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I truly do not understand the purpose of a free market for pharmaceuticals. The demand for these drugs is almost completely inelastic, as it is driven by the st

I truly do not understand the purpose of a free market for pharmaceuticals. The demand for these drugs is almost completely inelastic, as it is driven by the statistical incidence of the underlying medical conditions. This makes central planning remarkably easy compared to typical consumer goods. The government already sponsors the vast majority of exploratory, pre-clinical, and early-phase clinical research; all it would take to expand that program to include later-phase clinical trials would be increased funding. A nationalized pharmaceutical industry that provides drugs at cost seems like it would be a tremendous boon to our society, only requiring the "sacrifice" of the opulent lifestyles of the executives and investors profiting off the extortionate practices of our current system.

the_cat_kittles 7y ago
you are correct
droffel 7y ago
The big issue I see here is the proper allocation of this earmarked funding. Would all of it go to aids research? Maybe half to aids, half to schizophrenia treatments? But then what about [insert condition here]? The 'free' market may have a lot of perverse incentives in this environment, but I'm not sure how else you could prioritize which drug research has the most impact (without it turning into a capital sink that has severely diminishing returns due to limitations of the skilled humans necessary to do the job)
- fallingfrog 7y ago
  Can’t possibly be any worse than it is now, with Lyme disease still having no vaccine while billions of dollars are plowed into boner pills.
  - ChrisLomont 7y ago
    Maybe one is harder to solve?
  - mattkrause 7y ago
    The initial "boner pill" was also discovered entirely by accident--it was originally meant to be a hypertension/angina drug. While it wasn't very good for that, it did have a...marked side-effect, which Pfizer ran with.
- InvisibleCities 7y ago
  >The big issue I see here is the proper allocation of this earmarked funding. The overwhleming majority of exploratory, pre-clinical, and early-phase clinical research is already funded by government grants, particularly from the CDC and NIH. To the extent that this is a "problem", it is one the system already faces. Personally, I would prefer that research funding decisions are made by public officials that are at least nominally accountable to the electorate over ruthless capitalists who are accountable only to their shareholders.
  - aantix 7y ago
    >The overwhleming majority of exploratory, pre-clinical, and early-phase clinical research is already funded by government grants, particularly from the CDC and NIH. The overwhelming number of SAAS prototypes are made by engineers on the weekends - just take a few of those, and $$$, profit. ... Of course not. Exploratory, initial research is not the same as being successful at bringing a drug to market. Who decides what research to follow? It's successful in animal models, but then later not in humans? Or fails the one of the clinical phase trials. Or isn't safe. Drug companies fail. Even if something is promising initially, doesn't make it a slam dunk. Billions can be spent only to have a potential drug sunk by one of the trials. There are absolute risks. There are tough decisions to be made on which looks most promising and given that money and time and researchers aren't infinite, you have to make the calls on what looks most promising.
    - InvisibleCities 7y ago
      The questions and issues you pose are real, but they apply equally regardless of whether the decisions about research funding are made by for-profit pharmaceutical corporations or a panel of government experts. I posit that the latter is preferable because they are accountable to the public, whereas the former are accountable only to their shareholders and profitability metrics.
  - aaavl2821 7y ago
    It is not true that the vast majority of early stage research is funded by the government. The NIH spends $30-35B a year on research, the top ~15 pharma companies spend $70B+, and about half of that is on early stage R&D. VCs invest $10-20B / year and most of that is early stage as well
- nathanvanfleet 7y ago
  Not so sure why you landed on the "don't bother curing AIDs" argument but ok. I think that ultimately what you are saying is "if there is no profit motive guiding research we won't know what to spend money on." My answer to that is to allocate money for research based on the impact of the solution. So ultimately how many people are affected or how seriously people are effected, and not how much money you might be able to make. We currently have problems with drug companies not even making life-saving drugs that exist already because there are only a handful of people suffering from those particular diseases.
  - droffel 7y ago
    I wasn't intending to single out a particular condition, just labelled a few large-scale areas of active research and development.
siglesias 7y ago
What about the supply? Wouldn't the real culprit here be patents and other protections?
devoply 7y ago
We have to let rich people get richer because the Constitution says so... It's price and parcel of freedom.
- bromuro 7y ago
  Which Constitution are you talking about?
  - naringas 7y ago
    the one which is actually running things? and which isn't written down, they monkey patched it
- dang 7y ago
  We've asked you many times to stop taking HN threads further into political and ideological flamewar. Since you've ignored those requests, we've banned this account until we get some indication that you've had a change of heart and want to use HN as intended. If you don't want to be banned, you're welcome to email hn@ycombinator.com. We're happy to unban anyone who gives us reason to believe that they'll follow the rules in the future.
whatshisface 7y ago
>The demand for these drugs is almost completely inelastic, as it is driven by the statistical incidence of the underlying medical conditions. There are many drugs for which this condition is weakened. Firstly, there are drugs for illnesses that could go untreated. Secondly, there are drugs which have alternatives. In these cases the demand is elastic. Not every drug is uniquely lifesaving with 100% efficacy, in fact a tiny minority are.
pbhjpbhj 7y ago
It's something ridiculous like 40% of all pharma spending being advertising, so you'd also have a lot of advertising workers who'd lose their jobs. We'd also presumably save a lot on duplication and reduced effort of not competing. Now you just have to get power from the rich people, who stand to lose from such moves, long enough to implement them.
- jjoonathan 7y ago
  Or co-opt the rich people with big companies that pay for lots of employee health insurance. I've seen Bezos making waves but I don't know if anything has come from it yet.
- vonmoltke 7y ago
  > It's something ridiculous like 40% of all pharma spending being advertising, so you'd also have a lot of advertising workers who'd lose their jobs. Not sure where you got that number from. The industry spends about $30B in total on marketing, of which about $13.5B is for free samples and $9.6B is for direct-to-consumer advertising: https://www.biopharmadive.com/news/pharma-dtc-spending-outpaces-rest-of-medical-marketing-jama-study-finds/545441/ https://www.biopharmadive.com/news/pharma-dtc-spending-outpa...
devit 7y ago
How does central planning determine which approaches are most likely to result in a successful cure?
PopeDotNinja 7y ago
If big pharma charged ridiculous amounts of money for new drugs, made off-patent drugs dirt cheap, and didn't find new & ridiculous ways to re-patent old drugs, I'd feel better about their business model.
- iambateman 7y ago
  I imagine you’re correct, but could you source ‘re-patent old drugs’? My understanding was that the drug owner had a 7 year exclusive window before the drug was released to public domain. At which point I would’ve expected the drug to be sold near cost. If it’s possible to re-patent a drug, then obviously that process would break. FWIW, 7 years of high prices in exchange for having the drug forever afterward feels like a theoretically good solution to me. Caveat: I know very little about this. ;)
  - waiquoo 7y ago
    Generally it's patents on drug delivery systems, like fast dissolve gelcaps on the name brand vs pressed pills in the generic
  - logosmonkey 7y ago
    The biggest thing they do is file multiple patents for different parts of a drug. So they can have a 100 or so patents on a single drug and have the patents staggered over time. (Humira is a good example of this) If that doesn't work they slightly alter stuff like dosage per pill and re-patent that.
    - rayiner 7y ago
      That doesn’t work because the original pill is itself prior art to every patent as of the date it’s released. So you either claim priority to the first batch of patents, or your later patent is defeated by your own prior art. Same thing with changing the dosage. Even if you can show a new discovery that wasn’t obvious from the original patent, that doesn’t prevent anyone from making a pill with the original dosage. The way this works in practice is that there is a stream of patents on incremental improvements. Doctors continue to prescribe the branded, patented drug (because they have no reason not to) even though the original drug was fine. Insulin is like this. If there was a substantial market for the 1923 bovine insulin produced by Eli Lilly, it would be cheap. Instead, insurance is willing to cover the high prices of newer, incrementally better versions. Leaving a relatively small market for a worse, but patent free version.
ulucs 7y ago
This situation has nothing to do with "free markets". The problem is the horribly high price of entry enabling the incumbents to have monopoly power over the market. Giving the control of the prices to the government does nothing to solve the problem, it only adds a level of indirection. Pharma companies are still going to rally for the price increases and the prices will continue going up as much as the politicians can get away with it. The real solution is lowering the barriers of entry, or at least allowing people to import drugs from a select number of countries. Then the markups will start tumbling down to reasonable levels.
- Vysero 7y ago
  Seems like a solution to me.
- opless 7y ago
  The real solution is a single major social healthcare program, throughout all the states paid for by federal taxes. A single major provider of healthcare will have better negotiating powers than the multitude of hospitals and insurance programs as is at the moment. Of course, with it being federally funded, the health system will be wanting to keep costs down. Congress can help this by forcing bad actors to behave ethically by removing their licenses to operate, and stripping them of their patents. Something other governments have done in the past. However, in the US, you have a president that sides against the people, and for big pharma. https://www.bbc.co.uk/news/business-44087735 https://www.bbc.co.uk/news/business-44087735
  - refurb 7y ago
    Two things: 1) The largest private insurers in the US cover more people than many single payer countries, like Canada for example. They don’t get better prices. 2) As someone who works in the drug industry, Trump is actually the first President in recent history that is freaking out the pharma companies. His “international price referencing” proposal is being taken very seriously as it would have very negative consequences.
    - 7y ago
conanbatt 7y ago
Pharma in the US is not a free market. Pharma in the US is not a free market. Pharma in the US is not a free market. Pharma in the US is not a free market.
- dang 7y ago
  Maybe not, but please don't post unsubstantive comments here.
4ntonius8lock 7y ago
Well, our corporatist system isn't exactly free trade. Most people who talk about Adam Smith haven't actually read him: "The trade of a joint stock company is always managed by a court of directors. This court, indeed, is frequently subject, in many respects, to the control of a general court of proprietors. But the greater part of those proprietors seldom pretend to understand anything of the business of the company, and when the spirit of faction happens not to prevail among them, give themselves no trouble about it, but receive contentedly such half-yearly or yearly dividend as the directors think proper to make to them. This total exemption from trouble and from risk, beyond a limited sum, encourages many people to become adventurers in joint stock companies, who would, upon no account, hazard their fortunes in any private copartnery." Adam Smith Fortunes aren't only monetary, but reputation.
nostromo 7y ago
I truly do not understand the purpose of a free market for food. The demand for food is almost completely inelastic, as it is driven by the biological need for sustenance. This makes central planning remarkably easy compared to typical consumer goods. A nationalized food industry that provides food at cost seems like it would be a tremendous boon to our society. It's time we give Washington full control of our nation's food market.
- pixl97 7y ago
  Heh, you really dont understand the US at all and the effects of the commerce clause lawsuits. It is a multibillion dollar industry of government handouts.
- opportune 7y ago
  The production of food is extremely decentralized whereas pharmaceuticals are quite centralized. Many countries have nationalized industries similar to pharmaceuticals, such as petroleum production, and it has been successful.
- PhasmaFelis 7y ago
  Just for starters, there are many different kinds of food, and the barriers to entry are relatively low. Everyone needs some food, but there's plenty of room for competition when there's filet mignon vs. hamburger vs. beans and multiple providers for each. That's a textbook condition where the free market can serve everyone well. With a lot of medicines, in the current regulatory environment, there is one product from one manufacturer, and you must pay what they want or suffer. When you resort to sarcastic mockery, people are going to look a lot harder for holes in your argument. If you must do that, you should start by making sure your argument is solid, or at least not transparently flawed.
- zeptoon 7y ago
  Lol it's possible to make/find your own food. Try making your own chemotherapy drug. Reasoning by "hey, let's pick an analogy that isn't remotely the same" leads to BS conclusions.
- cat199 7y ago
ChrisLomont 7y ago
>This makes central planning remarkably easy compared to typical consumer goods. What if bureaucrats are much more risk averse than investors? We may end up with less drugs. The same things happens when taxpayers get too many stories of paying scientist salaries for things that fail. Letting investors and those more knowledgeable of markets and drugs might end up making drugs that wouldn't happen on taxpayer money only. >all it would take to expand that program to include later-phase clinical trials would be increased funding. [1] claims ~60 new drugs approved in 2018. [2] puts the cost of a new drug, plus post analysis, at $3B. This is already ~180B, perhaps not counting the ~80% of drugs that fail to make it to market. For scale, the entire NIH budget is ~12B; the money paid by the govt for drug research is a tiny part of the cost to get the drug to market, (otherwise more universities would start their own drug companies) Raising another 180B from taxpayers is no small feat, and if that could be done, it's not clear this is the best space to spend it. It may be much cheaper overall to let investors take the risks (and thus also get rewards). >A nationalized pharmaceutical industry that provides drugs at cost seems like it would be a tremendous boon to our society Agreed, assuming that it would truly cost less to do this. The govt is not terribly efficient at many things the market provides, from power to package delivery. The most cost efficient outcomes usually come from govt ensuring markets are competitive, then letting companies fight for sales, causing them to develop and fight over efficiency gains. A better fight might be to find ways to make the current market more competitive while still delivering results. [1] https://www.forbes.com/sites/bernardmunos/2019/01/14/2018-new-drugs-approvals-an-all-time-record-and-a-watershed/#53fea3cb332d https://www.forbes.com/sites/bernardmunos/2019/01/14/2018-ne... [2] https://www.policymed.com/2014/12/a-tough-road-cost-to-develop-one-new-drug-is-26-billion-approval-rate-for-drugs-entering-clinical-de.html https://www.policymed.com/2014/12/a-tough-road-cost-to-devel...
- mattkrause 7y ago
  The NIH budget is much, much larger: $39.2B https://www.nih.gov/about-nih/what-we-do/budget https://www.nih.gov/about-nih/what-we-do/budget
  - ChrisLomont 7y ago
    Oops. You’re correct. The point still stands, though: the amount needed to bring drugs to market is vastly more, and if taxpayers were going to pay this much more in taxes, it’s not clear this is the best use of those new taxes.
entee 7y ago
You might be right to a certain extent, but keep in mind just how expensive trials are. Many millions sometimes even into the 10s of millions of dollars for a single trial depending on the indication. That's a ton of money. For reference, an RO1 grant from the NIH (the bread and butter grant for biology research in the US) is about $250-$500K a year for one lab. That means for the price of one phase 3 trial you could fund 20 labs looking into how diseases work. There are plenty of private sector actors that will fund the phase 3 trial, very few that will fund the basic science. So your choices are: 1.) Cut funding for basic research, move the money to clinical development 2.) Increase funding for research overall, but then where does the money come from? In the case of 2, you'd probably have to boost funding a lot to match the private sector spending. Pfizer spends $8B/year or so on R&D. The NIH budget is $40B. So to match a single pharma's total R&D budget (granted much of that isn't strictly clinical trials, but the entire drug development process), you'd have to increase NIH's budget by 20-25%. There are always trade-offs, and these are hard ones to make. Perhaps they should be tilted more toward the government, but the numbers are really large, so it's good to understand them before making a conclusion.
- guelo 7y ago
  Pfizer also spends $14 billion/year on marketing, which patients have to pay for.
  - entee 7y ago
    I won’t defend the marketing very much, I think there’s a lot wrong in pharma marketing. The only (very slight) defense I’d make is that marketing when done well brings in more resources than it costs and helps the broader org. That said, it’s hard to know and it’s a difficult area morally.
refurb 7y ago
You’re lumping all drugs into one basket. The demand for some drugs is very elastic. A good example is what I take for stomach acid. I stick with generic ranitidine and skip the esomeprazole. Is ranitidine inferior? Yeah, probably, but it’s worth the cost savings. Even in markets like cancer there is competition. However, a big problem is that the person who pays, the person who understands the data and the person who should make the choice are all different.
rlt 7y ago
> A nationalized pharmaceutical industry that provides drugs at cost Would the drugs be made available to other countries? If so, wouldn't we be subsidizing drug development for the rest of the world? (maybe that's ok?)
partiallypro 7y ago
I think it has a lot more to do with the complete inability of the US to import drugs from other countries. I don't know why it's not legal and highly regulated to do so. People are already doing it illegally with fentanyl, imported from China. We could better stop that if we had a system in place to combat it and allow it for certain categories of drugs. US firms have no competition or reason to lower prices. Add that to long FDA processes and it's incredibly expensive to compete.
- s1artibartfast 7y ago
  They are the same multinational firms operating in other countries and selling the same drugs.
rayiner 7y ago
I’ll address your second point first because I think it’s important for framing the debate. Worldwide profits for publicly traded pharmaceutical companies adds up to $200 billion. That’s 2.7% of worldwide health spending, and 5.7% of US health spending even if you allocate all worldwide profits to the US alone. As to your first point: what is the limiting principle to your theory? If the government can efficiently run an industry as complicated as drug development, shouldn’t it be able to efficiently run every other industry as well? If you could squeeze out Facebook’s 30% profit margins by nationalizing the web tech industry, without any adverse consequences, I fail to see why you wouldn’t do so. The fact that prices are inelastic (and they’re often not) doesn’t get you all the way there. That tells you that the government may need to play a role in regulating prices in the extreme case. But the elasticity of price has nothing to do with the government’s competency to run a nationalized industry. Nobody dies if Facebook imposes unreasonable impingements in privacy. But is that the dispositive fact for why the government wouldn’t be competent to run the web tech industry?
- amelius 7y ago
  > If the government can efficiently run an industry as complicated as drug development, shouldn’t it be able to efficiently run every other industry as well? If you could squeeze out Facebook’s 30% profit margins by nationalizing the web tech industry, without any adverse consequences, I fail to see why you wouldn’t do so. I think the answer lies outside the realm of the economy. Many people seek meaning and purpose in their lives and jobs, and for instance many universities in the world are essentially state-run. You can't really ignore the effectiveness of this arrangement. I think the same would hold for medical/pharmaceutical institutes, whereas something like Facebook would, in this light, be a totally different thing.
  - rayiner 7y ago
    Except the university departments that do produce technology generally are tightly integrated with industry. How many Stanford and MIT professors and graduate students launched startups? And what would happen to that system if there was no exist into the private sector?
_edo 7y ago
Simply assuming that the proper allocation of resources is easy in this or any other industry is wishful thinking. If drugs have any substitutes the demand side already goes from easy to hard. When drug treatments can cost tens or hundreds of thousands of dollars we have more demand for medical treatments than we have supply. Even the concept of providing drugs "at cost" is complicated because costs vary not only with the price of inputs but with amount supplied. On the supply side the inputs for the pharmaceutical industry aren't infinite. Whether it's chemists, chemicals, warehouse space, machinery, or time all of these things are rivalrous. When you put a chemist on one project you take them away from another. If you put a chemical in one drug you take it away from another. If you make a factory produce one drug it stops producing another. In order to solve the problem of maximizing the benefit of the resources being used we can use a market that uses prices and profits to coordinate itself, or we can have a group of really smart people trying to reason out what is needed where. Markets are historically good at solving this type of problem, bureaucrats are historically bad at it.
aaavl2821 7y ago
It is not true that the vast majority of early stage research is funded by the government. The NIH spends $30-35B a year on research, the top ~15 pharma companies spend $70B+, and about half of that is on early stage R&D. VCs invest $10-20B / year and most of that is early stage as well So implementing a publicly funded drug r&d industry would be vastly more complicated than "increased funding" High drug prices are a major issue (arguably though, they are less of an issue than high hospital / physician costs bc these make up 50% of healthcare spend compared to 10-20% for drugs), but it is disappointing that people are so unaware of the basics of how the industry works
ianai 7y ago
I think either windfall awards for successful, new medications that then become public domain and production and/or public loans with gracious forgiveness conditions for meds that fail to make it out of the trials would significantly help the market clear. It’s inefficient to let a company coalesce all the resources and knowledge needed to develop a medication for a disease and then let or force that company into bankruptcy after a failed trial. Those people and resources can more readily retool, refocus, and so on onto the next medication than always starting from scratch. Windfall payments should make the government able to produce and deliver he medication at the rate of occurrence in population instead of a pricing mechanism. Just my .02 though.
elif 7y ago
The purpose is campaign financing.

the_cat_kittles 7y ago

you are correct

droffel 7y ago

The big issue I see here is the proper allocation of this earmarked funding. Would all of it go to aids research? Maybe half to aids, half to schizophrenia treatments? But then what about [insert condition here]? The 'free' market may have a lot of perverse incentives in this environment, but I'm not sure how else you could prioritize which drug research has the most impact (without it turning into a capital sink that has severely diminishing returns due to limitations of the skilled humans necessary to do the job)

fallingfrog 7y ago
Can’t possibly be any worse than it is now, with Lyme disease still having no vaccine while billions of dollars are plowed into boner pills.
- ChrisLomont 7y ago
  Maybe one is harder to solve?
- mattkrause 7y ago
  The initial "boner pill" was also discovered entirely by accident--it was originally meant to be a hypertension/angina drug. While it wasn't very good for that, it did have a...marked side-effect, which Pfizer ran with.
InvisibleCities 7y ago
>The big issue I see here is the proper allocation of this earmarked funding. The overwhleming majority of exploratory, pre-clinical, and early-phase clinical research is already funded by government grants, particularly from the CDC and NIH. To the extent that this is a "problem", it is one the system already faces. Personally, I would prefer that research funding decisions are made by public officials that are at least nominally accountable to the electorate over ruthless capitalists who are accountable only to their shareholders.
- aantix 7y ago
  >The overwhleming majority of exploratory, pre-clinical, and early-phase clinical research is already funded by government grants, particularly from the CDC and NIH. The overwhelming number of SAAS prototypes are made by engineers on the weekends - just take a few of those, and $$$, profit. ... Of course not. Exploratory, initial research is not the same as being successful at bringing a drug to market. Who decides what research to follow? It's successful in animal models, but then later not in humans? Or fails the one of the clinical phase trials. Or isn't safe. Drug companies fail. Even if something is promising initially, doesn't make it a slam dunk. Billions can be spent only to have a potential drug sunk by one of the trials. There are absolute risks. There are tough decisions to be made on which looks most promising and given that money and time and researchers aren't infinite, you have to make the calls on what looks most promising.
  - InvisibleCities 7y ago
    The questions and issues you pose are real, but they apply equally regardless of whether the decisions about research funding are made by for-profit pharmaceutical corporations or a panel of government experts. I posit that the latter is preferable because they are accountable to the public, whereas the former are accountable only to their shareholders and profitability metrics.
- aaavl2821 7y ago
  It is not true that the vast majority of early stage research is funded by the government. The NIH spends $30-35B a year on research, the top ~15 pharma companies spend $70B+, and about half of that is on early stage R&D. VCs invest $10-20B / year and most of that is early stage as well
nathanvanfleet 7y ago
Not so sure why you landed on the "don't bother curing AIDs" argument but ok. I think that ultimately what you are saying is "if there is no profit motive guiding research we won't know what to spend money on." My answer to that is to allocate money for research based on the impact of the solution. So ultimately how many people are affected or how seriously people are effected, and not how much money you might be able to make. We currently have problems with drug companies not even making life-saving drugs that exist already because there are only a handful of people suffering from those particular diseases.
- droffel 7y ago
  I wasn't intending to single out a particular condition, just labelled a few large-scale areas of active research and development.

siglesias 7y ago

What about the supply? Wouldn't the real culprit here be patents and other protections?

devoply 7y ago

We have to let rich people get richer because the Constitution says so... It's price and parcel of freedom.

bromuro 7y ago
Which Constitution are you talking about?
- naringas 7y ago
  the one which is actually running things? and which isn't written down, they monkey patched it
dang 7y ago
We've asked you many times to stop taking HN threads further into political and ideological flamewar. Since you've ignored those requests, we've banned this account until we get some indication that you've had a change of heart and want to use HN as intended. If you don't want to be banned, you're welcome to email hn@ycombinator.com. We're happy to unban anyone who gives us reason to believe that they'll follow the rules in the future.

whatshisface 7y ago

>The demand for these drugs is almost completely inelastic, as it is driven by the statistical incidence of the underlying medical conditions. There are many drugs for which this condition is weakened. Firstly, there are drugs for illnesses that could go untreated. Secondly, there are drugs which have alternatives. In these cases the demand is elastic. Not every drug is uniquely lifesaving with 100% efficacy, in fact a tiny minority are.

pbhjpbhj 7y ago

It's something ridiculous like 40% of all pharma spending being advertising, so you'd also have a lot of advertising workers who'd lose their jobs. We'd also presumably save a lot on duplication and reduced effort of not competing. Now you just have to get power from the rich people, who stand to lose from such moves, long enough to implement them.

jjoonathan 7y ago
Or co-opt the rich people with big companies that pay for lots of employee health insurance. I've seen Bezos making waves but I don't know if anything has come from it yet.
vonmoltke 7y ago
> It's something ridiculous like 40% of all pharma spending being advertising, so you'd also have a lot of advertising workers who'd lose their jobs. Not sure where you got that number from. The industry spends about $30B in total on marketing, of which about $13.5B is for free samples and $9.6B is for direct-to-consumer advertising: https://www.biopharmadive.com/news/pharma-dtc-spending-outpaces-rest-of-medical-marketing-jama-study-finds/545441/ https://www.biopharmadive.com/news/pharma-dtc-spending-outpa...

devit 7y ago

How does central planning determine which approaches are most likely to result in a successful cure?

PopeDotNinja 7y ago

If big pharma charged ridiculous amounts of money for new drugs, made off-patent drugs dirt cheap, and didn't find new & ridiculous ways to re-patent old drugs, I'd feel better about their business model.

iambateman 7y ago
I imagine you’re correct, but could you source ‘re-patent old drugs’? My understanding was that the drug owner had a 7 year exclusive window before the drug was released to public domain. At which point I would’ve expected the drug to be sold near cost. If it’s possible to re-patent a drug, then obviously that process would break. FWIW, 7 years of high prices in exchange for having the drug forever afterward feels like a theoretically good solution to me. Caveat: I know very little about this. ;)
- waiquoo 7y ago
  Generally it's patents on drug delivery systems, like fast dissolve gelcaps on the name brand vs pressed pills in the generic
- logosmonkey 7y ago
  The biggest thing they do is file multiple patents for different parts of a drug. So they can have a 100 or so patents on a single drug and have the patents staggered over time. (Humira is a good example of this) If that doesn't work they slightly alter stuff like dosage per pill and re-patent that.
  - rayiner 7y ago
    That doesn’t work because the original pill is itself prior art to every patent as of the date it’s released. So you either claim priority to the first batch of patents, or your later patent is defeated by your own prior art. Same thing with changing the dosage. Even if you can show a new discovery that wasn’t obvious from the original patent, that doesn’t prevent anyone from making a pill with the original dosage. The way this works in practice is that there is a stream of patents on incremental improvements. Doctors continue to prescribe the branded, patented drug (because they have no reason not to) even though the original drug was fine. Insulin is like this. If there was a substantial market for the 1923 bovine insulin produced by Eli Lilly, it would be cheap. Instead, insurance is willing to cover the high prices of newer, incrementally better versions. Leaving a relatively small market for a worse, but patent free version.

ulucs 7y ago

This situation has nothing to do with "free markets". The problem is the horribly high price of entry enabling the incumbents to have monopoly power over the market. Giving the control of the prices to the government does nothing to solve the problem, it only adds a level of indirection. Pharma companies are still going to rally for the price increases and the prices will continue going up as much as the politicians can get away with it. The real solution is lowering the barriers of entry, or at least allowing people to import drugs from a select number of countries. Then the markups will start tumbling down to reasonable levels.

Vysero 7y ago
Seems like a solution to me.
opless 7y ago
The real solution is a single major social healthcare program, throughout all the states paid for by federal taxes. A single major provider of healthcare will have better negotiating powers than the multitude of hospitals and insurance programs as is at the moment. Of course, with it being federally funded, the health system will be wanting to keep costs down. Congress can help this by forcing bad actors to behave ethically by removing their licenses to operate, and stripping them of their patents. Something other governments have done in the past. However, in the US, you have a president that sides against the people, and for big pharma. https://www.bbc.co.uk/news/business-44087735 https://www.bbc.co.uk/news/business-44087735
- refurb 7y ago
  Two things: 1) The largest private insurers in the US cover more people than many single payer countries, like Canada for example. They don’t get better prices. 2) As someone who works in the drug industry, Trump is actually the first President in recent history that is freaking out the pharma companies. His “international price referencing” proposal is being taken very seriously as it would have very negative consequences.
  - 7y ago

conanbatt 7y ago

Pharma in the US is not a free market. Pharma in the US is not a free market. Pharma in the US is not a free market. Pharma in the US is not a free market.

dang 7y ago
Maybe not, but please don't post unsubstantive comments here.

4ntonius8lock 7y ago

Well, our corporatist system isn't exactly free trade. Most people who talk about Adam Smith haven't actually read him: "The trade of a joint stock company is always managed by a court of directors. This court, indeed, is frequently subject, in many respects, to the control of a general court of proprietors. But the greater part of those proprietors seldom pretend to understand anything of the business of the company, and when the spirit of faction happens not to prevail among them, give themselves no trouble about it, but receive contentedly such half-yearly or yearly dividend as the directors think proper to make to them. This total exemption from trouble and from risk, beyond a limited sum, encourages many people to become adventurers in joint stock companies, who would, upon no account, hazard their fortunes in any private copartnery." Adam Smith Fortunes aren't only monetary, but reputation.

nostromo 7y ago

I truly do not understand the purpose of a free market for food. The demand for food is almost completely inelastic, as it is driven by the biological need for sustenance. This makes central planning remarkably easy compared to typical consumer goods. A nationalized food industry that provides food at cost seems like it would be a tremendous boon to our society. It's time we give Washington full control of our nation's food market.

pixl97 7y ago
Heh, you really dont understand the US at all and the effects of the commerce clause lawsuits. It is a multibillion dollar industry of government handouts.
opportune 7y ago
The production of food is extremely decentralized whereas pharmaceuticals are quite centralized. Many countries have nationalized industries similar to pharmaceuticals, such as petroleum production, and it has been successful.
PhasmaFelis 7y ago
Just for starters, there are many different kinds of food, and the barriers to entry are relatively low. Everyone needs some food, but there's plenty of room for competition when there's filet mignon vs. hamburger vs. beans and multiple providers for each. That's a textbook condition where the free market can serve everyone well. With a lot of medicines, in the current regulatory environment, there is one product from one manufacturer, and you must pay what they want or suffer. When you resort to sarcastic mockery, people are going to look a lot harder for holes in your argument. If you must do that, you should start by making sure your argument is solid, or at least not transparently flawed.
zeptoon 7y ago
Lol it's possible to make/find your own food. Try making your own chemotherapy drug. Reasoning by "hey, let's pick an analogy that isn't remotely the same" leads to BS conclusions.
cat199 7y ago

ChrisLomont 7y ago

>This makes central planning remarkably easy compared to typical consumer goods. What if bureaucrats are much more risk averse than investors? We may end up with less drugs. The same things happens when taxpayers get too many stories of paying scientist salaries for things that fail. Letting investors and those more knowledgeable of markets and drugs might end up making drugs that wouldn't happen on taxpayer money only. >all it would take to expand that program to include later-phase clinical trials would be increased funding. [1] claims ~60 new drugs approved in 2018. [2] puts the cost of a new drug, plus post analysis, at $3B. This is already ~180B, perhaps not counting the ~80% of drugs that fail to make it to market. For scale, the entire NIH budget is ~12B; the money paid by the govt for drug research is a tiny part of the cost to get the drug to market, (otherwise more universities would start their own drug companies) Raising another 180B from taxpayers is no small feat, and if that could be done, it's not clear this is the best space to spend it. It may be much cheaper overall to let investors take the risks (and thus also get rewards). >A nationalized pharmaceutical industry that provides drugs at cost seems like it would be a tremendous boon to our society Agreed, assuming that it would truly cost less to do this. The govt is not terribly efficient at many things the market provides, from power to package delivery. The most cost efficient outcomes usually come from govt ensuring markets are competitive, then letting companies fight for sales, causing them to develop and fight over efficiency gains. A better fight might be to find ways to make the current market more competitive while still delivering results. [1] https://www.forbes.com/sites/bernardmunos/2019/01/14/2018-new-drugs-approvals-an-all-time-record-and-a-watershed/#53fea3cb332d https://www.forbes.com/sites/bernardmunos/2019/01/14/2018-ne... [2] https://www.policymed.com/2014/12/a-tough-road-cost-to-develop-one-new-drug-is-26-billion-approval-rate-for-drugs-entering-clinical-de.html https://www.policymed.com/2014/12/a-tough-road-cost-to-devel...

mattkrause 7y ago
The NIH budget is much, much larger: $39.2B https://www.nih.gov/about-nih/what-we-do/budget https://www.nih.gov/about-nih/what-we-do/budget
- ChrisLomont 7y ago
  Oops. You’re correct. The point still stands, though: the amount needed to bring drugs to market is vastly more, and if taxpayers were going to pay this much more in taxes, it’s not clear this is the best use of those new taxes.

entee 7y ago

You might be right to a certain extent, but keep in mind just how expensive trials are. Many millions sometimes even into the 10s of millions of dollars for a single trial depending on the indication. That's a ton of money. For reference, an RO1 grant from the NIH (the bread and butter grant for biology research in the US) is about $250-$500K a year for one lab. That means for the price of one phase 3 trial you could fund 20 labs looking into how diseases work. There are plenty of private sector actors that will fund the phase 3 trial, very few that will fund the basic science. So your choices are: 1.) Cut funding for basic research, move the money to clinical development 2.) Increase funding for research overall, but then where does the money come from? In the case of 2, you'd probably have to boost funding a lot to match the private sector spending. Pfizer spends $8B/year or so on R&D. The NIH budget is $40B. So to match a single pharma's total R&D budget (granted much of that isn't strictly clinical trials, but the entire drug development process), you'd have to increase NIH's budget by 20-25%. There are always trade-offs, and these are hard ones to make. Perhaps they should be tilted more toward the government, but the numbers are really large, so it's good to understand them before making a conclusion.

guelo 7y ago
Pfizer also spends $14 billion/year on marketing, which patients have to pay for.
- entee 7y ago
  I won’t defend the marketing very much, I think there’s a lot wrong in pharma marketing. The only (very slight) defense I’d make is that marketing when done well brings in more resources than it costs and helps the broader org. That said, it’s hard to know and it’s a difficult area morally.

refurb 7y ago

You’re lumping all drugs into one basket. The demand for some drugs is very elastic. A good example is what I take for stomach acid. I stick with generic ranitidine and skip the esomeprazole. Is ranitidine inferior? Yeah, probably, but it’s worth the cost savings. Even in markets like cancer there is competition. However, a big problem is that the person who pays, the person who understands the data and the person who should make the choice are all different.

rlt 7y ago

> A nationalized pharmaceutical industry that provides drugs at cost Would the drugs be made available to other countries? If so, wouldn't we be subsidizing drug development for the rest of the world? (maybe that's ok?)

partiallypro 7y ago

I think it has a lot more to do with the complete inability of the US to import drugs from other countries. I don't know why it's not legal and highly regulated to do so. People are already doing it illegally with fentanyl, imported from China. We could better stop that if we had a system in place to combat it and allow it for certain categories of drugs. US firms have no competition or reason to lower prices. Add that to long FDA processes and it's incredibly expensive to compete.

s1artibartfast 7y ago
They are the same multinational firms operating in other countries and selling the same drugs.

rayiner 7y ago

I’ll address your second point first because I think it’s important for framing the debate. Worldwide profits for publicly traded pharmaceutical companies adds up to $200 billion. That’s 2.7% of worldwide health spending, and 5.7% of US health spending even if you allocate all worldwide profits to the US alone. As to your first point: what is the limiting principle to your theory? If the government can efficiently run an industry as complicated as drug development, shouldn’t it be able to efficiently run every other industry as well? If you could squeeze out Facebook’s 30% profit margins by nationalizing the web tech industry, without any adverse consequences, I fail to see why you wouldn’t do so. The fact that prices are inelastic (and they’re often not) doesn’t get you all the way there. That tells you that the government may need to play a role in regulating prices in the extreme case. But the elasticity of price has nothing to do with the government’s competency to run a nationalized industry. Nobody dies if Facebook imposes unreasonable impingements in privacy. But is that the dispositive fact for why the government wouldn’t be competent to run the web tech industry?

amelius 7y ago
> If the government can efficiently run an industry as complicated as drug development, shouldn’t it be able to efficiently run every other industry as well? If you could squeeze out Facebook’s 30% profit margins by nationalizing the web tech industry, without any adverse consequences, I fail to see why you wouldn’t do so. I think the answer lies outside the realm of the economy. Many people seek meaning and purpose in their lives and jobs, and for instance many universities in the world are essentially state-run. You can't really ignore the effectiveness of this arrangement. I think the same would hold for medical/pharmaceutical institutes, whereas something like Facebook would, in this light, be a totally different thing.
- rayiner 7y ago
  Except the university departments that do produce technology generally are tightly integrated with industry. How many Stanford and MIT professors and graduate students launched startups? And what would happen to that system if there was no exist into the private sector?

_edo 7y ago

Simply assuming that the proper allocation of resources is easy in this or any other industry is wishful thinking. If drugs have any substitutes the demand side already goes from easy to hard. When drug treatments can cost tens or hundreds of thousands of dollars we have more demand for medical treatments than we have supply. Even the concept of providing drugs "at cost" is complicated because costs vary not only with the price of inputs but with amount supplied. On the supply side the inputs for the pharmaceutical industry aren't infinite. Whether it's chemists, chemicals, warehouse space, machinery, or time all of these things are rivalrous. When you put a chemist on one project you take them away from another. If you put a chemical in one drug you take it away from another. If you make a factory produce one drug it stops producing another. In order to solve the problem of maximizing the benefit of the resources being used we can use a market that uses prices and profits to coordinate itself, or we can have a group of really smart people trying to reason out what is needed where. Markets are historically good at solving this type of problem, bureaucrats are historically bad at it.

aaavl2821 7y ago

It is not true that the vast majority of early stage research is funded by the government. The NIH spends $30-35B a year on research, the top ~15 pharma companies spend $70B+, and about half of that is on early stage R&D. VCs invest $10-20B / year and most of that is early stage as well So implementing a publicly funded drug r&d industry would be vastly more complicated than "increased funding" High drug prices are a major issue (arguably though, they are less of an issue than high hospital / physician costs bc these make up 50% of healthcare spend compared to 10-20% for drugs), but it is disappointing that people are so unaware of the basics of how the industry works

ianai 7y ago

I think either windfall awards for successful, new medications that then become public domain and production and/or public loans with gracious forgiveness conditions for meds that fail to make it out of the trials would significantly help the market clear. It’s inefficient to let a company coalesce all the resources and knowledge needed to develop a medication for a disease and then let or force that company into bankruptcy after a failed trial. Those people and resources can more readily retool, refocus, and so on onto the next medication than always starting from scratch. Windfall payments should make the government able to produce and deliver he medication at the rate of occurrence in population instead of a pricing mechanism. Just my .02 though.

elif 7y ago

The purpose is campaign financing.