4 ms·
> Drug development is therefore hellaciously expensive, And yet, drug companies still have outrageous profit margin.
by the_other 2y ago
> Drug development is therefore hellaciously expensive,
And yet, drug companies still have outrageous profit margin.
- tlb 2y ago“Profit margin” doesn’t subtract the initial development costs, just current costs. So drug profit margins should be large to repay the billions previously spent in development.
- mft_ 2y agoHmm, if for the sake of argument we assume that spend on R&D is kept constant, then profit margin (being money left over after spending on stuff) does indeed account for development costs. In reality (I think this is your point) there's a big time shift, in that profit earned in 2024 is thanks to R&D spend over the past decade or so. However, the 2024 profit margin would incorporate the 2024 R&D spend contributing towards new drugs and indications over the next decade or so, and with a with a constant R&D spend these would effectively cancel out. (In reality, of course, R&D budgets do fluctuate.)
- aidenn0 2y agoThe term is insufficiently specified; there is "Gross Profit Margin" which considers only COGS, so works roughly as you suggest. There is also "Operating Profit Margin," which would include current R&D costs, which (assuming they are non-declining over time) would account for development costs. If the company took on debt to develop the drugs, then "Net Profit Margin" would also include the cost of servicing that debt.
- COGlory 2y agoNot really, their margins typically wind up comparably with other manufacturing. They just have way way higher costs. Modern drugs are expensive, for a ton of reasons. See this talk about pharmaceutical finances: https://www.youtube.com/watch?v=3LGqQJFdoWM https://www.youtube.com/watch?v=3LGqQJFdoWM