical price ceilings as long as we allow our citizens to buy overseas drugs first. Otherwise I don't see why Americans should suffer like this. American citizens alone bear the cost of R&D for the world because every other country sets price ceilings? Also, I'll just once again point out that our drug development industry is not struggling! It's doing great right now, they spend lots of money on dividends and stock buybacks and advertising and still make fantastic profits. They're fine.

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!

Thriptic 10y ago
> >And for most new drugs, patents expire approximately 12 years after market introduction. The length of a drug patent is 20 years, 8 of which by your statement are spent in development. So yes, almost half the patent duration is spent with the drug off the market. This is burden almost no other industry has to deal with. My original statement is completely valid. > 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. Other countries place more stringent price ceilings on the cost of pharmaceuticals, which is why there is such a disparity between what we are paying and what others are paying. If we want to spread the cost burden geographically, countries benefiting from these products should be pressured to remove their price ceilings, which would lower costs in the US. Opening up the markets to other countries is just regulatory arbitrage, not spreading of cost burden. Also, if I'm interpreting this correctly, nothing you posted suggests that the government is the primary backer of pharmaceutical research. We can argue over whether the research costs are 50 billion or 30 billion or whatever, but your original claim is still incorrect unless the numbers are off by literally an order of magnitude.
- frgtpsswrdlame 10y ago
  * >The length of a drug patent is 20 years, 8 of which by your statement are spent in development. So yes, almost half the patent duration is spent with the drug off the market. This is burden almost no other industry has to deal with. My original statement is completely valid. And yet they seem to be doing just fine, check that stock price chart above. Part of this is because 12 years is already pretty long, they're obviously making their money back. Also, there are all sorts of strategies these companies use in order to avoid true patent expiration. >The problem is, these modified drugs don’t offer enough of an advantage over generic versions of the original molecules, says Jim Keon, president of the Canadian Generic Pharmaceutical Association. So the sophisticated lifecycle plans brand-name companies have for their products — rolling out new versions when patents near expiry — are created primarily to help bottom lines rather than patients. And the argument that this is necessary to earn enough money to reinvest in new R&D doesn’t hold much weight, suggests Keon, if that research only results in more “me-too” drugs. “They have to recoup R&D costs, yes, but the question is: Is it useful R&D? If the R&D is just to tweak a product to get more monopoly protection without really providing an improved medication, then maybe it doesn’t deserve a patent,” says Keon. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3680578/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3680578/ >Nexium illustrates the drug makers’ strategy. Many chemicals come in two versions, each a mirror image of the other: an L-isomer and an R-isomer. (The “L” is for left, the “R” is for right.) Nexium’s predecessor Prilosec is a mixture of both isomers. When Prilosec’s patent expired in 2001, the drug maker was ready with Nexium, which contains only the L-isomer. http://sm.stanford.edu/archive/stanmed/2005summer/drugs-metoo.html http://sm.stanford.edu/archive/stanmed/2005summer/drugs-meto... >AstraZeneca somehow managed to convince the US Patent Office that Nexium was substantially different from Prilosec, and thus should be granted its own patent, along with 20 years of protection http://acsh.org/news/2017/01/18/nexium-dark-side-pharma-10546 http://acsh.org/news/2017/01/18/nexium-dark-side-pharma-1054... * >Also, if I'm interpreting this correctly, nothing you posted suggests that the government is the primary backer of pharmaceutical research. We can argue over whether the research costs are 50 billion or 30 billion or whatever, but your original claim is still incorrect unless the numbers are off by literally an order of magnitude. I admitted that was a tad misleading, here's the fact I was thinking of. I should have linked it earlier. >An internal National Institutes of Health (NIH) document, obtained by Public Citizen through the Freedom of Information Act, shows how crucial taxpayer-funded research is to top-selling drugs. According to the NIH, taxpayer-funded scientists conducted 55 percent of the research projects that led to the discovery and development of the top five selling drugs in 1995. (See Section III) http://www.citizen.org/publications/publicationredirect.cfm?ID=7065 http://www.citizen.org/publications/publicationredirect.cfm?... * >Other countries place more stringent price ceilings on the cost of pharmaceuticals, which is why there is such a disparity between what we are paying and what others are paying. If we want to spread the cost burden geographically, countries benefiting from these products should be pressured to remove their price ceilings, which would lower costs in the US. Opening up the markets to other countries is just regulatory arbitrage, not spreading of cost burden. I'm fine with the US or US industry "exerting pressure" on other countries to remove pharmaceutical price ceilings as long as we allow our citizens to buy overseas drugs first. Otherwise I don't see why Americans should suffer like this. American citizens alone bear the cost of R&D for the world because every other country sets price ceilings? Also, I'll just once again point out that our drug development industry is not struggling! It's doing great right now, they spend lots of money on dividends and stock buybacks and advertising and still make fantastic profits. They're fine.