3 ms·

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. T

by 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.
  - airstrike 8y ago
    Volume is pretty much fixed for all health related drugs, particularly since your health insurance will foot the bill most of the time. As a patient, you don't care if the drug costs $100 or $1,000 to the insurance company – you want the best treatment available. Viagra is a different ball of wax since you not taking it will never reduce how many years you'll live.
philwelch 8y ago
And if the anticipated future profit-maximizing price of a new drug isn’t high enough, you don’t fund the R&D and the drug never gets invented.
- JAlexoid 8y ago
  Yeah. I hear Dr Salk died a multi-billionaire, right? You really need to understand the diminishing returns, when it comes to this issue. Having $70k HepC healing drug is OK. Having daily medication that's $50 per dose is not, unless the target demographic is exceptionally small.
refurb 8y ago
As someone who works in the industry, you are somewhat correct. Once a drug is approved, it is priced independently of the R&D cost. However, the decision to bring a drug through clinical trials (the "D" in "R&D") is gated. The potential price of the drug is estimated and the financial costs and potential return are calculated. If the return isn't that great because you can't get the volume or price, the R&D investment isn't made and the drug "dies". So in other words, price controls on drugs would lower the prices of drugs already approved, but it would likely also kill a number of drugs currently in development.
- tobylane 8y ago
  There's sticker price and there's what buyers with the ability to negotiate pays. I hear the government healthcare suppliers (Medicare, Medicaid and VA) aren't allowed to ask for lower prices for bulk despite being some of the world's largest customers, each.
  - kingaillas 8y ago
    >I hear the government healthcare suppliers (Medicare, Medicaid and VA) aren't allowed to ask for lower prices for bulk despite being some of the world's largest customers, each. Yep, that's part of Medicare Part D, in turn part of the "Medicare Prescription Drug, Improvement, and Modernization Act", and went into effect in 2003 under Bush 43.
  - refurb 8y ago
    That's not true in the slightest. Medicare - gets an automatic discount equal to the average discount that commercial customers pay Medicaid - gets another 23.1% discount on top of what Medicare gets VA - lowest price of all customers, get at least a 24% discounts on top of what Medicare gets

by pravda 8y ago

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.
- airstrike 8y ago
  Volume is pretty much fixed for all health related drugs, particularly since your health insurance will foot the bill most of the time. As a patient, you don't care if the drug costs $100 or $1,000 to the insurance company – you want the best treatment available. Viagra is a different ball of wax since you not taking it will never reduce how many years you'll live.

philwelch 8y ago

And if the anticipated future profit-maximizing price of a new drug isn’t high enough, you don’t fund the R&D and the drug never gets invented.

JAlexoid 8y ago
Yeah. I hear Dr Salk died a multi-billionaire, right? You really need to understand the diminishing returns, when it comes to this issue. Having $70k HepC healing drug is OK. Having daily medication that's $50 per dose is not, unless the target demographic is exceptionally small.

refurb 8y ago

As someone who works in the industry, you are somewhat correct. Once a drug is approved, it is priced independently of the R&D cost. However, the decision to bring a drug through clinical trials (the "D" in "R&D") is gated. The potential price of the drug is estimated and the financial costs and potential return are calculated. If the return isn't that great because you can't get the volume or price, the R&D investment isn't made and the drug "dies". So in other words, price controls on drugs would lower the prices of drugs already approved, but it would likely also kill a number of drugs currently in development.

tobylane 8y ago
There's sticker price and there's what buyers with the ability to negotiate pays. I hear the government healthcare suppliers (Medicare, Medicaid and VA) aren't allowed to ask for lower prices for bulk despite being some of the world's largest customers, each.
- kingaillas 8y ago
  >I hear the government healthcare suppliers (Medicare, Medicaid and VA) aren't allowed to ask for lower prices for bulk despite being some of the world's largest customers, each. Yep, that's part of Medicare Part D, in turn part of the "Medicare Prescription Drug, Improvement, and Modernization Act", and went into effect in 2003 under Bush 43.
- refurb 8y ago
  That's not true in the slightest. Medicare - gets an automatic discount equal to the average discount that commercial customers pay Medicaid - gets another 23.1% discount on top of what Medicare gets VA - lowest price of all customers, get at least a 24% discounts on top of what Medicare gets