5 ms·

I don't think this article's analysis makes sense. If pharma companies lose revenue, they have to cut something. Presumably the intention is to force them to c

I don't think this article's analysis makes sense. If pharma companies lose revenue, they have to cut something. Presumably the intention is to force them to cut profits. I found this analysis of global pharma industry profitability: https://www.ispor.org/docs/default-source/euro2023/poster-ispor-profitability-291023130819-pdf.pdf?sfvrsn=cd54cb76_0 https://www.ispor.org/docs/default-source/euro2023/poster-is... They found that the average profit margin across the pharma industry was around 20%. So even if pharma companies cut their profits to zero, prices would only drop 20%, right? And even the idea of cutting profits to zero isn't realistic. Pharma investment is similar to venture capital; investors make risky bets in the hopes that a few of them will pay off big. Why would investors agree to take that risk if they get zero profit in return? Some people propose things like "the government should fund drug development". OK, that's a fine proposal; it has pros and cons. But that's a very different proposal than "the government should institute price caps on privately-developed drugs". Don't try to justify the latter proposal by conflating it with the former.

AnthonyMouse 2y ago
> Some people propose things like "the government should fund drug development". OK, that's a fine proposal; it has pros and cons. Not only that, it's complementary to private investment. Did public investment produce a valuable new drug? Great! Make sure the law doesn't allow anyone to patent drugs developed entirely with public funding so it immediately becomes a cheap generic. But if a different drug is developed with private financing under the assumption that they'll get returns during the patent term to justify the cost and risk, well, that's why they're doing it. And paying a higher price for that drug is better than not having it all, or else why is anybody willing to pay the higher price for it?
rileymat2 2y ago
But doesn’t the high price come, largely from government blessed IP creating an artificial monopoly? Controlling prices in the context of a created monopoly makes some sense to me. But yes, balancing incentives is critical.
complaintdept 2y ago
Pharma spends more on marketing drugs than developing them. If marketing drugs is prohibited, especially through dubious kickback schemes with doctors and hospitals, there'd be a lot more room for lowering prices. The profit motive really doesn't deliver great outcomes in medicine, between the enormous information asymmetry between patient and doctor (and even other doctors), doctors with perverse financial incentives, and believing (whether it's true or not) that your life or wellbeing are on the line if you're wrong, it's ideal for all sorts of chicanery. (/rant)
- Loughla 2y ago
  I hear that a lot, but have never seen numbers. Googling it doesn't help me either. Would you know of any resources?
  - complaintdept 2y ago
    https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-pharmaceutical-companies-are-spending-far-more-on-marketing-than-research/ https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p... https://www.ahip.org/news/articles/new-study-in-the-midst-of-covid-19-crisis-7-out-of-10-big-pharma-companies-spent-more-on-sales-and-marketing-than-r-d https://www.ahip.org/news/articles/new-study-in-the-midst-of... I'm sure there's plenty more out there.
  - js2 2y ago
    Derek Lowe is as good a source as any (he works as a research scientist but I've always believe writes in good faith): https://www.science.org/content/blog-post/don-t-drug-companies-spend-more-marketing https://www.science.org/content/blog-post/don-t-drug-compani... Pharma companies spend about 2x on sales and administration as they do on R&D. However, this compares favorably to large tech companies where the ratio is closer to 2-8x. So yes, the statement that "pharma companies spend more marketing drugs than developing them" seems strictly true, but lacks context. Therefor, I rate this claim: mostly true. :-)
    - mandmandam 2y ago
schneems 2y ago
Profit is revenue minus costs. How many of those “costs” are things like private planes for executives? How much for reps that visit doctors and give out free samples and swag and tickets to Cancun? Famously some major tech companies aim to have zero profit as they want to reinvest everything back in the company. It doesn’t mean they don’t have any wiggle room to drop prices.
- deleted 2y ago
  [deleted]

AnthonyMouse 2y ago

> Some people propose things like "the government should fund drug development". OK, that's a fine proposal; it has pros and cons. Not only that, it's complementary to private investment. Did public investment produce a valuable new drug? Great! Make sure the law doesn't allow anyone to patent drugs developed entirely with public funding so it immediately becomes a cheap generic. But if a different drug is developed with private financing under the assumption that they'll get returns during the patent term to justify the cost and risk, well, that's why they're doing it. And paying a higher price for that drug is better than not having it all, or else why is anybody willing to pay the higher price for it?

rileymat2 2y ago

But doesn’t the high price come, largely from government blessed IP creating an artificial monopoly? Controlling prices in the context of a created monopoly makes some sense to me. But yes, balancing incentives is critical.

complaintdept 2y ago

Pharma spends more on marketing drugs than developing them. If marketing drugs is prohibited, especially through dubious kickback schemes with doctors and hospitals, there'd be a lot more room for lowering prices. The profit motive really doesn't deliver great outcomes in medicine, between the enormous information asymmetry between patient and doctor (and even other doctors), doctors with perverse financial incentives, and believing (whether it's true or not) that your life or wellbeing are on the line if you're wrong, it's ideal for all sorts of chicanery. (/rant)

Loughla 2y ago
I hear that a lot, but have never seen numbers. Googling it doesn't help me either. Would you know of any resources?
- complaintdept 2y ago
  https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-pharmaceutical-companies-are-spending-far-more-on-marketing-than-research/ https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p... https://www.ahip.org/news/articles/new-study-in-the-midst-of-covid-19-crisis-7-out-of-10-big-pharma-companies-spent-more-on-sales-and-marketing-than-r-d https://www.ahip.org/news/articles/new-study-in-the-midst-of... I'm sure there's plenty more out there.
- js2 2y ago
  Derek Lowe is as good a source as any (he works as a research scientist but I've always believe writes in good faith): https://www.science.org/content/blog-post/don-t-drug-companies-spend-more-marketing https://www.science.org/content/blog-post/don-t-drug-compani... Pharma companies spend about 2x on sales and administration as they do on R&D. However, this compares favorably to large tech companies where the ratio is closer to 2-8x. So yes, the statement that "pharma companies spend more marketing drugs than developing them" seems strictly true, but lacks context. Therefor, I rate this claim: mostly true. :-)
  - mandmandam 2y ago

schneems 2y ago

Profit is revenue minus costs. How many of those “costs” are things like private planes for executives? How much for reps that visit doctors and give out free samples and swag and tickets to Cancun? Famously some major tech companies aim to have zero profit as they want to reinvest everything back in the company. It doesn’t mean they don’t have any wiggle room to drop prices.

deleted 2y ago
[deleted]