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Horrifying. But also horrifying that treatment costs so much. Supposedly we have to let drug companies charge extravagant prices because it costs so much to dis

Horrifying. But also horrifying that treatment costs so much. Supposedly we have to let drug companies charge extravagant prices because it costs so much to discover new treatments, but there has to be a great deal of inefficiency there. Are we getting a 99% solution for $X when we could be getting a 95% solution for $X/10?

dboreham 2y ago
> Supposedly we have to let drug companies charge extravagant prices because it costs so much to discover new treatments Big pharma disinformation? Perhaps most new treatment research is government funded (and by governments of other countries).
- croissants 2y ago
  Do you have evidence for "most new treatment research is government funded (and by governments of other countries)"? My understanding is that the opposite is true: big pharmaceutical companies foot most of the bill for developing new drugs, then US-based insurers pay high costs, and most "other countries" enjoy much lower prices because US healthcare is effectively subsidizing their drug prices.
  - _yb2s 2y ago
    It’s both working together- the basic research, including identifying targets and new chemistry and in some cases even the drugs themselves are mostly academia. However, clinical trials, and drug development that iterates the chemical structure itself and delivery approaches is very expensive, and almost entirely done by industry. Often the academics are working collaboratively with pharmaceutical- and can have either government or pharmaceutical funding for these projects. I’m an academic PI that has discovered and patented new drugs and licensed them to industry.
    - croissants 2y ago
      Thanks. Do you have some sense of the breakdown in actual expenses incurred by the basic research and subsequent industrial development? It may qualitatively be true that many governments sponsor basic research that is later productized, but if the second bit costs 1000x more than the first bit, it's not exactly a fairly shared cost.
      - _yb2s 2y ago
        I don’t know the numbers off the top of my head, but most likely substantially more of the money is from industry. However, just answering that requires really carefully defining the question- because much academic research that happens to lead to new drugs or drug targets is basic medical and biology research- do you also include all biological research that does not turn out this way? On the industry side do you include all biotech startups hoping to sell to big pharmaceutical companies including the majority that do not? Clinical trials are incredibly expensive but also comparatively straightforward and require a very different set of facilities and skills from basic research. Pharma mostly could not recruit away the people with these skills from academia- they can’t offer the same freedom and job security, but the academics often found startups they work for on the side and ultimately sell to pharma if it works out. So comparing money spent isn’t the entire picture of relative contribution- as they are each doing parts the other is not equipped for.
  - loeg 2y ago
    You are correct.
- loeg 2y ago
  The vast majority of new therapy R&D expenses are paid for by "big pharma."
itronitron 2y ago
The inefficiency is that for many pharmaceutical companies in the US, their marketing budget is much higher than (~10X) the R&D budget.
- slt2021 2y ago
  the marketing expense is a legalized lobbying. What you see in marketing, is just payback scheme to Media/TV (to shut down any criticism of pharma), and doctors (for promoting/prescribing drugs)
- croissants 2y ago
  Where are you getting 10X? If I look at, say, Merck, their "sales, general, and administrative expenses" [1] trends at even or slightly higher than their R&D expenses [2]. Abbvie's ratio is around 2x [3, 4]. AFAIK, SG&A is the number that groups criticizing pharmaceutical companies look at, even though it includes a lot of money spent on things like paying lawyers, which any pharmaceutical company that actually wants to make back the billions spent on developing drugs will have to do. [1] https://www.statista.com/statistics/269499/merck-and-co-sganda-expenses/ https://www.statista.com/statistics/269499/merck-and-co-sgan... [2] https://www.statista.com/statistics/282738/expenditure-on-research-and-development-by-merck-and-co/ https://www.statista.com/statistics/282738/expenditure-on-re... [3] https://www.macrotrends.net/stocks/charts/ABBV/abbvie/selling-general-administrative-expenses https://www.macrotrends.net/stocks/charts/ABBV/abbvie/sellin... [4] https://www.statista.com/statistics/417068/r-and-d-expenditure-of-abbvie/ https://www.statista.com/statistics/417068/r-and-d-expenditu...
  - itronitron 2y ago
    That's how it was described to me by several R&D staff at JnJ two decades ago.
readthenotes1 2y ago
We have to let drug companies charge extravagant prices because of otherwise medical care costs would not be so high. Companies providing medical Care have to spend 80% of their costs on actual medical care, not marketing and executive compensation. The only way to make the 20% that really matter to the decision makers larger is to make the medical costs larger. It is one reason people on United healthcare get $100 gift card to see their primary care provider each year. It's also the reason why there's no real pressure to reduce drug costs.
- thfuran 2y ago
  >Companies providing medical Care have to spend 80% of their costs on actual medical care, not marketing and executive compensation. That requirement was imposed on insurers in response to already-exorbitant medical costs. It does create a perverse incentive, but it cannot be the root cause of the issue.
  - readthenotes1 2y ago
    Well, before that (and continuing), the largest customer of drugs in the United States is prohibited from negotiating price for most drugs. The exorbitant costs arose with the provision of private medical insurance in the 1940s but only really took off when Medicare and Medicaid came in the 1969s with, essentially, a blank check for cost. Things weren't improved in the 1980s when emergency rooms were required to provide care regardless on a patient's ability to pay, leading to another perversion that for a significant group of people the only way to get medical care was when it was too late and most expensive. ACA is just another example of the US government doing stupid.
    - JumpCrisscross 2y ago
      > the largest customer of drugs in the United States is prohibited from negotiating price for most drugs Note that this changed in 2022 for the most-bought drugs.
      - 2y ago
Dalewyn 2y ago
>But also horrifying that treatment costs so much. My mother underwent chemotherapy for her cancer. According to the statements from her insurance company, each round of chemotherapy cost as much as a new luxury car before hospital vs. insurance negotiations. Yeah. The value of health insurance isn't just the offloading of expenses, it's also their power to tell hospitals to get fucking bent with ludicrous bills.
- Hemospectrum 2y ago
  Health insurance price negotiation is the primary reason those prices are so high in the first place. An insurance company gets to say it negotiated a 99% discount (or whatever) and the hospitals and pharmaceutical companies still charge prices high enough to turn a comfortable profit. It's a lot like "Black Friday" sales where retailers jack up their shelf prices in the preceding days and weeks so they can mark them down and persuade the customers they're getting attractive deals.
- spondylosaurus 2y ago
  To be fair to hospitals, some of those bills are ludicrous because of insurance. If they know that insurers will only ever pay 10% of the listed cost, they'll make the listed cost seem a lot bigger so that that 10% payout is comparatively bigger too.
- ANewFormation 2y ago
  Insurance companies have a motivation to see high healthcare costs - it justifies higher premiums, and in a broken 'public' healthcare system that entrenches insurance middlemen, and subsidizes their costs for those unable to afford them, you're just going to see costs skyrocket endlessly. Public healthcare, of any sort, should not involve working with third party insurance companies. In any case, this is also why medical tourism is a thing - you could go get the exact same treatment, to completion, half way around for far less than what you the cost you were quoted for a single round in the US - including housing and other costs.
- cogman10 2y ago
  The health industry is what's wrong with a captured market and few players. Every party is trying to extract maximum value for minimum input. That leads hospitals to 1000x every treatment price so when insurance companies come to negotiate they can negotiate down to 100x. It causes hospitals to understaff because is cheaper to pay for legal staff to handle malpractice claims than it is to not work your nurses and doctors to death. It causes drug companies consolidate and then charge through the nose for drugs that cost them pennies to manufacturer (for example, penicillin or insulin) drugs that, everyone should be aware, all of the R&D and FDA approval has been done. The most expensive part of drug development is done. There are solutions. It's regulations. Hospitals regulated to minimal coverage. Drug/hospitals hit with anti price gouging regulations. Insurance companies hit with coverage regulations. That's all something doable and probably with enough political will to be done. An even better idea is simply nationalizing medicine, top to bottom. That's unlikely to happen, but would result in the biggest drop in healthcare costs.
spondylosaurus 2y ago
Both of the drugs listed in the article (Remicade and Entyvio) have generic/biosimilar equivalents, too, so in theory competition should drive down the price... but this is the American healthcare system so of course it doesn't. Unclear from the article, but it's quite possible that UHC was _forcing_ him to use the more expensive name-brand drugs due to an agreement that they made with their pharmacy benefits manager (PBM). Some name-brand manufacturers will see generics on the horizon and throw in a clause that obliges the PBM to continue exclusively covering the name-brand drug for X amount of time. UHC specifically fucked me over this way by refusing to cover a widely available generic drug, insisting that they'd only pay for the name-brand stuff, but no pharmacy on earth seems to carry the name brand stuff and couldn't even source it to order it, so UHC effectively denied me the drug altogether. I feel for the guy in the article because the drug that UHC fucked me over about (mesalamine/Lialda) was keeping my Crohn's in check, and after the ensuing flare I had to switch to Remicade, which isn't totally working for me—I'll be switching to something else soon. Obligatory link about PBMs and how they suck: https://www.thebignewsletter.com/p/inside-the-mafia-of-pharma-pricing https://www.thebignewsletter.com/p/inside-the-mafia-of-pharm... And being on Remicade myself, albeit at a lower dose (and without Entyvio like he's also taking), I was curious enough to check the EOB for how much my current insurance pays for it. I have Anthem BCBS and here's the breakdown of my last infusion. For context, this is a drug where you have to go to an infusion clinic for administration because it's delivered intravenously. Doctor/facility charges: $21,420.70 Your discounts: -19,563.26 Due to your doctor/facility (max allowed): $1,857.44 Anthem paid: $1,857.44 So the "cost" was 20k for a single infusion, but Anthem negotiated that down to 2k. (I didn't pay anything since I'd met my out-of-pocket limit for the year.) Here's the itemized breakdown of that 20k cost: Drugs Provider charges: 21,020.70 Plan discounts: 19,226.20 Anthem paid: 1794,50 Infusion center Provider charges: 400.00 Plan discounts: 337.06 Anthem paid: 62.94 So the drug cost $1.8k, and they only paid $60 to have someone stick it in me. And for reference, that's name-brand Remicade too, because it's what Anthem's PBM requires. I'm on 7.5mg/kg every 8 weeks, and the highest approved dose is 10mg/kg every 4 weeks. So even if he was on, e.g., 20mg/kg every 4 weeks, that would be maybe $4k worth of drugs once a month, which is $48k a year. Unless Entyvio is way more expensive than I realized, I have no clue how that would add up to a million dollars a year in costs, unless they're sending him to an infusion center that charges crazy high prices (which, if it's part of UHC's Optum network rather than an independent clinic... maybe they do :P)
BeefWellington 2y ago
Worse, in many cases you're getting an existing 100% solution repackaged for $X * 1000. Anything routine is so expensive in the US because regulation's gone completely out the window. An area I'm familiar with for example: in Canada (where I am now) Salbutamol inhalers cost about $20-25. In California I was lucky to find it less than $100. And this is for a well-known decades old generic. See also: insulin. It's making headlines[1] that companies are finally dropping prices down to roughly in line with the rest of the world (starting in 2026). And this is after other measures have already been taken -- it used to be much worse.[2] Worth repeating: this price gouging is for generic and old medication. [1] https://www.msn.com/en-us/money/companies/novo-nordisk-to-cut-us-list-prices-of-two-insulin-products-by-more-than-70/ar-AA1vlqI8 https://www.msn.com/en-us/money/companies/novo-nordisk-to-cu... [2] https://www.bbc.com/news/world-us-canada-47491964 https://www.bbc.com/news/world-us-canada-47491964
ivraatiems 2y ago
The reason the treatment costs so much is in large part because of insurers aggressively pricing treatments down, forcing hospitals to respond by jacking prices up. It's a never-ending cycle. See e. g. https://www.fairobserver.com/economics/why-are-us-hospitals-so-expensive/ https://www.fairobserver.com/economics/why-are-us-hospitals-... The fix here would be to remove the middlemen (insurance companies) and pay hospitals what Medicare/Medicaid pay them, which is typically a much lower negotiated amount.
SpicyLemonZest 2y ago
Perhaps we are, but the treatment regimen described in the article sounds like one of those 4 percentage points missing from the 95% solution. A custom-made cocktail of two drugs, each requiring a special biologic manufacturing process and each far above the standard recommended dose? It seems very plausible that this would not be economical to produce for 1/10 the price.

dboreham 2y ago

> Supposedly we have to let drug companies charge extravagant prices because it costs so much to discover new treatments Big pharma disinformation? Perhaps most new treatment research is government funded (and by governments of other countries).

croissants 2y ago
Do you have evidence for "most new treatment research is government funded (and by governments of other countries)"? My understanding is that the opposite is true: big pharmaceutical companies foot most of the bill for developing new drugs, then US-based insurers pay high costs, and most "other countries" enjoy much lower prices because US healthcare is effectively subsidizing their drug prices.
- _yb2s 2y ago
  It’s both working together- the basic research, including identifying targets and new chemistry and in some cases even the drugs themselves are mostly academia. However, clinical trials, and drug development that iterates the chemical structure itself and delivery approaches is very expensive, and almost entirely done by industry. Often the academics are working collaboratively with pharmaceutical- and can have either government or pharmaceutical funding for these projects. I’m an academic PI that has discovered and patented new drugs and licensed them to industry.
  - croissants 2y ago
    Thanks. Do you have some sense of the breakdown in actual expenses incurred by the basic research and subsequent industrial development? It may qualitatively be true that many governments sponsor basic research that is later productized, but if the second bit costs 1000x more than the first bit, it's not exactly a fairly shared cost.
    - _yb2s 2y ago
      I don’t know the numbers off the top of my head, but most likely substantially more of the money is from industry. However, just answering that requires really carefully defining the question- because much academic research that happens to lead to new drugs or drug targets is basic medical and biology research- do you also include all biological research that does not turn out this way? On the industry side do you include all biotech startups hoping to sell to big pharmaceutical companies including the majority that do not? Clinical trials are incredibly expensive but also comparatively straightforward and require a very different set of facilities and skills from basic research. Pharma mostly could not recruit away the people with these skills from academia- they can’t offer the same freedom and job security, but the academics often found startups they work for on the side and ultimately sell to pharma if it works out. So comparing money spent isn’t the entire picture of relative contribution- as they are each doing parts the other is not equipped for.
- loeg 2y ago
  You are correct.
loeg 2y ago
The vast majority of new therapy R&D expenses are paid for by "big pharma."

itronitron 2y ago

The inefficiency is that for many pharmaceutical companies in the US, their marketing budget is much higher than (~10X) the R&D budget.

slt2021 2y ago
the marketing expense is a legalized lobbying. What you see in marketing, is just payback scheme to Media/TV (to shut down any criticism of pharma), and doctors (for promoting/prescribing drugs)
croissants 2y ago
Where are you getting 10X? If I look at, say, Merck, their "sales, general, and administrative expenses" [1] trends at even or slightly higher than their R&D expenses [2]. Abbvie's ratio is around 2x [3, 4]. AFAIK, SG&A is the number that groups criticizing pharmaceutical companies look at, even though it includes a lot of money spent on things like paying lawyers, which any pharmaceutical company that actually wants to make back the billions spent on developing drugs will have to do. [1] https://www.statista.com/statistics/269499/merck-and-co-sganda-expenses/ https://www.statista.com/statistics/269499/merck-and-co-sgan... [2] https://www.statista.com/statistics/282738/expenditure-on-research-and-development-by-merck-and-co/ https://www.statista.com/statistics/282738/expenditure-on-re... [3] https://www.macrotrends.net/stocks/charts/ABBV/abbvie/selling-general-administrative-expenses https://www.macrotrends.net/stocks/charts/ABBV/abbvie/sellin... [4] https://www.statista.com/statistics/417068/r-and-d-expenditure-of-abbvie/ https://www.statista.com/statistics/417068/r-and-d-expenditu...
- itronitron 2y ago
  That's how it was described to me by several R&D staff at JnJ two decades ago.

readthenotes1 2y ago

We have to let drug companies charge extravagant prices because of otherwise medical care costs would not be so high. Companies providing medical Care have to spend 80% of their costs on actual medical care, not marketing and executive compensation. The only way to make the 20% that really matter to the decision makers larger is to make the medical costs larger. It is one reason people on United healthcare get $100 gift card to see their primary care provider each year. It's also the reason why there's no real pressure to reduce drug costs.

thfuran 2y ago
>Companies providing medical Care have to spend 80% of their costs on actual medical care, not marketing and executive compensation. That requirement was imposed on insurers in response to already-exorbitant medical costs. It does create a perverse incentive, but it cannot be the root cause of the issue.
- readthenotes1 2y ago
  Well, before that (and continuing), the largest customer of drugs in the United States is prohibited from negotiating price for most drugs. The exorbitant costs arose with the provision of private medical insurance in the 1940s but only really took off when Medicare and Medicaid came in the 1969s with, essentially, a blank check for cost. Things weren't improved in the 1980s when emergency rooms were required to provide care regardless on a patient's ability to pay, leading to another perversion that for a significant group of people the only way to get medical care was when it was too late and most expensive. ACA is just another example of the US government doing stupid.
  - JumpCrisscross 2y ago
    > the largest customer of drugs in the United States is prohibited from negotiating price for most drugs Note that this changed in 2022 for the most-bought drugs.
    - 2y ago

Dalewyn 2y ago

>But also horrifying that treatment costs so much. My mother underwent chemotherapy for her cancer. According to the statements from her insurance company, each round of chemotherapy cost as much as a new luxury car before hospital vs. insurance negotiations. Yeah. The value of health insurance isn't just the offloading of expenses, it's also their power to tell hospitals to get fucking bent with ludicrous bills.

Hemospectrum 2y ago
Health insurance price negotiation is the primary reason those prices are so high in the first place. An insurance company gets to say it negotiated a 99% discount (or whatever) and the hospitals and pharmaceutical companies still charge prices high enough to turn a comfortable profit. It's a lot like "Black Friday" sales where retailers jack up their shelf prices in the preceding days and weeks so they can mark them down and persuade the customers they're getting attractive deals.
spondylosaurus 2y ago
To be fair to hospitals, some of those bills are ludicrous because of insurance. If they know that insurers will only ever pay 10% of the listed cost, they'll make the listed cost seem a lot bigger so that that 10% payout is comparatively bigger too.
ANewFormation 2y ago
Insurance companies have a motivation to see high healthcare costs - it justifies higher premiums, and in a broken 'public' healthcare system that entrenches insurance middlemen, and subsidizes their costs for those unable to afford them, you're just going to see costs skyrocket endlessly. Public healthcare, of any sort, should not involve working with third party insurance companies. In any case, this is also why medical tourism is a thing - you could go get the exact same treatment, to completion, half way around for far less than what you the cost you were quoted for a single round in the US - including housing and other costs.
cogman10 2y ago
The health industry is what's wrong with a captured market and few players. Every party is trying to extract maximum value for minimum input. That leads hospitals to 1000x every treatment price so when insurance companies come to negotiate they can negotiate down to 100x. It causes hospitals to understaff because is cheaper to pay for legal staff to handle malpractice claims than it is to not work your nurses and doctors to death. It causes drug companies consolidate and then charge through the nose for drugs that cost them pennies to manufacturer (for example, penicillin or insulin) drugs that, everyone should be aware, all of the R&D and FDA approval has been done. The most expensive part of drug development is done. There are solutions. It's regulations. Hospitals regulated to minimal coverage. Drug/hospitals hit with anti price gouging regulations. Insurance companies hit with coverage regulations. That's all something doable and probably with enough political will to be done. An even better idea is simply nationalizing medicine, top to bottom. That's unlikely to happen, but would result in the biggest drop in healthcare costs.

spondylosaurus 2y ago

Both of the drugs listed in the article (Remicade and Entyvio) have generic/biosimilar equivalents, too, so in theory competition should drive down the price... but this is the American healthcare system so of course it doesn't. Unclear from the article, but it's quite possible that UHC was _forcing_ him to use the more expensive name-brand drugs due to an agreement that they made with their pharmacy benefits manager (PBM). Some name-brand manufacturers will see generics on the horizon and throw in a clause that obliges the PBM to continue exclusively covering the name-brand drug for X amount of time. UHC specifically fucked me over this way by refusing to cover a widely available generic drug, insisting that they'd only pay for the name-brand stuff, but no pharmacy on earth seems to carry the name brand stuff and couldn't even source it to order it, so UHC effectively denied me the drug altogether. I feel for the guy in the article because the drug that UHC fucked me over about (mesalamine/Lialda) was keeping my Crohn's in check, and after the ensuing flare I had to switch to Remicade, which isn't totally working for me—I'll be switching to something else soon. Obligatory link about PBMs and how they suck: https://www.thebignewsletter.com/p/inside-the-mafia-of-pharma-pricing https://www.thebignewsletter.com/p/inside-the-mafia-of-pharm... And being on Remicade myself, albeit at a lower dose (and without Entyvio like he's also taking), I was curious enough to check the EOB for how much my current insurance pays for it. I have Anthem BCBS and here's the breakdown of my last infusion. For context, this is a drug where you have to go to an infusion clinic for administration because it's delivered intravenously. Doctor/facility charges: $21,420.70 Your discounts: -19,563.26 Due to your doctor/facility (max allowed): $1,857.44 Anthem paid: $1,857.44 So the "cost" was 20k for a single infusion, but Anthem negotiated that down to 2k. (I didn't pay anything since I'd met my out-of-pocket limit for the year.) Here's the itemized breakdown of that 20k cost: Drugs Provider charges: 21,020.70 Plan discounts: 19,226.20 Anthem paid: 1794,50 Infusion center Provider charges: 400.00 Plan discounts: 337.06 Anthem paid: 62.94 So the drug cost $1.8k, and they only paid $60 to have someone stick it in me. And for reference, that's name-brand Remicade too, because it's what Anthem's PBM requires. I'm on 7.5mg/kg every 8 weeks, and the highest approved dose is 10mg/kg every 4 weeks. So even if he was on, e.g., 20mg/kg every 4 weeks, that would be maybe $4k worth of drugs once a month, which is $48k a year. Unless Entyvio is way more expensive than I realized, I have no clue how that would add up to a million dollars a year in costs, unless they're sending him to an infusion center that charges crazy high prices (which, if it's part of UHC's Optum network rather than an independent clinic... maybe they do :P)

BeefWellington 2y ago

Worse, in many cases you're getting an existing 100% solution repackaged for $X * 1000. Anything routine is so expensive in the US because regulation's gone completely out the window. An area I'm familiar with for example: in Canada (where I am now) Salbutamol inhalers cost about $20-25. In California I was lucky to find it less than $100. And this is for a well-known decades old generic. See also: insulin. It's making headlines[1] that companies are finally dropping prices down to roughly in line with the rest of the world (starting in 2026). And this is after other measures have already been taken -- it used to be much worse.[2] Worth repeating: this price gouging is for generic and old medication. [1] https://www.msn.com/en-us/money/companies/novo-nordisk-to-cut-us-list-prices-of-two-insulin-products-by-more-than-70/ar-AA1vlqI8 https://www.msn.com/en-us/money/companies/novo-nordisk-to-cu... [2] https://www.bbc.com/news/world-us-canada-47491964 https://www.bbc.com/news/world-us-canada-47491964

ivraatiems 2y ago

The reason the treatment costs so much is in large part because of insurers aggressively pricing treatments down, forcing hospitals to respond by jacking prices up. It's a never-ending cycle. See e. g. https://www.fairobserver.com/economics/why-are-us-hospitals-so-expensive/ https://www.fairobserver.com/economics/why-are-us-hospitals-... The fix here would be to remove the middlemen (insurance companies) and pay hospitals what Medicare/Medicaid pay them, which is typically a much lower negotiated amount.

SpicyLemonZest 2y ago

Perhaps we are, but the treatment regimen described in the article sounds like one of those 4 percentage points missing from the 95% solution. A custom-made cocktail of two drugs, each requiring a special biologic manufacturing process and each far above the standard recommended dose? It seems very plausible that this would not be economical to produce for 1/10 the price.