5 ms·
Maybe pharmaceutical companies should dial back their return expectations.
by boringg 2y ago
Maybe pharmaceutical companies should dial back their return expectations.
- kelseyfrog 2y agoThey are owned by and have return expectation set by shareholders
- aantix 2y agoThen scale back your ROI expectations on your 401K.
- whimsicalism 2y agoIn public capital markets, this is equivalent to saying 'maybe we should devote less money to life-saving R&D'
- boringg 2y agoWhat about the Martin Shkreli incident? How does that get explained by your general broad thesis statement - 'maybe we should devote less money to life-saving R&D'?
- whimsicalism 2y agoEconomics describes human behavior in the aggregate. If the expectations for returns on pharma become substantially lower, less money will be invested in pharma and they will have less money to invest in R&D. I don't think Martin Shkreli is a challenge to that thesis.
- boringg 2y agoThe Martin Shkreli challenge is that its actually not R&D that money is being deployed its that many people (MS being one example) have found ways to capture consumer surplus in a quasi monopoly environment and then extract maximum prices to a group that has an inelastic demand. Nothing to do with deploying more R&D in this case. In terms of expectations on returns of your statement - I would be curious to see the case that increased expectations on returns correlates with positive outcomes. Sure more money in, but that does not equate to better meaningful and better results out.
- whimsicalism 2y agoThe Martin Shkreli example is perfect for you because it shows someone raising drugs but we don't have the timeframe to see someone quickly ramping up cheaper generic production because of how quickly he was jailed. His company went bankrupt due to generic competition. > Sure more money in, but that does not equate to better meaningful and better results out. I believe that spending more on R&D will cause more drugs to be developed. If you disagree, we can agree to disagree - I'm not sure it would be a productive conversation.
- boringg 2y agoYou miss a fundamental difference. "I believe that spending more on R&D will cause more drugs to be developed." More != better.
- talldayo 2y ago...partially due to the fact that nobody else can be bothered to fund it. Which is the problem with public capital markets; unless someone forces them to research, say, seatbelts and airbags, those things become an ignored liability.
- whimsicalism 2y ago> partially due to the fact that nobody else can be bothered to fund it I'm not even sure who the 'somebody else' even is. Public capital markets are how we direct money towards promising things that people want.
- talldayo 2y agoPublic capital markets are also how we avoid improving things to increase margins. Especially in a modern market with shareholders and administration involved, there's little incentive to improve things or even make them human-safe without regulation. It's why stuff like the FDA exists.
- whimsicalism 2y agoMarkets have inefficiencies and reflect collective human irrationality (such as underestimating the likelihood you will be in a fatal car crash). But it is trending better - not especially in a modern market. The stuff the FDA prevented when it was first created is much worse than what it has to deal with today because of better information dissemination and a broadly educated population. I'm not sure who else would be funding pharma research if not people who are giving their money willingly.
- talldayo 2y ago> I'm not sure who else would be funding pharma research if not people who are giving their money willingly. Hmm... yeah. Shame, there's just... no other way. Say, how often do you travel abroad?
- nijuashi 2y agoMore people need to be aware of how the drug development costs are distributed. It’s the clinical trials, not R&D, which contributes to astronomical cost, and that price is emphatically NOT set by the pharmaceutical companies that the public loves to point their fingers at.
- sigspec 2y agoYou can be emphatic all you want but I refuse to believe that pharma has no say in pricing. Ludicrous.
- nijuashi 2y agoIt’s a simple math of risk vs reward. Let me explain before dismissing my argument. Do you know why there are so many “Big Pharma”? It has to be big, because most of the smaller ones simply can’t survive for long. Developing drug is a difficult process. Whopping 90% of compounds fail during the three phase clinical trial period, $40k per patient in the trial, hundreds of millions of dollars per trial. Every failed trial is a signal for career change for people who develops drugs. You think people will invest in such risky business without expecting a big reward? Asking for low drug price without lowering the clinical trial cost is assuming drugmakers can print money. Unfortunately biology doesn’t work like that. A lot of us who develop drug are doing it because we believe this is a meaningful thing we can do in the world. They are just hidden behind investors like Shkrelli, who isn’t even anywhere near the actual people who make the drug. But we do need the money to develop the drug. A lot of it. I hope you understand. The real solution is to lower the cost of the trial. And I maintain that the drug company isn’t in control of this.