6 ms·

I think the concern is not that the government can't spur r&d, but publicly funded r&d would be less efficient than private capital Back in the 1960s no other

I think the concern is not that the government can't spur r&d, but publicly funded r&d would be less efficient than private capital Back in the 1960s no other organization but the government had enough money to fund something as ambitious as the space program. And the government spends a ton of defense research and always has. Sheer volume of capital can get things done, but that doesn't mean it is efficient The belief is that private markets incentives more efficient research than public funding. So if there is enough private capital to support some r&d goal, it is preferred to fund it privately vs publicly I'm sure there's research on this but as someone who has worked on r&d at small companies, large companies and with government funded grants, there's little doubt in my mind what groups are more efficient. If you look at r&d productivity at big pharma companies vs small, small companies are almost an order of magnitude better. And out of 47 new drugs approved last year, 40% were developed by small companies, 30-35% by big companies, and 1 from a public private partnership (the rest were mid sized companies). That's despite small companies getting an order of magnitude less funding than big ones, and half as much funding as NIH

philipkglass 8y ago
Does that 40% figure refer to taking drugs all the way through clinical trials and FDA approval, or does it also include e.g. drugs that small companies brought through earlier stages of the pipeline before well-capitalized BigCorp acquired/partnered to finish approval? My impression is that drug development costs are heavily weighted toward the later phase clinical trials, and that it’s rare for a startup to complete them without help/acquisition from one of the big incumbents. I could be wrong about this. My lay perspective is that of someone who used to be a (non-pharma) chemist and who enjoys reading Derek Lowe. But if I’m right, and small companies usually can’t finish fully independently, that suggests a role for government drug development: funding the clinical trials and completing approval. Whether a government agency or GSK provides that funding doesn’t seem to much affect innovation of small companies in earlier stages.
- aaavl2821 8y ago
  I'll have to check my data. You are right re late stage studies being most expensive component of drug dev cost in terms of direct costs, but when you account for cost of failure, early stage dev is actually more expensive. Phase 2 failure (drugs that work in the lab and animals not working in people) is the single biggest cost driver. That cost is linked highly to the difficulty of biology and biochemistry (the stuff Derek Lowe often talks about :) and it isn't clear to me how more public funding would address this Your proposal of having govt fund later stage r&d makes more sense to me that replacing IP altogether but i still think the current situation would be better at getting new drugs approved more cheaply Reason being is that early stage innovation is tightly linked to what assets pharma companies want. Allocation of venture capital by therapeutic area is very close to allocation of approved drugs by therapeutic area and to big pharma acquisitions of small biotechs by therapeutic area If government chose which drugs to fund at later stages, that would probably resemble the current NIH grant approval procedures which are fraught with politics and bureaucracy. There are some NIH / govt initiatives now to fund clinical studies (companies I've worked with have applied to two, CIRM and an NIH funded diabetes research group) and the application processes were brutal and took years. And I don't think those initiatives have yielded much in the way of approved drugs
  - philipkglass 8y ago
    I don’t think that government taking drugs through clinical trials would significantly reduce development costs. I think it could reduce all-in costs for drug buyers if some new drugs were “born generic” in terms of IP restrictions. Everybody’s revenue is somebody else’s cost. The idea is to shrink the cost/revenue for new drugs that government takes over the finish line, whereas private investment toward the same goal needs to recover R&D costs plus make a profit. I don’t think that lower drug prices is a panacea for health care costs in the US! Drug spending is a small slice of an oversized pie. But that pie is so big that even small improvements at the margin could save patients billions - mostly unnoticeable at the individual level, but worthwhile considered at the macro scale.
    - aaavl2821 8y ago
      I think that having the government take drugs through clinical studies would increase development costs, and the increase in development costs (funded by taxpayer dollars) plus the fact that you have to replace the entire commercial infrastructure (since no private company will take part in this) would be larger than any savings you'd get from eliminating IP. People would end up paying way way more in new taxes than they save in insurance premiums and copays (people spend roughly $30 a month on rx drugs today, govt run drug dev and distribution would probably cost $60-hundreds+ extra a month, unless you're ok getting 10% of the life saving new drugs our society gets today) The profits in pharma accrue to the top 15 or so companies by revenue, because they have invested in this commercial infrastructure over decades. You could argue that having large scale clin reg and commercial infrastructure is actually more valuable than IP. Especially in the new era of large molecules and cell / gene therapy, where IP doesn't matter nearly as much as in small molecules. Regualtory and manufacturing issues are a bigger barrier to competition in those areas than IP is. Look at biosimilar development as an example -- patents gone, no new competing drugs in most areas. An exec at a top antibody developer told me they know competitors can work around patents, they just need a 6 month head start and then their best in industry antibody dev capabilities will get them the edge they need. Avexis, Kite and Juno were acquired for ~$10B each not because of their products, but because they had the largest scale manufacturing and clinical logistics set up in gene and cell therapy I differ from most people on this forum as I fundamentally attribute the high price of drugs to the high cost of developing drugs, not to IP granting monopolies. IP does not exist to grant rent-seeking powers, it exists to incentive publicly useful research that otherwise would not get done. I think that if you look critically at the cost of drug development and the economics of the industry, that's the only conclusion you reach There's a lot of emotional and biased information about drug pricing out there. It is one of the top political issues of the day, one of the few with bipartisan supprt, it has become an emotional punching bag for a lot of people who have been really poorly treated by an opaque and impersonal healthcare system, and i can understand the frustration people feel. But if you look at the facts and take an objective standpoint, and invest the time into understanding the industry, the public dialogue becomes quite concerning edit: apologies if this comes off as aggressive, i just feel strongly about this :)
- refurb 8y ago
  Here is Derek’s blog post and reference to the original paper. They were quite explicit on what counts as “discovering” a new drug. It’s whoever first created the drug and identified it as having potential to treat a disease.[1] [1]http://blogs.sciencemag.org/pipeline/archives/2010/11/04/where_drugs_come_from_the_numbers http://blogs.sciencemag.org/pipeline/archives/2010/11/04/whe...
  - aaavl2821 8y ago
    Thanks, I actually hadn't seen that. The data I was referring to is from my own analysis of 2017 new drug approvals on FDA's website That paper covers 1998 to 2010, roughly coinciding with the end of the booming era of cardiovascular and psychiatric small molecules (prozac, lipitor etc) and ending right before the patent cliff in 2012, which saw the pharma industry's revenue shrink for the first time ever Since then, R&D has shifted strongly to smaller companies from big ones, as the data reflects.
- aaavl2821 8y ago
  9 of the 21 drugs I referred to as developed by small companies were owned by big companies at time of approval. Some of the drugs were acquired earlier in clinical dev, some were acquired after NDA was already filed
  - philipkglass 8y ago
    Thanks. I would credit "acquired after NDA was already filed" new drugs to small companies even if they were owned by big companies at time of approval. Either way, if 12 out of 21 small-company drugs were developed all the way to the way to approval without bigger companies, my earlier guess that the majority required big company help to finish was incorrect.
refurb 8y ago
Agreed. Don’t get me wrong, I think the gov’t should still play a role in funding “big ideas” that the market won’t. Antibiotic development is a good one. The other thing to keep in mind are all the failures. By pushing R&D to private companies, the tens of billions spent on Alzheimer’s drugs, of which every single one has failed, didn’t come from the pockets of tax payers, rather they came from private investors.

philipkglass 8y ago

Does that 40% figure refer to taking drugs all the way through clinical trials and FDA approval, or does it also include e.g. drugs that small companies brought through earlier stages of the pipeline before well-capitalized BigCorp acquired/partnered to finish approval? My impression is that drug development costs are heavily weighted toward the later phase clinical trials, and that it’s rare for a startup to complete them without help/acquisition from one of the big incumbents. I could be wrong about this. My lay perspective is that of someone who used to be a (non-pharma) chemist and who enjoys reading Derek Lowe. But if I’m right, and small companies usually can’t finish fully independently, that suggests a role for government drug development: funding the clinical trials and completing approval. Whether a government agency or GSK provides that funding doesn’t seem to much affect innovation of small companies in earlier stages.

aaavl2821 8y ago
I'll have to check my data. You are right re late stage studies being most expensive component of drug dev cost in terms of direct costs, but when you account for cost of failure, early stage dev is actually more expensive. Phase 2 failure (drugs that work in the lab and animals not working in people) is the single biggest cost driver. That cost is linked highly to the difficulty of biology and biochemistry (the stuff Derek Lowe often talks about :) and it isn't clear to me how more public funding would address this Your proposal of having govt fund later stage r&d makes more sense to me that replacing IP altogether but i still think the current situation would be better at getting new drugs approved more cheaply Reason being is that early stage innovation is tightly linked to what assets pharma companies want. Allocation of venture capital by therapeutic area is very close to allocation of approved drugs by therapeutic area and to big pharma acquisitions of small biotechs by therapeutic area If government chose which drugs to fund at later stages, that would probably resemble the current NIH grant approval procedures which are fraught with politics and bureaucracy. There are some NIH / govt initiatives now to fund clinical studies (companies I've worked with have applied to two, CIRM and an NIH funded diabetes research group) and the application processes were brutal and took years. And I don't think those initiatives have yielded much in the way of approved drugs
- philipkglass 8y ago
  I don’t think that government taking drugs through clinical trials would significantly reduce development costs. I think it could reduce all-in costs for drug buyers if some new drugs were “born generic” in terms of IP restrictions. Everybody’s revenue is somebody else’s cost. The idea is to shrink the cost/revenue for new drugs that government takes over the finish line, whereas private investment toward the same goal needs to recover R&D costs plus make a profit. I don’t think that lower drug prices is a panacea for health care costs in the US! Drug spending is a small slice of an oversized pie. But that pie is so big that even small improvements at the margin could save patients billions - mostly unnoticeable at the individual level, but worthwhile considered at the macro scale.
  - aaavl2821 8y ago
    I think that having the government take drugs through clinical studies would increase development costs, and the increase in development costs (funded by taxpayer dollars) plus the fact that you have to replace the entire commercial infrastructure (since no private company will take part in this) would be larger than any savings you'd get from eliminating IP. People would end up paying way way more in new taxes than they save in insurance premiums and copays (people spend roughly $30 a month on rx drugs today, govt run drug dev and distribution would probably cost $60-hundreds+ extra a month, unless you're ok getting 10% of the life saving new drugs our society gets today) The profits in pharma accrue to the top 15 or so companies by revenue, because they have invested in this commercial infrastructure over decades. You could argue that having large scale clin reg and commercial infrastructure is actually more valuable than IP. Especially in the new era of large molecules and cell / gene therapy, where IP doesn't matter nearly as much as in small molecules. Regualtory and manufacturing issues are a bigger barrier to competition in those areas than IP is. Look at biosimilar development as an example -- patents gone, no new competing drugs in most areas. An exec at a top antibody developer told me they know competitors can work around patents, they just need a 6 month head start and then their best in industry antibody dev capabilities will get them the edge they need. Avexis, Kite and Juno were acquired for ~$10B each not because of their products, but because they had the largest scale manufacturing and clinical logistics set up in gene and cell therapy I differ from most people on this forum as I fundamentally attribute the high price of drugs to the high cost of developing drugs, not to IP granting monopolies. IP does not exist to grant rent-seeking powers, it exists to incentive publicly useful research that otherwise would not get done. I think that if you look critically at the cost of drug development and the economics of the industry, that's the only conclusion you reach There's a lot of emotional and biased information about drug pricing out there. It is one of the top political issues of the day, one of the few with bipartisan supprt, it has become an emotional punching bag for a lot of people who have been really poorly treated by an opaque and impersonal healthcare system, and i can understand the frustration people feel. But if you look at the facts and take an objective standpoint, and invest the time into understanding the industry, the public dialogue becomes quite concerning edit: apologies if this comes off as aggressive, i just feel strongly about this :)
refurb 8y ago
Here is Derek’s blog post and reference to the original paper. They were quite explicit on what counts as “discovering” a new drug. It’s whoever first created the drug and identified it as having potential to treat a disease.[1] [1]http://blogs.sciencemag.org/pipeline/archives/2010/11/04/where_drugs_come_from_the_numbers http://blogs.sciencemag.org/pipeline/archives/2010/11/04/whe...
- aaavl2821 8y ago
  Thanks, I actually hadn't seen that. The data I was referring to is from my own analysis of 2017 new drug approvals on FDA's website That paper covers 1998 to 2010, roughly coinciding with the end of the booming era of cardiovascular and psychiatric small molecules (prozac, lipitor etc) and ending right before the patent cliff in 2012, which saw the pharma industry's revenue shrink for the first time ever Since then, R&D has shifted strongly to smaller companies from big ones, as the data reflects.
aaavl2821 8y ago
9 of the 21 drugs I referred to as developed by small companies were owned by big companies at time of approval. Some of the drugs were acquired earlier in clinical dev, some were acquired after NDA was already filed
- philipkglass 8y ago
  Thanks. I would credit "acquired after NDA was already filed" new drugs to small companies even if they were owned by big companies at time of approval. Either way, if 12 out of 21 small-company drugs were developed all the way to the way to approval without bigger companies, my earlier guess that the majority required big company help to finish was incorrect.

refurb 8y ago

Agreed. Don’t get me wrong, I think the gov’t should still play a role in funding “big ideas” that the market won’t. Antibiotic development is a good one. The other thing to keep in mind are all the failures. By pushing R&D to private companies, the tens of billions spent on Alzheimer’s drugs, of which every single one has failed, didn’t come from the pockets of tax payers, rather they came from private investors.