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I’ve worked in pharma for much of my career, but will never go back. At one point I was working for a company that continues to milk profits off of a drug that
by i_am_nomad 7y ago
I’ve worked in pharma for much of my career, but will never go back. At one point I was working for a company that continues to milk profits off of a drug that was developed in the 1950s - the company doubled the price over the span of a few years in the late 2000s, for no reason besides the P in P&L. And that company is generally considered one of the “good guys” in the industry, spending proportionally more on R&D than almost anyone else.
You could argue that the outrageous profits made off a 70 year old drug are funding that research, but (a) that’s just not the case, and (b) why should one group of patients and their insurers have to shell out for another? Isn’t that what financing is for?
- rob-olmos 7y agoOut of curiosity, why do you feel (a) is not the case? Are the profits going to salaries instead?
- spsful 7y agoI think he reasons that a drug so old would have no debt left over from its research expenses.
- rayiner 7y agoImagine if we applied this rule to Silicon Valley. Once you recouped your R&D expenses, you weren't allowed to make any more money (or only a token profit above cost). Do you think Silicon Valley would be the same? Better? Worse? (Yes, people don't die if they don't have Facebook. That's not relevant to the R&D process. The mechanics of developing pharmaceuticals is the same as developing software. You take large amounts of capital and throw it at highly skilled and scarce labor.) EDIT: That does not mean there are no problems. There's lots of real problems, such attempts to keep things from going out of patent, how to handle orphan drugs and drugs for rare diseases, etc. My point is simply that we have proven principles for how to enable innovation, and they apply to pharmaceuticals as much as to web tech. Of course, we can make different trade-offs within that analytical framework--e.g. trade future innovation for lower short-term costs. But we can't apply a wholly different set of principles for thinking about the costs of those trade-offs.
- cptskippy 7y agoImagine a piece of software that had fully recouped it's R&D budget, had minimal support costs, and was sold for a modest profit suddenly went up 100x in price.
- tptacek 7y agoThis happens all the time. You don't notice it because you're not directly billed for it, but basically the central theme of the startup playbook is to subsidize growth, acquire a userbase, and then (and only then) monetize the hell out if it.
- cptskippy 7y agoWhat you're describing is the early cycle of a Drug before R&D is recouped. We're talking late stage after all the initial VCs have recovered their investment 10x and divested themselves. We're not talking about Uber after successfully running Taxis out of business jacking up prices. We're talking about 25-30 years later after Uber has been the de-facto transportation provider suddenly decides to do a 1000x price increase.
- tptacek 7y agoI'm responding to (really, refuting) a specific argument you made upthread. You can now make a different argument, if you like, but I won't necessarily have much to say about it.
- ummonk 7y agoA lot of startup products go from free to monetized (an infinity x increase in price) at some point.
- cptskippy 7y agoWe're talking about a drug that's going on 50 years on the market, not a startup. The drug has already been monetized and paid for itself 100x times over.
- manigandham 7y agoSo a company can’t invest profits from old products into new products? Is there a cutoff? What is the rationale behind this?
- mistrial9 7y agoThere is a certain management metric called "profit per employee" used for managerial accounting. Many ordinary business' have a fairly low number. Apple Inc at one point made a very public version of their "profit per employee" and perhaps that influenced/emboldened others.. at any rate, the drug discovery and pharma industries have very high "profit per employee" numbers which you can find in some annual reports and some industry analysis papers.
- manigandham 7y agoThe software industry has high per-employee profit too, that’s the leverage that pays the high salaries in the first place. None of that has to do with this company or the profits not funding new research.
- Excel_Wizard 7y agoWhat's the company's overall margin? Everything objective you stated sounds like it could describe either a good company or a bad company, all conditional upon whether the margins are huge or fair. Any pharma company that spends on R&D will have to rake in profits from somewhere to subsidize R&D efforts. R&D is extremely risky (most drug R&D projects fail) and has a very long time period before payback if it succeeds.
- dv_dt 7y agoMaybe. There are studies which point out some interesting large scale trends. One that private pharma R&D is getting less efficient, creating fewer and fewer drugs per billion dollars. Another is that many current high profit drugs had their early fundamental breakthrough research as government funded R&D, and that todays gov't funding of drug R&D is at a relative low because private industry is theoretically taking care of it all now. Another observation is that private R&D often focuses far more on the development than the research, developing new drug "packaging and delivery", in part to gain IP extensions, instead of fundamentally new drugs.
- hilbert42 7y ago"...studies which point out some interesting large scale trends. One that private pharma R&D is getting less efficient, creating fewer and fewer drugs per billion dollars" All the more reason for the State to involve itself here by bringing to an end such an expensive,'inefficient' (or more likely self-serving, profit-driven) system. As I've said above, it's the job of Government to protect its citizens from such abuse and in this matter it's high time it started.
- deleted 7y ago[deleted]
- entee 7y agoIt's important to understand why the efficiency is going down, and it's not because the companies themselves suck more every year. It's because of two main drivers: 1.) The easy targets are mostly gone. All the biology we understand very well either has drugs already, or for some key reason can't be addressed with the drug discovery system we have today (see KRAS, though there are glimmers of home there). This means we have to go after harder diseases that aren't as well understood or have complex etiology. Necessarily that's less efficient. 2.) When you drug something, it eventually becomes incredibly cheap to use that drug, and it becomes the benchmark. (AKA the "better than the Beatles problem") As a pharma company you're competing against the former, better (because you were going after easier biology) versions of yourself all the time. This is also true in software, good software often becomes somewhat commoditized. However, in software we've had exponentially increasing compute capacity for some time, which means the next product can be exponentially better than the previous one simply because new things become actually possible to do when they weren't before. This by and large isn't and can't be true in pharma.
- bigYahnz 7y agoSure, but what is the reason a lot of the bigger players are putting less into R&D and more into aquisitions buying up smaller micro-cap companies after they've managed to get to approval and then wear down shareprice before enevitably being bought out or sold off? What is the expense for the average drug to get from p1 through p3 and then through pdufa approval assuming it will only take a single submission for approval (Hi $HRTX and $OCUL, you fucking bastards)? What percent even make it all the way through p3? What sort of financing are we talking about? An offering to dilute sharholders? Saddle the company with so much debt it is coming out of their eyes? Has this sector done very well compared to the broad market during the last 5 +/- years? Odd, if they're just jacking up prices sky high, hey?
- colordrops 7y agoWhy are there not generics for this drug considering that any patents are certainly expired at this point?
- refurb 7y agoI’d love to know what company you worked for. I worked in the drug industry for one of the “good guys”. We thought some companies were destroying the reputation of the industry. When we launched drugs, we typical launched at a lower price than the competition. Why? Because even 10-20% lower was a profitable venture. And it keeps the pitchforks away.
- kgwxd 7y agoIt's obvious you're not naming the company out of self preservation. It's also obvious the people running these companies have no shame or fear of legal repercussion. Whatever social norm/political system is allowing both of those things needs to be attacked with full force.