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The reality is that high drug prices are what incentivize companies to go through the process of creating/designing/trialing them. They will get cheaper with ti

The reality is that high drug prices are what incentivize companies to go through the process of creating/designing/trialing them. They will get cheaper with time as the techniques become commodities. The US should probably negotiate 'most favored nation' status so they get the lowest price offered among the OECD (maybe adjusted by national income per capita) such that there is less global free ridership - but even that probably won't do that much to shift the cost burden. We should also invest in lowering the costs of drug design & trialing so we can lower the risk premium and startup cost.

tehjoker 2y ago
We could just have nationalized pharma and direct research and production rationally at lower prices. The scientists and research directions are managed for the most part by the state and organic energy already, pharma just does marketing and purchasing trials. Anyone with money (i.e. the state) could do that, probably for less.
- gruez 2y ago
  If it's really easy that "anyone" can do it, wouldn't you expect investors to flood in and drive the cost of capital to near-zero?
  - tehjoker 2y ago
    Not really, it's an expensive and risky undertaking so only very wealthy investors or the state can afford this. That doesn't mean that the investors are a value add other than providing money. Furthermore, many publicly useful innovations will not be able to capture a positive return despite being beneficial for society as a whole, so private money is actually poison.
- whimsicalism 2y ago
  You would kill, at minimum, hundreds of thousands of people with your hubris. I encourage you to read some econmetrics papers on governmental success rates as 'picking winners.' They are terrible allocators and would be more likely to try to build a pharma R&D center in Michigan and Wisconsin for general election concerns.
  - tehjoker 2y ago
    Are you kidding me? The way the private sector "picks winners" more consistently is by tweaking existing molecules or creating two-in-one pills for patent protection purposes. In other words, by avoiding real work.
FireBeyond 2y ago
> They will get cheaper with time as the techniques become commodities. Except the cost of many drugs continues to go up, even as they're commercially available and R&D has been recouped (I also realize that R&D may be a bucket across multiple drugs, not just a 1:1 correlation, but nonetheless). > We should also invest in lowering the costs of drug design & trialing so we can lower the risk premium and startup cost. We already lower the costs of a lot of drug design by doing (some of) it at public universities.
- gruez 2y ago
  >Except the cost of many drugs continues to go up, even as they're commercially available and R&D has been recouped A successful drug doesn't have to recoup its own R&D costs, it also has to recoup the costs of all the drugs that failed to make it to approval. It's not any different than VC investing. Just because one company in a portfolio returned 10x ROI, doesn't mean you can be like "alright guys, you made back all your money, now turn yourself into a non-profit".
- whimsicalism 2y ago
  > Except the cost of many drugs continues to go up, even as they're commercially available and R&D has been recouped Yes, it is a bucket. I would like your examples though. > We already lower the costs of a lot of drug design by doing (some of) it at public universities. Yes, we should do this more. Public funding is very rarely sufficient to go through the whole development -> market process.
jerojero 2y ago
I have heard this argument before but it's interesting to see where the money for R&D is actually spent. It's not on these kind of diseases, this kind of work is usually done with public money, grants. Money in big pharma is usually spent in researching weight loss and alternative drugs for common diseases. After all, the return of investment on these types of drugs is much higher. For a big company to make a drug that costs 1 million dollars but only 1000 people in the world have it, and from those only perhaps 100 live in countries that can afford the drug might be a business opportunity but it's honestly not a huge profit which is why they will turn to public funding to research these. Imo, if you use public money then the products should be free of intellectual property. Public money, public goods.
- NoMoreNicksLeft 2y ago
  > and alternative drugs for common diseases. After all, the return of investment on these types of drugs is much higher. This isn't just some greedy behavior. Treating common diseases is how you reduce discomfort/misery the most, in aggregate. Aspirin for 100 million people who are 1.5 on the pain scale is more effective than some $50,000/pill analgesic for that one guy who happens to be at 11.
  - jerojero 2y ago
    Aspirin already exists and improvements to it are marginal. This kind of extreme utilitarian approach seems flawed when you view healthcare as a human right. Reducing pain from 1.5 to 1.4 to millions of people is not really as valuable as saving one person's life. That's my opinion at least. Of course, developing a drug that could save thousands of lives or one life is a real problem that governments and pharmaceutical companies need to face. And I would agree that in this case a utilitarian view is helpful. But on the other hand, companies are not making these decisions based on ethical frameworks. They're making them on a basis of shareholder profit maximization. When you talk about "reducing the pain" do you actually care about reducing pain or is that simply a positive externality to the profits you'll make.
    - whimsicalism 2y ago
davisr 2y ago
> They will get cheaper with time as the techniques become commodities. Absolutely not. Take mebendazole, for instance. It's generic, it's on the WHO's list of most-essential medicines, but in the US there is only a single manufacturer (Janssen/Johnson & Johnson) who uses their monopoly to charge an outrageous $350 per tablet. In every other nation, the price per tablet ranges from $0.10 to $10.00.
- whimsicalism 2y ago
  which is why we should have most favored nation status. for most drugs, it would probably raise prices globally rather than significantly lower them in the US. given tropical diseases are so rare in the US though, there might not be enough liquidity to encourage good pricing
cjbgkagh 2y ago
There is a perverse incentive by the drug companies to encourage more expensive regulation, both to keep competitors out but also to justify their higher prices. Efficient markets drives prices down to the point the participants end up only making average returns on investments, regulation is one of those tricks that can help reliably maintain above average returns. Like the children's fable; 'please don't throw me into the briar patch'.
faeriechangling 2y ago
High drug prices also incentivize companies who don’t do R&D themselves to corner the market on existing drugs and raise prices. As for “free ridership”, the US only has so much military and economic power to compel the rest of the world to give them money because THEY own certain molecules and not anybody else. It is actually totally absurd to think the US can unilaterally set prices because of a self-inflicted victim complex. If the US wants less free riding it should spend less on research which is fundamentally impossible to profit from without mass scale coercion, or maybe should kick off some cooperative research funding agreements. The TPP shakedown meant to force the global poor to pay tribute to US pharma in the guise of a trade agreement went down in flames and it went well below actually expecting poorer countries than the US to pay more for drugs - which is a bad pricing strategy anyways driven by envy since you will not achieve optimal profits if you price people out.
- whimsicalism 2y ago
  > High drug prices also incentivize companies who don’t do R&D themselves to corner the market on existing drugs and raise prices. High drug prices do not encourage cornering the market on drugs, for obvious reasons? > As for “free ridership”, the US only has so much military and economic power to compel the rest of the world to give them money because THEY own certain molecules and not anybody else. It is actually totally absurd to think the US can unilaterally set prices because of a self-inflicted victim complex. Most developed countries have sufficient rule of law that they won't sell a drug if the creator refuses to sell it in the country. If that can't be enforced, that's too bad - as it will leave us all worse off in the long-run.
- YetAnotherNick 2y ago
  How does high drug price incentize to increase the price further, at least any more than low drug price would do. And US doesn't compel rest of the world to give money in fact it's the opposite. Almost all pharmaceutical company in the world would die if US refuses to increase their price like the rest of the world.
smarm52 2y ago
Not according to the literature. Lee Mendoza, R. (2019). Incentives and disincentives to drug innovation: evidence from recent literature. Journal of medical economics, 22(8), 713-721. > While high and continuously rising drug prices are typically claimed as the price of scientific innovation, the reviewed literature finds that this link only partially accounts for the problem. High risk aversion owing to information asymmetries and vastly intractable uncertainties is prevalent among innovating firms. Predatory business models abound. Reverse predatory strategies also exist to maintain product exclusivity without much added clinical benefits, and to constrain generic competition. CEO compensation practices contribute to rising drug prices. Feldman, R. (2020). Perverse incentives: why everyone prefers high drug prices-except for those who pay the bills. Harv. J. on Legis., 57, 303. > Quite simply, incentives percolating throughout the prescription drug market push players toward higher prices. At the center lies the highly secretive and concentrated Pharmacy Benefit Manager (PBM) industry middle players who negotiate between drug companies and health insurers by arranging for rebates and establishing coverage levels for patients. > Thus, one should not be surprised to see competitive distortions and sub-optimal outcomes. > presents a full picture of incentive structures in which higher-priced drugs receive favorable treatment, and patients are channeled towards more expensive medicines. > In exchange for financial incentives structured in different ways to appeal to hospitals, insurers, doctors, and even patient advocacy groups, drug companies ensure that lower-priced substitutes cannot gain a foothold.
- whimsicalism 2y ago
  The literature is divided. I will point out most of the people you are sharing are not econometricists by trade. And these articles are mostly just saying that a lot of the cost is due to middlemen. Here is an extremely recent study by one of the most famous econometricists out there: https://www.nber.org/papers/w32606#fromrss https://www.nber.org/papers/w32606#fromrss
nijuashi 2y ago
As I’ve said elsewhere, the majority of the cost of developing a drug is from clinical trials, to make sure that the drug is safe and effective for human consumption. Unless we commoditize the medical services in US, this cost isn’t coming down. In fact, it’s going up. Asking for lower price is simply asking for fewer whizzy new drugs. If our medical system price goes down, so will drug price.

tehjoker 2y ago

We could just have nationalized pharma and direct research and production rationally at lower prices. The scientists and research directions are managed for the most part by the state and organic energy already, pharma just does marketing and purchasing trials. Anyone with money (i.e. the state) could do that, probably for less.

gruez 2y ago
If it's really easy that "anyone" can do it, wouldn't you expect investors to flood in and drive the cost of capital to near-zero?
- tehjoker 2y ago
  Not really, it's an expensive and risky undertaking so only very wealthy investors or the state can afford this. That doesn't mean that the investors are a value add other than providing money. Furthermore, many publicly useful innovations will not be able to capture a positive return despite being beneficial for society as a whole, so private money is actually poison.
whimsicalism 2y ago
You would kill, at minimum, hundreds of thousands of people with your hubris. I encourage you to read some econmetrics papers on governmental success rates as 'picking winners.' They are terrible allocators and would be more likely to try to build a pharma R&D center in Michigan and Wisconsin for general election concerns.
- tehjoker 2y ago
  Are you kidding me? The way the private sector "picks winners" more consistently is by tweaking existing molecules or creating two-in-one pills for patent protection purposes. In other words, by avoiding real work.

FireBeyond 2y ago

> They will get cheaper with time as the techniques become commodities. Except the cost of many drugs continues to go up, even as they're commercially available and R&D has been recouped (I also realize that R&D may be a bucket across multiple drugs, not just a 1:1 correlation, but nonetheless). > We should also invest in lowering the costs of drug design & trialing so we can lower the risk premium and startup cost. We already lower the costs of a lot of drug design by doing (some of) it at public universities.

gruez 2y ago
>Except the cost of many drugs continues to go up, even as they're commercially available and R&D has been recouped A successful drug doesn't have to recoup its own R&D costs, it also has to recoup the costs of all the drugs that failed to make it to approval. It's not any different than VC investing. Just because one company in a portfolio returned 10x ROI, doesn't mean you can be like "alright guys, you made back all your money, now turn yourself into a non-profit".
whimsicalism 2y ago
> Except the cost of many drugs continues to go up, even as they're commercially available and R&D has been recouped Yes, it is a bucket. I would like your examples though. > We already lower the costs of a lot of drug design by doing (some of) it at public universities. Yes, we should do this more. Public funding is very rarely sufficient to go through the whole development -> market process.

jerojero 2y ago

I have heard this argument before but it's interesting to see where the money for R&D is actually spent. It's not on these kind of diseases, this kind of work is usually done with public money, grants. Money in big pharma is usually spent in researching weight loss and alternative drugs for common diseases. After all, the return of investment on these types of drugs is much higher. For a big company to make a drug that costs 1 million dollars but only 1000 people in the world have it, and from those only perhaps 100 live in countries that can afford the drug might be a business opportunity but it's honestly not a huge profit which is why they will turn to public funding to research these. Imo, if you use public money then the products should be free of intellectual property. Public money, public goods.

NoMoreNicksLeft 2y ago
> and alternative drugs for common diseases. After all, the return of investment on these types of drugs is much higher. This isn't just some greedy behavior. Treating common diseases is how you reduce discomfort/misery the most, in aggregate. Aspirin for 100 million people who are 1.5 on the pain scale is more effective than some $50,000/pill analgesic for that one guy who happens to be at 11.
- jerojero 2y ago
  Aspirin already exists and improvements to it are marginal. This kind of extreme utilitarian approach seems flawed when you view healthcare as a human right. Reducing pain from 1.5 to 1.4 to millions of people is not really as valuable as saving one person's life. That's my opinion at least. Of course, developing a drug that could save thousands of lives or one life is a real problem that governments and pharmaceutical companies need to face. And I would agree that in this case a utilitarian view is helpful. But on the other hand, companies are not making these decisions based on ethical frameworks. They're making them on a basis of shareholder profit maximization. When you talk about "reducing the pain" do you actually care about reducing pain or is that simply a positive externality to the profits you'll make.
  - whimsicalism 2y ago

davisr 2y ago

> They will get cheaper with time as the techniques become commodities. Absolutely not. Take mebendazole, for instance. It's generic, it's on the WHO's list of most-essential medicines, but in the US there is only a single manufacturer (Janssen/Johnson & Johnson) who uses their monopoly to charge an outrageous $350 per tablet. In every other nation, the price per tablet ranges from $0.10 to $10.00.

whimsicalism 2y ago
which is why we should have most favored nation status. for most drugs, it would probably raise prices globally rather than significantly lower them in the US. given tropical diseases are so rare in the US though, there might not be enough liquidity to encourage good pricing

cjbgkagh 2y ago

There is a perverse incentive by the drug companies to encourage more expensive regulation, both to keep competitors out but also to justify their higher prices. Efficient markets drives prices down to the point the participants end up only making average returns on investments, regulation is one of those tricks that can help reliably maintain above average returns. Like the children's fable; 'please don't throw me into the briar patch'.

faeriechangling 2y ago

High drug prices also incentivize companies who don’t do R&D themselves to corner the market on existing drugs and raise prices. As for “free ridership”, the US only has so much military and economic power to compel the rest of the world to give them money because THEY own certain molecules and not anybody else. It is actually totally absurd to think the US can unilaterally set prices because of a self-inflicted victim complex. If the US wants less free riding it should spend less on research which is fundamentally impossible to profit from without mass scale coercion, or maybe should kick off some cooperative research funding agreements. The TPP shakedown meant to force the global poor to pay tribute to US pharma in the guise of a trade agreement went down in flames and it went well below actually expecting poorer countries than the US to pay more for drugs - which is a bad pricing strategy anyways driven by envy since you will not achieve optimal profits if you price people out.

whimsicalism 2y ago
> High drug prices also incentivize companies who don’t do R&D themselves to corner the market on existing drugs and raise prices. High drug prices do not encourage cornering the market on drugs, for obvious reasons? > As for “free ridership”, the US only has so much military and economic power to compel the rest of the world to give them money because THEY own certain molecules and not anybody else. It is actually totally absurd to think the US can unilaterally set prices because of a self-inflicted victim complex. Most developed countries have sufficient rule of law that they won't sell a drug if the creator refuses to sell it in the country. If that can't be enforced, that's too bad - as it will leave us all worse off in the long-run.
YetAnotherNick 2y ago
How does high drug price incentize to increase the price further, at least any more than low drug price would do. And US doesn't compel rest of the world to give money in fact it's the opposite. Almost all pharmaceutical company in the world would die if US refuses to increase their price like the rest of the world.

smarm52 2y ago

Not according to the literature. Lee Mendoza, R. (2019). Incentives and disincentives to drug innovation: evidence from recent literature. Journal of medical economics, 22(8), 713-721. > While high and continuously rising drug prices are typically claimed as the price of scientific innovation, the reviewed literature finds that this link only partially accounts for the problem. High risk aversion owing to information asymmetries and vastly intractable uncertainties is prevalent among innovating firms. Predatory business models abound. Reverse predatory strategies also exist to maintain product exclusivity without much added clinical benefits, and to constrain generic competition. CEO compensation practices contribute to rising drug prices. Feldman, R. (2020). Perverse incentives: why everyone prefers high drug prices-except for those who pay the bills. Harv. J. on Legis., 57, 303. > Quite simply, incentives percolating throughout the prescription drug market push players toward higher prices. At the center lies the highly secretive and concentrated Pharmacy Benefit Manager (PBM) industry middle players who negotiate between drug companies and health insurers by arranging for rebates and establishing coverage levels for patients. > Thus, one should not be surprised to see competitive distortions and sub-optimal outcomes. > presents a full picture of incentive structures in which higher-priced drugs receive favorable treatment, and patients are channeled towards more expensive medicines. > In exchange for financial incentives structured in different ways to appeal to hospitals, insurers, doctors, and even patient advocacy groups, drug companies ensure that lower-priced substitutes cannot gain a foothold.

whimsicalism 2y ago
The literature is divided. I will point out most of the people you are sharing are not econometricists by trade. And these articles are mostly just saying that a lot of the cost is due to middlemen. Here is an extremely recent study by one of the most famous econometricists out there: https://www.nber.org/papers/w32606#fromrss https://www.nber.org/papers/w32606#fromrss

nijuashi 2y ago

As I’ve said elsewhere, the majority of the cost of developing a drug is from clinical trials, to make sure that the drug is safe and effective for human consumption. Unless we commoditize the medical services in US, this cost isn’t coming down. In fact, it’s going up. Asking for lower price is simply asking for fewer whizzy new drugs. If our medical system price goes down, so will drug price.