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> But I do appreciate the fact that some market incentives (profits) exist to encourage greedy companies to come out with new drugs. I fear lower innovation in
by thaumaturgy 7y ago
> But I do appreciate the fact that some market incentives (profits) exist to encourage greedy companies to come out with new drugs. I fear lower innovation in its absence.
I think of this as a "prayer to innovation", in the cargo-cultism sense. Like tax relief for the wealthy, the prayer goes that "if we can just give these people more money, they'll improve our lives".
Multiple studies have found links between drug pricing and the development of new drugs, but it doesn't work in the obvious way. Large pharmaceutical companies often rely on purchasing smaller startups who do the actual research into developing new drugs [1] but don't have the expertise in bringing the new drug to market and making it successful. The larger pharma companies need financial capacity for this, but since the patents have expired on a lot of other successful drugs before the companies recovered the profits they wanted, they're relying on captive markets for the monopolies they still have in niche pharmaceuticals [2].
These companies are profit-motivated. They aren't working for the public interest. They have no particular desire to "innovate"; their business model instead relies on identifying innovators, buying them, and then selling the product of their research at high prices for as long as possible.
Price controls for pharmaceuticals would ultimately reduce the funding available for the R&D startups, which would limit the creation of new drugs. But it's not clear that allowing big pharma companies to continue charging extortionate rates for life-saving medicines is a good solution to this, nor is it a guarantee for future innovation.
It seems like single-payer insurance and more federal funding for pharmaceutical R&D would be a far better solution than defending predatory drug pricing.
[1]: https://www.forbes.com/sites/stanfleming/2019/06/20/the-relationship-between-drug-prices-and-innovation/ https://www.forbes.com/sites/stanfleming/2019/06/20/the-rela...
[2]: https://www.healthaffairs.org/do/10.1377/hblog20190228.636555/full/ https://www.healthaffairs.org/do/10.1377/hblog20190228.63655...
- rayiner 7y ago> They have no particular desire to "innovate"; their business model instead relies on identifying innovators, buying them, and then selling the product of their research at high prices for as long as possible. Isn't that to a great degree how Silicon Valley works too? Google didn't develop Android, for example. It acquired Android, Inc. and then plugged it into the Google ecosystem. Such acquisitions are a fundamental pillar of R&D. They enable startups to do what they do best, and allow big companies to take over when it is time to try and bring a product to market.
- tptacek 7y agoI think your point is well taken but Google does a metric crapload of innovation on the Android platform.
- thaumaturgy 7y agoSure, but Google and Pfizer (to pick an example at random) aren't exactly equivalent. Few people will die if Google suddenly decides to jack up their pricing on one or more of their services. The incentives and market pressures are likewise different. Despite the valid criticisms of Google's anticompetitve practices, they have a far less captive market than any large pharmaceutical company does. If Google behaves too badly, they'll become vulnerable; meanwhile, a pharmaceutical company can increase drug pricing for vulnerable people as much as they care to, as long as the company has a patent-protected monopoly on the drug, and people will either find a way to pay it, or they will die. This business model deserves far more scrutiny than any Silicon Valley darling simply because people's lives and well-being are at stake.
- tptacek 7y agoTo ratchet Rayiner's argument forward to its next step: if the difference between Google and Pfizer is that Pfizer's work is more important, why would it make sense to de-incentivize it by capping its profits? Shouldn't we want drug development to be an attractive industry for entrants?
- xg15 7y agoI wonder how important the R&D part actually is. The most benefit for society seems in a steady supply of many pharmaceuticals we already have. Of course R&D into research for cancer, Alzheimer's, new antibiotics etc would be critically important - but one would need to know if pharma companies actually prioritize that at all.
- pixl97 7y ago>why would it make sense to de-incentivize it by capping its profits Because like most publicly traded companies all they start caring about it profit maximization over everything else.
- wbl 7y agoFederal R&D does not aim at bringing drugs to market. It aims at basic biology.
- mattkrause 7y agoThe Forbes article glosses over the tremendous amount of work needed to move a candidate that works on cells in a dish (or a mouse) through clinical trials and into something that can be picked up at CVS. These are hard—-and capital-intensive—things in their own right—it’s not like Apple snapping up your an app and adding it to the next iOS release.
- stevetodd 7y ago> It seems like single-payer insurance and more federal funding for pharmaceutical R&D would be a far better solution than defending predatory drug pricing. That seems like just another prayer to a different god. As much as I would like to believe that the government is motivated by doing what is best for its people, it seems more interested in self preservation and maintaining its own power. I don't see much evidence of the government being motivated to be wise with the money we give it.