5 ms·

The alternative is to have no cure at all. The businesses need that money as incentive to develop new cures. If we don’t want it to work this way, we need gover

by xyzzyz 9y ago

The alternative is to have no cure at all. The businesses need that money as incentive to develop new cures. If we don’t want it to work this way, we need government to spend much more on research, otherwise we will just get fewer new drugs.

thefounder 9y ago
It's not really true. Have you heard of pharma boy? There are alternatives/solutions to regulate the market.
EliRivers 9y ago
I understand the drug companies ("pharmaceutical industry" in the link below) pay about 60% of the research costs. It's a lot of it, but it's not orders-of-magnitude bigger than the public contribution. https://www.thebalance.com/who-funds-biomedical-research-2663193 https://www.thebalance.com/who-funds-biomedical-research-266... Some would suggest that the drug companies actually take on the lower risk research, leaving the high risk work to be funded by other sources: http://www.latimes.com/opinion/op-ed/la-oe-1027-mazzucato-big-pharma-prices-20151027-story.html http://www.latimes.com/opinion/op-ed/la-oe-1027-mazzucato-bi... There are more questions opened by these pieces, sure, but it's clear that we would still have research and still have cures without the businesses stumping up for research. otherwise we will just get fewer new drugs. I thought I had a link here somewhere, but can't find it; I have a strong suspicion that the companies have a preference to repackage or reformulate existing drugs, and that basic research on new drugs is disproportionately covered by the public purse and charity.
- mft_ 9y ago
  > I thought I had a link here somewhere, but can't find it; I have a strong suspicion that the companies have a preference to repackage or reformulate existing drugs, and that basic research on new drugs is disproportionately covered by the public purse and charity. Absolutely there are companies which do this, and there are some very interesting examples of somewhat shady practices, but the vast majority of companies which you think of as 'pharma' --i.e. big pharma, and the big biotechs-- survive by discovering or insourcing and then developing new drugs, and/or developing their existing drugs in new indications.
hshehehjdjdjd 9y ago
In general, I tend to agree. But isn’t this particular case a counter example? The non profit was able to develop a drug that doesn’t cost 84k for a course. That implies that the incentive structure you’re referring to isn’t in fact necessary.
cma 9y ago
That's not really always the case. In the case of orphan drugs it would often be much cheaper overall to have the government fund production instead of granting new exclusive rights to out of patent medications to entities like Skhreli. Aside from that, more than half of pharma budgets are spent on spent on marketing and patent-workaround redevelopment than on actual productive drug research (even after accounting for new discoveries that sometimes come out of workaround research). > If we don’t want it to work this way, we need government to spend much more on research, NIH already funds something close to half of drug research. Even more if you include basic research that has a longer time horizon. Overall spending would go down, with the side-effect that there would be less penis pill popup ads and way less funding for the Super Bowl halftime show.
- darawk 9y ago
  > That's not really always the case. In the case of orphan drugs it would often be much cheaper overall to have the government fund production instead of granting new exclusive rights to out of patent medications to entities like Skhreli. You're conflating two things. Orphan drugs are drugs that aren't profitable to produce, for whatever reason. Shkreli did something a bit different and more complex: https://en.wikipedia.org/wiki/Pyrimethamine#Availability_and_price https://en.wikipedia.org/wiki/Pyrimethamine#Availability_and... > NIH already funds something close to half of drug research. Even more if you include basic research that has a longer time horizon. The NIH spends 32[1] billion per year, whereas the global spending is ~160[2] billion. So around 20%. That's a lot, but not nearly half. > Overall spending would go down, with the side-effect that there would be less penis pill popup ads and way less funding for the Super Bowl halftime show. That's a fairly simplistic interpretation of the world. In general, companies tend to be much more efficient at spending their money than governments. We should expect a substantially higher level of productivity per dollar from businesses than we get from government spending. There's definitely a reasonable debate to be had about public funding models, but it ought to be properly contextualized by the realities. [1] - https://www.nih.gov/grants-funding https://www.nih.gov/grants-funding [2] - https://www.statista.com/statistics/309466/global-r-and-d-expenditure-for-pharmaceuticals/ https://www.statista.com/statistics/309466/global-r-and-d-ex... The global R&D spend is
jopsen 9y ago
Aren't most actual medical research done with public funding... Or at least partial public funding? IMO we should make drug research a public endeavor. Probably EU level. We'll pay the costs anyways, as taxes fund pricy healthcare/drugs. Besides the private sector is very risk adverse, that bad when you're developing drugs.
- briandear 9y ago
  The private sector is risk adverse when tax policy encourages risk aversion. Look at the capital gains tax for example, the existence of that tax means that you have a n% lower risk tolerance since you would have to exceed the cost of the capital gains tax plus make a profit. If taking a moonshot costs $1000 and if it’s successful, you make $10000, but after capital gains you net $5000, that means it cost $1000 to make $5000, however if the percentage chance of success is just 5%, private markets would be less likely to invest compared to a $1000 investment that has a 90% chance of making $2000. Which means you get a lot of the “safer” investments and very few of the high risk investments because the risk/reward ratio is destroyed by high confiscatory taxes. But, if capital gains taxes were zero, you would have a necessarily higher percentage because the reward side of the ratio is much better. This somewhat explains why a French VC is much more risk adverse than a Silicon Valley VC. My point is risk aversion is a function of the risk/reward ratio. Since government isn’t really directly accountable to anyone, they can pour money into highly risky “investments,” because they really aren’t beholden to anyone. The US, for example wasted billions on so-called green energy investments in companaies that no sane private investor would have supported: Solyndra as an example. In Houston, taxpayers are being forced to pay for Astrodome renovations to turn the aging structure into a parking facility; government promised that the facility would be “profitable,” yet, if that were that case, they would have had no trouble raising private capital for such a “profitable” endeavor. My other point is that governments have a long, illustrious history of treading in areas that are actually terrible investments, but since they can literally print money (and provide payoffs to various constituencies,) they are under less pressure to actually do their diligence (or ignore diligence that counter argues their project viability.) As long as the right groups “get theirs,” a government effort continues unencumbered by pesky ideas such as return on investment.
gruturo 9y ago
I would be fine with this narrative if it were true - but it's a load of bullshit to justify plain greed. Most of the people actually doing the research and the boring (but thorough, and necessary) test studies are paid a pittance, while the company has every incentive to do some hollywood accounting and overstate what they spend on everything. In the end it's mostly profit for execs and shareholders.
- soVeryTired 9y ago
  I once read an article on some of these practices. From memory, one company claimed the opportunity cost of investing in the stock market and gaining an assumed 12% per annum as part of their 'research cost'. Edit: I think the article referenced Joe DiMasi's work [0], which uses a Capital Asset Pricing Model for cost of capital. Essentially, it says there's only one source of risk in the world, and you get paid 11% per annum for taking that risk. I'm pretty sure this work really informed public policy. Shitty economics strikes again. [0] https://www.ncbi.nlm.nih.gov/pubmed/12606142 https://www.ncbi.nlm.nih.gov/pubmed/12606142
tomcooks 9y ago
IMHO the fulcrum of your parent's comment was exactly how bad we are at helping those in need, and the fact that we assume government regulation would fix our greed is the proof. Hasn't Shkreli' story shown us that medication prices are made up? A fraction of those $84,000 might be necessary to keep new cures being researched, but most of it is pure speculation on sick people's lives.
jiggunjer 9y ago
A lot of discoveries are also made by academic and non-profit institutes. The IP is then sold to a pharma giant to fund more long-shot research or give the employees a bonus. Or the group that made the discovery starts their own company and adopts the amoral big pharma model. Why would a government-run agency do things any differently? Sell IP, lower taxes, win elections.
- xyzzyz 9y ago
  I don't mind increased government funding, I just want people to be aware of the fact that the monopoly of the patent is the award for the cost they have beared developing the patented drug. If we stop incentivizing that, we will need to increase government funding to make up for the loss of private research funds.
YPCrumble 9y ago
That isn’t the alternative. That’s the status quo. Name another cure to a chronic illness that’s been developed. You can’t unless you go back to penecillin. The pharma industry makes money by not curing disease and treating the symptoms. They want people to be addicted to their pills. Curing a disease means you can stop taking the pills and stop paying for them.
gohbgl 9y ago
This is empirically false as Boldrin & Levine describe in chapter 9 of their book Against Intellectual Monopoly that countries which had no patent protection for pharmaceuticals had a high innovation rate in this field. Link to chapter: http://levine.sscnet.ucla.edu/papers/ip.ch.9.m1004.pdf http://levine.sscnet.ucla.edu/papers/ip.ch.9.m1004.pdf

by xyzzyz 9y ago

thefounder 9y ago

It's not really true. Have you heard of pharma boy? There are alternatives/solutions to regulate the market.

EliRivers 9y ago

I understand the drug companies ("pharmaceutical industry" in the link below) pay about 60% of the research costs. It's a lot of it, but it's not orders-of-magnitude bigger than the public contribution. https://www.thebalance.com/who-funds-biomedical-research-2663193 https://www.thebalance.com/who-funds-biomedical-research-266... Some would suggest that the drug companies actually take on the lower risk research, leaving the high risk work to be funded by other sources: http://www.latimes.com/opinion/op-ed/la-oe-1027-mazzucato-big-pharma-prices-20151027-story.html http://www.latimes.com/opinion/op-ed/la-oe-1027-mazzucato-bi... There are more questions opened by these pieces, sure, but it's clear that we would still have research and still have cures without the businesses stumping up for research. otherwise we will just get fewer new drugs. I thought I had a link here somewhere, but can't find it; I have a strong suspicion that the companies have a preference to repackage or reformulate existing drugs, and that basic research on new drugs is disproportionately covered by the public purse and charity.

mft_ 9y ago
> I thought I had a link here somewhere, but can't find it; I have a strong suspicion that the companies have a preference to repackage or reformulate existing drugs, and that basic research on new drugs is disproportionately covered by the public purse and charity. Absolutely there are companies which do this, and there are some very interesting examples of somewhat shady practices, but the vast majority of companies which you think of as 'pharma' --i.e. big pharma, and the big biotechs-- survive by discovering or insourcing and then developing new drugs, and/or developing their existing drugs in new indications.

hshehehjdjdjd 9y ago

In general, I tend to agree. But isn’t this particular case a counter example? The non profit was able to develop a drug that doesn’t cost 84k for a course. That implies that the incentive structure you’re referring to isn’t in fact necessary.

cma 9y ago

That's not really always the case. In the case of orphan drugs it would often be much cheaper overall to have the government fund production instead of granting new exclusive rights to out of patent medications to entities like Skhreli. Aside from that, more than half of pharma budgets are spent on spent on marketing and patent-workaround redevelopment than on actual productive drug research (even after accounting for new discoveries that sometimes come out of workaround research). > If we don’t want it to work this way, we need government to spend much more on research, NIH already funds something close to half of drug research. Even more if you include basic research that has a longer time horizon. Overall spending would go down, with the side-effect that there would be less penis pill popup ads and way less funding for the Super Bowl halftime show.

darawk 9y ago
> That's not really always the case. In the case of orphan drugs it would often be much cheaper overall to have the government fund production instead of granting new exclusive rights to out of patent medications to entities like Skhreli. You're conflating two things. Orphan drugs are drugs that aren't profitable to produce, for whatever reason. Shkreli did something a bit different and more complex: https://en.wikipedia.org/wiki/Pyrimethamine#Availability_and_price https://en.wikipedia.org/wiki/Pyrimethamine#Availability_and... > NIH already funds something close to half of drug research. Even more if you include basic research that has a longer time horizon. The NIH spends 32[1] billion per year, whereas the global spending is ~160[2] billion. So around 20%. That's a lot, but not nearly half. > Overall spending would go down, with the side-effect that there would be less penis pill popup ads and way less funding for the Super Bowl halftime show. That's a fairly simplistic interpretation of the world. In general, companies tend to be much more efficient at spending their money than governments. We should expect a substantially higher level of productivity per dollar from businesses than we get from government spending. There's definitely a reasonable debate to be had about public funding models, but it ought to be properly contextualized by the realities. [1] - https://www.nih.gov/grants-funding https://www.nih.gov/grants-funding [2] - https://www.statista.com/statistics/309466/global-r-and-d-expenditure-for-pharmaceuticals/ https://www.statista.com/statistics/309466/global-r-and-d-ex... The global R&D spend is

jopsen 9y ago

Aren't most actual medical research done with public funding... Or at least partial public funding? IMO we should make drug research a public endeavor. Probably EU level. We'll pay the costs anyways, as taxes fund pricy healthcare/drugs. Besides the private sector is very risk adverse, that bad when you're developing drugs.

briandear 9y ago
The private sector is risk adverse when tax policy encourages risk aversion. Look at the capital gains tax for example, the existence of that tax means that you have a n% lower risk tolerance since you would have to exceed the cost of the capital gains tax plus make a profit. If taking a moonshot costs $1000 and if it’s successful, you make $10000, but after capital gains you net $5000, that means it cost $1000 to make $5000, however if the percentage chance of success is just 5%, private markets would be less likely to invest compared to a $1000 investment that has a 90% chance of making $2000. Which means you get a lot of the “safer” investments and very few of the high risk investments because the risk/reward ratio is destroyed by high confiscatory taxes. But, if capital gains taxes were zero, you would have a necessarily higher percentage because the reward side of the ratio is much better. This somewhat explains why a French VC is much more risk adverse than a Silicon Valley VC. My point is risk aversion is a function of the risk/reward ratio. Since government isn’t really directly accountable to anyone, they can pour money into highly risky “investments,” because they really aren’t beholden to anyone. The US, for example wasted billions on so-called green energy investments in companaies that no sane private investor would have supported: Solyndra as an example. In Houston, taxpayers are being forced to pay for Astrodome renovations to turn the aging structure into a parking facility; government promised that the facility would be “profitable,” yet, if that were that case, they would have had no trouble raising private capital for such a “profitable” endeavor. My other point is that governments have a long, illustrious history of treading in areas that are actually terrible investments, but since they can literally print money (and provide payoffs to various constituencies,) they are under less pressure to actually do their diligence (or ignore diligence that counter argues their project viability.) As long as the right groups “get theirs,” a government effort continues unencumbered by pesky ideas such as return on investment.

gruturo 9y ago

I would be fine with this narrative if it were true - but it's a load of bullshit to justify plain greed. Most of the people actually doing the research and the boring (but thorough, and necessary) test studies are paid a pittance, while the company has every incentive to do some hollywood accounting and overstate what they spend on everything. In the end it's mostly profit for execs and shareholders.

soVeryTired 9y ago
I once read an article on some of these practices. From memory, one company claimed the opportunity cost of investing in the stock market and gaining an assumed 12% per annum as part of their 'research cost'. Edit: I think the article referenced Joe DiMasi's work [0], which uses a Capital Asset Pricing Model for cost of capital. Essentially, it says there's only one source of risk in the world, and you get paid 11% per annum for taking that risk. I'm pretty sure this work really informed public policy. Shitty economics strikes again. [0] https://www.ncbi.nlm.nih.gov/pubmed/12606142 https://www.ncbi.nlm.nih.gov/pubmed/12606142

tomcooks 9y ago

IMHO the fulcrum of your parent's comment was exactly how bad we are at helping those in need, and the fact that we assume government regulation would fix our greed is the proof. Hasn't Shkreli' story shown us that medication prices are made up? A fraction of those $84,000 might be necessary to keep new cures being researched, but most of it is pure speculation on sick people's lives.

jiggunjer 9y ago

A lot of discoveries are also made by academic and non-profit institutes. The IP is then sold to a pharma giant to fund more long-shot research or give the employees a bonus. Or the group that made the discovery starts their own company and adopts the amoral big pharma model. Why would a government-run agency do things any differently? Sell IP, lower taxes, win elections.

xyzzyz 9y ago
I don't mind increased government funding, I just want people to be aware of the fact that the monopoly of the patent is the award for the cost they have beared developing the patented drug. If we stop incentivizing that, we will need to increase government funding to make up for the loss of private research funds.

YPCrumble 9y ago

That isn’t the alternative. That’s the status quo. Name another cure to a chronic illness that’s been developed. You can’t unless you go back to penecillin. The pharma industry makes money by not curing disease and treating the symptoms. They want people to be addicted to their pills. Curing a disease means you can stop taking the pills and stop paying for them.

gohbgl 9y ago

This is empirically false as Boldrin & Levine describe in chapter 9 of their book Against Intellectual Monopoly that countries which had no patent protection for pharmaceuticals had a high innovation rate in this field. Link to chapter: http://levine.sscnet.ucla.edu/papers/ip.ch.9.m1004.pdf http://levine.sscnet.ucla.edu/papers/ip.ch.9.m1004.pdf