8 ms·

I think Ozempic cost somewhere around $3 billion to research and develop. What’s the steel man argument for how we could charge the same for the drug in America

I think Ozempic cost somewhere around $3 billion to research and develop. What’s the steel man argument for how we could charge the same for the drug in America, and fund future research with the proceeds? I don’t want to be paying $800/mo for my drugs, but if the alternative is that everyone is paying $5/mo and there’s no hope of recouping the R&D costs, then we just won’t get biomedical breakthroughs like this at all. I think it’s easy to look at places in Europe that get drugs virtually for free, and want to be like that, but the US despite being 1/20 of the world’s population, funds something like 80% of the biomedical industry, due to our lack of price controls. There’s so many areas of medicine where we don’t see progress because the ROI just isn’t worth it. Do we want to risk making all medicine like that?

EasyMark 2y ago
They’re actually charging more like $1300+ to insurers for it
deleted 2y ago
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deleted 2y ago
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dumbfool666 2y ago
[flagged]
- bognition 2y ago
  Well the research and development was originally for a diabetes. It actually worked quite well. The appetite suppression was a bonus (an extremely lucrative) side effect.
  - dumbfool666 2y ago
    Most people get diabetes because they are fat and unhealthy. My comment stands.
    - Tade0 2y ago
      Cancer research is already wildly profitable as companies simply adjust the price according to the expected number of cases annually. It's not like you're going to take your time and shop around when you have a potentially terminal illness. Plenty of controversy around that, but the point is that there's always going to be enough money for cancer research, as it's one of the pillars of modern high life expectancies.
- zzzeek 2y ago
  when you have a public health crisis like obesity, and you work in public health, it's not OK for your conclusion to be, "well they're all just lazy fucks with no self control, fuck em".
  - dumbfool666 2y ago
    why not put them in rehab and restrict access to food? have an intervention same as drug addict.
    - llamaimperative 2y ago
      “Why not do a more expensive, more complex, less effective thing instead!” Like seriously, do you hear yourself? Your solution is to… force (?)… people to leave their jobs and families to temporarily solve their eating problems? People can do this today. They don’t because it’s a bad solution.
      - dumbfool666 2y ago
        Yes that's my solution suggestion. It happens to alcoholics, why not morbidly obese people? They are just as big a burden on their family and the healthcare system. Are you this concerned about the cost of keeping millions of black men locked up in prison for 20 years because they had some marijuana in their pocket?
        llamaimperative 2y ago
        You believe the government forces alcoholics to go to rehab by virtue of being alcoholics? Re marijuana: what? I think you're confusing health problems with committing and being convicted of crimes (regardless of whether you believe there's a moral failure or not, in either case)
    - InitialLastName 2y ago
      When a drug addict gets out of a successful stint in rehab (many aren't), they aren't then required to keep doing drugs, just less. Cold turkey doesn't work for food, and it especially doesn't work when everything about the modern American's lifestyle is optimized towards sedentarism and calorie-dense food over-consumption.
bognition 2y ago
Ok I’ll bite. Ozempic cost 3B to bring to market. Let’s 4x that to include the cost of drugs that never go to market. Raising costs to 12B. Let’s say a company can recoup their costs over 6 years, meaning they need to make 2B a year in a drug. In 2023 [1] Novo made 12B on Ozempic. So they’re doing 6X better than the estimate above. So they could cut the cost of Ozempic by 6, bringing the monthly price to $125 (which would be material for most people). They would still be raking in the cash. I get the above model is overly simple but with the amount of money Novo is making they cannot justify these high prices. [1]https://www.axios.com/2024/01/31/novo-profits-jump-wegovy-ozempic https://www.axios.com/2024/01/31/novo-profits-jump-wegovy-oz...
- ericd 2y ago
  What about all the $3B shots on goal that don’t yield anything?
  - infecto 2y ago
    Not sure why this gets downvoted? Certainly a lot of money goes into failed drugs?
  - Octoth0rpe 2y ago
    That is accounted for here: > Let’s 4x that to include the cost of drugs that never go to market. Also, that's a hugely generous multiplier. IANA pharma marketer, but I'm fairly confident that if a drug is ultimately unsuccessful, it's cut off long before the 3b mark. Not saying that the investment isn't substantial, but it's not like they have millions of doses produced/distributed before they discover that it's ineffective.
    - Ferret7446 2y ago
      Not only is medical research extremely risky in that you fail to develop a drug, you also have to take into account the risk if something goes wrong and you injure people. IMO, the multiplier would be at least 10x, though I'd love to hear from an industry expert.
    - 2y ago
geysersam 2y ago
The article mentioned they are expected to make 3x the claimed RnD costs already this year, not sure what fraction of that is profits, but probably quite a large chunk. There's no risk they won't recoup the costs even if prices were reduced 10x in the US. > There’s so many areas of medicine where we don’t see progress because the ROI just isn’t worth it .. because it's so much more profitable making medicines in demand in rich countries than medicines that benefit the largest number of people.
deleted 2y ago
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DarkNova6 2y ago
> I think Ozempic cost somewhere around $3 billion to research and develop Sure. But how much of that was invested by the company and how much of it came from public research grants?
- llamaimperative 2y ago
  Public research grants are mostly for super early stage pre-clinical stuff which isn’t really the expensive part of drug development. The expensive bit is testing it in humans.
- bdzr 2y ago
  Not a lot. https://www.science.org/content/blog-post/rep-ocasio-cortez-and-where-drugs-come https://www.science.org/content/blog-post/rep-ocasio-cortez-...
- throwup238 2y ago
  Novo Nordisk has been the one funding GLP-1 research since the 1990s. It got started manufacturing insulin in the 1920s so that kind of research was right up its alley. It’s controlled by a charitable foundation too. Sadly they’ve got a strong claim to being the ones responsible for the basic research here, which is exceedingly rare in pharma. Their latest drugs like Ozempic are the result of decades long research.
sshine 2y ago
The cost to research and produce the diabetes and weight-loss drug Ozempic is significantly lower than the price charged to consumers: A new study found that Ozempic costs between $0.95 and $5.50 to produce per unit, or no more than $22 per month at the highest dose. [1] Another study estimated that Ozempic could be sold for as little as $5 per pen and still be profitable for the manufacturer, Novo Nordisk. [2] Senator Bernie Sanders stated that a Yale study found Ozempic costs less than $5 per month to manufacture, yet Novo Nordisk charges Americans nearly $1,000 per month for the drug. [3] The available evidence indicates that the research and production costs for Ozempic are a small fraction of the final retail price charged to patients. The significant markup between manufacturing costs and consumer prices has led to calls for the drug manufacturer to lower prices.[4] [1]: https://eu.usatoday.com/story/news/health/2024/03/29/ozempic-wegovy-weight-loss-diabetes-drug-cost/73125135007/ https://eu.usatoday.com/story/news/health/2024/03/29/ozempic... [2]: https://www.fastcompany.com/91071415/your-1000-per-month-ozempic-costs-5-to-make-says-study https://www.fastcompany.com/91071415/your-1000-per-month-oze... [3]: https://www.sanders.senate.gov/press-releases/news-sanders-statement-on-outrageous-cost-of-ozempic/ https://www.sanders.senate.gov/press-releases/news-sanders-s... [4]: https://www.beckershospitalreview.com/glp-1s/5-ozempic-new-study-sparks-calls-for-novo-nordisk-to-cut-prices.html https://www.beckershospitalreview.com/glp-1s/5-ozempic-new-s...
- fabian2k 2y ago
  To be fair you have to include research costs here, which is very tricky as most drugs won't make it that far and still cost some money for research. So even including the development cost of the drug itself is not the whole story as it would not take into account the other drugs that failed. I'm not saying that Ozempic specifically isn't overpriced, I don't know that. But production cost isn't the only factor for new drugs (it's somewhat different if we talk about older drugs/generics).
- bdzr 2y ago
  Is this the cost for the "pill" after research is done? The first pill is the one that costs billions after all.
- executive 2y ago
tjpnz 2y ago
My understanding of GLP1 agonists is that they're relatively simple and cheap to produce. People have been able to source semaglutide and tirzepatide online for instance and there are communities on Reddit that will take you through mixing it/whatever you need to do prior to injecting it. I don't know where this three billion comes from.
- ygjb 2y ago
  This has "I could recreate twitter in a weekend" vibes. I am not out here rallying to lick corporate boots (I am in the 'hand the drug companies a cheque to recoup research costs, and make the drug generic' camp), but this is a really bad take. The $3 billion comes from researching and demonstrating the role of GLP antagonists, determining how to use them as a medication, developing manufacturing and distribution processes, and dosing mechanisms, testing, documenting, and getting the appropriate certifications and approvals to ensure that the risks of using the medication are reasonably well understood and communicated. Then there is the cost of marketing and educating the medical services providers in various fragmented markets about the effects and efficacy of the drugs and presenting them as alternatives to existing medications. $3B sounds like a lot of money, but when you consider that the efforts above take hundreds to thousands of people over 30[1] years to achieve, it's not alot. As for the idea that people should or could manufacture or self-administer these drugs safely at home, yeah, that might be the case for a very limited number of people, but I am going to lean on the ghost of George Carlin for that “Think about how stupid the average person is, then realize that half of em’ are stupider than that”. [1] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5707151/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5707151/
Tade0 2y ago
There's currently approximately 100mln obese adults in the US alone. Assuming only 10% get the treatment that's $300 per person to recoup the costs. There's really no reason why a drug for something affecting tens of millions of people should cost so much.
- lotsofpulp 2y ago
  >There's really no reason why a drug for something affecting tens of millions of people should cost so much. The reason is becoming very rich is the carrot for taking the big risks to develop the medicine, because you will likely fail for years and years, and maybe never succeed. If the discussion is changing to limit how rich someone should be able to get, that is a different topic about tax policy and wealth redistribution, not medicine prices.
  - mcphage 2y ago
    It’s all the same conversation.
    - lotsofpulp 2y ago
      Except it is not. One is about price controls, which distort supply and demand. The other is about societal harmony. For example, price controls on medicine results in society incentivizing more efforts to be put forth toward slinging advertisements, which is obviously not a good thing. Then you say, well put price controls on advertisements, in which case..why chase the tail when it would be far less corruptive and complex to subject everyone to the same rules via tax and welfare policy.
  - Tade0 2y ago
    > The reason is becoming very rich is the carrot for taking the big risks to develop the medicine, because you will likely fail for years and years, and maybe never succeed. Not how it works. It's rare for a drug to reach the most expensive phase of clinical trials without demonstrating efficacy.
RobotToaster 2y ago
According to one report[0] in three months there were 9m prescriptions for semaglutide, which can be extrapolated to 36m in a year. 3b/36m = 83.34. So they could have recouped their development cost in a single year, just from USA sales, charging only $84 over the cost price. https://www.cnbc.com/2023/09/27/ozempic-wegovy-drug-prescriptions-hit-9-million.html https://www.cnbc.com/2023/09/27/ozempic-wegovy-drug-prescrip...
infecto 2y ago
Your post will probably get a lot of flack but it is fairly well established the way the economics work out. America does fund a lot of the drug research that happens and a lot of the rest of the world reaps the benefits. I already see posts of people trying to explain how they could charge less money. Nonsense, this is a drug that cost a lot of money to bring to market, along side countless other failed drugs. Unless we have a unified world effort to research and produce drugs, I don't see any valid arguments against the current pricing regime.
tl 2y ago
> There’s so many areas of medicine where we don’t see progress because the ROI just isn’t worth it. Do we want to risk making all medicine like that? You can have a market for R&D and see progress. You cannot have a market for lemons and expect the same. For every Ozempic, you can expect one or more Nexium, where the company (AstraZeneca in the case of Prilosec/Nexium) uses the first research win to pretend to have a second win (or third, or fourth, or even first because acquisitions) using marketing and distribution channels to bury the cheaper med.
ikesau 2y ago
I highly recommend you listen to the recent 80000hours podcast with Rachel Glennerster on Market Shaping, or read her book, Strong Medicine. Advanced market commitments, i.e. governments signing contracts that guarantee they'll pay $X hundred million for a solution BEFORE the research has been done, is the way to incentivize this while avoiding the disincentive of governments becoming extremely tough monopsonic price negotiators once the drug has been developed. The development of more drugs could be funded this way, through global health organizations like GAVI, such that medicine wouldn't need to be developed by gouging some for the benefit of others.
- HDThoreaun 2y ago
  Bounties are tough imo. You quickly run into goodharts law where everyone just looks for loopholes or how to satisfy whatever requirement as easily as possible. With markets we know that everyone involved is better off for partaking. With billions of dollars on the line you better believe the pharma lawyers will find some way to get the bounty with a suboptimal product. A bounty on QALYs would probably be the best method, but that makes it difficult to commit to a sum before development.
- bdzr 2y ago
  > governments signing contracts that guarantee they'll pay $X hundred million for a solution BEFORE the research has been done Did you say "hundred million" intentionally? Because the average cost of a drug has been estimated in the billions for over a decade now. [1] I'll take a listen to the podcast, I'm generally skeptical of the government deciding funding levels since they're likely to be worse at assessing demand than consumers. [1] https://www.appliedclinicaltrialsonline.com/view/tufts-center-study-drug-development-cost-developing-new-drugs https://www.appliedclinicaltrialsonline.com/view/tufts-cente...
  - ikesau 2y ago
    Great, thanks. I'm sure you'll find it thought provoking. re: hundred million: I was trying to imply that AMCs can be large but not necessarily always in the billions - it depends on the market size and estimated economic damage of the thing we're trying to incentivize R&D for - though yes, both medical AMCs to date (pneumococcal and covax) were in the billions. Just to clarify, AMCs aren't the same thing as governments "fixing" the price of R&D with wishful thinking. It's when a government/funder uses epidemiology and economics to calculate the cost of leaving a disease untreated, and agreeing in advance to pay that much for it. That way, if set correctly, companies will invest to develop a solution without fear of being punished by the moral/political forces that make them suppress their prices once the solution is developed. It's a way to fix the incentives that have left us with a whole class of neglected tropical diseases (firms needing to recoup investments, governments needing to negotiate cheapest possible prices)

EasyMark 2y ago

They’re actually charging more like $1300+ to insurers for it

deleted 2y ago

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deleted 2y ago

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dumbfool666 2y ago

[flagged]

bognition 2y ago
Well the research and development was originally for a diabetes. It actually worked quite well. The appetite suppression was a bonus (an extremely lucrative) side effect.
- dumbfool666 2y ago
  Most people get diabetes because they are fat and unhealthy. My comment stands.
  - Tade0 2y ago
    Cancer research is already wildly profitable as companies simply adjust the price according to the expected number of cases annually. It's not like you're going to take your time and shop around when you have a potentially terminal illness. Plenty of controversy around that, but the point is that there's always going to be enough money for cancer research, as it's one of the pillars of modern high life expectancies.
zzzeek 2y ago
when you have a public health crisis like obesity, and you work in public health, it's not OK for your conclusion to be, "well they're all just lazy fucks with no self control, fuck em".
- dumbfool666 2y ago
  why not put them in rehab and restrict access to food? have an intervention same as drug addict.
  - llamaimperative 2y ago
    “Why not do a more expensive, more complex, less effective thing instead!” Like seriously, do you hear yourself? Your solution is to… force (?)… people to leave their jobs and families to temporarily solve their eating problems? People can do this today. They don’t because it’s a bad solution.
    - dumbfool666 2y ago
      Yes that's my solution suggestion. It happens to alcoholics, why not morbidly obese people? They are just as big a burden on their family and the healthcare system. Are you this concerned about the cost of keeping millions of black men locked up in prison for 20 years because they had some marijuana in their pocket?
      - llamaimperative 2y ago
        You believe the government forces alcoholics to go to rehab by virtue of being alcoholics? Re marijuana: what? I think you're confusing health problems with committing and being convicted of crimes (regardless of whether you believe there's a moral failure or not, in either case)
  - InitialLastName 2y ago
    When a drug addict gets out of a successful stint in rehab (many aren't), they aren't then required to keep doing drugs, just less. Cold turkey doesn't work for food, and it especially doesn't work when everything about the modern American's lifestyle is optimized towards sedentarism and calorie-dense food over-consumption.

bognition 2y ago

Ok I’ll bite. Ozempic cost 3B to bring to market. Let’s 4x that to include the cost of drugs that never go to market. Raising costs to 12B. Let’s say a company can recoup their costs over 6 years, meaning they need to make 2B a year in a drug. In 2023 [1] Novo made 12B on Ozempic. So they’re doing 6X better than the estimate above. So they could cut the cost of Ozempic by 6, bringing the monthly price to $125 (which would be material for most people). They would still be raking in the cash. I get the above model is overly simple but with the amount of money Novo is making they cannot justify these high prices. [1]https://www.axios.com/2024/01/31/novo-profits-jump-wegovy-ozempic https://www.axios.com/2024/01/31/novo-profits-jump-wegovy-oz...

ericd 2y ago
What about all the $3B shots on goal that don’t yield anything?
- infecto 2y ago
  Not sure why this gets downvoted? Certainly a lot of money goes into failed drugs?
- Octoth0rpe 2y ago
  That is accounted for here: > Let’s 4x that to include the cost of drugs that never go to market. Also, that's a hugely generous multiplier. IANA pharma marketer, but I'm fairly confident that if a drug is ultimately unsuccessful, it's cut off long before the 3b mark. Not saying that the investment isn't substantial, but it's not like they have millions of doses produced/distributed before they discover that it's ineffective.
  - Ferret7446 2y ago
    Not only is medical research extremely risky in that you fail to develop a drug, you also have to take into account the risk if something goes wrong and you injure people. IMO, the multiplier would be at least 10x, though I'd love to hear from an industry expert.
  - 2y ago

geysersam 2y ago

The article mentioned they are expected to make 3x the claimed RnD costs already this year, not sure what fraction of that is profits, but probably quite a large chunk. There's no risk they won't recoup the costs even if prices were reduced 10x in the US. > There’s so many areas of medicine where we don’t see progress because the ROI just isn’t worth it .. because it's so much more profitable making medicines in demand in rich countries than medicines that benefit the largest number of people.

deleted 2y ago

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DarkNova6 2y ago

> I think Ozempic cost somewhere around $3 billion to research and develop Sure. But how much of that was invested by the company and how much of it came from public research grants?

llamaimperative 2y ago
Public research grants are mostly for super early stage pre-clinical stuff which isn’t really the expensive part of drug development. The expensive bit is testing it in humans.
bdzr 2y ago
Not a lot. https://www.science.org/content/blog-post/rep-ocasio-cortez-and-where-drugs-come https://www.science.org/content/blog-post/rep-ocasio-cortez-...
throwup238 2y ago
Novo Nordisk has been the one funding GLP-1 research since the 1990s. It got started manufacturing insulin in the 1920s so that kind of research was right up its alley. It’s controlled by a charitable foundation too. Sadly they’ve got a strong claim to being the ones responsible for the basic research here, which is exceedingly rare in pharma. Their latest drugs like Ozempic are the result of decades long research.

sshine 2y ago

The cost to research and produce the diabetes and weight-loss drug Ozempic is significantly lower than the price charged to consumers: A new study found that Ozempic costs between $0.95 and $5.50 to produce per unit, or no more than $22 per month at the highest dose. [1] Another study estimated that Ozempic could be sold for as little as $5 per pen and still be profitable for the manufacturer, Novo Nordisk. [2] Senator Bernie Sanders stated that a Yale study found Ozempic costs less than $5 per month to manufacture, yet Novo Nordisk charges Americans nearly $1,000 per month for the drug. [3] The available evidence indicates that the research and production costs for Ozempic are a small fraction of the final retail price charged to patients. The significant markup between manufacturing costs and consumer prices has led to calls for the drug manufacturer to lower prices.[4] [1]: https://eu.usatoday.com/story/news/health/2024/03/29/ozempic-wegovy-weight-loss-diabetes-drug-cost/73125135007/ https://eu.usatoday.com/story/news/health/2024/03/29/ozempic... [2]: https://www.fastcompany.com/91071415/your-1000-per-month-ozempic-costs-5-to-make-says-study https://www.fastcompany.com/91071415/your-1000-per-month-oze... [3]: https://www.sanders.senate.gov/press-releases/news-sanders-statement-on-outrageous-cost-of-ozempic/ https://www.sanders.senate.gov/press-releases/news-sanders-s... [4]: https://www.beckershospitalreview.com/glp-1s/5-ozempic-new-study-sparks-calls-for-novo-nordisk-to-cut-prices.html https://www.beckershospitalreview.com/glp-1s/5-ozempic-new-s...

fabian2k 2y ago
To be fair you have to include research costs here, which is very tricky as most drugs won't make it that far and still cost some money for research. So even including the development cost of the drug itself is not the whole story as it would not take into account the other drugs that failed. I'm not saying that Ozempic specifically isn't overpriced, I don't know that. But production cost isn't the only factor for new drugs (it's somewhat different if we talk about older drugs/generics).
bdzr 2y ago
Is this the cost for the "pill" after research is done? The first pill is the one that costs billions after all.
executive 2y ago

tjpnz 2y ago

My understanding of GLP1 agonists is that they're relatively simple and cheap to produce. People have been able to source semaglutide and tirzepatide online for instance and there are communities on Reddit that will take you through mixing it/whatever you need to do prior to injecting it. I don't know where this three billion comes from.

ygjb 2y ago
This has "I could recreate twitter in a weekend" vibes. I am not out here rallying to lick corporate boots (I am in the 'hand the drug companies a cheque to recoup research costs, and make the drug generic' camp), but this is a really bad take. The $3 billion comes from researching and demonstrating the role of GLP antagonists, determining how to use them as a medication, developing manufacturing and distribution processes, and dosing mechanisms, testing, documenting, and getting the appropriate certifications and approvals to ensure that the risks of using the medication are reasonably well understood and communicated. Then there is the cost of marketing and educating the medical services providers in various fragmented markets about the effects and efficacy of the drugs and presenting them as alternatives to existing medications. $3B sounds like a lot of money, but when you consider that the efforts above take hundreds to thousands of people over 30[1] years to achieve, it's not alot. As for the idea that people should or could manufacture or self-administer these drugs safely at home, yeah, that might be the case for a very limited number of people, but I am going to lean on the ghost of George Carlin for that “Think about how stupid the average person is, then realize that half of em’ are stupider than that”. [1] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5707151/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5707151/

Tade0 2y ago

There's currently approximately 100mln obese adults in the US alone. Assuming only 10% get the treatment that's $300 per person to recoup the costs. There's really no reason why a drug for something affecting tens of millions of people should cost so much.

lotsofpulp 2y ago
>There's really no reason why a drug for something affecting tens of millions of people should cost so much. The reason is becoming very rich is the carrot for taking the big risks to develop the medicine, because you will likely fail for years and years, and maybe never succeed. If the discussion is changing to limit how rich someone should be able to get, that is a different topic about tax policy and wealth redistribution, not medicine prices.
- mcphage 2y ago
  It’s all the same conversation.
  - lotsofpulp 2y ago
    Except it is not. One is about price controls, which distort supply and demand. The other is about societal harmony. For example, price controls on medicine results in society incentivizing more efforts to be put forth toward slinging advertisements, which is obviously not a good thing. Then you say, well put price controls on advertisements, in which case..why chase the tail when it would be far less corruptive and complex to subject everyone to the same rules via tax and welfare policy.
- Tade0 2y ago
  > The reason is becoming very rich is the carrot for taking the big risks to develop the medicine, because you will likely fail for years and years, and maybe never succeed. Not how it works. It's rare for a drug to reach the most expensive phase of clinical trials without demonstrating efficacy.

RobotToaster 2y ago

According to one report[0] in three months there were 9m prescriptions for semaglutide, which can be extrapolated to 36m in a year. 3b/36m = 83.34. So they could have recouped their development cost in a single year, just from USA sales, charging only $84 over the cost price. https://www.cnbc.com/2023/09/27/ozempic-wegovy-drug-prescriptions-hit-9-million.html https://www.cnbc.com/2023/09/27/ozempic-wegovy-drug-prescrip...

infecto 2y ago

Your post will probably get a lot of flack but it is fairly well established the way the economics work out. America does fund a lot of the drug research that happens and a lot of the rest of the world reaps the benefits. I already see posts of people trying to explain how they could charge less money. Nonsense, this is a drug that cost a lot of money to bring to market, along side countless other failed drugs. Unless we have a unified world effort to research and produce drugs, I don't see any valid arguments against the current pricing regime.

tl 2y ago

> There’s so many areas of medicine where we don’t see progress because the ROI just isn’t worth it. Do we want to risk making all medicine like that? You can have a market for R&D and see progress. You cannot have a market for lemons and expect the same. For every Ozempic, you can expect one or more Nexium, where the company (AstraZeneca in the case of Prilosec/Nexium) uses the first research win to pretend to have a second win (or third, or fourth, or even first because acquisitions) using marketing and distribution channels to bury the cheaper med.

ikesau 2y ago

I highly recommend you listen to the recent 80000hours podcast with Rachel Glennerster on Market Shaping, or read her book, Strong Medicine. Advanced market commitments, i.e. governments signing contracts that guarantee they'll pay $X hundred million for a solution BEFORE the research has been done, is the way to incentivize this while avoiding the disincentive of governments becoming extremely tough monopsonic price negotiators once the drug has been developed. The development of more drugs could be funded this way, through global health organizations like GAVI, such that medicine wouldn't need to be developed by gouging some for the benefit of others.

HDThoreaun 2y ago
Bounties are tough imo. You quickly run into goodharts law where everyone just looks for loopholes or how to satisfy whatever requirement as easily as possible. With markets we know that everyone involved is better off for partaking. With billions of dollars on the line you better believe the pharma lawyers will find some way to get the bounty with a suboptimal product. A bounty on QALYs would probably be the best method, but that makes it difficult to commit to a sum before development.
bdzr 2y ago
> governments signing contracts that guarantee they'll pay $X hundred million for a solution BEFORE the research has been done Did you say "hundred million" intentionally? Because the average cost of a drug has been estimated in the billions for over a decade now. [1] I'll take a listen to the podcast, I'm generally skeptical of the government deciding funding levels since they're likely to be worse at assessing demand than consumers. [1] https://www.appliedclinicaltrialsonline.com/view/tufts-center-study-drug-development-cost-developing-new-drugs https://www.appliedclinicaltrialsonline.com/view/tufts-cente...
- ikesau 2y ago
  Great, thanks. I'm sure you'll find it thought provoking. re: hundred million: I was trying to imply that AMCs can be large but not necessarily always in the billions - it depends on the market size and estimated economic damage of the thing we're trying to incentivize R&D for - though yes, both medical AMCs to date (pneumococcal and covax) were in the billions. Just to clarify, AMCs aren't the same thing as governments "fixing" the price of R&D with wishful thinking. It's when a government/funder uses epidemiology and economics to calculate the cost of leaving a disease untreated, and agreeing in advance to pay that much for it. That way, if set correctly, companies will invest to develop a solution without fear of being punished by the moral/political forces that make them suppress their prices once the solution is developed. It's a way to fix the incentives that have left us with a whole class of neglected tropical diseases (firms needing to recoup investments, governments needing to negotiate cheapest possible prices)