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Indian Government uses special powers to slash cancer drug price by 97%

241 points by Garbage 15y ago

jensnockert 15y ago
It would be interesting to see how much money was lost or gained by Bayer based on this. I assume that usage might go up by at least a factor 20 in India (and their production costs go down) so those 6% might actually be a fair deal in the long run.
- unicron 15y ago
  Probably a big loss. It costs in their other market sectors which include Chemo drugs, various palliative care drugs/equipment. Technically, they're pricing the cure high so it doesn't affect their keeping you sick drugs. This sort of shit is why medicine should be 100% government/taxpayer funded research agencies with an enforced zero profit outcome. Drug companies are simply not ethical when there are shareholders and profits involved.
- rmc 15y ago
  remember that Bayer won't have to manufactor it, someone else does. They get a cut (6%) without having to do any work
  - getsat 15y ago
    They already did the overwhelming majority of the work. Developing that kind of stuff is expensive. I've seen estimates of ~100MM USD quoted for the discovery of a new drug.
  - Tuna-Fish 15y ago
    As others put it, the manufacture of simple chemicals in the quantities involved in pharmaceuticals is effectively free. As in, give me 100k and I'll be able to make enough of the drug for the whole world for the next hundred years. The packaging of most pharmaceuticals is more expensive than the manufacture of their contents. The cost is overwhelmingly in R&D -- finding the chemicals, proving it doesn't kill people, and proving it actually does something useful.
    - crusso 15y ago
      Don't forget a huge expense: Battling lawsuits (mostly frivolous) from users of the drug and potentially paying out huge settlements.
- JumpCrisscross 15y ago
  Fewer than 200 Indians used the drug in 2011; impact on sales should be minimal [1]. Bayer's concern is probably the export of these generics (illegally) to other places where it sources more sales from. [1] http://www.nytimes.com/2012/03/13/business/global/india-overrules-bayer-allowing-generic-drug.html http://www.nytimes.com/2012/03/13/business/global/india-over...
  - piyushranjan 15y ago
    Only 200 people bought it because the price of the drugs is ridiculously high. Even people who are dying would not have been able to afford it.
arkitaip 15y ago
Bayer shareholders should hold the senior management accountable for not caring enough to bring the drug to more than 2% of the Indian market.
- crusso 15y ago
  And if they lower the price drastically in India and then are accused of gouging their customers in other countries? When they lower the price of the drug in India, a gray market arises that resells the drugs to other countries. The presence of the gray market creates yet more opportunities for scam artists to sell fake versions of the drug, creating yet more victims. My point is that this isn't as cut and dry of an issue as you imply.
  - Produce 15y ago
    Human lives are at stake, there's nothing more cut and dry than that. We need to stop trying to make our reality fit our models and start adapting our models to fit reality. This whole business is backwards.
    - tomjen3 15y ago
      Yes human lives are at stake. All the people who invested their stock money in Bayer and plane to retire some day. All the people who depend on the drugs the company makes and so on.
    - crusso 15y ago
      Human lives are at stake if we screw up the drive to discover new drugs that will save future lives. Imagine if you had eliminated Bayer's incentive for even creating this cancer-saving drug in the first place. How many lives would you have ended prematurely? Imagine all the new drug research that depends upon Bayer's initial research that will save yet more lives. Like I said, it's not so cut and dry. The pharmaceutical industry has had quantifiable and demostrable success at a level that is almost unparalleled in history. But your claim is that it's backwards. I think your statement is inherently backwards. The "reality" is that the pharmaceutical industry produces something that society has found to be extraordinarily valuable. The people I see warping models that don't reflect reality are the ones that disregard the cost of keeping the pharmaceutical rate of discovery going. I'd love to see improvements to the industry, but "human lives are at stake! It's all backwards!" along with the "senior management should be held accountable" just don't seem to be statements that head is a direction of improvement.
corin_ 15y ago
I think few people would argue that drug companies' prices are reasonable, and when it comes to life vs. death I no longer care much about the "they're a business, they're allowed to make a profit" line - of course it's still true, and of course they are, but there's a (subjective) line between "making a good profit" and killing people through greed. That said, what pricing would be fair? When people claim that these pills cost bugger all to make, the answer is (perfectly validly) that the second pill costs bugger all, the first one costs $$$$ in R&D. So I don't know how cheap they would have to be to be considered a fairer price, and I've no idea if it's possible for anyone outside the companies to work out - even if you ignore the fact that what's fair is so subjective.
- JumpCrisscross 15y ago
  This is a difficult decision to rule on, without resorting to petty emotions, without access to the underlying data. One must balance the incentive for drug companies to develop drugs (and get that development financed) with the price inelasticity of the healthcare market. There is marginal cost, the cost to produce one more product independent of development cost, and fully amortised cost, which amortises the development (and, holistically, finances future development). Saying we should abolish innovator drug patents ignores the latter. If we take the assumption that a life tomorrow is worth about a life today cutting pharma's revenues 97% means the development model is unsustainable. The government would have to develop drugs (or promise to refund all or most of the cost of developing a drug that gets FDA approved). On the other hand we know that, since most people will pay whatever they able to for healthcare, drug companies have too much leverage. The market doesn't function well un-aided. The problem here is the way this decision has been implemented throws up a lot of regulatory uncertainty. Having an objective framework for how innovator drug companies can be subject to need-based forced licencing (and under what boilerplate terms) would allow pharma companies to plan how to allocate development dollars.
  - tripzilch 15y ago
    While assuming that a life tomorrow is worth about a life today might be reasonable, we're talking about research costs for drugs, and the comparison does not hold to assume that a new drug tomorrow is worth about an already existing drug today. New drugs are often about squeezing out those last few years of life-expectancy, and even if they're not, they're a marginal increase over today's drugs. Meanwhile today's drugs fail to save many many lives because they are unaffordable in order to pay for R&D on new drugs (which will also be unaffordable). See, the system is very broken on both sides. But the choice to me seems very clear: - on the one hand you have +developing new future drugs. except those drugs will only be affordable to a tiny fraction of the world population. additionally this lines the pockets of big pharma and the bureaucracy that keeps the system broken as it currently is ("Bayer was disappointed") - on the other hand developing new drugs will be slowed down for some time, but all people will be able to afford the many current ones that could be saving lives today, big pharma + your FDA bureaucracy will fail and maybe that opens room for a new and better system to emerge so that R&D on drugs may start once more but in a more efficient manner. All the while lives are being saved and quality of live is being improved because today's drugs are affordable to everyone.
vineetdhanawat 15y ago
"The Bayer price of Rs 34,11,898 per year ($69,000) is more than 41 times the projected average per capita income for India in 2012, shattering any measure of affordability." This is good enough for any govt to act so and rightly done as well! Also "6% royalty on net sales every quarter to Bayer" that isnt all unfair
- tomjen3 15y ago
  Bayer is in it to make money, so presumably the reason the Indian government forced this deal is that Bayer would lose money under it. So no, it isn't fair.
  - Yeroc 15y ago
    Keep in mind that the government did NOT force Bayer to manufacture the drug, only to license it. I don't believe Bayer had any interest in pursuing the Indian market whatsoever since it was priced well beyond what the average person could afford. On the question of fairness: Is it fair for people to die because they can't afford a life-saving drug? I'm sure that's what it boiled down to for the Indian government. According to my math if Bayer priced the drug over here the same way they did in India relative to average per-capita income the drug would cost around $1.5 million per year. Would that change your perspective?
    - vineetdhanawat 15y ago
      Maybe, who knows. Bayer reported the price as part of Research Costs etc, maybe true! But at the end Question stands - "Was the price fair?" I dont think so!
MaggieL 15y ago
Why not just do what the Greeks did? Pay for all the drugs with government bonds that are worth nothing. That'll work just as well.
digamber_kamat 15y ago
Government was forced to make such decision because Bayer sold these drugs at a price unaffordable to most Indians. This to me seems like a very stupid decision from Bayer's management. The shareholders must act against the board now. however because of such decisions companies will find it risky to invest in life saving drug research. I think government should also take some steps to win their confidence.
- ttt_ 15y ago
  >> however because of such decisions companies will find it risky to invest in life saving drug research. I disagree. That mentality is precisely the reason that they are overpricing now (and always have done so) as much as they can. People will always need life saving drugs, and ordinary drugs as well. Terminal and cronical patients will always try both traditional and new drugs (or the state will provide it to them in case there is health care). There is absolutely no need to overprice because any price will eventually give a fair ROI for them. What they do instead is maximize profit at the cost of human life. On a different light, a lot of research is funded by government entities worldwide, and even if pharmaceutical companies do their own research, they certainly reference other research that is also publicly funded. Thankfully some states do care a lot about their people and will challenge them. India is doing so now, Brazil has also broken HIV drug patents (they cover the full cost of treatment through Health Care) and I hope to hear more of it from different places.
  - relix 15y ago
    You're talking about an infinite timeline where they are the sole seller of a drug that is used indefinitely. This is false. When patents expire the drug is also made by generic drug making companies for cheap. So upper bound of getting a ROI is the lifetime of a patent (30 years for drugs iirc, 10 years longer because it takes about 10 years to develop, so still effectively 20 years). For every drug that is successful, they pour tons of money into drugs that are eventually considered useless. So the R&D isn't solely for the one successful drug, but also for the losses. A competitor might come in 5 years with a drug for the same problem, that works better. Now the timespan for any ROI has been cut short to 5 years. Looking at the profits of pharmaceutical companies: sure, most medicine is probably overpriced. But saying that they can get a good ROI at any price is false. They will need to recoup the billions spent on R&D.
urza 15y ago
Bayer said it was "disappointed" and would "evaluate options to defend intellectual property rights" in the country. Down-vote me if you like, but I get sick to my stomach when I read sentences like this. If someone is able to deliver and sell the anti-cancer drug by 97% cheaper than you, then in my eyes you have no right to interfere. I am starting to dislike the whole concept of intellectual property and patents and copyright. These are tools of greedy people and bring nothing to the table for the wider audience. No one creates anything just by himself. You are always building on the work of others and merely deriving, combining, changing and mutating it. Whether you do it consciously or unconsciously. It is the principle of cultural evolution and it is why we are where we are. If intellectual property was always practiced the way it is today, I fear we would still be in the Middle Ages.
- gaius 15y ago
  If someone is able to deliver and sell the anti-cancer drug by 97% cheaper than you, then in my eyes you have no right to interfere ... Provided that that "someone" also bears their fair share of the cost of discovery and clinical trials. THAT is the issue here.
  - man1sh 15y ago
    also don't forget that for these companies the poor people in India are the subjects of clinial trials. The mindset of these companies of treating the poor people as Guinea pigs is also disgusting 671 reported deaths http://www.business-standard.com/india/news/human-rights-panel-seeks-reportclinical-trial-deaths/447641/ http://www.business-standard.com/india/news/human-rights-pan... There is no count of no of people who get disabilities but don't die due to trials failing. Who will pay for these? These pharma companies are steered by greed
    - gaius 15y ago
      I am referring to FDA trials, in the US, which can take over a decade and cost 8- or 9-figure dollar sums. These are required before the drug even comes to market.
ThomPete 15y ago
The reason why it's expensive to develop drugs is in large parts because of the process involved to get the approval. Couldn't you turn this on it's head? What if the companies could expense the cost of getting the approval. I.e. the tax payers pay for drugtesting and approval process. Wouldn't this make sense? Since it's in the publics interest to get safe medicin, shouldn't they/we pay for that part.
- nickik 15y ago
  You risk everybody threwing some shit into the pipeline. Now they have to think about if the really want to trie to get it threw.
  - ThomPete 15y ago
    I am not sure I follow? It would force the governments to develop better and cheaper systems themselves to make sure that they can test for cheap. Surely the current scenario isn't working is it?
    - nickik 15y ago
      What I was trying to say: When the goverments pays for testing how will you stop brute force testing? > It would force the governments to develop better and cheaper systems themselves to make sure that they can test for cheap. I doute they cool do that. > Surely the current scenario isn't working is it? Well like most things it kind of works but is not very effective. I agree its not very good right know but I don't know how to change it.
      - ThomPete 15y ago
        I would stop brute force testing simply by putting a limit on it. As far as I know there are some pretty standard procedures you have to go through. Surely it must be possible to somehow validate and verify whether someone is trying to take advantage. You can't hinder some taking advantage of it, but you don't have to IMO. >I doute they cool do that. Of course they can, just like then can improve many other areas in public service. >I agree its not very good right know but I don't know how to change it. Well I for one think its more fair to accept some fraud to make it cheaper for everyone else if possible of course.
yaix 15y ago
My guess is that this is not so much about saving patients from cancer than it is about saving polititians during the next elections.
- deleted 15y ago
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JunkDNA 15y ago
I worked in the drug R&D business for over 8 years. I still follow the industry closely. Some things always get lost in these discussions. First, manufacturing an existing drug is absurdly cheap. Modern industrial chemistry ensures this for all small molecule drugs (note that this is not the same case for the "biologics" which are often fiendishly difficult to make). Almost all the cost in a drug is the manufacturer recouping R&D costs. These costs have been spiraling out of control for 10 years. They are astronomical. A recent Forbes analysis pegs the cost of a new drug with failures of drugs in development folded in anywhere from $3 billion to $12 billion depending on the manufacturer (excellent context and discussion here: http://pipeline.corante.com/archives/2012/02/10/the_terrifying_cost_of_a_new_drug.php http://pipeline.corante.com/archives/2012/02/10/the_terrifyi...). You don't need to be an industry expert to grok that those numbers are wildly unsustainable. It is not possible to keep spending the amount companies spend to make new drugs. In the past, companies would inflate the price in the USA to make up for reduced prices elsewhere. But with all the recent healthcare reform in the USA, that strategy is ending. To add insult to injury, the vast majority of the most commonly used drugs will lose patent protection in the next couple of years. In the industry they call this the patent cliff. There will not be enough new drugs to offset all the ones that go generic. This move by India is a symptom of the wider drug industry problems. There will be more of these kinds of moves in the future. The industry has been searching for ways to more effectively make drugs and have it not be so expensive. But so far they have been striking out for 10 years running. The current strategy is to lay off most of their r&d workforce and offshore and outsource this part of the business. Somewhere out there, a business model is waiting to be found. Whoever cracks that nut and becomes the Southwest of the drug industry is going to make a fortune.
- deleted 15y ago
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- Retric 15y ago
  There are a finite number of useful small molecules you can use as drugs. If it's costing 3-12 billion to find new ones and even then we are failing we may be at a point where it's time to 'give up' on our existing approach. As an upside we can remove a significant slice of our spiraling healthcare costs. We can also remove a lot of drug related advertizing that has dubious healthcare benefits. Unfortunately, that also means antibiotics are going to become infective in the not to distance future. On the net I don't think this is a good thing, but it should free up a lot of vary intelligent people to work on other lines of research. Hopefully, we may eventual start to develop the tools to build direct DNA specific medicines on the fly by using the fruits of those other lines of research.
robmcm 15y ago
Perhaps making drug companies non proffit to ensure all money went back into developing new drugs and perhaps less proffitable drugs (i.e. Drugs targeted at the developing world).
Shivetya 15y ago
Special powers? They mean by force or arms. There is nothing special about theft except when a government does it they are pretty much immune to counter actions. This is little different that Greece having passed laws allowing them to retroactively change bond agreements and then implement said changes they claimed were now legal under their laws. Now if India decided to pay a reasonable fee to Bayer for the ability to have a national drug company manufacture them then I would see little issue here. Instead they are simply passing the costs to other countries. As in, let those "rich" countries pay for the development of medicines and countries like India will simply steal what they want with impunity. How different is that from what the Chinese do to manufacturers of cars, electronics, and other technology not developed at home. The cost is simply borne by people they don't have to see or care about. Yes I know the drugs are expensive but development of new medicines is not a cheap endeavor. To have government arbitrarily decide who can charge what and when will simply trade a few lives today for a potentially larger number in the future, that larger number arises because potential treatments may be deemed to risky to research under the threat of confiscation.
x3c 15y ago
I propose the following solution. R&D stays in private sector. All successful drugs are bought by the government at the cost of R&D and a sizable profit. The government, then, distributes it. Government can control the distribution and Pvt. markets can control the invention. Government can then tie up with other govts. and allow sales of the said medicine in those countries. It's not an ideal solution, but it has best of both capitalist and socialist ideologies.
- crusso 15y ago
  So the government then picks "successful drugs" and hands out massive amounts of money to those companies based on the definition of success as determined by politicians, bureaucrats, and lobbyists. Sounds like a nonstarter to me.
  - jbooth 15y ago
    I'm not advocating for the proposal necessarily, but it's worth pointing out that a solution could be all kinds of bad yet still better than the mess we have today.
    - crusso 15y ago
      I don't agree with that. We could really screw up an industry that has been phenomenally successful at producing drugs that everyone agrees have provided incomparable and vital life-saving solutions. We should be extremely sober and careful about messing with it and mindful of our ability to destroy the benefits that we already get today. I've seen too many comments in this thread along the lines of "They make too much money" or "The Government should take over the industry" or "Something radical needs to be done right away because 'lives are at stake'". Statements and positions like those set off my warning alarms.
      - jbooth 15y ago
        How about, "they spend more money on ads and sending hot 23-yos to doctors' offices with free schwag than they'll ever spend on R&D". Again, I'm inclined to agree with your criticism of that particular proposal. And I'll agree that there are things that are worse than the current state. But the current state is pretty bad, and imperfection is not a disqualifier for "better".
w1ntermute 15y ago
Does anyone else find it appalling that the American government and American companies have the gall to complain about intellectual property violations in developing countries like China and India? Until the late 1800s, American IP law explicitly excluded foreigners from IP rights. That's right, forget about lax enforcement (like you often see in developing nations nowadays) - you could violate foreign IP rights in public view and not a thing would be done about it. And that's exactly what Americans and American companies did - they went to Europe, took the latest IP, brought it back to America, and copied it. Charles Dickens went on a tour of America to try to get people to buy legitimate copies of his books, which no Americans were doing at that point. By the end of his tour, he realized this was a pointless venture, referring to America as a "nation of pirates". Doesn't sound that different from what contemporary American industry trade groups call China and India, does it? And it wasn't just international - domestic IP rights violations were endemic as well. The reason the movie industry developed in California was because the movie studios (the same people that are now crying foul about copyright violations) were trying to escape Thomas Edison and his patents on moving picture technology. Not only was Edison's lab in New Jersey, distancing them geographically, but the Ninth Circuit Court of Appeals (which covers California) took a more "relaxed" view of IP rights.
- nikcub 15y ago
  It isn't just with IP protection, but also CO2 emissions, restricting nuclear technology, military powers. A big case of 'do as I say not as I do' designed to retain the status quo in the order of the world.
- Produce 15y ago
  All of what you described falls under the "history is written by the victors" sentiment.
- deleted 15y ago
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  - w1ntermute 15y ago
    You completely missed my point. The reason the US approved the abolition of slavery and women's suffrage has nothing to do with the reason it approved IP protection for foreigners. The US approved IP protection for foreigners when Americans wanted to start having their copyrights protected in other countries - something that happened when it reached developed nation status. Now, the US is criticizing developing nations for taking the same approach for their own devlopment, and not respecting IP rights until they can afford to. Not to mention that equating IP rights violations with acts such as enslaving people or not allowing them to vote is the epitome of absurdity.
ck2 15y ago
$5500 a month per person? Bayer are scumbags, serious, serious scumbags. Do they think cancer is just going to stop happening so their profit will dry up? Kudos to India for doing the right thing, I think the 6% royalty is a nice offering.
GuyCall 15y ago
I have no idea when it was first public knowledge that the Indian Govt were considering this option and when it was finalised. But since Bayer AG's share price in part the markets sentiment of their potential future earnings, and their share price has done reasonable well over recent years, I suspect the market doesn't see this as a major issue. Bayer's current market cap is a fairly significant EUR45.93bn. So even with the "patent cliff" that JunkDNA discusses, it seems people still expect big pharma to be profitable.
chollida1 15y ago
Stanford has a set of awesome podcasts called Entrepreneurial thought leaders (http://ecorner.stanford.edu/podcasts.html http://ecorner.stanford.edu/podcasts.html). One of the more recent ones was from a serial entrepreneur in the medial space. He said the reason that drugs take so long to produce is the FDA process. Now the FDA is housed by smart people but you have to look at it from their prespective. They can accept or reject drugs. If they reject a drug then there is no serious problem that can come back and bite them. If they accept a drug, there is no real upside to them. They get no bonus for accepting the drug, however if the drug turns out to actually harm people then they are squarely in the cross hairs. This leads to the question of why would the FDA accept any drug without being 100% sure, and with medicine there is no such thing as 100% sure.
sanderoak 15y ago
finally atleast 1 government has the common sense i was waiting for!
suprgeek 15y ago
Excuse me for not being cut up about how the BigPharma companies will be pulling in a few less dollars. Thinking about some of the corrupt and downright unethical practices employed by these companies - this would almost seem like just payback. - They use Drug trials in lightly regulated developing countries to get FDA approvals for medicines. There was a famous case in India last year I think where 10-12 children died due to an experimental vaccine. The company involved was one of the biggest vaccine manufacturers in US. That case got hushed up quick. - Drugs that get banned in US/Europe get dumped in Developing countries where the science/regulation may not have caught up yet. So even when the deadly consequences are known, these companies push dangerous medicines. - Medical Reps employed by these companies routinely pressure doctors to over-prescribe expensive medicines. for a uneducated public this ends up costing them more for the same effects. Against the backdrop of these practices an occasional such judgement is indeed good news against these companies.
refurb 15y ago
This may end up hurting India not helping. In order to get a drug approved in India, you need to run clinical trial on Indians. You also need to go to through the regulatory process, which isn't cheap. If drug companies fear that the millions they spend on getting a drug approved in India won't be recouped because the gov't issues a compulsory license, then they simply won't do it. I mean think about it... if introducing your product to a new market resulted in a net loss, would you do it?
- Yeroc 15y ago
  The really simple argument is that at the previous price very, very few people in India could afford it. So in the end it is more than likely that the revenue that is gained is higher than it would have been at the very high price.
  - refurb 15y ago
    No, I can't argue that's not true. We don't really know what Bayer's strategy was here. For all we know they could have told the Indian gov't to shove it. In that case, they gambled and lost. Or, they could have offered the drug at 25% of the original cost and the gov't could have told them to shove it.
bradharper 15y ago
That "special power" is commonly referred to as theft.
- bradharper 15y ago
  Would love for any down-voters to tell me how I'm wrong...
tibbon 15y ago
So wait- am I reading this right? Essentially Bayer didn't sell the drug cheap enough, so the Indian Gov't gives an Indian company the 'right' to copy the drug and send Bayer checks for 6% of the proceeds? And on the flip side of intellectual property, the US is able to extradite a kid over piracy of TV shows? (http://news.ycombinator.com/item?id=3699325 http://news.ycombinator.com/item?id=3699325) Neither seems right to me. Maybe they aren't the same thing, but if ThePirateBay was sending the MPAA checks for 6% of what they made on the site, and saying "This should make it right, you weren't cheap enough so we distributed it ourselves" then the US would be trying to seize and detain people involved. Hasn't India signed some intellectual property treaty with... well pretty much the rest of the world? How in the world can they do this? And totally on the flip side- props to India for sticking it to the man. Kinda...
senthilnayagam 15y ago
This is a late stage cancer drug, delays death by 6 months to 5 years for liver and kidney cancer patient. Even after 97% reduction most Indian households may not be able to afford it . Government wants to buy it and distribute through government and aided hospitals, that is the principal reason behind it. According to statistics there about 200 Indians using it, even if can save a additional thousand lives it is worth passing this compulsory licensing
tuxguy 15y ago
Related NYT article with some more facts & insights http://www.nytimes.com/2012/03/13/business/global/india-overrules-bayer-allowing-generic-drug.html http://www.nytimes.com/2012/03/13/business/global/india-over...

241 points by Garbage 15y ago

It would be interesting to see how much money was lost or gained by Bayer based on this. I assume that usage might go up by at least a factor 20 in India (and their production costs go down) so those 6% might actually be a fair deal in the long run.

unicron 15y ago
Probably a big loss. It costs in their other market sectors which include Chemo drugs, various palliative care drugs/equipment. Technically, they're pricing the cure high so it doesn't affect their keeping you sick drugs. This sort of shit is why medicine should be 100% government/taxpayer funded research agencies with an enforced zero profit outcome. Drug companies are simply not ethical when there are shareholders and profits involved.
rmc 15y ago
remember that Bayer won't have to manufactor it, someone else does. They get a cut (6%) without having to do any work
- getsat 15y ago
  They already did the overwhelming majority of the work. Developing that kind of stuff is expensive. I've seen estimates of ~100MM USD quoted for the discovery of a new drug.
- Tuna-Fish 15y ago
  As others put it, the manufacture of simple chemicals in the quantities involved in pharmaceuticals is effectively free. As in, give me 100k and I'll be able to make enough of the drug for the whole world for the next hundred years. The packaging of most pharmaceuticals is more expensive than the manufacture of their contents. The cost is overwhelmingly in R&D -- finding the chemicals, proving it doesn't kill people, and proving it actually does something useful.
  - crusso 15y ago
    Don't forget a huge expense: Battling lawsuits (mostly frivolous) from users of the drug and potentially paying out huge settlements.
JumpCrisscross 15y ago
Fewer than 200 Indians used the drug in 2011; impact on sales should be minimal [1]. Bayer's concern is probably the export of these generics (illegally) to other places where it sources more sales from. [1] http://www.nytimes.com/2012/03/13/business/global/india-overrules-bayer-allowing-generic-drug.html http://www.nytimes.com/2012/03/13/business/global/india-over...
- piyushranjan 15y ago
  Only 200 people bought it because the price of the drugs is ridiculously high. Even people who are dying would not have been able to afford it.

arkitaip 15y ago

Bayer shareholders should hold the senior management accountable for not caring enough to bring the drug to more than 2% of the Indian market.

crusso 15y ago
And if they lower the price drastically in India and then are accused of gouging their customers in other countries? When they lower the price of the drug in India, a gray market arises that resells the drugs to other countries. The presence of the gray market creates yet more opportunities for scam artists to sell fake versions of the drug, creating yet more victims. My point is that this isn't as cut and dry of an issue as you imply.
- Produce 15y ago
  Human lives are at stake, there's nothing more cut and dry than that. We need to stop trying to make our reality fit our models and start adapting our models to fit reality. This whole business is backwards.
  - tomjen3 15y ago
    Yes human lives are at stake. All the people who invested their stock money in Bayer and plane to retire some day. All the people who depend on the drugs the company makes and so on.
  - crusso 15y ago
    Human lives are at stake if we screw up the drive to discover new drugs that will save future lives. Imagine if you had eliminated Bayer's incentive for even creating this cancer-saving drug in the first place. How many lives would you have ended prematurely? Imagine all the new drug research that depends upon Bayer's initial research that will save yet more lives. Like I said, it's not so cut and dry. The pharmaceutical industry has had quantifiable and demostrable success at a level that is almost unparalleled in history. But your claim is that it's backwards. I think your statement is inherently backwards. The "reality" is that the pharmaceutical industry produces something that society has found to be extraordinarily valuable. The people I see warping models that don't reflect reality are the ones that disregard the cost of keeping the pharmaceutical rate of discovery going. I'd love to see improvements to the industry, but "human lives are at stake! It's all backwards!" along with the "senior management should be held accountable" just don't seem to be statements that head is a direction of improvement.

corin_ 15y ago

I think few people would argue that drug companies' prices are reasonable, and when it comes to life vs. death I no longer care much about the "they're a business, they're allowed to make a profit" line - of course it's still true, and of course they are, but there's a (subjective) line between "making a good profit" and killing people through greed. That said, what pricing would be fair? When people claim that these pills cost bugger all to make, the answer is (perfectly validly) that the second pill costs bugger all, the first one costs $$$$ in R&D. So I don't know how cheap they would have to be to be considered a fairer price, and I've no idea if it's possible for anyone outside the companies to work out - even if you ignore the fact that what's fair is so subjective.

JumpCrisscross 15y ago
This is a difficult decision to rule on, without resorting to petty emotions, without access to the underlying data. One must balance the incentive for drug companies to develop drugs (and get that development financed) with the price inelasticity of the healthcare market. There is marginal cost, the cost to produce one more product independent of development cost, and fully amortised cost, which amortises the development (and, holistically, finances future development). Saying we should abolish innovator drug patents ignores the latter. If we take the assumption that a life tomorrow is worth about a life today cutting pharma's revenues 97% means the development model is unsustainable. The government would have to develop drugs (or promise to refund all or most of the cost of developing a drug that gets FDA approved). On the other hand we know that, since most people will pay whatever they able to for healthcare, drug companies have too much leverage. The market doesn't function well un-aided. The problem here is the way this decision has been implemented throws up a lot of regulatory uncertainty. Having an objective framework for how innovator drug companies can be subject to need-based forced licencing (and under what boilerplate terms) would allow pharma companies to plan how to allocate development dollars.
- tripzilch 15y ago
  While assuming that a life tomorrow is worth about a life today might be reasonable, we're talking about research costs for drugs, and the comparison does not hold to assume that a new drug tomorrow is worth about an already existing drug today. New drugs are often about squeezing out those last few years of life-expectancy, and even if they're not, they're a marginal increase over today's drugs. Meanwhile today's drugs fail to save many many lives because they are unaffordable in order to pay for R&D on new drugs (which will also be unaffordable). See, the system is very broken on both sides. But the choice to me seems very clear: - on the one hand you have +developing new future drugs. except those drugs will only be affordable to a tiny fraction of the world population. additionally this lines the pockets of big pharma and the bureaucracy that keeps the system broken as it currently is ("Bayer was disappointed") - on the other hand developing new drugs will be slowed down for some time, but all people will be able to afford the many current ones that could be saving lives today, big pharma + your FDA bureaucracy will fail and maybe that opens room for a new and better system to emerge so that R&D on drugs may start once more but in a more efficient manner. All the while lives are being saved and quality of live is being improved because today's drugs are affordable to everyone.

vineetdhanawat 15y ago

"The Bayer price of Rs 34,11,898 per year ($69,000) is more than 41 times the projected average per capita income for India in 2012, shattering any measure of affordability." This is good enough for any govt to act so and rightly done as well! Also "6% royalty on net sales every quarter to Bayer" that isnt all unfair

tomjen3 15y ago
Bayer is in it to make money, so presumably the reason the Indian government forced this deal is that Bayer would lose money under it. So no, it isn't fair.
- Yeroc 15y ago
  Keep in mind that the government did NOT force Bayer to manufacture the drug, only to license it. I don't believe Bayer had any interest in pursuing the Indian market whatsoever since it was priced well beyond what the average person could afford. On the question of fairness: Is it fair for people to die because they can't afford a life-saving drug? I'm sure that's what it boiled down to for the Indian government. According to my math if Bayer priced the drug over here the same way they did in India relative to average per-capita income the drug would cost around $1.5 million per year. Would that change your perspective?
  - vineetdhanawat 15y ago
    Maybe, who knows. Bayer reported the price as part of Research Costs etc, maybe true! But at the end Question stands - "Was the price fair?" I dont think so!

MaggieL 15y ago

Why not just do what the Greeks did? Pay for all the drugs with government bonds that are worth nothing. That'll work just as well.

digamber_kamat 15y ago

Government was forced to make such decision because Bayer sold these drugs at a price unaffordable to most Indians. This to me seems like a very stupid decision from Bayer's management. The shareholders must act against the board now. however because of such decisions companies will find it risky to invest in life saving drug research. I think government should also take some steps to win their confidence.

ttt_ 15y ago
>> however because of such decisions companies will find it risky to invest in life saving drug research. I disagree. That mentality is precisely the reason that they are overpricing now (and always have done so) as much as they can. People will always need life saving drugs, and ordinary drugs as well. Terminal and cronical patients will always try both traditional and new drugs (or the state will provide it to them in case there is health care). There is absolutely no need to overprice because any price will eventually give a fair ROI for them. What they do instead is maximize profit at the cost of human life. On a different light, a lot of research is funded by government entities worldwide, and even if pharmaceutical companies do their own research, they certainly reference other research that is also publicly funded. Thankfully some states do care a lot about their people and will challenge them. India is doing so now, Brazil has also broken HIV drug patents (they cover the full cost of treatment through Health Care) and I hope to hear more of it from different places.
- relix 15y ago
  You're talking about an infinite timeline where they are the sole seller of a drug that is used indefinitely. This is false. When patents expire the drug is also made by generic drug making companies for cheap. So upper bound of getting a ROI is the lifetime of a patent (30 years for drugs iirc, 10 years longer because it takes about 10 years to develop, so still effectively 20 years). For every drug that is successful, they pour tons of money into drugs that are eventually considered useless. So the R&D isn't solely for the one successful drug, but also for the losses. A competitor might come in 5 years with a drug for the same problem, that works better. Now the timespan for any ROI has been cut short to 5 years. Looking at the profits of pharmaceutical companies: sure, most medicine is probably overpriced. But saying that they can get a good ROI at any price is false. They will need to recoup the billions spent on R&D.

urza 15y ago

Bayer said it was "disappointed" and would "evaluate options to defend intellectual property rights" in the country. Down-vote me if you like, but I get sick to my stomach when I read sentences like this. If someone is able to deliver and sell the anti-cancer drug by 97% cheaper than you, then in my eyes you have no right to interfere. I am starting to dislike the whole concept of intellectual property and patents and copyright. These are tools of greedy people and bring nothing to the table for the wider audience. No one creates anything just by himself. You are always building on the work of others and merely deriving, combining, changing and mutating it. Whether you do it consciously or unconsciously. It is the principle of cultural evolution and it is why we are where we are. If intellectual property was always practiced the way it is today, I fear we would still be in the Middle Ages.

gaius 15y ago
If someone is able to deliver and sell the anti-cancer drug by 97% cheaper than you, then in my eyes you have no right to interfere ... Provided that that "someone" also bears their fair share of the cost of discovery and clinical trials. THAT is the issue here.
- man1sh 15y ago
  also don't forget that for these companies the poor people in India are the subjects of clinial trials. The mindset of these companies of treating the poor people as Guinea pigs is also disgusting 671 reported deaths http://www.business-standard.com/india/news/human-rights-panel-seeks-reportclinical-trial-deaths/447641/ http://www.business-standard.com/india/news/human-rights-pan... There is no count of no of people who get disabilities but don't die due to trials failing. Who will pay for these? These pharma companies are steered by greed
  - gaius 15y ago
    I am referring to FDA trials, in the US, which can take over a decade and cost 8- or 9-figure dollar sums. These are required before the drug even comes to market.

ThomPete 15y ago

The reason why it's expensive to develop drugs is in large parts because of the process involved to get the approval. Couldn't you turn this on it's head? What if the companies could expense the cost of getting the approval. I.e. the tax payers pay for drugtesting and approval process. Wouldn't this make sense? Since it's in the publics interest to get safe medicin, shouldn't they/we pay for that part.

nickik 15y ago
You risk everybody threwing some shit into the pipeline. Now they have to think about if the really want to trie to get it threw.
- ThomPete 15y ago
  I am not sure I follow? It would force the governments to develop better and cheaper systems themselves to make sure that they can test for cheap. Surely the current scenario isn't working is it?
  - nickik 15y ago
    What I was trying to say: When the goverments pays for testing how will you stop brute force testing? > It would force the governments to develop better and cheaper systems themselves to make sure that they can test for cheap. I doute they cool do that. > Surely the current scenario isn't working is it? Well like most things it kind of works but is not very effective. I agree its not very good right know but I don't know how to change it.
    - ThomPete 15y ago
      I would stop brute force testing simply by putting a limit on it. As far as I know there are some pretty standard procedures you have to go through. Surely it must be possible to somehow validate and verify whether someone is trying to take advantage. You can't hinder some taking advantage of it, but you don't have to IMO. >I doute they cool do that. Of course they can, just like then can improve many other areas in public service. >I agree its not very good right know but I don't know how to change it. Well I for one think its more fair to accept some fraud to make it cheaper for everyone else if possible of course.

yaix 15y ago

My guess is that this is not so much about saving patients from cancer than it is about saving polititians during the next elections.

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JunkDNA 15y ago

I worked in the drug R&D business for over 8 years. I still follow the industry closely. Some things always get lost in these discussions. First, manufacturing an existing drug is absurdly cheap. Modern industrial chemistry ensures this for all small molecule drugs (note that this is not the same case for the "biologics" which are often fiendishly difficult to make). Almost all the cost in a drug is the manufacturer recouping R&D costs. These costs have been spiraling out of control for 10 years. They are astronomical. A recent Forbes analysis pegs the cost of a new drug with failures of drugs in development folded in anywhere from $3 billion to $12 billion depending on the manufacturer (excellent context and discussion here: http://pipeline.corante.com/archives/2012/02/10/the_terrifying_cost_of_a_new_drug.php http://pipeline.corante.com/archives/2012/02/10/the_terrifyi...). You don't need to be an industry expert to grok that those numbers are wildly unsustainable. It is not possible to keep spending the amount companies spend to make new drugs. In the past, companies would inflate the price in the USA to make up for reduced prices elsewhere. But with all the recent healthcare reform in the USA, that strategy is ending. To add insult to injury, the vast majority of the most commonly used drugs will lose patent protection in the next couple of years. In the industry they call this the patent cliff. There will not be enough new drugs to offset all the ones that go generic. This move by India is a symptom of the wider drug industry problems. There will be more of these kinds of moves in the future. The industry has been searching for ways to more effectively make drugs and have it not be so expensive. But so far they have been striking out for 10 years running. The current strategy is to lay off most of their r&d workforce and offshore and outsource this part of the business. Somewhere out there, a business model is waiting to be found. Whoever cracks that nut and becomes the Southwest of the drug industry is going to make a fortune.

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Retric 15y ago
There are a finite number of useful small molecules you can use as drugs. If it's costing 3-12 billion to find new ones and even then we are failing we may be at a point where it's time to 'give up' on our existing approach. As an upside we can remove a significant slice of our spiraling healthcare costs. We can also remove a lot of drug related advertizing that has dubious healthcare benefits. Unfortunately, that also means antibiotics are going to become infective in the not to distance future. On the net I don't think this is a good thing, but it should free up a lot of vary intelligent people to work on other lines of research. Hopefully, we may eventual start to develop the tools to build direct DNA specific medicines on the fly by using the fruits of those other lines of research.

robmcm 15y ago

Perhaps making drug companies non proffit to ensure all money went back into developing new drugs and perhaps less proffitable drugs (i.e. Drugs targeted at the developing world).

Shivetya 15y ago

Special powers? They mean by force or arms. There is nothing special about theft except when a government does it they are pretty much immune to counter actions. This is little different that Greece having passed laws allowing them to retroactively change bond agreements and then implement said changes they claimed were now legal under their laws. Now if India decided to pay a reasonable fee to Bayer for the ability to have a national drug company manufacture them then I would see little issue here. Instead they are simply passing the costs to other countries. As in, let those "rich" countries pay for the development of medicines and countries like India will simply steal what they want with impunity. How different is that from what the Chinese do to manufacturers of cars, electronics, and other technology not developed at home. The cost is simply borne by people they don't have to see or care about. Yes I know the drugs are expensive but development of new medicines is not a cheap endeavor. To have government arbitrarily decide who can charge what and when will simply trade a few lives today for a potentially larger number in the future, that larger number arises because potential treatments may be deemed to risky to research under the threat of confiscation.

x3c 15y ago

I propose the following solution. R&D stays in private sector. All successful drugs are bought by the government at the cost of R&D and a sizable profit. The government, then, distributes it. Government can control the distribution and Pvt. markets can control the invention. Government can then tie up with other govts. and allow sales of the said medicine in those countries. It's not an ideal solution, but it has best of both capitalist and socialist ideologies.

crusso 15y ago
So the government then picks "successful drugs" and hands out massive amounts of money to those companies based on the definition of success as determined by politicians, bureaucrats, and lobbyists. Sounds like a nonstarter to me.
- jbooth 15y ago
  I'm not advocating for the proposal necessarily, but it's worth pointing out that a solution could be all kinds of bad yet still better than the mess we have today.
  - crusso 15y ago
    I don't agree with that. We could really screw up an industry that has been phenomenally successful at producing drugs that everyone agrees have provided incomparable and vital life-saving solutions. We should be extremely sober and careful about messing with it and mindful of our ability to destroy the benefits that we already get today. I've seen too many comments in this thread along the lines of "They make too much money" or "The Government should take over the industry" or "Something radical needs to be done right away because 'lives are at stake'". Statements and positions like those set off my warning alarms.
    - jbooth 15y ago
      How about, "they spend more money on ads and sending hot 23-yos to doctors' offices with free schwag than they'll ever spend on R&D". Again, I'm inclined to agree with your criticism of that particular proposal. And I'll agree that there are things that are worse than the current state. But the current state is pretty bad, and imperfection is not a disqualifier for "better".

w1ntermute 15y ago

Does anyone else find it appalling that the American government and American companies have the gall to complain about intellectual property violations in developing countries like China and India? Until the late 1800s, American IP law explicitly excluded foreigners from IP rights. That's right, forget about lax enforcement (like you often see in developing nations nowadays) - you could violate foreign IP rights in public view and not a thing would be done about it. And that's exactly what Americans and American companies did - they went to Europe, took the latest IP, brought it back to America, and copied it. Charles Dickens went on a tour of America to try to get people to buy legitimate copies of his books, which no Americans were doing at that point. By the end of his tour, he realized this was a pointless venture, referring to America as a "nation of pirates". Doesn't sound that different from what contemporary American industry trade groups call China and India, does it? And it wasn't just international - domestic IP rights violations were endemic as well. The reason the movie industry developed in California was because the movie studios (the same people that are now crying foul about copyright violations) were trying to escape Thomas Edison and his patents on moving picture technology. Not only was Edison's lab in New Jersey, distancing them geographically, but the Ninth Circuit Court of Appeals (which covers California) took a more "relaxed" view of IP rights.

nikcub 15y ago
It isn't just with IP protection, but also CO2 emissions, restricting nuclear technology, military powers. A big case of 'do as I say not as I do' designed to retain the status quo in the order of the world.
Produce 15y ago
All of what you described falls under the "history is written by the victors" sentiment.
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- w1ntermute 15y ago
  You completely missed my point. The reason the US approved the abolition of slavery and women's suffrage has nothing to do with the reason it approved IP protection for foreigners. The US approved IP protection for foreigners when Americans wanted to start having their copyrights protected in other countries - something that happened when it reached developed nation status. Now, the US is criticizing developing nations for taking the same approach for their own devlopment, and not respecting IP rights until they can afford to. Not to mention that equating IP rights violations with acts such as enslaving people or not allowing them to vote is the epitome of absurdity.

ck2 15y ago

$5500 a month per person? Bayer are scumbags, serious, serious scumbags. Do they think cancer is just going to stop happening so their profit will dry up? Kudos to India for doing the right thing, I think the 6% royalty is a nice offering.

GuyCall 15y ago

I have no idea when it was first public knowledge that the Indian Govt were considering this option and when it was finalised. But since Bayer AG's share price in part the markets sentiment of their potential future earnings, and their share price has done reasonable well over recent years, I suspect the market doesn't see this as a major issue. Bayer's current market cap is a fairly significant EUR45.93bn. So even with the "patent cliff" that JunkDNA discusses, it seems people still expect big pharma to be profitable.

chollida1 15y ago

Stanford has a set of awesome podcasts called Entrepreneurial thought leaders (http://ecorner.stanford.edu/podcasts.html http://ecorner.stanford.edu/podcasts.html). One of the more recent ones was from a serial entrepreneur in the medial space. He said the reason that drugs take so long to produce is the FDA process. Now the FDA is housed by smart people but you have to look at it from their prespective. They can accept or reject drugs. If they reject a drug then there is no serious problem that can come back and bite them. If they accept a drug, there is no real upside to them. They get no bonus for accepting the drug, however if the drug turns out to actually harm people then they are squarely in the cross hairs. This leads to the question of why would the FDA accept any drug without being 100% sure, and with medicine there is no such thing as 100% sure.

sanderoak 15y ago

finally atleast 1 government has the common sense i was waiting for!

suprgeek 15y ago

Excuse me for not being cut up about how the BigPharma companies will be pulling in a few less dollars. Thinking about some of the corrupt and downright unethical practices employed by these companies - this would almost seem like just payback. - They use Drug trials in lightly regulated developing countries to get FDA approvals for medicines. There was a famous case in India last year I think where 10-12 children died due to an experimental vaccine. The company involved was one of the biggest vaccine manufacturers in US. That case got hushed up quick. - Drugs that get banned in US/Europe get dumped in Developing countries where the science/regulation may not have caught up yet. So even when the deadly consequences are known, these companies push dangerous medicines. - Medical Reps employed by these companies routinely pressure doctors to over-prescribe expensive medicines. for a uneducated public this ends up costing them more for the same effects. Against the backdrop of these practices an occasional such judgement is indeed good news against these companies.

refurb 15y ago

This may end up hurting India not helping. In order to get a drug approved in India, you need to run clinical trial on Indians. You also need to go to through the regulatory process, which isn't cheap. If drug companies fear that the millions they spend on getting a drug approved in India won't be recouped because the gov't issues a compulsory license, then they simply won't do it. I mean think about it... if introducing your product to a new market resulted in a net loss, would you do it?

Yeroc 15y ago
The really simple argument is that at the previous price very, very few people in India could afford it. So in the end it is more than likely that the revenue that is gained is higher than it would have been at the very high price.
- refurb 15y ago
  No, I can't argue that's not true. We don't really know what Bayer's strategy was here. For all we know they could have told the Indian gov't to shove it. In that case, they gambled and lost. Or, they could have offered the drug at 25% of the original cost and the gov't could have told them to shove it.

bradharper 15y ago

That "special power" is commonly referred to as theft.

bradharper 15y ago
Would love for any down-voters to tell me how I'm wrong...

tibbon 15y ago

So wait- am I reading this right? Essentially Bayer didn't sell the drug cheap enough, so the Indian Gov't gives an Indian company the 'right' to copy the drug and send Bayer checks for 6% of the proceeds? And on the flip side of intellectual property, the US is able to extradite a kid over piracy of TV shows? (http://news.ycombinator.com/item?id=3699325 http://news.ycombinator.com/item?id=3699325) Neither seems right to me. Maybe they aren't the same thing, but if ThePirateBay was sending the MPAA checks for 6% of what they made on the site, and saying "This should make it right, you weren't cheap enough so we distributed it ourselves" then the US would be trying to seize and detain people involved. Hasn't India signed some intellectual property treaty with... well pretty much the rest of the world? How in the world can they do this? And totally on the flip side- props to India for sticking it to the man. Kinda...

senthilnayagam 15y ago

This is a late stage cancer drug, delays death by 6 months to 5 years for liver and kidney cancer patient. Even after 97% reduction most Indian households may not be able to afford it . Government wants to buy it and distribute through government and aided hospitals, that is the principal reason behind it. According to statistics there about 200 Indians using it, even if can save a additional thousand lives it is worth passing this compulsory licensing

tuxguy 15y ago

Related NYT article with some more facts & insights http://www.nytimes.com/2012/03/13/business/global/india-overrules-bayer-allowing-generic-drug.html http://www.nytimes.com/2012/03/13/business/global/india-over...