4 ms·

How do you know that the higher drug prices in the US lead to more research instead of making executives and shareholders richer? You seem to imply that. Every

How do you know that the higher drug prices in the US lead to more research instead of making executives and shareholders richer? You seem to imply that. Everything aside at a minimum the US needs more transparency about pricing. The whole system with its coupons, rebates and middlemen seems to be set up to hide the real cost of drugs. Without transparency no real discussion can be had.

rayiner 8y ago
> How do you know that the higher drug prices in the US lead to more research instead of making executives and shareholders richer? You seem to imply that. Because I have an iPhone. It's made executives and shareholders at Apple quite rich. It's also, I'm confident, advanced the state-of-the-art far faster than if Apple had been a government-regulated utility of sorts, limited to a "fair" 10% profit margin. If people were talking about the government exercising monopsony power to drive down the price of iPhones, I'd (a) except Apple to protest vigorously; and (b) worry about the impact on smartphone innovation. Drugs are no different. The fact that drugs are important to society doesn't change the basic mechanics of a capital- and talent-intensive industry.
- maxxxxx 8y ago
  Perfect line of reasoning. Very convincing. Let’s also stop negotiating any other government procurement. We will get some real cool fighter jets.
- PretzelFisch 8y ago
  I have trouble with this iPhone analogy. The demand of an iPhone is fundamentally different then the demand for a drug. I don't think it's fair to compare price discovery of a luxury item to an item needed to survive or escape pain.
  - deleted 8y ago
    [deleted]
  - maxxxxx 8y ago
    It would be pretty bad if the only phone options were iPhones or Pixels. For broad society we need cheap phones. Same for drugs or other medical treatments. First we need cheap options for all before we should worry about luxury treatments.
    - AnthonyMouse 8y ago
      > First we need cheap options for all before we should worry about luxury treatments. In this context the "luxury treatments" are drugs under patent and the "cheap options for all" are generics. And then we can identify a specific problem -- we don't have enough generics because unless a drug is under patent, nobody has the incentive to pay to put it through FDA trials. But you can't solve that by removing the profit from the "luxury drugs" -- that only makes it worse. Then nobody has the incentive to pay for FDA trials for anything. The actual problem is that FDA trials are an unfunded mandate. Either they need to be made significantly less expensive somehow or the government needs to fund them itself so that more unpatented generics can actually get approved.
      - PretzelFisch 8y ago
        My understanding is that the FDA trial is a trivial expense[1][2] in the whole drug development cycle. What I usually hear is that R&D that spans years to decades is what the pharma company wants to recoup during the patent phase. https://www.jhsph.edu/news/news-releases/2018/cost-of-clinical-trials-for-new-drug-FDA-approval-are-fraction-of-total-tab.html https://www.jhsph.edu/news/news-releases/2018/cost-of-clinic... https://www.outsourcing-pharma.com/Article/2018/09/26/Clinical-trial-cost-is-a-fraction-of-the-drug-development-bill https://www.outsourcing-pharma.com/Article/2018/09/26/Clinic...
        AnthonyMouse 8y ago
        You're comparing the wrong numbers. The trial costs are small compared to R&D costs, but that's only because R&D costs are very large. So it's millions of dollars compared to billions of dollars. But generics don't have R&D costs, they already exist and are out of patent. Which correspondingly makes them much less profitable -- that's the whole point -- and then "millions of dollars" becomes a significant cost. Moreover, it's a free rider problem, because once you pay for it for a generic drug, anyone can make it, but they didn't have to pay the millions of dollars for the trials so now they can undercut your price. As a result everybody sits around waiting for somebody else to spend several million dollars for a trial instead of doing it themselves, which means that nobody does it.
- selimthegrim 8y ago
  None of that is an excuse for the shenanigans Avik Roy lists in this report, especially around orphan drugs https://docs.house.gov/meetings/GO/GO00/20190129/108817/HHRG-116-GO00-Wstate-RoyA-20190129.pdf https://docs.house.gov/meetings/GO/GO00/20190129/108817/HHRG...
refurb 8y ago
We know because public drug manufacturers share that information. For the big companies, it's around 17-20% of revenues go into R&D.
- maxxxxx 8y ago
  They also have very good profit margins. Would they spend less on R&D if their margins got reduced? I am not talking about reducing profit to zero or below.
  - refurb 8y ago
    Well, reduction in price means reduction in revenue, so I would assume they'd target the same 17-20% of a lower number.

rayiner 8y ago

> How do you know that the higher drug prices in the US lead to more research instead of making executives and shareholders richer? You seem to imply that. Because I have an iPhone. It's made executives and shareholders at Apple quite rich. It's also, I'm confident, advanced the state-of-the-art far faster than if Apple had been a government-regulated utility of sorts, limited to a "fair" 10% profit margin. If people were talking about the government exercising monopsony power to drive down the price of iPhones, I'd (a) except Apple to protest vigorously; and (b) worry about the impact on smartphone innovation. Drugs are no different. The fact that drugs are important to society doesn't change the basic mechanics of a capital- and talent-intensive industry.

maxxxxx 8y ago
Perfect line of reasoning. Very convincing. Let’s also stop negotiating any other government procurement. We will get some real cool fighter jets.
PretzelFisch 8y ago
I have trouble with this iPhone analogy. The demand of an iPhone is fundamentally different then the demand for a drug. I don't think it's fair to compare price discovery of a luxury item to an item needed to survive or escape pain.
- deleted 8y ago
  [deleted]
- maxxxxx 8y ago
  It would be pretty bad if the only phone options were iPhones or Pixels. For broad society we need cheap phones. Same for drugs or other medical treatments. First we need cheap options for all before we should worry about luxury treatments.
  - AnthonyMouse 8y ago
    > First we need cheap options for all before we should worry about luxury treatments. In this context the "luxury treatments" are drugs under patent and the "cheap options for all" are generics. And then we can identify a specific problem -- we don't have enough generics because unless a drug is under patent, nobody has the incentive to pay to put it through FDA trials. But you can't solve that by removing the profit from the "luxury drugs" -- that only makes it worse. Then nobody has the incentive to pay for FDA trials for anything. The actual problem is that FDA trials are an unfunded mandate. Either they need to be made significantly less expensive somehow or the government needs to fund them itself so that more unpatented generics can actually get approved.
    - PretzelFisch 8y ago
      My understanding is that the FDA trial is a trivial expense[1][2] in the whole drug development cycle. What I usually hear is that R&D that spans years to decades is what the pharma company wants to recoup during the patent phase. https://www.jhsph.edu/news/news-releases/2018/cost-of-clinical-trials-for-new-drug-FDA-approval-are-fraction-of-total-tab.html https://www.jhsph.edu/news/news-releases/2018/cost-of-clinic... https://www.outsourcing-pharma.com/Article/2018/09/26/Clinical-trial-cost-is-a-fraction-of-the-drug-development-bill https://www.outsourcing-pharma.com/Article/2018/09/26/Clinic...
      - AnthonyMouse 8y ago
        You're comparing the wrong numbers. The trial costs are small compared to R&D costs, but that's only because R&D costs are very large. So it's millions of dollars compared to billions of dollars. But generics don't have R&D costs, they already exist and are out of patent. Which correspondingly makes them much less profitable -- that's the whole point -- and then "millions of dollars" becomes a significant cost. Moreover, it's a free rider problem, because once you pay for it for a generic drug, anyone can make it, but they didn't have to pay the millions of dollars for the trials so now they can undercut your price. As a result everybody sits around waiting for somebody else to spend several million dollars for a trial instead of doing it themselves, which means that nobody does it.
selimthegrim 8y ago
None of that is an excuse for the shenanigans Avik Roy lists in this report, especially around orphan drugs https://docs.house.gov/meetings/GO/GO00/20190129/108817/HHRG-116-GO00-Wstate-RoyA-20190129.pdf https://docs.house.gov/meetings/GO/GO00/20190129/108817/HHRG...

refurb 8y ago

We know because public drug manufacturers share that information. For the big companies, it's around 17-20% of revenues go into R&D.

maxxxxx 8y ago
They also have very good profit margins. Would they spend less on R&D if their margins got reduced? I am not talking about reducing profit to zero or below.
- refurb 8y ago
  Well, reduction in price means reduction in revenue, so I would assume they'd target the same 17-20% of a lower number.