5 ms·

Health care veteran tries to upend the system and bring drug prices down

47 points by vo2maxer 7y ago

DataDrivenMD 7y ago
'Robert Nelsen, of ARCH Venture Partners, said he invested because “I think it’s really cool and I like throwing rocks into the pond.”' Definitely a bold approach that will require lots of cash up front, which explains the $200M round. It will be interesting to see how many VCs let their FOMO get the best of them and fund the first credible copy-cat pitch they hear. After all, there is only one Alexis Borisy out there. It will also be interesting to see what kind of tech or novel operational methodology is developed to deliver on their promise to lower costs. I'll also be interested to see whether they demonstrate substantive progress by the time they raise their next round.
dpflan 7y ago
> “I’ve spent the last 25 years creating breakthrough new medicines,” Borisy said in an interview. “We’ve ratcheted up the prices on them ever higher, frankly, because we can,” he said. “And the reality is we can create a lot of these great new medicines, and turn that into a viable business charging a lot less for them. This is not fantasy world. This is something that can be done.” Is he saying that he has participated in price increases because he could?
- trekrich 7y ago
  yea i suppose so, but then something in his world changed. And he thought maybe we can change this for the better. I would be interested to see what it was. Maybe he can just make more money doing this.
  - toast0 7y ago
    It sounds like the idea is to spend less money on research by seeking to make equivalents (but not generics? and not infringing patents) and then sell them for less. And, presumably, encourage pharmacies to fill with theirs instead of the original. If the development costs really are lower, and the targeted drugs have enough of a market, it seems totally reasonable to reduce end user costs and still make a bunch of money.
    - s1artibartfast 7y ago
      I'm still skeptical. It seems like this approach would be harder than making a biosimilar drug, which still takes >$100 million and 5-8 years. Pharmacies are not allowed to fill will biologic generics without FDA bio-interchangeable approval, which no biologic in the US has obtained. They would not be able to substitute an alternative drug either.
- ldoughty 7y ago
  If I could get a few million dollars _mostly_ at the expense of big businesses/insurers, I would to... Hell, having even 25k in disposable income makes starting a new business a reality... Which is inconceivable when you can pocket less than $1000/paycheck. And competition is what makes other's lives better under a capitalistic economic system (not saying that's the best, but it's what is most of us have)
s1artibartfast 7y ago
It is unclear what differentiates EQRx from other pharma companies. As the article points out: >The idea of creating a “fast-follower” — a new drug that is much like an existing one — is anything but new. All I see is the claim to come in with competitive pricing - something else that is anything but new. >But fast-followers do not compete on price, because lowering price has not historically resulted in selling more units of a drug.
- aaavl2821 7y ago
  that last quote seems strange to me. There are certainly instances where fast followers price lower and got significant share. The hepatitis c market is a good recent example. Gilead had the first drug and then two other companies followed shortly thereafter pricing at ~20-50% discounts and got significant share
  - s1artibartfast 7y ago
    Yeah, I believe a number of biosimilars have entered the market with steep discounts as well.
- snarf21 7y ago
  It is also weird that he talks about the reason he raised prices at companies in the past was because it was fiduciary to shareholders. Then he starts a new company with VC money. I might be more believing if the company was a B corp. We need a different approach to drug development that is not this. The big issue with drugs is that there are only legal protections for generics and other countries have far different bargaining power. We need some kind of shared risk and reimbursement model with every country having access to the ability to buy or create generics based on them paying to support the research. This is something that could be easily spearheaded by a Gates foundation or its ilk.
  - s1artibartfast 7y ago
    What do you mean by there are only legal protections for generics? As I understand it, original developers have the protections, not generics .
keenmaster 7y ago
EQRx could potentially lower drug prices, but only because of competition and not out of the goodness of their hearts. Few companies deliberately lower profits without exogenous pressure. If a company has a 20 year monopoly on a drug and a similar drug shows up before the patent expires, competition will somewhat bring down prices. I say somewhat because healthcare is a convoluted opaque mess.
BarelyLit 7y ago
>Gleevec, the Novartis cancer drug, was approved in 2001 and turned a form of leukemia into a chronic disease. It initially cost $24,000 a year, but the list price reached $100,000 a year by the time it went generic in 2016 Novartis increased the price by about $5k a year. That's insane, I don't think this should be legal. How come there are no laws that keep the prices of medication under control?
- drcross 7y ago
  In the best functioning capitalist systems it's the role of government to prevent monopolies. This is why I enjoy living in Europe, where we have reasonable costs for things like medicine, mobile plans, internet costs, insurance and the like. It sounds like the US has devolved to a crony capitalist system and it's not working for the benefit of the citizens.
  - ridewinter 7y ago
    The common trope is that European price controls hinder innovation in pharmaceuticals [1]. I've read that American pharmaceutical firms spend 4x in R&D per capita than European counterparts. Counterpoints? [1] https://www.nature.com/articles/nrd2293 https://www.nature.com/articles/nrd2293
    - bildung 7y ago
      The 4x spend on research per capita seems to be true. I looked into that before and found that the absolute spend is about $59 billion in the US and probably about $30 billion in the EU [0,1]. With the US population at 327 million and the EU population at 514 million the 1:4 factor seems about right. But there is another factor which IMO is important: The domestic spend on pharmaceuticals. The US healthcare system seems to be more pharmaceutical friendly. Yearly US spend on pharmaceuticals alone is about $330 billion [2], while yearly EU spend on "medical goods", which I assume to include pharmaceuticals, seems to be only €120 billion [3]. So pharmaceutical spend per capita is also about 1:4 when compared to the EU, not just R&D. As production usually follows consumption (which is why e.g. every US and EU car producer has domestic factories in China), one could also argue that the high US health care costs are the reason why so many US pharma companies exist. [0] https://www.healthaffairs.org/do/10.1377/hblog20170307.059036/full/#one https://www.healthaffairs.org/do/10.1377/hblog20170307.05903... [1] https://www.vfa.de/download/the-pharmaceutical-industry-in-germany.pdf https://www.vfa.de/download/the-pharmaceutical-industry-in-g... [2] https://www.actuary.org/content/prescription-drug-spending-us-health-care-system https://www.actuary.org/content/prescription-drug-spending-u... [3] https://ec.europa.eu/eurostat/statistics-explained/index.php/Healthcare_expenditure_statistics https://ec.europa.eu/eurostat/statistics-explained/index.php...
bobosha 7y ago
>Drug companies like to quote statistics that prescription drugs represent only a tenth of medical costs. How true is the claim that drug costs are ~10-15% of the final cost to patients? Apparently, It's the caregivers (hospitals, doctors, nurses etc.) who make up the vast majority of the final bill.

47 points by vo2maxer 7y ago

'Robert Nelsen, of ARCH Venture Partners, said he invested because “I think it’s really cool and I like throwing rocks into the pond.”' Definitely a bold approach that will require lots of cash up front, which explains the $200M round. It will be interesting to see how many VCs let their FOMO get the best of them and fund the first credible copy-cat pitch they hear. After all, there is only one Alexis Borisy out there. It will also be interesting to see what kind of tech or novel operational methodology is developed to deliver on their promise to lower costs. I'll also be interested to see whether they demonstrate substantive progress by the time they raise their next round.

dpflan 7y ago

> “I’ve spent the last 25 years creating breakthrough new medicines,” Borisy said in an interview. “We’ve ratcheted up the prices on them ever higher, frankly, because we can,” he said. “And the reality is we can create a lot of these great new medicines, and turn that into a viable business charging a lot less for them. This is not fantasy world. This is something that can be done.” Is he saying that he has participated in price increases because he could?

trekrich 7y ago
yea i suppose so, but then something in his world changed. And he thought maybe we can change this for the better. I would be interested to see what it was. Maybe he can just make more money doing this.
- toast0 7y ago
  It sounds like the idea is to spend less money on research by seeking to make equivalents (but not generics? and not infringing patents) and then sell them for less. And, presumably, encourage pharmacies to fill with theirs instead of the original. If the development costs really are lower, and the targeted drugs have enough of a market, it seems totally reasonable to reduce end user costs and still make a bunch of money.
  - s1artibartfast 7y ago
    I'm still skeptical. It seems like this approach would be harder than making a biosimilar drug, which still takes >$100 million and 5-8 years. Pharmacies are not allowed to fill will biologic generics without FDA bio-interchangeable approval, which no biologic in the US has obtained. They would not be able to substitute an alternative drug either.
ldoughty 7y ago
If I could get a few million dollars _mostly_ at the expense of big businesses/insurers, I would to... Hell, having even 25k in disposable income makes starting a new business a reality... Which is inconceivable when you can pocket less than $1000/paycheck. And competition is what makes other's lives better under a capitalistic economic system (not saying that's the best, but it's what is most of us have)

s1artibartfast 7y ago

It is unclear what differentiates EQRx from other pharma companies. As the article points out: >The idea of creating a “fast-follower” — a new drug that is much like an existing one — is anything but new. All I see is the claim to come in with competitive pricing - something else that is anything but new. >But fast-followers do not compete on price, because lowering price has not historically resulted in selling more units of a drug.

aaavl2821 7y ago
that last quote seems strange to me. There are certainly instances where fast followers price lower and got significant share. The hepatitis c market is a good recent example. Gilead had the first drug and then two other companies followed shortly thereafter pricing at ~20-50% discounts and got significant share
- s1artibartfast 7y ago
  Yeah, I believe a number of biosimilars have entered the market with steep discounts as well.
snarf21 7y ago
It is also weird that he talks about the reason he raised prices at companies in the past was because it was fiduciary to shareholders. Then he starts a new company with VC money. I might be more believing if the company was a B corp. We need a different approach to drug development that is not this. The big issue with drugs is that there are only legal protections for generics and other countries have far different bargaining power. We need some kind of shared risk and reimbursement model with every country having access to the ability to buy or create generics based on them paying to support the research. This is something that could be easily spearheaded by a Gates foundation or its ilk.
- s1artibartfast 7y ago
  What do you mean by there are only legal protections for generics? As I understand it, original developers have the protections, not generics .

keenmaster 7y ago

EQRx could potentially lower drug prices, but only because of competition and not out of the goodness of their hearts. Few companies deliberately lower profits without exogenous pressure. If a company has a 20 year monopoly on a drug and a similar drug shows up before the patent expires, competition will somewhat bring down prices. I say somewhat because healthcare is a convoluted opaque mess.

BarelyLit 7y ago

>Gleevec, the Novartis cancer drug, was approved in 2001 and turned a form of leukemia into a chronic disease. It initially cost $24,000 a year, but the list price reached $100,000 a year by the time it went generic in 2016 Novartis increased the price by about $5k a year. That's insane, I don't think this should be legal. How come there are no laws that keep the prices of medication under control?

drcross 7y ago
In the best functioning capitalist systems it's the role of government to prevent monopolies. This is why I enjoy living in Europe, where we have reasonable costs for things like medicine, mobile plans, internet costs, insurance and the like. It sounds like the US has devolved to a crony capitalist system and it's not working for the benefit of the citizens.
- ridewinter 7y ago
  The common trope is that European price controls hinder innovation in pharmaceuticals [1]. I've read that American pharmaceutical firms spend 4x in R&D per capita than European counterparts. Counterpoints? [1] https://www.nature.com/articles/nrd2293 https://www.nature.com/articles/nrd2293
  - bildung 7y ago
    The 4x spend on research per capita seems to be true. I looked into that before and found that the absolute spend is about $59 billion in the US and probably about $30 billion in the EU [0,1]. With the US population at 327 million and the EU population at 514 million the 1:4 factor seems about right. But there is another factor which IMO is important: The domestic spend on pharmaceuticals. The US healthcare system seems to be more pharmaceutical friendly. Yearly US spend on pharmaceuticals alone is about $330 billion [2], while yearly EU spend on "medical goods", which I assume to include pharmaceuticals, seems to be only €120 billion [3]. So pharmaceutical spend per capita is also about 1:4 when compared to the EU, not just R&D. As production usually follows consumption (which is why e.g. every US and EU car producer has domestic factories in China), one could also argue that the high US health care costs are the reason why so many US pharma companies exist. [0] https://www.healthaffairs.org/do/10.1377/hblog20170307.059036/full/#one https://www.healthaffairs.org/do/10.1377/hblog20170307.05903... [1] https://www.vfa.de/download/the-pharmaceutical-industry-in-germany.pdf https://www.vfa.de/download/the-pharmaceutical-industry-in-g... [2] https://www.actuary.org/content/prescription-drug-spending-us-health-care-system https://www.actuary.org/content/prescription-drug-spending-u... [3] https://ec.europa.eu/eurostat/statistics-explained/index.php/Healthcare_expenditure_statistics https://ec.europa.eu/eurostat/statistics-explained/index.php...

bobosha 7y ago

>Drug companies like to quote statistics that prescription drugs represent only a tenth of medical costs. How true is the claim that drug costs are ~10-15% of the final cost to patients? Apparently, It's the caregivers (hospitals, doctors, nurses etc.) who make up the vast majority of the final bill.