4 ms·

If the issue is the quality of manufacture, why would there be an expectation that brand name drugs be manufactured with higher quality controls, or be made in

If the issue is the quality of manufacture, why would there be an expectation that brand name drugs be manufactured with higher quality controls, or be made in the US (just following in the article's implication of a very US-centric view of big pharma). Couldn't big-pharma-company contract out manufacturing to whomever does it cheapest internationally?

Scoundreller 7y ago
Big pharma already does a lot of contracting out to varying degrees. Probably nobody makes their own excipients/binders or capsules. Others contract out API manufacture, and others the whole product. Shareholders want lowered costs while maintaining revenues, and contracting out manufacturing is one way to do it. Especially when you revealed all your secrets in your patents anyway.
the_crocodile 7y ago
Manufacturing costs are roughly similar between generics and brand name drugs (say ~$1/pill as an example). A large portion of costs for brand name drugs are in the development and qualification. Generics avoid these costs. For a brand name drugs, manufacturing costs are a relatively low portion of the price and margins are high (example: $20/pill, 95% gross margin). For generics, manufacturing costs are a larger portion of the price and margins are lower (example: $2/pill, 50% gross margin). For generics, because a substantial portion of the price is driven by manufactured costs, margins can be increased substantially by a reduction of the manufactured cost (example: cost $1->0.50, price: $2, margin ->75%, a 50% increase in profitability!). For the brand name drug, the same reduction (example: cost $1->0.50, price: $20, margin ->97%) yields less increase in margin. As a result, there is less incentive for the brand name drug to push for the manufacturing cost reduction (whether or not quality is affected.) And if there is a risk of reduced quality, then the brand name has much more to lose, both in terms of profitability and in the value of it's brand name.

Scoundreller 7y ago

Big pharma already does a lot of contracting out to varying degrees. Probably nobody makes their own excipients/binders or capsules. Others contract out API manufacture, and others the whole product. Shareholders want lowered costs while maintaining revenues, and contracting out manufacturing is one way to do it. Especially when you revealed all your secrets in your patents anyway.

the_crocodile 7y ago

Manufacturing costs are roughly similar between generics and brand name drugs (say ~$1/pill as an example). A large portion of costs for brand name drugs are in the development and qualification. Generics avoid these costs. For a brand name drugs, manufacturing costs are a relatively low portion of the price and margins are high (example: $20/pill, 95% gross margin). For generics, manufacturing costs are a larger portion of the price and margins are lower (example: $2/pill, 50% gross margin). For generics, because a substantial portion of the price is driven by manufactured costs, margins can be increased substantially by a reduction of the manufactured cost (example: cost $1->0.50, price: $2, margin ->75%, a 50% increase in profitability!). For the brand name drug, the same reduction (example: cost $1->0.50, price: $20, margin ->97%) yields less increase in margin. As a result, there is less incentive for the brand name drug to push for the manufacturing cost reduction (whether or not quality is affected.) And if there is a risk of reduced quality, then the brand name has much more to lose, both in terms of profitability and in the value of it's brand name.