4 ms·

> Or: we could just emulate what those other countries are doing to control prices Because centrally setting prices is very difficult, and that difficulty scal

> Or: we could just emulate what those other countries are doing to control prices Because centrally setting prices is very difficult, and that difficulty scales super-linearly with size. Every other country that controls pharmaceutical prices is significantly smaller than the US is, and they also fund much less pharmaceutical R&D than the US does[0], even though they essentially import the benefits of that R&D at reduced prices[1]. If the US tried to do that, pharmaceutical research would completely evaporate in the US, which would impact every other country that either produces or imports drugs produced in the US as well[2]. Instead, cross-border trade ensures that research funding is proportional to drug consumption. [0] Until a few years ago, US funded more than half the R&D of the entire world. It's now around 44%, mostly because China and India have been growing rapidly. [1] Even pharmaceutical companies based in Europe receive most of their R&D funding either directly or indirectly from the US. [2] Which is literally every other country in the world, even countries like India which do not recognize US pharmaceutical patents.

jcfrei 10y ago
In your comment you suggest that most of the profits of pharma companies go into R&D but that's not the case. There's a lot of rent seeking behavior by these companies due to poor legislation. This kind of behavior (incentives/"conferences" for physicians, lobbying, etc.) shows up under sales in their annual reports and it's clear they spend a lot more on it than on R&D: https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-pharmaceutical-companies-are-spending-far-more-on-marketing-than-research/ https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p... Clearly the current legal framework is not optimal for consumers.
- chimeracoder 10y ago
  > In your comment you suggest that most of the profits of pharma companies go into R&D but that's not the case. No, I didn't say that most of the profits of pharmaceutical companies go to R&D. I said that most R&D funding comes from the US (and that a large deal of that funding comes from profits, mostly profits on sales within the US).
- refurb 10y ago
  What a poorly written article. It looks like just lumped all the business expenses under "sales and marketing". I think it's absurd to assume that all of that spending is completely discretionary. Contrary to what people think, you need to do a certain level of sales support in the pharmaceutical market. The drugs don't sell themselves.
  - jellicle 10y ago
    We don't want them to be "sold". We want them to be prescribed as needed by medical professionals.
    - refurb 10y ago
      Yes, but medical professionals can't prescribe if they don't know enough about the drug. Here is an interesting example: People complain about direct to consumer advertising of drugs in the US. What an outrage!! Well, the FDA did some analysis and found out that when patients asked for the drug: (1) 87 percent actually had the condition the drug treats, (2) 6 percent of those DTC-generated visits, a previously undiagnosed condition was discovered, (3) Only 7 percent of doctors said they felt "very pressured to prescribe" a particular advertised drug - the real pressure was time pressure. More patients are coming in armed with more questions.[1] Sounds like DTC is pretty good huh? [1]http://drugwonks.com/blog/fake-dtc-news-mustn-t-drive-the-healthcare-debate http://drugwonks.com/blog/fake-dtc-news-mustn-t-drive-the-he...
- rayiner 10y ago
  So that's an article on how pharma companies spend more on sales and marketing than research. But many companies we'd consider "innovative" spend about twice as much on SG&A (sales, general, and administrative) as on R&D. For 2014-2015, the ratio between R&D spending and SG&A spending is 0.59 at Pfizer, 0.75 at Google, 0.56 at AstraZeneca, 0.43 at Apple, and 0.58 at Microsoft.
  - jcfrei 10y ago
    I'm skeptical that pharma companies should require equally high levels of marketing spending as other industries. After all most expensive pharmaceutical products are bought through an expert (ie. your physician). There's not a huge discoverability problem to be solved for those companies - or at least there shouldn't be - after all there's a national drug directory run by the FDA. Furthermore the US is one of only two countries where companies can advertise for drugs which require prescriptions.
    - SilasX 10y ago
      If doctors were hyperdiligent about researching treatment options rather than "meh, it's a job, we don't have anything for you, next!" then I would agree completely. But sometimes they have to be reminded of what is out there, which may have changed since they were in med school.
    - rayiner 10y ago
      Is discovability a problem for Apple, Microsoft, or Google? And note that Microsoft and Google sell primarily to experts too (advertising and IT professionals). As to advertising. As for as I know, what other nations ban is direct to consumer advertising, which is a minority of advertising spend. And as to DTC advertising, you can level the very legitimate criticism that it's directed to convincing people to ask for drugs they don't really need. But that's true of most advertising. Does anyone really need a new iPhone or to upgrade to Windows 10? Also, getting rid of DTC advertising wouldn't really address drug prices. It would just force manufacturers to recover their R&D + ROI from a smaller pool of buyers (the ones who really need the drug). On a cost per pill basis, whatever would be saved through lower DTC advertising expenditures clould be outweighed by the reduced sales.

jcfrei 10y ago

In your comment you suggest that most of the profits of pharma companies go into R&D but that's not the case. There's a lot of rent seeking behavior by these companies due to poor legislation. This kind of behavior (incentives/"conferences" for physicians, lobbying, etc.) shows up under sales in their annual reports and it's clear they spend a lot more on it than on R&D: https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-pharmaceutical-companies-are-spending-far-more-on-marketing-than-research/ https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p... Clearly the current legal framework is not optimal for consumers.

chimeracoder 10y ago
> In your comment you suggest that most of the profits of pharma companies go into R&D but that's not the case. No, I didn't say that most of the profits of pharmaceutical companies go to R&D. I said that most R&D funding comes from the US (and that a large deal of that funding comes from profits, mostly profits on sales within the US).
refurb 10y ago
What a poorly written article. It looks like just lumped all the business expenses under "sales and marketing". I think it's absurd to assume that all of that spending is completely discretionary. Contrary to what people think, you need to do a certain level of sales support in the pharmaceutical market. The drugs don't sell themselves.
- jellicle 10y ago
  We don't want them to be "sold". We want them to be prescribed as needed by medical professionals.
  - refurb 10y ago
    Yes, but medical professionals can't prescribe if they don't know enough about the drug. Here is an interesting example: People complain about direct to consumer advertising of drugs in the US. What an outrage!! Well, the FDA did some analysis and found out that when patients asked for the drug: (1) 87 percent actually had the condition the drug treats, (2) 6 percent of those DTC-generated visits, a previously undiagnosed condition was discovered, (3) Only 7 percent of doctors said they felt "very pressured to prescribe" a particular advertised drug - the real pressure was time pressure. More patients are coming in armed with more questions.[1] Sounds like DTC is pretty good huh? [1]http://drugwonks.com/blog/fake-dtc-news-mustn-t-drive-the-healthcare-debate http://drugwonks.com/blog/fake-dtc-news-mustn-t-drive-the-he...
rayiner 10y ago
So that's an article on how pharma companies spend more on sales and marketing than research. But many companies we'd consider "innovative" spend about twice as much on SG&A (sales, general, and administrative) as on R&D. For 2014-2015, the ratio between R&D spending and SG&A spending is 0.59 at Pfizer, 0.75 at Google, 0.56 at AstraZeneca, 0.43 at Apple, and 0.58 at Microsoft.
- jcfrei 10y ago
  I'm skeptical that pharma companies should require equally high levels of marketing spending as other industries. After all most expensive pharmaceutical products are bought through an expert (ie. your physician). There's not a huge discoverability problem to be solved for those companies - or at least there shouldn't be - after all there's a national drug directory run by the FDA. Furthermore the US is one of only two countries where companies can advertise for drugs which require prescriptions.
  - SilasX 10y ago
    If doctors were hyperdiligent about researching treatment options rather than "meh, it's a job, we don't have anything for you, next!" then I would agree completely. But sometimes they have to be reminded of what is out there, which may have changed since they were in med school.
  - rayiner 10y ago
    Is discovability a problem for Apple, Microsoft, or Google? And note that Microsoft and Google sell primarily to experts too (advertising and IT professionals). As to advertising. As for as I know, what other nations ban is direct to consumer advertising, which is a minority of advertising spend. And as to DTC advertising, you can level the very legitimate criticism that it's directed to convincing people to ask for drugs they don't really need. But that's true of most advertising. Does anyone really need a new iPhone or to upgrade to Windows 10? Also, getting rid of DTC advertising wouldn't really address drug prices. It would just force manufacturers to recover their R&D + ROI from a smaller pool of buyers (the ones who really need the drug). On a cost per pill basis, whatever would be saved through lower DTC advertising expenditures clould be outweighed by the reduced sales.