3 ms·

As I'm sure you could guess, the reality is much much more complicated. Drug dev is really hard, and really expensive. Private money funds an order of magnitu

As I'm sure you could guess, the reality is much much more complicated. Drug dev is really hard, and really expensive. Private money funds an order of magnitude more R&D than the government. That private money takes a huge amount of risk, and most investors lose money (even in the last few years when VCs and public equity investors have made money, those profits will probably be offset by poor returns to pharma companies for their expensive acquisitions of risky assets). The actual rent seekers in the US healthcare system are large hospital systems, although that's not something that is discussed much in the public debate (hospital spend accounts for 30% of US healthcare spend compared to 10% for prescription drugs, and the strategy of hospitals the last decade or so has been to consolidate into local monopolies so they can capture market share and drive higher rates with payers -- pretty much the definition of rent seeking) Drug company R&D productivity has been declining for years, and probably will be zero or negative in a decade barring breakthroughs. From my limited experience working with NIH and FDA, the government would be way, way worse -- there is very little accountability so simple things are really hard and slow. NIH spends ~$34B on R&D. Private industry spends over $200B (mostly US pharma companies, with a good number of EU and some Japanese as well). Top 15 biopharma companies spend like $70B per year on R&D in aggregate. Global venture funding is on pace to be $15-20B this year for biopharma Despite all this money, we got 47 new drugs in 2017 in the US. Most for cancer and rare disease, because those are the only remaining therapeutic areas where you have enough of a shot of making money to attract private capital. If you look at the top 10 causes of death in the US, only one -- cancer -- receives much private funding and new drugs -- very few new drugs for diseases like heart disease, diabetes, mental illness etc. That doesn't even account for the world's most devastating diseases, many of which receive very little funding and innovation, because the economics dont work To replace for-profit R&D with government R&D in the US, we'd need to probably quadruple or quintuple the NIH budget -- assuming NIH is just as efficient as private industry. If we wanted to allocate spend to the biggest unmet medical needs rather than those that can make a profit, we'd probably need to spend 10x the ~$300B+ the world spends now on drug R&D (that's basically a guess but I don't think it is crazy directionally, considering how little investment goes into cardiovascular disease, psychiatric disease, infectious disease, stroke, pretty much anything other than cancer) Apologies for the rant and i know this is an unpopular opinion, but I think the public debate on drug pricing and healthcare costs in general is way off and is a huge obstacle to actually making healthcare better and developing new medicines

opportune 8y ago
Regarding risk and most investors losing money, that makes government funding actually more attractive because it pools risk in basically the largest pool possible. Additionally regarding the private industry paying $X while the NIH pays $Y, private industry would not have $X for funding (minus the money spent on new drug companies) without at least the prospect of consumers paying for those drugs - that is, the funding is still coming from taxpayers' insurance / Medicare / Medicaid / pocketbooks. If we ignore insurance (because that may introduce a lot more factors), this configuration can only be desirable if we determine that, dollar for dollar, government R&D is less effective than private industry's R&D + all other costs regarding marketing/executive comp/profit that wouldn't already be incurred from their drugs' manufacturing. I'm in favor of letting industry compete with itself in a market as a way to keep things efficient - except this only works if things really resemble a market. The use of exclusive drug IP to extract money resembles a monopoly even more than regional hospital oligopolies, as need/choice of drug is not typically up to the user. If there were no private IP, nobody would develop new drugs, so why not just eliminate IP and pay for development with the money that taxpayers were going to be spending on R&D anyway?
- aaavl2821 8y ago
  My premise is that drugs are expensive because it costs a lot of money to get a drug developed, not because IP enables companies to collect value they didn't create. IP is a mechanism that incentivizes investment into a field that is publicly valuable. And it's not that great of an incentive because even with IP most drug r&d is not a great investment But most importantly, nationalizing drug research would probably make healthcare more expensive, not less. It's a red herring in the healthcare cost debate. Honestly my tinfoil hat theory is that hospitals, which have a ton of political clout (AHA lobby spends about as much as Phrma lobby, but hospitals are top employers in most areas so have a ton of soft political power), drive the drug pricing narrative to distract from the bad stuff they get away with. Tinfoil theory but I don't think it's too crazy That aside, US spends like $320B on rx drugs. Let's say that goes to zero with your plan. Then we increase NIH budget by $150-200B -- assuming government is just as efficient as private industry. That just covers R&D. You still need infrastructure covering prescription processing, drug manufacturing, distribution, quality control, etc. you'd need to set all that up from scratch, because you wouldn't have a private infrastructure. Could that be $100B? Maybe. So you're breaking even And if government is half as efficient as private industry? If it's an order of magnitude less efficient? Ouch My reasoning may be off bc it's Friday night but I think it's directionally correct. But more importantly: why are we focusing on this in the first place? Do we actually think we can pass legislation to quintuple the NIH budget even if we should (And I don't think we should) Wouldn't our efforts be better spent addressing the largest source of healthcare spend and biggest source of rent seeking behavior?

opportune 8y ago

Regarding risk and most investors losing money, that makes government funding actually more attractive because it pools risk in basically the largest pool possible. Additionally regarding the private industry paying $X while the NIH pays $Y, private industry would not have $X for funding (minus the money spent on new drug companies) without at least the prospect of consumers paying for those drugs - that is, the funding is still coming from taxpayers' insurance / Medicare / Medicaid / pocketbooks. If we ignore insurance (because that may introduce a lot more factors), this configuration can only be desirable if we determine that, dollar for dollar, government R&D is less effective than private industry's R&D + all other costs regarding marketing/executive comp/profit that wouldn't already be incurred from their drugs' manufacturing. I'm in favor of letting industry compete with itself in a market as a way to keep things efficient - except this only works if things really resemble a market. The use of exclusive drug IP to extract money resembles a monopoly even more than regional hospital oligopolies, as need/choice of drug is not typically up to the user. If there were no private IP, nobody would develop new drugs, so why not just eliminate IP and pay for development with the money that taxpayers were going to be spending on R&D anyway?

aaavl2821 8y ago
My premise is that drugs are expensive because it costs a lot of money to get a drug developed, not because IP enables companies to collect value they didn't create. IP is a mechanism that incentivizes investment into a field that is publicly valuable. And it's not that great of an incentive because even with IP most drug r&d is not a great investment But most importantly, nationalizing drug research would probably make healthcare more expensive, not less. It's a red herring in the healthcare cost debate. Honestly my tinfoil hat theory is that hospitals, which have a ton of political clout (AHA lobby spends about as much as Phrma lobby, but hospitals are top employers in most areas so have a ton of soft political power), drive the drug pricing narrative to distract from the bad stuff they get away with. Tinfoil theory but I don't think it's too crazy That aside, US spends like $320B on rx drugs. Let's say that goes to zero with your plan. Then we increase NIH budget by $150-200B -- assuming government is just as efficient as private industry. That just covers R&D. You still need infrastructure covering prescription processing, drug manufacturing, distribution, quality control, etc. you'd need to set all that up from scratch, because you wouldn't have a private infrastructure. Could that be $100B? Maybe. So you're breaking even And if government is half as efficient as private industry? If it's an order of magnitude less efficient? Ouch My reasoning may be off bc it's Friday night but I think it's directionally correct. But more importantly: why are we focusing on this in the first place? Do we actually think we can pass legislation to quintuple the NIH budget even if we should (And I don't think we should) Wouldn't our efforts be better spent addressing the largest source of healthcare spend and biggest source of rent seeking behavior?