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People always get really upset with drug pricing, which makes for great headlines but not for rational decision making. In 2030, would we as a society rather h

People always get really upset with drug pricing, which makes for great headlines but not for rational decision making. In 2030, would we as a society rather have a generic, cheap, openly available HepC cure or not? That is the question you need to ask, and I don't think anyone would say no to that. The $84K drug will fall off patent by then, which means the system we currently have, flawed as it is, will produce that outcome. It doesn't cost $84,000 to manufacture that drug compound. That $300 one even has the expensive drug formulated in it! The $84,000 covers the cost of developing the drug, along with the 56/57 other drugs that generally fail for every one that hits the market, along with a profit incentive to run a pharmacuetical company in the first place. And yes, it's grossly unfair for the patients currently requiring expensive treatment, though solving that through insurance is almost certainly a better idea than regulating prices. If you start regulating drug prices, as have many other countries outside of the US, you disincentivize development. If there is a better way to create cures, that would be wonderful, and I think we would all welcome suggestions. However, there is a reason the US invents the majority of the world's pharmaceuticals. Nothing to date (everything from regulating prices aggressively to prolifigate government spending projects) has worked as well as what we have now for long term results.

systems 9y ago
yes there is, and its called public finance medicine, and health care, in my opinion, seem to fall nicely in that category you as someone who is not infected with the hepatitis C virus, would benefit from others getting cured from it, to reduce the possibility of you catching it and this is just one example and to be clear, i am not saying, that all health care should be exclusively public i am just saying that public finance of not for profit organization working on creating medicine, should be an option
- geezerjay 9y ago
  > yes there is, and its called public finance > > medicine, and health care, in my opinion, seem to fall nicely in that category Then get your government institutions to spend your taxes to do the legwork. Meanwhile, don't hinder progress by barring everyone else from doing the job your state is incapable of doing or doesn't want to do.
  - ubernostrum 9y ago
    We already put tax dollars into research. Huge amounts of tax dollars into research. Some quick Googling says in 2016 just the federal government -- not counting state/local grants -- dedicated $145 billion to R&D. We just also let that research be locked up with patents and published in pay-to-read journals, because apparently "we pay for your R&D" is not enough "incentive" to get people to invent/develop new things, we also have to give them additional millions/billions of dollars in later sales.
    - rayiner 9y ago
      > We just also let that research be locked up with patents and published in pay-to-read journals, because apparently "we pay for your R&D" is not enough "incentive" to get people to invent/develop new things, we also have to give them additional millions/billions of dollars in later sales. In the R&D sector, the government is an investor like any other. Imagine a VC that offered you the following terms: we'll pay your salaries (which we'll heavily scrutinize) while you get your product a third of the way towards being commercial ready. After that, you can keep commercializing on your own dime, but we'll own anything you developed up to that point and give it away to your competitors for free. Would anyone with other options take that offer? But that's exactly the offer the government would be making if research initially funded by government grants wasn't eligible for patent protection.
      - ubernostrum 9y ago
        Flip your argument around: suppose a startup walked into a VC firm and said "we want you to fully fund us for our first couple years, which will be expensive, and in return we expect to give you nothing -- no equity of any sort, no shares of future profits, nothing". Would anyone who had the ability to invest in something that actually provides a return take that offer? But that's exactly the offer researchers -- many of whom work at publicly-funded universities -- are currently making.
        deleted 9y ago
        [deleted]
- rayiner 9y ago
  There are two orthogonal issues here: 1) how do you finance drug R&D? 2) how do you pay for people to get the resulting drugs? Public finance is a reasonable option for (2). It is not a reasonable option for (1). If you made it so, for example, going into drug development meant a career stuck on the GS scale, you'd drive away huge numbers of highly capable people. There is no link between technical competency and altruism. If there was, you wouldn't have huge numbers of people at HYPS jumping at the chance to go work at Wall Street and FANG companies instead of more altruistic pursuits.
  - davmre 9y ago
    What do you think about government-financed prizes for private-sector drug development, e.g., the government pledges $X billion if you develop an Alzheimer's cure and place it in the public domain? Bernie Sanders has a proposal like this: https://www.vox.com/2015/9/25/9397069/bernie-sanders-drug-prices https://www.vox.com/2015/9/25/9397069/bernie-sanders-drug-pr.... It seems like that retains most of the advantages of the current system, incentivizes private-sector development, but also eliminates the problem of high prices at the point of delivery. (i.e., it correctly prices the marginal cost of treating someone at the marginal cost of producing the drug, which is generally low).
    - rayiner 9y ago
      I think they would work if the government priced them appropriately. But the government is terrible at pricing things. E.g. how nearly every government under prices water/sewer and public transit, leaving those systems in a state of decay.
      - Firadeoclus 9y ago
        Government provided services are not necessarily meant to be profitable in the business sense. It is enough if their global benefits are worth the cost, even if those benefits cannot be captured as direct profits. For example public transit is worth a lot more in external benefits than just the fares paid.
DanBC 9y ago
> In 2030, would we as a society rather have a generic, cheap, openly available HepC cure or not? That is the question you need to ask, and I don't think anyone would say no to that. The $84K drug will fall off patent by then, which means the system we currently have, flawed as it is, will produce that outcome. I think if we look at the shenanigans around Avastin and Lucentis we'll see that patents and drug companies don't always work in the public interest. http://www.bbc.co.uk/news/health-30138097 http://www.bbc.co.uk/news/health-30138097
JangoSteve 9y ago
I think you kind of gloss over the core issue that most people have with drug prices. I don't think most people have a problem with pharmaceutical companies pricing drugs such that they pay for the R&D costs (or more generally the overhead) of the company plus some reasonable profit margin. The problem is that with the inelastic demand inherent in life-or-death treatments, there is no incentive for pharmaceutical companies to stop there. If pricing a pill at $200 could cover costs and provide 30% profit margin, why not double the cost and make a 50% profit margin? Or triple the cost and make a 60% profit margin? With inelastic demand that is governed only by a person's ability to pay, rather than their willingness to pay or competition, the demand drops far slower relative to the increase in price compared to normal supply-and-demand economics. It's the tendency (or at least perceived tendency) of taking advantage of someone's desire to live to extract as much money from them as possible in order to increase profit margins that people tend to have a problem with. This is called exploitation. I think it's a bit disingenuous to spin outcry over how expensive a drug is (in a relative sense) as being a simplistic outcry over a drug just being expensive (in an absolute sense). That said, it's possible that some of it comes from the fact that R&D is so expensive, and a pharmaceutical company never really knows how long their drug will be bought before some other company discovers something that outperforms it. I am by no means an expert on pharmaceutical company economics. EDIT: And the above argument is just one possible argument to make if you assume that drug development should be a function of capitalism in the first place. There's another viewpoint that drug development shouldn't be a responsibility of capitalism at all, in part because perverse incentives often times unavoidable in capitalism are especially unethical when applied to people's health.
- learc83 9y ago
  >of taking advantage of someone's desire to live to extract as much money from them as possible in order to increase profit margins that people tend to have a problem with. This is called exploitation It's not just about exploiting the people paying either, it's also about restricting access to people who can't afford it. If you don't have an easy way to do price differentiation, inelastict demand encourages a situation where it's more profitable to charge $1million to 1 person than it is to charge $100k, to 10 people. One way drug companies try to get around that is with price differentiation, but it's not very precise and effectively charging for a product as a percent of your income comes with it's own problems.
jedbrown 9y ago
Gilead bought Pharmasset for about $10B after clinical trials were complete on their $84k HepC drug. The R&D was priced in to that acquisition. Medicare and Medicaid spent $10B on that drug in 2015 alone (https://www.statnews.com/pharmalot/2016/11/14/medicare-medicaid-gilead-hepatitis/ https://www.statnews.com/pharmalot/2016/11/14/medicare-medic...). Our current public health economics are very distorted and institutions are not set up to create affordable outcomes.

systems 9y ago

yes there is, and its called public finance medicine, and health care, in my opinion, seem to fall nicely in that category you as someone who is not infected with the hepatitis C virus, would benefit from others getting cured from it, to reduce the possibility of you catching it and this is just one example and to be clear, i am not saying, that all health care should be exclusively public i am just saying that public finance of not for profit organization working on creating medicine, should be an option

geezerjay 9y ago
> yes there is, and its called public finance > > medicine, and health care, in my opinion, seem to fall nicely in that category Then get your government institutions to spend your taxes to do the legwork. Meanwhile, don't hinder progress by barring everyone else from doing the job your state is incapable of doing or doesn't want to do.
- ubernostrum 9y ago
  We already put tax dollars into research. Huge amounts of tax dollars into research. Some quick Googling says in 2016 just the federal government -- not counting state/local grants -- dedicated $145 billion to R&D. We just also let that research be locked up with patents and published in pay-to-read journals, because apparently "we pay for your R&D" is not enough "incentive" to get people to invent/develop new things, we also have to give them additional millions/billions of dollars in later sales.
  - rayiner 9y ago
    > We just also let that research be locked up with patents and published in pay-to-read journals, because apparently "we pay for your R&D" is not enough "incentive" to get people to invent/develop new things, we also have to give them additional millions/billions of dollars in later sales. In the R&D sector, the government is an investor like any other. Imagine a VC that offered you the following terms: we'll pay your salaries (which we'll heavily scrutinize) while you get your product a third of the way towards being commercial ready. After that, you can keep commercializing on your own dime, but we'll own anything you developed up to that point and give it away to your competitors for free. Would anyone with other options take that offer? But that's exactly the offer the government would be making if research initially funded by government grants wasn't eligible for patent protection.
    - ubernostrum 9y ago
      Flip your argument around: suppose a startup walked into a VC firm and said "we want you to fully fund us for our first couple years, which will be expensive, and in return we expect to give you nothing -- no equity of any sort, no shares of future profits, nothing". Would anyone who had the ability to invest in something that actually provides a return take that offer? But that's exactly the offer researchers -- many of whom work at publicly-funded universities -- are currently making.
      - deleted 9y ago
        [deleted]
rayiner 9y ago
There are two orthogonal issues here: 1) how do you finance drug R&D? 2) how do you pay for people to get the resulting drugs? Public finance is a reasonable option for (2). It is not a reasonable option for (1). If you made it so, for example, going into drug development meant a career stuck on the GS scale, you'd drive away huge numbers of highly capable people. There is no link between technical competency and altruism. If there was, you wouldn't have huge numbers of people at HYPS jumping at the chance to go work at Wall Street and FANG companies instead of more altruistic pursuits.
- davmre 9y ago
  What do you think about government-financed prizes for private-sector drug development, e.g., the government pledges $X billion if you develop an Alzheimer's cure and place it in the public domain? Bernie Sanders has a proposal like this: https://www.vox.com/2015/9/25/9397069/bernie-sanders-drug-prices https://www.vox.com/2015/9/25/9397069/bernie-sanders-drug-pr.... It seems like that retains most of the advantages of the current system, incentivizes private-sector development, but also eliminates the problem of high prices at the point of delivery. (i.e., it correctly prices the marginal cost of treating someone at the marginal cost of producing the drug, which is generally low).
  - rayiner 9y ago
    I think they would work if the government priced them appropriately. But the government is terrible at pricing things. E.g. how nearly every government under prices water/sewer and public transit, leaving those systems in a state of decay.
    - Firadeoclus 9y ago
      Government provided services are not necessarily meant to be profitable in the business sense. It is enough if their global benefits are worth the cost, even if those benefits cannot be captured as direct profits. For example public transit is worth a lot more in external benefits than just the fares paid.

DanBC 9y ago

> In 2030, would we as a society rather have a generic, cheap, openly available HepC cure or not? That is the question you need to ask, and I don't think anyone would say no to that. The $84K drug will fall off patent by then, which means the system we currently have, flawed as it is, will produce that outcome. I think if we look at the shenanigans around Avastin and Lucentis we'll see that patents and drug companies don't always work in the public interest. http://www.bbc.co.uk/news/health-30138097 http://www.bbc.co.uk/news/health-30138097

JangoSteve 9y ago

I think you kind of gloss over the core issue that most people have with drug prices. I don't think most people have a problem with pharmaceutical companies pricing drugs such that they pay for the R&D costs (or more generally the overhead) of the company plus some reasonable profit margin. The problem is that with the inelastic demand inherent in life-or-death treatments, there is no incentive for pharmaceutical companies to stop there. If pricing a pill at $200 could cover costs and provide 30% profit margin, why not double the cost and make a 50% profit margin? Or triple the cost and make a 60% profit margin? With inelastic demand that is governed only by a person's ability to pay, rather than their willingness to pay or competition, the demand drops far slower relative to the increase in price compared to normal supply-and-demand economics. It's the tendency (or at least perceived tendency) of taking advantage of someone's desire to live to extract as much money from them as possible in order to increase profit margins that people tend to have a problem with. This is called exploitation. I think it's a bit disingenuous to spin outcry over how expensive a drug is (in a relative sense) as being a simplistic outcry over a drug just being expensive (in an absolute sense). That said, it's possible that some of it comes from the fact that R&D is so expensive, and a pharmaceutical company never really knows how long their drug will be bought before some other company discovers something that outperforms it. I am by no means an expert on pharmaceutical company economics. EDIT: And the above argument is just one possible argument to make if you assume that drug development should be a function of capitalism in the first place. There's another viewpoint that drug development shouldn't be a responsibility of capitalism at all, in part because perverse incentives often times unavoidable in capitalism are especially unethical when applied to people's health.

learc83 9y ago
>of taking advantage of someone's desire to live to extract as much money from them as possible in order to increase profit margins that people tend to have a problem with. This is called exploitation It's not just about exploiting the people paying either, it's also about restricting access to people who can't afford it. If you don't have an easy way to do price differentiation, inelastict demand encourages a situation where it's more profitable to charge $1million to 1 person than it is to charge $100k, to 10 people. One way drug companies try to get around that is with price differentiation, but it's not very precise and effectively charging for a product as a percent of your income comes with it's own problems.

jedbrown 9y ago

Gilead bought Pharmasset for about $10B after clinical trials were complete on their $84k HepC drug. The R&D was priced in to that acquisition. Medicare and Medicaid spent $10B on that drug in 2015 alone (https://www.statnews.com/pharmalot/2016/11/14/medicare-medicaid-gilead-hepatitis/ https://www.statnews.com/pharmalot/2016/11/14/medicare-medic...). Our current public health economics are very distorted and institutions are not set up to create affordable outcomes.