5 ms·

It does appear to be the case that the US funds most pharma R&D due to Americans overpaying relative to the rest of the word. In some cases (China, India) this

It does appear to be the case that the US funds most pharma R&D due to Americans overpaying relative to the rest of the word. In some cases (China, India) this is due to weak IP protection, but in other cases (Canada, UK, Europe) it's more to do with our governments having a stronger negotiating position and setting hard limits on what they'll spend for a given benefit to patients. Some characterise this as freeloading, but looking at the NHS for example, they set relatively clear limits for how much they will pay per quality-adjusted life year that a drug provides. If a drug costs more than this limit, financially more people will lose out if our healthcare system purchases this drug over something else (more doctors, hospital beds, etc.). Does this make us immoral for "freeloading", because we prefer putting our limited money into cost effective treatments? Also, is it not worth looking at why pharma R&D costs so much? The pharma industry seems to run at a very healthy profit margin compared to most other industries. Maybe the lack of market pressure is allowing the pharma industry to remain fatty? Obviously there's a fear that cutting US pharma revenue would hurt global medical R&D, but I don't see this as being a foregone conclusion. It could just as possibly be market failure and regulatory capture keeping pharma R&D expensive.

rayiner 8y ago
> The pharma industry seems to run at a very healthy profit margin compared to most other industries. But not compared to other high risk, capital intensive industries, i.e. tech.
- refurb 8y ago
  Any those margins only look great if you ignore the billions of investment that failed to produce $1 of revenue.
darawk 8y ago
> Does this make us immoral for "freeloading", because we prefer putting our limited money into cost effective treatments? It doesn't make you immoral, but it is important in understanding the tradeoffs of suggesting that the US switch to an NHS-style system. > Also, is it not worth looking at why pharma R&D costs so much? The pharma industry seems to run at a very healthy profit margin compared to most other industries. Maybe the lack of market pressure is allowing the pharma industry to remain fatty? Obviously there's a fear that cutting US pharma revenue would hurt global medical R&D, but I don't see this as being a foregone conclusion. It could just as possibly be market failure and regulatory capture keeping pharma R&D expensive. They may be doing well, but you may not be seeing all the little pharma companies that die trying. At the end of the day, investors are allocating capital where they think they can get returns. If you reduce the returns of pharma, you reduce the attractiveness of investing there.
- guntars 8y ago
  Indeed, what is the purpose of the pharma industry if not making money for the shareholders?
- JAlexoid 8y ago
  I try investing a lot in smaller pharma companies... and they are hammered by the big ones. Not on innovation, but on marketing. I disagree about NHS type system, that reduces access. A healthy mix is required, though. A lot of upfront costs are also footed by users and government/non-government funds. And a lot more of those costs are due to government regulation and essential insurance at development. Pharmaceutics researchers aren't exactly rich, btw. Your dentist probably makes more than many researchers of life saving drugs.
  - laurencerowe 8y ago
    How does an NHS type system reduce access? Everyone is covered and can go to the doctor without worrying about paying thousands in copays.
    - DanBC 8y ago
      And also if people wish to pay for private care (whether out of pocket or using insurance) they're free to do that too.
- DanBC 8y ago
  Too often these drugs are hugely expensive and provide marginal benefit over existing treatment. Sometimes they're even worse than existing treatment.
pravda 8y ago
The "freeloading" meme is the creation of public relations groups employed by the pharma industry. Drugs in the US are priced at the profit-maximizing price. That profit-maximizing price has nothing to do with how much pharma earns in other countries. And it has absolutely nothing to do with the cost of R&D. R&D is a sunk cost, has no effect on drug pricing.
- airstrike 8y ago
  > And it has absolutely nothing to do with the cost of R&D. R&D is a sunk cost, has no effect on drug pricing. That's not how this works. Volume is fixed because you effectively already know how many patients there are and COGS is minimal because drugs are generally very cheap to produce, so price and SG&A are the key drivers to determine returns
  - pravda 8y ago
    To save others the Googling: SG&A = Selling, General and Administrative Expenses. I'm not sure that you disagree with me. The higher the price the higher the returns, but price too high and you earn less money, because volume is not fixed. (I'd bet a lot less Viagra would be sold if it cost $500 per pill.) That was the genius of Martin S. He felt, correctly, that Daraprim was mispriced. That's why the price per pill was raised to $750 from $13.50.
    - JAlexoid 8y ago
      I wrote on this above. As an investor in Gilead and a Truvada user, I really hate the fact that Gilead isn't making Truvada an effective vitamin for most of EU. It's an HIV infection prevention drug. It's priced for margin maximization at ~$1600 for 30 pills. I bet most EU countries could get on board with €20-€30 per month and have 10% of the population be on it. And EU has very low administrative costs, as many countries buy centrally. I consider Martin to be a scumbag, but not much more than your average human being. He's a scapegoat, to the industry that would prefer a flashy Martin to scrutiny of their own actions. He should be free, as his conviction was a witch-hunt.
    - 8y ago
int_19h 8y ago
> Does this make us immoral for "freeloading", because we prefer putting our limited money into cost effective treatments? It depends on whether some drugs that your system considers affordable today as generics, would have not existed without being funded by US taxpayers, I suppose.
- max76 8y ago
  > without being funded by US taxpayers It's not US taxpayers that are footing the R&D bill, but United States based customers of non-generic prescription drugs. These are technically two different sets of people.
  - hippich 8y ago
    I believe Medicare pays for like half of overall healthcare spending. So at least half of such R&D bill is paid by tax payers.
kieranmaine 8y ago
How does research funded by charity or governments figure in this? How do we know if research funded by these sources leads to profit making drug research?
thousandautumns 8y ago
How is there a lack of market pressure in the pharma industry?
- JoeAltmaier 8y ago
  Prices are essentially fixed and heavily influenced by govt. Not a total lack of market pressure, but definitely skewed vs shoes etc.

rayiner 8y ago

> The pharma industry seems to run at a very healthy profit margin compared to most other industries. But not compared to other high risk, capital intensive industries, i.e. tech.

refurb 8y ago
Any those margins only look great if you ignore the billions of investment that failed to produce $1 of revenue.

darawk 8y ago

> Does this make us immoral for "freeloading", because we prefer putting our limited money into cost effective treatments? It doesn't make you immoral, but it is important in understanding the tradeoffs of suggesting that the US switch to an NHS-style system. > Also, is it not worth looking at why pharma R&D costs so much? The pharma industry seems to run at a very healthy profit margin compared to most other industries. Maybe the lack of market pressure is allowing the pharma industry to remain fatty? Obviously there's a fear that cutting US pharma revenue would hurt global medical R&D, but I don't see this as being a foregone conclusion. It could just as possibly be market failure and regulatory capture keeping pharma R&D expensive. They may be doing well, but you may not be seeing all the little pharma companies that die trying. At the end of the day, investors are allocating capital where they think they can get returns. If you reduce the returns of pharma, you reduce the attractiveness of investing there.

guntars 8y ago
Indeed, what is the purpose of the pharma industry if not making money for the shareholders?
JAlexoid 8y ago
I try investing a lot in smaller pharma companies... and they are hammered by the big ones. Not on innovation, but on marketing. I disagree about NHS type system, that reduces access. A healthy mix is required, though. A lot of upfront costs are also footed by users and government/non-government funds. And a lot more of those costs are due to government regulation and essential insurance at development. Pharmaceutics researchers aren't exactly rich, btw. Your dentist probably makes more than many researchers of life saving drugs.
- laurencerowe 8y ago
  How does an NHS type system reduce access? Everyone is covered and can go to the doctor without worrying about paying thousands in copays.
  - DanBC 8y ago
    And also if people wish to pay for private care (whether out of pocket or using insurance) they're free to do that too.
DanBC 8y ago
Too often these drugs are hugely expensive and provide marginal benefit over existing treatment. Sometimes they're even worse than existing treatment.

pravda 8y ago

The "freeloading" meme is the creation of public relations groups employed by the pharma industry. Drugs in the US are priced at the profit-maximizing price. That profit-maximizing price has nothing to do with how much pharma earns in other countries. And it has absolutely nothing to do with the cost of R&D. R&D is a sunk cost, has no effect on drug pricing.

airstrike 8y ago
> And it has absolutely nothing to do with the cost of R&D. R&D is a sunk cost, has no effect on drug pricing. That's not how this works. Volume is fixed because you effectively already know how many patients there are and COGS is minimal because drugs are generally very cheap to produce, so price and SG&A are the key drivers to determine returns
- pravda 8y ago
  To save others the Googling: SG&A = Selling, General and Administrative Expenses. I'm not sure that you disagree with me. The higher the price the higher the returns, but price too high and you earn less money, because volume is not fixed. (I'd bet a lot less Viagra would be sold if it cost $500 per pill.) That was the genius of Martin S. He felt, correctly, that Daraprim was mispriced. That's why the price per pill was raised to $750 from $13.50.
  - JAlexoid 8y ago
    I wrote on this above. As an investor in Gilead and a Truvada user, I really hate the fact that Gilead isn't making Truvada an effective vitamin for most of EU. It's an HIV infection prevention drug. It's priced for margin maximization at ~$1600 for 30 pills. I bet most EU countries could get on board with €20-€30 per month and have 10% of the population be on it. And EU has very low administrative costs, as many countries buy centrally. I consider Martin to be a scumbag, but not much more than your average human being. He's a scapegoat, to the industry that would prefer a flashy Martin to scrutiny of their own actions. He should be free, as his conviction was a witch-hunt.
  - 8y ago

int_19h 8y ago

> Does this make us immoral for "freeloading", because we prefer putting our limited money into cost effective treatments? It depends on whether some drugs that your system considers affordable today as generics, would have not existed without being funded by US taxpayers, I suppose.

max76 8y ago
> without being funded by US taxpayers It's not US taxpayers that are footing the R&D bill, but United States based customers of non-generic prescription drugs. These are technically two different sets of people.
- hippich 8y ago
  I believe Medicare pays for like half of overall healthcare spending. So at least half of such R&D bill is paid by tax payers.

kieranmaine 8y ago

How does research funded by charity or governments figure in this? How do we know if research funded by these sources leads to profit making drug research?

thousandautumns 8y ago

How is there a lack of market pressure in the pharma industry?

JoeAltmaier 8y ago
Prices are essentially fixed and heavily influenced by govt. Not a total lack of market pressure, but definitely skewed vs shoes etc.