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When the Patient Is a Gold Mine: The Trouble with Rare-Disease Drugs

138 points by cpete 9y ago

rayiner 9y ago
This article does a pretty good job of grappling with the fact that you can't have your cake and eat it too. On one hand the article acknowledges that treatments for orphan diseases have been successful, and many more have come out since the Orphan Drug Act was passed, as compared to before when these diseases were largely ignored. At the same time, it notes that clearly this is a lot of money to spend on one patient. There is a tendency to believe that the normal dynamics of markets should be suspended when the product is "really important." Of course, that's backward. When the product is really important, the worst thing you can do is turn it into a low-profit economic ghetto by reducing incentives to invest. At the same time, when the government takes over the role of the market by granting a temporary monopoly, there clearly has to be some backstop at work. The interesting thing to note that the company in the article, Alexion, is not even an unusually lucrative company. In 2015 its operating income was $536 million on 2.6 billion of revenue, or about a 20% operating profit margin. For comparison, Alphabet's operating margin is over 25%. Google also does much better in terms of return on equity and revenue per employee metrics.
- dnautics 9y ago
  it's even crazier than that. Let's say that we institute some feel-good regulation that caps profits at 10% of cost. Presuming some sort of single payer system so that we don't have to feel guilty about screwing patients. What do I do as a pharmaceutical manufacturer? I'd overprovision FTEs on the production capability, encouraging them to spend "10%" time on other projects, ideation, but subtly encourage that 10% to be more. I'd create a QC system that is artificially stringent (make chromatography resins fail QC after single use) and recycle the QC-fail materials for pilot studies, etc... There are always ways to sneakily increase costs. And I'm not going to lose sleep at night, since I am putting those funds back into "improving society".
  - vkou 9y ago
    I think the problem with pharma is not the profit margins, as much as the stupid amount of money that gets poured into marketing. There is no indication that direct-to-consumer advertising of drugs improves health outcomes. It does, however, greatly increase the cost of medication. Since the marginal cost of producing more drugs is low, advertising, even at a positive RoI, leads to increased prices.
    - Brakenshire 9y ago
      Yes, I agree, I'm a big supporter of the pharmaceutical industry, it seems from random conversations that a significant proportion of people just think they are crooks, but clearly developing and testing drugs is expensive, that has to be paid for somehow, and private companies are completely indispensable to the process of drug development. But, marketing is where my support starts to peter out. It seems crazy that marketing takes up such a large percentage of expenditure, it's not only wasteful but also introduces perverse incentives. I really think it would be great if trade deals could establish not just concessions like mandated strong intellectual property laws or restricted bulk negotiation, but also serious limitations on the other side of the coin, on something like pharma marketing. If deep trade deals are justified by shaping the market to be at its most productive, I don't mind if that increases profits most of the time, but occasionally there will be measures that will improve the market but also reduce short term profit for some existing major players. In practice, under the current situation the market is structured so that a profitable pharma company has to be good at generating demand, just as much as meeting a need. A company that can do the latter but not the former will go bust. I think a world with more emphasis on judgements made by clinical research organizations (private or public) like NICE or the Cochrane Foundation rather than TV adverts, wine-ing and dining, and the nag factor on patients and overworked individual practitioners, would end up with a drastically more effective market for actually finding cures.
      - refurb 9y ago
        It seems crazy that marketing takes up such a large percentage of expenditure, it's not only wasteful but also introduces perverse incentives. How much do drug companies spend on marketing? I've only ever seen article mention SG&A which is an accounting catch all for more than just marketing.
- kharms 9y ago
  > There is a tendency to believe that the normal dynamics of markets should be suspended when the product is "really important." I've not seen the argument that they should be suspended as much as that they are. "Really important" just means that demand is inelastic.
- frgtpsswrdlame 9y ago
  >The interesting thing to note that the company in the article, Alexion, is not even an unusually lucrative company. In 2015 its operating income was $536 million on 2.6 billion of revenue, or about a 20% operating profit margin. ...what. 20% margin isn't good nowadays? And why on earth are we comparing this company to a tech giant, they're not in the same world when it comes to how they operate. Of course google's going to look better in a lot of these terms, it's google (and i'd argue a monopoly). I mean at what point do we say, actually these biotech companies are plenty profitable? There's so much handwringing about how if we hurt these companies in anyway then all these sick people will die. It's just not true. Why don't we take the S&P 500, a Biotech Index and ALXN and put them on a chart: https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1495669925719&chddm=624036&chls=IntervalBasedLine&cmpto=NASDAQ:ALXN;INDEXSP:.INX&cmptdms=0;0&q=INDEXSP:SPSIBI&ntsp=0&ei=nRwmWfHyE5vM2AaR9ZuQDw https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&... Well damn, looks like despite all their huge R&D costs, only 20% margins, so on and so on they are doing pretty damn well. Honestly, are we looking at the same chart? These companies are MILKING sick people and we're afraid to intervene. Markets don't work in life and death scenarios because people would pay anything. This is a case that begs for regulation and even with it these companies are going to be just fine.
  - tuna-piano 9y ago
    In a world where investors invest in photo sharing apps and social media websites because of the potential billion dollar payouts - why would you limit the potential drug payouts without limiting the social media app payouts? Over time, would limiting the potential profits in life-saving drugs increase or decrease the number of life-saving drugs developed? In an economy where people can choose to work in any field, and investors can choose to invest their money in any field - what better way is there to allocate the people and money resources than by letting people voice how valuable something is with their wallets? Do you want to force someone to buy a third car instead of buying a new drug treatment? If you understand the invisible hand theory (actually understand it, not just the everyman's definition) I think it's difficult to (a) argue against in general and (b) argue against for certain life-saving industries especially.
- deleted 9y ago
  [deleted]
- tuna-piano 9y ago
  While the math isn't exactly right - even if Alexion returned all profits to its patients at the end of the year, the cost of the drug would still be only 20% less than the current price. So instead of $500k, it would be $400k. Would that really change the dynamics of the discussion?
  - refurb 9y ago
    Great point to call out. Also, Alexion uses about 21% of their revenue for R&D. So of the $500K they sell the product for, $100K is profit, $100K goes back into R&D and the rest is paying for expenses.
- finolex1 9y ago
  It's highly debatable over whether lower profits will significantly reduce the incentive to invest, especially considering profits are already high (about 20%). A small drop won't make a significant difference for the lucrativeness of the industry. Perhaps the best way to go about doing this is by reducing patent lengths, rather than some other policy that is easy to circumvent/bend like taxes or price ceilings. It's also worth noting that a large proportion of the basic research that goes into making these drugs is funded by the federal government or other research foundations, which receive little, if any of the benefits when commercialized. For instance, Alexion's drug is based to some extent on research conducted at Yale by its former CEO, not to mention the whole host of foundational research that preceded it.
  - refurb 9y ago
    A few thoughts since I worked for a biotech company. R&D management sure as hell looks at the potential returns generated. I've been on projects where the company said "we're going to spend out $500M in R&D funds on this disease because we might actually make our money back. The other disease is off the table since we can't even break-even." Yes, a lot of basic research is funded by the gov't, but that's minuscule compared to the funding the companies themselves put in. I sat in a meeting when a decision was made to move a promising compound forward. The investment? $400M for all activities post-phase 3. The NIH grants that supported the discovery? Maybe a few million?
  - WalterBright 9y ago
    If the risks of investing in X or Y are the same, but the rewards of X > Y, then investors will invest in X. Capping returns will result in investment dollars going elsewhere.
- ubernostrum 9y ago
  There is a tendency to believe that the normal dynamics of markets should be suspended when the product is "really important." Of course, that's backward. When the product is really important, the worst thing you can do is turn it into a low-profit economic ghetto by reducing incentives to invest. You contradict yourself here. The normal dynamics of markets have been suspended in order to ensure that "really important" products make it to market. That occurs through government-granted monopolies on drugs along with subsidies and grants on research. And that is what props up the market and provides the "incentive to invest" you insist is needed. So you can argue for "normal dynamics" -- which would be a more free market with no government-granted monopolies, subsidies or research grants -- or you can argue to preserve "incentive to invest". But you can't have your cake and eat it, too, and the fact that you don't seem to consider how much we already do to meddle with the market in order to make sure "important" products are available is slightly worrying.
- skybrian 9y ago
  Perhaps a temporary monopoly isn't the best way to reward these companies? Prize money might work better. Once the prize is awarded, there can be competition.
- barrkel 9y ago
  When the product is really important, we should change how we reward development, because if it's expensive, and we grant a monopoly, then the benefits of the product will be concentrated with the wealthy, rather than the many. And yes, that's not a good thing. Consider prizes instead of patents: https://en.wikipedia.org/wiki/Prizes_as_an_alternative_to_patents https://en.wikipedia.org/wiki/Prizes_as_an_alternative_to_pa... We don't need to have a government enforced monopoly to support high prices to fund drug development. There are other ways that don't turn it into an economic ghetto either.
- arjie 9y ago
  Not going to argue about the drug issue but 20% profit margin is fantastic. That _is_ unusually lucrative.
deleted 9y ago
[deleted]
nraynaud 9y ago
for people interested, there are 4 videos on the topic of orphan drug legislation here: https://www.youtube.com/user/thehealthcaretriage/videos https://www.youtube.com/user/thehealthcaretriage/videos
Mz 9y ago
I have a rare disease. One of the drugs developed in recent years to treat it costs about $300k/year and only works for about 5 percent of patients with the condition. I have made dietary and lifestyle changes to get better for a pittance compared to what conventional treatment costs. I get called a loon. But here is what I think about these high priced drugs: Joe was a successful lawyer, but as he got older he was increasingly hampered by incredible headaches. When his career and love life started to suffer, he sought medical help. After being referred from one specialist to another, he finally came across an old country doctor who solved the problem. "The good news is I can cure your headaches... the bad news is that it will require castration." You have a very rare condition which causes your testicles to press up against the base of your spine and the pressure creates one hell of a headache. The only way to relieve the pressure is to remove the testicles." Joe was shocked and depressed. He woundered if he had anything to live for. He couldn't concentrate long enough to answer, but decided he had no choice but to go under the knife. When he left the hospital he was without a headache for the first time in 20 years, but he felt like he was missing an important part of himself. As he walked down the street, he realized that he felt like a different person. He could make a new beginning and live a new life. He saw a men's clothing store and thought, "that's what I need .. a new suit." He entered the shop and told the salesman, "I'd like a new suit." The elderly tailor eyed him briefly and said, "Let's see... size 42 long." Joe laughed, "That's right, how did you know?" "Been in business 60 years!" Joe tried on the suit. It fit perfectly. As Joe admired himself in the mirror, the salesman asked, "how about a new shirt?" Joe thought for a moment and then said "sure..." The salesman eyed Joe and said "let's see...34 sleeves and...16 and a half neck." Joe was suprised, "that's right, how did you know?" "Been in the business 60 years" Joe tried one the shirt, and it fit perfectly. As Joe adjusted the collar in the mirror, the salesman asked "how about some new shoes?" Joe was on a roll and said "sure!" The salesman eyed Joe's feet and said "Let's see... 10-1/2...E." Joe said astonished, "that's right, how did you know?" "Been in business 60 years!" Joe tried on the shoes and they fit perfectly. Joe walked comfortably around the shop and the salesman asked "how about some new underwear?" Joe thought for a second and said, "sure!" The salesman stepped back, eyed Joe's waist and said "Let's see... size 36." Joe laughed, "Ah ha! I got you I've worn a size 34 since I was 18 years old." "The salesman shook his head, "you can't wear a size 34, it will press your testicles up against the base of your spine and give you one hell of a headache." http://jokes4us.com/dirtyjokes/castrationjoke.html http://jokes4us.com/dirtyjokes/castrationjoke.html
GlobalServices 9y ago
The Conservatives set back the possibility of having single-payer universal health coverage by taking "Death Panels" off the table. In fact, the only way it could possibly work is to only cover standard cost-effective treatments to benefit the most people for the least money.
theprop 9y ago
Great insight into how and why Pharma spends the highest percentage of its revenues on marketing, more than any other industry.
- theprop 9y ago
  I used to think a "miracle drug" would sell itself...I guess at $350k/year it needs some help?!
- afarrell 9y ago
  What other industry requires the customer to obtain permission to buy the product from someone with an expensive education? The only thing I'm thinking of is the military, and they have loads of lobbying costs and operational costs due to spreading their supply chain across many districts.
theprop 9y ago
Where did the $850 million to bring the drug to market go? What is that spent on? The drug or chemical itself is often discovered somewhere else, in say a university lab financed by the NIH, then licensed to a company. Rarely are the subjects of testing compensated for being guinea pigs for the drugs. There are also not that many doctors overseeing the trials.
- spullara 9y ago
  Each person in the clinical trials of which there are at least 3 phases costs 20-30k for most drugs.
  - theprop 9y ago
    That's payments to the patient for trying the drugs??
    - HappyTypist 9y ago
      Yes, I participated in one clinical trial as a 'volunteer' and I was paid for it.
    - afarrell 9y ago
      I would imagine that the costs are for: - Paying someone to monitor progress - Insurance against the possibility that the drug seriously harms them - Administration for communicating with them - Advertising of the trial to recruit them - Paying them cash directly for their troubles
      - spullara 9y ago
        This is more like the list of costs. Missing from this list are the doctors that prescribe and deliver the treatment.
y1426i 9y ago
This is inevitable in a value based economy. And yes, there can be cost based economies. Something is terribly wrong when greed can legally come in the way of a sick person and their cure. There are too many solutions to this problem if you think about it. Government could sponsor all medical research and share the research to companies to manufacture based on cost based pricing. Companies can be restricted from increasing price of their drugs beyond what they were launched with. People should be allowed to freely import life saving drugs and equipments from other countries. The government has the solution, what is needed is a will to solve.
ghufran_syed 9y ago
The company has only 4 more years of patent exclusivity in the US, and 3 more years in Europe. If there is really SO MUCH MONEY to be made by selling it, wouldn't we expect other companies to be developing their own version right now, so they can sell it in 2021. And wouldn't the presence of many different sellers reduce the price? [1] End result, new drug that benefits patients, at steadily lower prices... isn't that what we want? Is there some reason to think that other companies will NOT want a piece of that large pile of money? I intensely dislike the way pharma companies "buy" the opinions of prominent doctors and get them to sell their drugs for them. There are many similarly unethical things that the pharma companies do, but having made a drug that seems to help patients, and then charging as much as they can for the limited time that they can does not seem unreasonable. This econtalk episode [2] on "price gouging" seems particularly relevant, it's really very entertaining (and educational) [1] https://en.wikipedia.org/wiki/Generic_pharmaceutical_price_decay https://en.wikipedia.org/wiki/Generic_pharmaceutical_price_d... [2] http://www.econtalk.org/archives/2007/01/munger_on_price_1.html http://www.econtalk.org/archives/2007/01/munger_on_price_1.h...
- makomk 9y ago
  It's a biologic. There are huge obstacles to licensing generic versions of those in the US, they're quite expensive to produce, and there's a substantial risk that the original manufacturer will drop the price to the point that the generic manufacturer can't make their money back or even incentivise customers not to buy generics: https://www.reuters.com/article/us-merck-co-britain-remicade-idUSKBN18J12Z https://www.reuters.com/article/us-merck-co-britain-remicade... In the UK, which is the country that Wikipedia article is about, generics do somewhat work to drive prices down.
JusticeJuice 9y ago
Serious question - what's stopping somebody reverse engineering the drug / figuring out how to make it, then producing it for much cheaper? Obviously it's not legal, but that's not going to stop somebody when they have potentially 300k a year to save.
- epmaybe 9y ago
  Just off the top of my head, reversing a synthesis reaction seems expensive without knowing any reaction intermediates. Not to mention that the lawsuit you would get handed would be a slam dunk case for any lawyer. That being said, other companies in countries that don't honor patents definitely do this very thing for chemotherapies and the like.
jlebrech 9y ago
Martin Shkreli explained that most of his revenue came from insurance companies and health services and not the patient directly. He raised the price of a drug that had better alternatives but those alternatives were too pricey, bringing it's price up, brought them down too.

138 points by cpete 9y ago

This article does a pretty good job of grappling with the fact that you can't have your cake and eat it too. On one hand the article acknowledges that treatments for orphan diseases have been successful, and many more have come out since the Orphan Drug Act was passed, as compared to before when these diseases were largely ignored. At the same time, it notes that clearly this is a lot of money to spend on one patient. There is a tendency to believe that the normal dynamics of markets should be suspended when the product is "really important." Of course, that's backward. When the product is really important, the worst thing you can do is turn it into a low-profit economic ghetto by reducing incentives to invest. At the same time, when the government takes over the role of the market by granting a temporary monopoly, there clearly has to be some backstop at work. The interesting thing to note that the company in the article, Alexion, is not even an unusually lucrative company. In 2015 its operating income was $536 million on 2.6 billion of revenue, or about a 20% operating profit margin. For comparison, Alphabet's operating margin is over 25%. Google also does much better in terms of return on equity and revenue per employee metrics.

dnautics 9y ago
it's even crazier than that. Let's say that we institute some feel-good regulation that caps profits at 10% of cost. Presuming some sort of single payer system so that we don't have to feel guilty about screwing patients. What do I do as a pharmaceutical manufacturer? I'd overprovision FTEs on the production capability, encouraging them to spend "10%" time on other projects, ideation, but subtly encourage that 10% to be more. I'd create a QC system that is artificially stringent (make chromatography resins fail QC after single use) and recycle the QC-fail materials for pilot studies, etc... There are always ways to sneakily increase costs. And I'm not going to lose sleep at night, since I am putting those funds back into "improving society".
- vkou 9y ago
  I think the problem with pharma is not the profit margins, as much as the stupid amount of money that gets poured into marketing. There is no indication that direct-to-consumer advertising of drugs improves health outcomes. It does, however, greatly increase the cost of medication. Since the marginal cost of producing more drugs is low, advertising, even at a positive RoI, leads to increased prices.
  - Brakenshire 9y ago
    Yes, I agree, I'm a big supporter of the pharmaceutical industry, it seems from random conversations that a significant proportion of people just think they are crooks, but clearly developing and testing drugs is expensive, that has to be paid for somehow, and private companies are completely indispensable to the process of drug development. But, marketing is where my support starts to peter out. It seems crazy that marketing takes up such a large percentage of expenditure, it's not only wasteful but also introduces perverse incentives. I really think it would be great if trade deals could establish not just concessions like mandated strong intellectual property laws or restricted bulk negotiation, but also serious limitations on the other side of the coin, on something like pharma marketing. If deep trade deals are justified by shaping the market to be at its most productive, I don't mind if that increases profits most of the time, but occasionally there will be measures that will improve the market but also reduce short term profit for some existing major players. In practice, under the current situation the market is structured so that a profitable pharma company has to be good at generating demand, just as much as meeting a need. A company that can do the latter but not the former will go bust. I think a world with more emphasis on judgements made by clinical research organizations (private or public) like NICE or the Cochrane Foundation rather than TV adverts, wine-ing and dining, and the nag factor on patients and overworked individual practitioners, would end up with a drastically more effective market for actually finding cures.
    - refurb 9y ago
      It seems crazy that marketing takes up such a large percentage of expenditure, it's not only wasteful but also introduces perverse incentives. How much do drug companies spend on marketing? I've only ever seen article mention SG&A which is an accounting catch all for more than just marketing.
kharms 9y ago
> There is a tendency to believe that the normal dynamics of markets should be suspended when the product is "really important." I've not seen the argument that they should be suspended as much as that they are. "Really important" just means that demand is inelastic.
frgtpsswrdlame 9y ago
>The interesting thing to note that the company in the article, Alexion, is not even an unusually lucrative company. In 2015 its operating income was $536 million on 2.6 billion of revenue, or about a 20% operating profit margin. ...what. 20% margin isn't good nowadays? And why on earth are we comparing this company to a tech giant, they're not in the same world when it comes to how they operate. Of course google's going to look better in a lot of these terms, it's google (and i'd argue a monopoly). I mean at what point do we say, actually these biotech companies are plenty profitable? There's so much handwringing about how if we hurt these companies in anyway then all these sick people will die. It's just not true. Why don't we take the S&P 500, a Biotech Index and ALXN and put them on a chart: https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1495669925719&chddm=624036&chls=IntervalBasedLine&cmpto=NASDAQ:ALXN;INDEXSP:.INX&cmptdms=0;0&q=INDEXSP:SPSIBI&ntsp=0&ei=nRwmWfHyE5vM2AaR9ZuQDw https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&... Well damn, looks like despite all their huge R&D costs, only 20% margins, so on and so on they are doing pretty damn well. Honestly, are we looking at the same chart? These companies are MILKING sick people and we're afraid to intervene. Markets don't work in life and death scenarios because people would pay anything. This is a case that begs for regulation and even with it these companies are going to be just fine.
- tuna-piano 9y ago
  In a world where investors invest in photo sharing apps and social media websites because of the potential billion dollar payouts - why would you limit the potential drug payouts without limiting the social media app payouts? Over time, would limiting the potential profits in life-saving drugs increase or decrease the number of life-saving drugs developed? In an economy where people can choose to work in any field, and investors can choose to invest their money in any field - what better way is there to allocate the people and money resources than by letting people voice how valuable something is with their wallets? Do you want to force someone to buy a third car instead of buying a new drug treatment? If you understand the invisible hand theory (actually understand it, not just the everyman's definition) I think it's difficult to (a) argue against in general and (b) argue against for certain life-saving industries especially.
deleted 9y ago
[deleted]
tuna-piano 9y ago
While the math isn't exactly right - even if Alexion returned all profits to its patients at the end of the year, the cost of the drug would still be only 20% less than the current price. So instead of $500k, it would be $400k. Would that really change the dynamics of the discussion?
- refurb 9y ago
  Great point to call out. Also, Alexion uses about 21% of their revenue for R&D. So of the $500K they sell the product for, $100K is profit, $100K goes back into R&D and the rest is paying for expenses.
finolex1 9y ago
It's highly debatable over whether lower profits will significantly reduce the incentive to invest, especially considering profits are already high (about 20%). A small drop won't make a significant difference for the lucrativeness of the industry. Perhaps the best way to go about doing this is by reducing patent lengths, rather than some other policy that is easy to circumvent/bend like taxes or price ceilings. It's also worth noting that a large proportion of the basic research that goes into making these drugs is funded by the federal government or other research foundations, which receive little, if any of the benefits when commercialized. For instance, Alexion's drug is based to some extent on research conducted at Yale by its former CEO, not to mention the whole host of foundational research that preceded it.
- refurb 9y ago
  A few thoughts since I worked for a biotech company. R&D management sure as hell looks at the potential returns generated. I've been on projects where the company said "we're going to spend out $500M in R&D funds on this disease because we might actually make our money back. The other disease is off the table since we can't even break-even." Yes, a lot of basic research is funded by the gov't, but that's minuscule compared to the funding the companies themselves put in. I sat in a meeting when a decision was made to move a promising compound forward. The investment? $400M for all activities post-phase 3. The NIH grants that supported the discovery? Maybe a few million?
- WalterBright 9y ago
  If the risks of investing in X or Y are the same, but the rewards of X > Y, then investors will invest in X. Capping returns will result in investment dollars going elsewhere.
ubernostrum 9y ago
There is a tendency to believe that the normal dynamics of markets should be suspended when the product is "really important." Of course, that's backward. When the product is really important, the worst thing you can do is turn it into a low-profit economic ghetto by reducing incentives to invest. You contradict yourself here. The normal dynamics of markets have been suspended in order to ensure that "really important" products make it to market. That occurs through government-granted monopolies on drugs along with subsidies and grants on research. And that is what props up the market and provides the "incentive to invest" you insist is needed. So you can argue for "normal dynamics" -- which would be a more free market with no government-granted monopolies, subsidies or research grants -- or you can argue to preserve "incentive to invest". But you can't have your cake and eat it, too, and the fact that you don't seem to consider how much we already do to meddle with the market in order to make sure "important" products are available is slightly worrying.
skybrian 9y ago
Perhaps a temporary monopoly isn't the best way to reward these companies? Prize money might work better. Once the prize is awarded, there can be competition.
barrkel 9y ago
When the product is really important, we should change how we reward development, because if it's expensive, and we grant a monopoly, then the benefits of the product will be concentrated with the wealthy, rather than the many. And yes, that's not a good thing. Consider prizes instead of patents: https://en.wikipedia.org/wiki/Prizes_as_an_alternative_to_patents https://en.wikipedia.org/wiki/Prizes_as_an_alternative_to_pa... We don't need to have a government enforced monopoly to support high prices to fund drug development. There are other ways that don't turn it into an economic ghetto either.
arjie 9y ago
Not going to argue about the drug issue but 20% profit margin is fantastic. That _is_ unusually lucrative.

deleted 9y ago

[deleted]

nraynaud 9y ago

for people interested, there are 4 videos on the topic of orphan drug legislation here: https://www.youtube.com/user/thehealthcaretriage/videos https://www.youtube.com/user/thehealthcaretriage/videos

Mz 9y ago

I have a rare disease. One of the drugs developed in recent years to treat it costs about $300k/year and only works for about 5 percent of patients with the condition. I have made dietary and lifestyle changes to get better for a pittance compared to what conventional treatment costs. I get called a loon. But here is what I think about these high priced drugs: Joe was a successful lawyer, but as he got older he was increasingly hampered by incredible headaches. When his career and love life started to suffer, he sought medical help. After being referred from one specialist to another, he finally came across an old country doctor who solved the problem. "The good news is I can cure your headaches... the bad news is that it will require castration." You have a very rare condition which causes your testicles to press up against the base of your spine and the pressure creates one hell of a headache. The only way to relieve the pressure is to remove the testicles." Joe was shocked and depressed. He woundered if he had anything to live for. He couldn't concentrate long enough to answer, but decided he had no choice but to go under the knife. When he left the hospital he was without a headache for the first time in 20 years, but he felt like he was missing an important part of himself. As he walked down the street, he realized that he felt like a different person. He could make a new beginning and live a new life. He saw a men's clothing store and thought, "that's what I need .. a new suit." He entered the shop and told the salesman, "I'd like a new suit." The elderly tailor eyed him briefly and said, "Let's see... size 42 long." Joe laughed, "That's right, how did you know?" "Been in business 60 years!" Joe tried on the suit. It fit perfectly. As Joe admired himself in the mirror, the salesman asked, "how about a new shirt?" Joe thought for a moment and then said "sure..." The salesman eyed Joe and said "let's see...34 sleeves and...16 and a half neck." Joe was suprised, "that's right, how did you know?" "Been in the business 60 years" Joe tried one the shirt, and it fit perfectly. As Joe adjusted the collar in the mirror, the salesman asked "how about some new shoes?" Joe was on a roll and said "sure!" The salesman eyed Joe's feet and said "Let's see... 10-1/2...E." Joe said astonished, "that's right, how did you know?" "Been in business 60 years!" Joe tried on the shoes and they fit perfectly. Joe walked comfortably around the shop and the salesman asked "how about some new underwear?" Joe thought for a second and said, "sure!" The salesman stepped back, eyed Joe's waist and said "Let's see... size 36." Joe laughed, "Ah ha! I got you I've worn a size 34 since I was 18 years old." "The salesman shook his head, "you can't wear a size 34, it will press your testicles up against the base of your spine and give you one hell of a headache." http://jokes4us.com/dirtyjokes/castrationjoke.html http://jokes4us.com/dirtyjokes/castrationjoke.html

GlobalServices 9y ago

The Conservatives set back the possibility of having single-payer universal health coverage by taking "Death Panels" off the table. In fact, the only way it could possibly work is to only cover standard cost-effective treatments to benefit the most people for the least money.

theprop 9y ago

Great insight into how and why Pharma spends the highest percentage of its revenues on marketing, more than any other industry.

theprop 9y ago
I used to think a "miracle drug" would sell itself...I guess at $350k/year it needs some help?!
afarrell 9y ago
What other industry requires the customer to obtain permission to buy the product from someone with an expensive education? The only thing I'm thinking of is the military, and they have loads of lobbying costs and operational costs due to spreading their supply chain across many districts.

theprop 9y ago

Where did the $850 million to bring the drug to market go? What is that spent on? The drug or chemical itself is often discovered somewhere else, in say a university lab financed by the NIH, then licensed to a company. Rarely are the subjects of testing compensated for being guinea pigs for the drugs. There are also not that many doctors overseeing the trials.

spullara 9y ago
Each person in the clinical trials of which there are at least 3 phases costs 20-30k for most drugs.
- theprop 9y ago
  That's payments to the patient for trying the drugs??
  - HappyTypist 9y ago
    Yes, I participated in one clinical trial as a 'volunteer' and I was paid for it.
  - afarrell 9y ago
    I would imagine that the costs are for: - Paying someone to monitor progress - Insurance against the possibility that the drug seriously harms them - Administration for communicating with them - Advertising of the trial to recruit them - Paying them cash directly for their troubles
    - spullara 9y ago
      This is more like the list of costs. Missing from this list are the doctors that prescribe and deliver the treatment.

y1426i 9y ago

This is inevitable in a value based economy. And yes, there can be cost based economies. Something is terribly wrong when greed can legally come in the way of a sick person and their cure. There are too many solutions to this problem if you think about it. Government could sponsor all medical research and share the research to companies to manufacture based on cost based pricing. Companies can be restricted from increasing price of their drugs beyond what they were launched with. People should be allowed to freely import life saving drugs and equipments from other countries. The government has the solution, what is needed is a will to solve.

ghufran_syed 9y ago

The company has only 4 more years of patent exclusivity in the US, and 3 more years in Europe. If there is really SO MUCH MONEY to be made by selling it, wouldn't we expect other companies to be developing their own version right now, so they can sell it in 2021. And wouldn't the presence of many different sellers reduce the price? [1] End result, new drug that benefits patients, at steadily lower prices... isn't that what we want? Is there some reason to think that other companies will NOT want a piece of that large pile of money? I intensely dislike the way pharma companies "buy" the opinions of prominent doctors and get them to sell their drugs for them. There are many similarly unethical things that the pharma companies do, but having made a drug that seems to help patients, and then charging as much as they can for the limited time that they can does not seem unreasonable. This econtalk episode [2] on "price gouging" seems particularly relevant, it's really very entertaining (and educational) [1] https://en.wikipedia.org/wiki/Generic_pharmaceutical_price_decay https://en.wikipedia.org/wiki/Generic_pharmaceutical_price_d... [2] http://www.econtalk.org/archives/2007/01/munger_on_price_1.html http://www.econtalk.org/archives/2007/01/munger_on_price_1.h...

makomk 9y ago
It's a biologic. There are huge obstacles to licensing generic versions of those in the US, they're quite expensive to produce, and there's a substantial risk that the original manufacturer will drop the price to the point that the generic manufacturer can't make their money back or even incentivise customers not to buy generics: https://www.reuters.com/article/us-merck-co-britain-remicade-idUSKBN18J12Z https://www.reuters.com/article/us-merck-co-britain-remicade... In the UK, which is the country that Wikipedia article is about, generics do somewhat work to drive prices down.

JusticeJuice 9y ago

Serious question - what's stopping somebody reverse engineering the drug / figuring out how to make it, then producing it for much cheaper? Obviously it's not legal, but that's not going to stop somebody when they have potentially 300k a year to save.

epmaybe 9y ago
Just off the top of my head, reversing a synthesis reaction seems expensive without knowing any reaction intermediates. Not to mention that the lawsuit you would get handed would be a slam dunk case for any lawyer. That being said, other companies in countries that don't honor patents definitely do this very thing for chemotherapies and the like.

jlebrech 9y ago

Martin Shkreli explained that most of his revenue came from insurance companies and health services and not the patient directly. He raised the price of a drug that had better alternatives but those alternatives were too pricey, bringing it's price up, brought them down too.