Drugmaker to testify on why weight-loss drugs cost 15x more in the US(arstechnica.com)
arstechnica.com
Drugmaker to testify on why weight-loss drugs cost 15x more in the US
https://arstechnica.com/science/2024/06/drugmaker-ceo-to-testify-on-outrageously-priced-weight-loss-drugs/
112 comments
Ok I’ll bite.
Ozempic cost 3B to bring to market. Let’s 4x that to include the cost of drugs that never go to market. Raising costs to 12B. Let’s say a company can recoup their costs over 6 years, meaning they need to make 2B a year in a drug.
In 2023 [1] Novo made 12B on Ozempic. So they’re doing 6X better than the estimate above.
So they could cut the cost of Ozempic by 6, bringing the monthly price to $125 (which would be material for most people). They would still be raking in the cash.
I get the above model is overly simple but with the amount of money Novo is making they cannot justify these high prices.
[1]https://www.axios.com/2024/01/31/novo-profits-jump-wegovy-oz...
Ozempic cost 3B to bring to market. Let’s 4x that to include the cost of drugs that never go to market. Raising costs to 12B. Let’s say a company can recoup their costs over 6 years, meaning they need to make 2B a year in a drug.
In 2023 [1] Novo made 12B on Ozempic. So they’re doing 6X better than the estimate above.
So they could cut the cost of Ozempic by 6, bringing the monthly price to $125 (which would be material for most people). They would still be raking in the cash.
I get the above model is overly simple but with the amount of money Novo is making they cannot justify these high prices.
[1]https://www.axios.com/2024/01/31/novo-profits-jump-wegovy-oz...
I think doing this analysis against possibly the most commercially viable class of drugs ever created may lead to misleading conclusions.
My conclusions were not about how to do drug pricing in general. Rather about how we could justify a lower price for this specific drug.
The success of Ozempic is exceptional Without a doubt, And I’m arguing that because of this exceptional success, the company can afford to dramatically lower price
The success of Ozempic is exceptional Without a doubt, And I’m arguing that because of this exceptional success, the company can afford to dramatically lower price
You can't realistically discuss "how to do drug pricing in general" without taking into account the dynamic where companies recoup their research costs on a tiny number of hit drugs. It doesn't work if those hit drugs only make a small margin.
You're over thinking it.
Americans are just fatter.
Americans are just fatter.
That's true, but I'm honestly not sure what you think that has to do with this.
Is your theory that demand is higher in the US and that's why the prices are higher?
I don't see any reason to think that would be the case for a product that is very easy to transport globally. That is, absent other effects, like regulation and the differences between how insurance works in different places, I think this would be a global market with prices driven by global demand.
Is your theory that demand is higher in the US and that's why the prices are higher?
I don't see any reason to think that would be the case for a product that is very easy to transport globally. That is, absent other effects, like regulation and the differences between how insurance works in different places, I think this would be a global market with prices driven by global demand.
(As a though experiment) The problem would be how to combine shareholder capitalism with post hoc lowering of prices. Why should the shareholders Novo accept less returns on their bet, in order to give Americans a better price than 'the US' with all it's market power (or lack thereof considering their institutional arrangements) can bargain for? My opinion: The US could obviously change their institutional arrangements and get lower prices for patients (plus the shortages that go along with low prices), but this change would face stiff opposition in Congress from those gaining from the current status quo. You get what you pay for. Massive prices, and all the preferential treatment of suppliers and those involved in the supply chains that money can buy.
Because we live in a society. Other countries don’t pay nearly as much for it. Is it the duty of the US to subsidize those countries? Why are they paying less than us? It’s the US society that lets the corporation exist here, so why shouldn’t we leverage that against their interest. No one is calling for them to give it away free, but why should they get away with what is essentially usury? We aren’t really in a “free market”, lots of things have price controls especially those things which a necessary for life. In particular this could save tens (hundreds?)of thousands of lives a year, so when is enough $$ enough for stockholders? Who is really in charge here?
It isn't the duty of the US to subsidize them, but many of us think it is nonetheless worth the bargain in order to incentivize research into novel medicines.
I personally don't think this is the only way we could accomplish this, but I think it's a better outcome than it would be if nobody nation "over"-paid for medicine in order to subsidize research.
I personally don't think this is the only way we could accomplish this, but I think it's a better outcome than it would be if nobody nation "over"-paid for medicine in order to subsidize research.
You'd think people on a startup accelerator forum would understand power laws.
That is the point of a steel man, yes. OP was asking “how could this possibly ever work” and the parent did the math.
> So they could cut the cost of Ozempic by 6, bringing the monthly price to $125 (which would be material for most people). They would still be raking in the cash.
If your assumptions are true, why are investors not jumping up and down to throw money at researching medicine? Is there no risk involved?
Why are governments around the world unable to pay for the development and approval of these medicines?
If your assumptions are true, why are investors not jumping up and down to throw money at researching medicine? Is there no risk involved?
Why are governments around the world unable to pay for the development and approval of these medicines?
They are? Biotech VC is bigger than tech VC in volume invested and most biotech companies that IPO do so with zero revenue to fund clinical trials. It’s only gotten bigger after COVID.
VC investors are not the only investors. If developing a medicine was so guaranteed, the total returns of pharma stocks (all of them) would reflect that.
If the above poster is correct, then one should be able to invest all their money in just pharma stocks, and make a killings.
But you wouldn’t. You can’t pick the winners after the fact and claim the risk wasn’t there.
If the above poster is correct, then one should be able to invest all their money in just pharma stocks, and make a killings.
But you wouldn’t. You can’t pick the winners after the fact and claim the risk wasn’t there.
At this point pharmaceutical companies don’t do a lot of their own research - Novo Nordisk is a bit of an exception, largely because it’s the commercial arm of a diabetic foundation.
Pharmaceutical companies acquire the winners when it’s obvious they’re winners and they pay a lot for the privilege. That’s how biotech investing has worked for decades now. The risk of drug development is spread among several layers from publicly funded grants to VCs to public investors and finally pharma pays for the winners.
VCs fund the early stage, once the startup has something promising that can go to clinical trials they IPO (VCs often fund phase I), then when it’s cleared phase III a pharma company acquires it. Sometimes its so obvious that a drug will work and there’s so much competition that they acquire them early like Sofosbuvir for $11 billion, years before its approved.
You can’t make a killing investing in pharma because everyone before them takes all the risk and gets a lot of the profit. Pharma makes a commensurate profit for providing an exit for public investors and the expertise to mass manufacture and distribute the final product, not all the windfall from developing the drugs.
Pharmaceutical companies acquire the winners when it’s obvious they’re winners and they pay a lot for the privilege. That’s how biotech investing has worked for decades now. The risk of drug development is spread among several layers from publicly funded grants to VCs to public investors and finally pharma pays for the winners.
VCs fund the early stage, once the startup has something promising that can go to clinical trials they IPO (VCs often fund phase I), then when it’s cleared phase III a pharma company acquires it. Sometimes its so obvious that a drug will work and there’s so much competition that they acquire them early like Sofosbuvir for $11 billion, years before its approved.
You can’t make a killing investing in pharma because everyone before them takes all the risk and gets a lot of the profit. Pharma makes a commensurate profit for providing an exit for public investors and the expertise to mass manufacture and distribute the final product, not all the windfall from developing the drugs.
> Sometimes its so obvious that a drug will work and there’s so much competition that they acquire them early like Sofosbuvir for $11 billion, years before its approved.
Then why doesn’t someone else pay $12B?
Clearly there is a limit, and it must be related to risk. The risk of the drug failing to sell at the price you hope it will sell in the quantities you need it to sell to earn the desired ROI.
Then why doesn’t someone else pay $12B?
Clearly there is a limit, and it must be related to risk. The risk of the drug failing to sell at the price you hope it will sell in the quantities you need it to sell to earn the desired ROI.
The value is easily calculated by taking the potential number of patients times how much their insurance will pay, which is itself easy to calculate based on historical information and quality of life improvements. Adjust for risk based on the stage of development etc.
This is all really really basic stuff. Please just google the rest yourself: https://www.baybridgebio.com/drug_valuation.html
This is all really really basic stuff. Please just google the rest yourself: https://www.baybridgebio.com/drug_valuation.html
Your link says Novo earned 12B total in net profit not just from Ozempic. It seems like most of Novo's profits do not come from Ozempic so the profit from Ozempic would be substantially lower.
Maybe your comment is correct for say 2023 or 1H 2024, but Ozempic has far from ramped up to full production. Also, Ozempic isn't launched yet in most countries.
The ars article says 10 billion to make.
What about all the $3B shots on goal that don’t yield anything?
That is accounted for here:
> Let’s 4x that to include the cost of drugs that never go to market.
Also, that's a hugely generous multiplier. IANA pharma marketer, but I'm fairly confident that if a drug is ultimately unsuccessful, it's cut off long before the 3b mark. Not saying that the investment isn't substantial, but it's not like they have millions of doses produced/distributed before they discover that it's ineffective.
> Let’s 4x that to include the cost of drugs that never go to market.
Also, that's a hugely generous multiplier. IANA pharma marketer, but I'm fairly confident that if a drug is ultimately unsuccessful, it's cut off long before the 3b mark. Not saying that the investment isn't substantial, but it's not like they have millions of doses produced/distributed before they discover that it's ineffective.
I really don't think that's a generous multiplier, at all. I'm pretty sure it's not manufacturing doses that's costly, it's probably nearly free on a marginal cost basis, the costly part is trying a huge number of options, getting all the way to testing on them, and then it not panning out, and paying the researchers who are doing that all the while.
Another comment nailed it, this is a power law return market, like startup investing. Those very few 100-1000x returns pay for everything else. You can't look at one of the most successful drugs and the costs of making it and decide that they should get a 50% return on top of that, it needs to cover a huge number of failures.
Another comment nailed it, this is a power law return market, like startup investing. Those very few 100-1000x returns pay for everything else. You can't look at one of the most successful drugs and the costs of making it and decide that they should get a 50% return on top of that, it needs to cover a huge number of failures.
Not only is medical research extremely risky in that you fail to develop a drug, you also have to take into account the risk if something goes wrong and you injure people.
IMO, the multiplier would be at least 10x, though I'd love to hear from an industry expert.
IMO, the multiplier would be at least 10x, though I'd love to hear from an industry expert.
Not sure why this gets downvoted? Certainly a lot of money goes into failed drugs?
Your post will probably get a lot of flack but it is fairly well established the way the economics work out. America does fund a lot of the drug research that happens and a lot of the rest of the world reaps the benefits.
I already see posts of people trying to explain how they could charge less money. Nonsense, this is a drug that cost a lot of money to bring to market, along side countless other failed drugs. Unless we have a unified world effort to research and produce drugs, I don't see any valid arguments against the current pricing regime.
I already see posts of people trying to explain how they could charge less money. Nonsense, this is a drug that cost a lot of money to bring to market, along side countless other failed drugs. Unless we have a unified world effort to research and produce drugs, I don't see any valid arguments against the current pricing regime.
According to one report[0] in three months there were 9m prescriptions for semaglutide, which can be extrapolated to 36m in a year.
3b/36m = 83.34.
So they could have recouped their development cost in a single year, just from USA sales, charging only $84 over the cost price.
https://www.cnbc.com/2023/09/27/ozempic-wegovy-drug-prescrip...
3b/36m = 83.34.
So they could have recouped their development cost in a single year, just from USA sales, charging only $84 over the cost price.
https://www.cnbc.com/2023/09/27/ozempic-wegovy-drug-prescrip...
There's currently approximately 100mln obese adults in the US alone.
Assuming only 10% get the treatment that's $300 per person to recoup the costs.
There's really no reason why a drug for something affecting tens of millions of people should cost so much.
Assuming only 10% get the treatment that's $300 per person to recoup the costs.
There's really no reason why a drug for something affecting tens of millions of people should cost so much.
>There's really no reason why a drug for something affecting tens of millions of people should cost so much.
The reason is becoming very rich is the carrot for taking the big risks to develop the medicine, because you will likely fail for years and years, and maybe never succeed.
If the discussion is changing to limit how rich someone should be able to get, that is a different topic about tax policy and wealth redistribution, not medicine prices.
The reason is becoming very rich is the carrot for taking the big risks to develop the medicine, because you will likely fail for years and years, and maybe never succeed.
If the discussion is changing to limit how rich someone should be able to get, that is a different topic about tax policy and wealth redistribution, not medicine prices.
> The reason is becoming very rich is the carrot for taking the big risks to develop the medicine, because you will likely fail for years and years, and maybe never succeed.
Not how it works. It's rare for a drug to reach the most expensive phase of clinical trials without demonstrating efficacy.
Not how it works. It's rare for a drug to reach the most expensive phase of clinical trials without demonstrating efficacy.
What does that have to do with anything? “Develop” includes everything it takes to start getting paid for it.
Surely the equity is not left up for grabs for cheap by the time it is a guaranteed to earn the owner lots of money.
Surely the equity is not left up for grabs for cheap by the time it is a guaranteed to earn the owner lots of money.
It's not a "big risk" in any capacity because drugs with low probability of success usually never reach the phase where they accumulate $3bln in costs.
The pharma industry has over a century of experience in managing risks of this sort, which is why it's so profitable.
The pharma industry has over a century of experience in managing risks of this sort, which is why it's so profitable.
Risk and reward are proportional, absent corruption. Managing risk does not make it disappear. Managing risk is what people get paid for, it’s the hard part that requires knowledge and expertise.
If there was no risk, then there would be no failed pharmaceutical businesses. If it was so easy to take medicines from idea to market and make a ton of money, people wouldn’t be wasting their time on buying stocks for other businesses.
It is also simultaneously possible that US patent law, as implemented with medicines, is too rewarding to pharma companies.
If there was no risk, then there would be no failed pharmaceutical businesses. If it was so easy to take medicines from idea to market and make a ton of money, people wouldn’t be wasting their time on buying stocks for other businesses.
It is also simultaneously possible that US patent law, as implemented with medicines, is too rewarding to pharma companies.
It’s all the same conversation.
Except it is not. One is about price controls, which distort supply and demand.
The other is about societal harmony.
For example, price controls on medicine results in society incentivizing more efforts to be put forth toward slinging advertisements, which is obviously not a good thing.
Then you say, well put price controls on advertisements, in which case..why chase the tail when it would be far less corruptive and complex to subject everyone to the same rules via tax and welfare policy.
The other is about societal harmony.
For example, price controls on medicine results in society incentivizing more efforts to be put forth toward slinging advertisements, which is obviously not a good thing.
Then you say, well put price controls on advertisements, in which case..why chase the tail when it would be far less corruptive and complex to subject everyone to the same rules via tax and welfare policy.
I highly recommend you listen to the recent 80000hours podcast with Rachel Glennerster on Market Shaping, or read her book, Strong Medicine.
Advanced market commitments, i.e. governments signing contracts that guarantee they'll pay $X hundred million for a solution BEFORE the research has been done, is the way to incentivize this while avoiding the disincentive of governments becoming extremely tough monopsonic price negotiators once the drug has been developed.
The development of more drugs could be funded this way, through global health organizations like GAVI, such that medicine wouldn't need to be developed by gouging some for the benefit of others.
Advanced market commitments, i.e. governments signing contracts that guarantee they'll pay $X hundred million for a solution BEFORE the research has been done, is the way to incentivize this while avoiding the disincentive of governments becoming extremely tough monopsonic price negotiators once the drug has been developed.
The development of more drugs could be funded this way, through global health organizations like GAVI, such that medicine wouldn't need to be developed by gouging some for the benefit of others.
> governments signing contracts that guarantee they'll pay $X hundred million for a solution BEFORE the research has been done
Did you say "hundred million" intentionally? Because the average cost of a drug has been estimated in the billions for over a decade now. [1] I'll take a listen to the podcast, I'm generally skeptical of the government deciding funding levels since they're likely to be worse at assessing demand than consumers.
[1] https://www.appliedclinicaltrialsonline.com/view/tufts-cente...
Did you say "hundred million" intentionally? Because the average cost of a drug has been estimated in the billions for over a decade now. [1] I'll take a listen to the podcast, I'm generally skeptical of the government deciding funding levels since they're likely to be worse at assessing demand than consumers.
[1] https://www.appliedclinicaltrialsonline.com/view/tufts-cente...
Great, thanks. I'm sure you'll find it thought provoking.
re: hundred million: I was trying to imply that AMCs can be large but not necessarily always in the billions - it depends on the market size and estimated economic damage of the thing we're trying to incentivize R&D for - though yes, both medical AMCs to date (pneumococcal and covax) were in the billions.
Just to clarify, AMCs aren't the same thing as governments "fixing" the price of R&D with wishful thinking. It's when a government/funder uses epidemiology and economics to calculate the cost of leaving a disease untreated, and agreeing in advance to pay that much for it. That way, if set correctly, companies will invest to develop a solution without fear of being punished by the moral/political forces that make them suppress their prices once the solution is developed.
It's a way to fix the incentives that have left us with a whole class of neglected tropical diseases (firms needing to recoup investments, governments needing to negotiate cheapest possible prices)
re: hundred million: I was trying to imply that AMCs can be large but not necessarily always in the billions - it depends on the market size and estimated economic damage of the thing we're trying to incentivize R&D for - though yes, both medical AMCs to date (pneumococcal and covax) were in the billions.
Just to clarify, AMCs aren't the same thing as governments "fixing" the price of R&D with wishful thinking. It's when a government/funder uses epidemiology and economics to calculate the cost of leaving a disease untreated, and agreeing in advance to pay that much for it. That way, if set correctly, companies will invest to develop a solution without fear of being punished by the moral/political forces that make them suppress their prices once the solution is developed.
It's a way to fix the incentives that have left us with a whole class of neglected tropical diseases (firms needing to recoup investments, governments needing to negotiate cheapest possible prices)
Bounties are tough imo. You quickly run into goodharts law where everyone just looks for loopholes or how to satisfy whatever requirement as easily as possible. With markets we know that everyone involved is better off for partaking. With billions of dollars on the line you better believe the pharma lawyers will find some way to get the bounty with a suboptimal product. A bounty on QALYs would probably be the best method, but that makes it difficult to commit to a sum before development.
> There’s so many areas of medicine where we don’t see progress because the ROI just isn’t worth it. Do we want to risk making all medicine like that?
You can have a market for R&D and see progress. You cannot have a market for lemons and expect the same. For every Ozempic, you can expect one or more Nexium, where the company (AstraZeneca in the case of Prilosec/Nexium) uses the first research win to pretend to have a second win (or third, or fourth, or even first because acquisitions) using marketing and distribution channels to bury the cheaper med.
You can have a market for R&D and see progress. You cannot have a market for lemons and expect the same. For every Ozempic, you can expect one or more Nexium, where the company (AstraZeneca in the case of Prilosec/Nexium) uses the first research win to pretend to have a second win (or third, or fourth, or even first because acquisitions) using marketing and distribution channels to bury the cheaper med.
The cost to research and produce the diabetes and weight-loss drug Ozempic is significantly lower than the price charged to consumers:
A new study found that Ozempic costs between $0.95 and $5.50 to produce per unit, or no more than $22 per month at the highest dose. [1]
Another study estimated that Ozempic could be sold for as little as $5 per pen and still be profitable for the manufacturer, Novo Nordisk. [2]
Senator Bernie Sanders stated that a Yale study found Ozempic costs less than $5 per month to manufacture, yet Novo Nordisk charges Americans nearly $1,000 per month for the drug. [3]
The available evidence indicates that the research and production costs for Ozempic are a small fraction of the final retail price charged to patients. The significant markup between manufacturing costs and consumer prices has led to calls for the drug manufacturer to lower prices.[4]
[1]: https://eu.usatoday.com/story/news/health/2024/03/29/ozempic... [2]: https://www.fastcompany.com/91071415/your-1000-per-month-oze... [3]: https://www.sanders.senate.gov/press-releases/news-sanders-s... [4]: https://www.beckershospitalreview.com/glp-1s/5-ozempic-new-s...
A new study found that Ozempic costs between $0.95 and $5.50 to produce per unit, or no more than $22 per month at the highest dose. [1]
Another study estimated that Ozempic could be sold for as little as $5 per pen and still be profitable for the manufacturer, Novo Nordisk. [2]
Senator Bernie Sanders stated that a Yale study found Ozempic costs less than $5 per month to manufacture, yet Novo Nordisk charges Americans nearly $1,000 per month for the drug. [3]
The available evidence indicates that the research and production costs for Ozempic are a small fraction of the final retail price charged to patients. The significant markup between manufacturing costs and consumer prices has led to calls for the drug manufacturer to lower prices.[4]
[1]: https://eu.usatoday.com/story/news/health/2024/03/29/ozempic... [2]: https://www.fastcompany.com/91071415/your-1000-per-month-oze... [3]: https://www.sanders.senate.gov/press-releases/news-sanders-s... [4]: https://www.beckershospitalreview.com/glp-1s/5-ozempic-new-s...
To be fair you have to include research costs here, which is very tricky as most drugs won't make it that far and still cost some money for research. So even including the development cost of the drug itself is not the whole story as it would not take into account the other drugs that failed.
I'm not saying that Ozempic specifically isn't overpriced, I don't know that. But production cost isn't the only factor for new drugs (it's somewhat different if we talk about older drugs/generics).
I'm not saying that Ozempic specifically isn't overpriced, I don't know that. But production cost isn't the only factor for new drugs (it's somewhat different if we talk about older drugs/generics).
The drug would not have come to market if it could only 'still be profitable'
Is this the cost for the "pill" after research is done? The first pill is the one that costs billions after all.
My understanding of GLP1 agonists is that they're relatively simple and cheap to produce. People have been able to source semaglutide and tirzepatide online for instance and there are communities on Reddit that will take you through mixing it/whatever you need to do prior to injecting it. I don't know where this three billion comes from.
This has "I could recreate twitter in a weekend" vibes. I am not out here rallying to lick corporate boots (I am in the 'hand the drug companies a cheque to recoup research costs, and make the drug generic' camp), but this is a really bad take.
The $3 billion comes from researching and demonstrating the role of GLP antagonists, determining how to use them as a medication, developing manufacturing and distribution processes, and dosing mechanisms, testing, documenting, and getting the appropriate certifications and approvals to ensure that the risks of using the medication are reasonably well understood and communicated. Then there is the cost of marketing and educating the medical services providers in various fragmented markets about the effects and efficacy of the drugs and presenting them as alternatives to existing medications.
$3B sounds like a lot of money, but when you consider that the efforts above take hundreds to thousands of people over 30[1] years to achieve, it's not alot.
As for the idea that people should or could manufacture or self-administer these drugs safely at home, yeah, that might be the case for a very limited number of people, but I am going to lean on the ghost of George Carlin for that “Think about how stupid the average person is, then realize that half of em’ are stupider than that”.
[1] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5707151/
The $3 billion comes from researching and demonstrating the role of GLP antagonists, determining how to use them as a medication, developing manufacturing and distribution processes, and dosing mechanisms, testing, documenting, and getting the appropriate certifications and approvals to ensure that the risks of using the medication are reasonably well understood and communicated. Then there is the cost of marketing and educating the medical services providers in various fragmented markets about the effects and efficacy of the drugs and presenting them as alternatives to existing medications.
$3B sounds like a lot of money, but when you consider that the efforts above take hundreds to thousands of people over 30[1] years to achieve, it's not alot.
As for the idea that people should or could manufacture or self-administer these drugs safely at home, yeah, that might be the case for a very limited number of people, but I am going to lean on the ghost of George Carlin for that “Think about how stupid the average person is, then realize that half of em’ are stupider than that”.
[1] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5707151/
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They’re actually charging more like $1300+ to insurers for it
> I think Ozempic cost somewhere around $3 billion to research and develop
Sure. But how much of that was invested by the company and how much of it came from public research grants?
Sure. But how much of that was invested by the company and how much of it came from public research grants?
Public research grants are mostly for super early stage pre-clinical stuff which isn’t really the expensive part of drug development. The expensive bit is testing it in humans.
Novo Nordisk has been the one funding GLP-1 research since the 1990s. It got started manufacturing insulin in the 1920s so that kind of research was right up its alley. It’s controlled by a charitable foundation too.
Sadly they’ve got a strong claim to being the ones responsible for the basic research here, which is exceedingly rare in pharma. Their latest drugs like Ozempic are the result of decades long research.
Sadly they’ve got a strong claim to being the ones responsible for the basic research here, which is exceedingly rare in pharma. Their latest drugs like Ozempic are the result of decades long research.
The article mentioned they are expected to make 3x the claimed RnD costs already this year, not sure what fraction of that is profits, but probably quite a large chunk.
There's no risk they won't recoup the costs even if prices were reduced 10x in the US.
> There’s so many areas of medicine where we don’t see progress because the ROI just isn’t worth it
.. because it's so much more profitable making medicines in demand in rich countries than medicines that benefit the largest number of people.
There's no risk they won't recoup the costs even if prices were reduced 10x in the US.
> There’s so many areas of medicine where we don’t see progress because the ROI just isn’t worth it
.. because it's so much more profitable making medicines in demand in rich countries than medicines that benefit the largest number of people.
dumbfool666(2)
Lawrence Lessig had a blog post about this before he ran for president: drug prices are lower in places like Africa because they’re higher in the US. The rich US consumers (or insurance companies) subsidize the poorer African purchases. For that matter, they also subsidize Medicaid purchases.
Economists view this as a good and obvious way to get medication to more people.
Economists view this as a good and obvious way to get medication to more people.
That's fair enough, but that kind of feels like poor and middle class Americans are the sacrificial lambs for healthcare for the rest of the world. There are certain income brackets that make too much money to qualify for medicare, but still don't really make enough to pay for healthcare out of pocket and don't have jobs that provide it, so they can't milk the insurance companies for endless amounts of money to cover their treatment. This leads to situations where people know that they can't afford the healthcare, so they don't see a doctor until situations are dire, go to an emergency room (where they cannot be denied treatment), ending up with an even higher bill that then needs to be accounted for in the rest of the hospital pricing, and therefore insurance.
I'm glad that we're able to subsidize drug prices to make it so Africans can get cheaper healthcare, and I am fine with charging the insurance companies lots of money and taking money from richer people in the process (since the high costs have to be rolled into the premium rates), but it's a little frustrating that it has to come at the direct expense of poorer Americans in the process.
I'm glad that we're able to subsidize drug prices to make it so Africans can get cheaper healthcare, and I am fine with charging the insurance companies lots of money and taking money from richer people in the process (since the high costs have to be rolled into the premium rates), but it's a little frustrating that it has to come at the direct expense of poorer Americans in the process.
you don't have to be glad about that because its clearly not why prices are lower in africa.
Looking in from the outside this whole reasoning seems to me like some kind of propaganda thats meant to me easily swallowed by americans.
It seems like a deflection that sells the disparity by leveraging american exceptionalism (US medicine is the best) to be swallowed resulting in variying thoughts depending on the disposition of the recipient ranging between "i am glad we are helping those poor people" to "WAAAA why should I pay for them".
But neither of it is really true. The truth as it looks from the outside is that the american people are simply taken for a ride by pretty much all the parts of the healthcare sector.
Looking in from the outside this whole reasoning seems to me like some kind of propaganda thats meant to me easily swallowed by americans.
It seems like a deflection that sells the disparity by leveraging american exceptionalism (US medicine is the best) to be swallowed resulting in variying thoughts depending on the disposition of the recipient ranging between "i am glad we are helping those poor people" to "WAAAA why should I pay for them".
But neither of it is really true. The truth as it looks from the outside is that the american people are simply taken for a ride by pretty much all the parts of the healthcare sector.
Sure, and a counter to my claim is that we have a fully socialized system for the military (funded entirely by taxes), and that certainly hasn't stopped weapons from being developed here at all, and it hasn't stopped us from giving these weapons to other countries as a form of diplomacy.
The military industrial complex of course has its own share of many problems, but clearly having the price be reasonable for the average Americans is not one of them.
The military industrial complex of course has its own share of many problems, but clearly having the price be reasonable for the average Americans is not one of them.
I think this is what I remember reading (or perhaps a first draft that turned into this): https://www.wired.com/2004/02/stop-making-pills-political-pr... .
It was written before those drugs actually were made available to poorer countries for low cost for humanitarian reasons.
It was written before those drugs actually were made available to poorer countries for low cost for humanitarian reasons.
That doesn’t really play out in a capitalistic system of incentives. Pharma companies charge as much as the market will bear and the market in Africa just can’t bear very much, so pricing them out will leave profit on the table. Drugs that are too expensive like chemotherapy usually aren’t offered except as humanitarian donations or supplied to upper class patients.
The tech industry does it all the time too, pricing games and SaaS subscriptions based on the currency, so that i.e. people in Russia or India pay a cheaper rate. Not because their consumers are being subsidized but because they would get zero profit from them otherwise.
The tech industry does it all the time too, pricing games and SaaS subscriptions based on the currency, so that i.e. people in Russia or India pay a cheaper rate. Not because their consumers are being subsidized but because they would get zero profit from them otherwise.
not having read the blog post I can at least say that it doesn't pass the smell test for me. The fact alone that the price disparity is not "africa" and "the rest of the world" but rather "the rest of the world" and the "USA" makes that very unlikely as a direct conclusion.
Many countries that are comparitively rich should see similar high prices. This is not the case. Also when looking at the develpment costs of some of the most expensive drugs the high prices are simply not justified.
Especially in cases where the main costs for a manufacturer is marketing because development was fully or partially financed from public money.
I mean aside from insulin the epipen price hikes are also well known about. As manufacturing technics improve and whatever cost overheads are payed off the prices should go down for all drugs. This is not the case at all somehow.
Many countries that are comparitively rich should see similar high prices. This is not the case. Also when looking at the develpment costs of some of the most expensive drugs the high prices are simply not justified.
Especially in cases where the main costs for a manufacturer is marketing because development was fully or partially financed from public money.
I mean aside from insulin the epipen price hikes are also well known about. As manufacturing technics improve and whatever cost overheads are payed off the prices should go down for all drugs. This is not the case at all somehow.
Other rich countries have price controls. If the US had the same price controls, all else equal, the economics of pharmaceutical research would fall apart. Whether that would be bad or good is certainly up for debate, but my personal view is that it would be bad.
But it wouldn't be necessary to leave all else equal, if we introduced the same kind of price controls. The idea I think seems interesting is to do more research funding via large public prizes, rather than primarily grants and profits. Unfortunately it sounds pretty untenable, politically, to me, to set these prizes high enough to encourage a similar amount of research as the profit motive does. It's hard for me to envision a like $3B prize for "create a really good weight loss drug" having been politically feasible, for instance.
But it wouldn't be necessary to leave all else equal, if we introduced the same kind of price controls. The idea I think seems interesting is to do more research funding via large public prizes, rather than primarily grants and profits. Unfortunately it sounds pretty untenable, politically, to me, to set these prizes high enough to encourage a similar amount of research as the profit motive does. It's hard for me to envision a like $3B prize for "create a really good weight loss drug" having been politically feasible, for instance.
What price controls other countries have allow for profits that are more than healthy. And I don't think that the economics of pharmaceutical research are all that closely coupled to the prices of drugs in the US. The apparent profit margin of the US parma industry is just too high for that - I have seen 70% cited compared to ~20% in other countries. [Source:https://healthpolicy.usc.edu/research/flow-of-money-through-...]
Lets just think about your 3B weighloss thing leaving out complications like its a spherical cow in a vaccum - there are enough overweight people in the world that if you can sell enough of it to each of them at a 10USD profit in total you easily make that back. Imagine what a 20usd per cured overweight person profit would do. isn't doubling your money enough? And considering that new potentially overweight people are born every day it would be a perpetual (spherical) cash cow.
Lets just think about your 3B weighloss thing leaving out complications like its a spherical cow in a vaccum - there are enough overweight people in the world that if you can sell enough of it to each of them at a 10USD profit in total you easily make that back. Imagine what a 20usd per cured overweight person profit would do. isn't doubling your money enough? And considering that new potentially overweight people are born every day it would be a perpetual (spherical) cash cow.
I really don't understand the repeated drama about drug prices.
IIUC, the dynamics are the same as with most other businesses:
- Seller sets prices to maximize profits. If possible, on a per-market-segment / per-customer basis.
- There are no laws (AFAIK) enforcing price caps, aside from what Medicare will pay.
- Seller has a temporary monopoly on some drugs via the government -controlled patent system.
- Seller is a for-profit corporation.
So what do lawmakers expect???
They made the rules, and are uniquely empowered to change them if they don't like the resulting market dynamics.
IIUC, the dynamics are the same as with most other businesses:
- Seller sets prices to maximize profits. If possible, on a per-market-segment / per-customer basis.
- There are no laws (AFAIK) enforcing price caps, aside from what Medicare will pay.
- Seller has a temporary monopoly on some drugs via the government -controlled patent system.
- Seller is a for-profit corporation.
So what do lawmakers expect???
They made the rules, and are uniquely empowered to change them if they don't like the resulting market dynamics.
> Seller has a temporary monopoly on some drugs via the government -controlled patent system.
That's the problem, it gives them a government enforced monopoly with no responsibility or obligation.
Patents should expire after a certain amount of profit is made from them, or come with some level of responsibility to use them for the public good.
That's the problem, it gives them a government enforced monopoly with no responsibility or obligation.
Patents should expire after a certain amount of profit is made from them, or come with some level of responsibility to use them for the public good.
They expire after 20 years IIRC. There is some shenanigans that go on with "evergreening" where they try to expand it out for longer, but it's generally an effective system.
A lot of people can die in 20 years.
>Patents should expire after a certain amount of profit is made from them, or come with some level of responsibility to use them for the public good.
Not only patents, that should also apply to copyright and the like. If the goal is really to push insensitive for innovation, creating uncapped profit will mechanically lead to undesirable situation (as per the stated goal) where an oligarchy will relentlessly take the lion’s share and let next to nothing for the rest of their late competitors.
Not only patents, that should also apply to copyright and the like. If the goal is really to push insensitive for innovation, creating uncapped profit will mechanically lead to undesirable situation (as per the stated goal) where an oligarchy will relentlessly take the lion’s share and let next to nothing for the rest of their late competitors.
That "certain amount of profit" might be a lot higher than you think.
Developing new drugs is a multi-billion dollar gamble. Between FDA approvals and research that doesn't go anywhere, drug making is a really losing game unless you make a metric ton of money.
Developing new drugs is a multi-billion dollar gamble. Between FDA approvals and research that doesn't go anywhere, drug making is a really losing game unless you make a metric ton of money.
They expect to get votes by creating theater that seems to show they care and blames others for problems.
Obviously they can pass laws to do things but it’s more politically expedient to just talk about how they want to do things.
Obviously they can pass laws to do things but it’s more politically expedient to just talk about how they want to do things.
It’s one thing if you make yet another acne medicine to the market and let the market bear what it will but when you have something that can possibly save lives and improve general health for 40% of the US population that are obese then it might come time to do a little governmental intervention and give the middle finger to the market, pay off the company a handsome sum, and take over the medication.
I mean almost half of them want to change the rules, any kind of universal healthcare would massively change how drug prices are negotiated. You'll have to blame the other politicians here that do not want to change the system here.
If Europe makes several more blockbusters at the expense of the US pharma industry, I'd expect to see American price regulation take hold. Prices are unregulated because American pharma companies benefit disproportionately from this arrangement.
Why would that matter? Novo is a publicly traded company on Nasdaq, surely lots and lots of Americans (including American taxpayer funded DB pension fund) have benefited from Novo stock going up. No less than any other “American” pharmaceutical company.
It is also controlled by a charity that does global research.
https://en.wikipedia.org/wiki/Novo_Holdings_A/S
It is also controlled by a charity that does global research.
https://en.wikipedia.org/wiki/Novo_Holdings_A/S
I have no clue where most drug research or drug development takes place. Right now the discussion tends to end up with US companies saying they charge so much for new medications to recoup the costs of ideas that didn’t pan out. Since only the drug companies know what didn’t pan out, it’s hard to refute.
If most drug research happens in the US (and, really, I don’t know if that’s true), then it suggests that the US model does a good job of incentivizing research. If another approach could get the same results, it would refute the drug companies’ argument.
If most drug research happens in the US (and, really, I don’t know if that’s true), then it suggests that the US model does a good job of incentivizing research. If another approach could get the same results, it would refute the drug companies’ argument.
> Right now the discussion tends to end up with US companies saying they charge so much for new medications to recoup the costs of ideas that didn’t pan out.
This is just public relations, because “we want to make as much money as possible” is not good PR. However, everyone wants to make as much money as possible, so faulting pharmaceutical companies for that is stupid. It’s just business.
> Since only the drug companies know what didn’t pan out, it’s hard to refute.
Lots of pharmaceutical businesses don’t pan out. For every Novo Nordisk, there are a lot of upstart pharma companies that go nowhere and lots of gambling day traders that lose money on the stock. Otherwise, an index of purely pharma companies would be the best performing asset class.
> If most drug research happens in the US (and, really, I don’t know if that’s true), then it suggests that the US model does a good job of incentivizing research. If another approach could get the same results, it would refute the drug companies’ argument.
Exactly! If it’s so easy to develop medicines, then do it. All these governments around the world are free to invest tens of billions of dollars, and yet none take up the cause.
This is just public relations, because “we want to make as much money as possible” is not good PR. However, everyone wants to make as much money as possible, so faulting pharmaceutical companies for that is stupid. It’s just business.
> Since only the drug companies know what didn’t pan out, it’s hard to refute.
Lots of pharmaceutical businesses don’t pan out. For every Novo Nordisk, there are a lot of upstart pharma companies that go nowhere and lots of gambling day traders that lose money on the stock. Otherwise, an index of purely pharma companies would be the best performing asset class.
> If most drug research happens in the US (and, really, I don’t know if that’s true), then it suggests that the US model does a good job of incentivizing research. If another approach could get the same results, it would refute the drug companies’ argument.
Exactly! If it’s so easy to develop medicines, then do it. All these governments around the world are free to invest tens of billions of dollars, and yet none take up the cause.
> All these governments around the world are free to invest tens of billions of dollars, and yet none take up the cause.
It is only expensive in USA, why would anyone else pay to make it cheaper in USA? Until USA changes there is no incentive for anyone else to pay for it.
And a very large share of drug research is happening in Europe, its just sold at high prices in USA as well just like American drug companies do. Just because non Americans makes a drug doesn't make it cheap in USA.
It is only expensive in USA, why would anyone else pay to make it cheaper in USA? Until USA changes there is no incentive for anyone else to pay for it.
And a very large share of drug research is happening in Europe, its just sold at high prices in USA as well just like American drug companies do. Just because non Americans makes a drug doesn't make it cheap in USA.
A few thousand vs 100’s of millions of fat Americans who could beneficially use this? That hardly seems fair.
Stockholders are global, there is no disproportionate gain for Europeans. Novo trades on an American stock market, and Americans (whoever they may be) are reaping just as much of a benefit from Novo as they would from Eli/Pfizer/etc.
If this were a normal commodity like chairs, the prices could not differ like that because people would buy it in a place where it's cheap, transport it to the US, and resell it.
The reason this doesn't happen for medications is that if you do this at scale, the FDA will have you arrested. If you remove the FDA's power to do that, the price of medications will fall immediately, and drastically.
The reason this doesn't happen for medications is that if you do this at scale, the FDA will have you arrested. If you remove the FDA's power to do that, the price of medications will fall immediately, and drastically.
Isn't it more important for food producers to explain why American's are so obese?
I have seen Americans on Tiktok say that they lost about 40 pounds in weight when they stayed in Europe for a while even when they ate the same amount of food?
Shouldn't those concerned about the health of Americans get their priorities right?
Is this "Idiocracy" in the making or what?
I have seen Americans on Tiktok say that they lost about 40 pounds in weight when they stayed in Europe for a while even when they ate the same amount of food?
Shouldn't those concerned about the health of Americans get their priorities right?
Is this "Idiocracy" in the making or what?
I live in Japan where you can get Ozempic from weight loss clinics for 15,000~20,000 JPY per month. There's no government subsidy and it's being sourced directly from the drug companies in the US. There's no excuse for what you're paying.
Same thing in Canada, as a google search tells me that "Ozempic costs between $200 and $300 per month in Canada."
But that doesn't tell us anything about the reasons behind the pricing strategy US drug companies are using.
But that doesn't tell us anything about the reasons behind the pricing strategy US drug companies are using.
Prices are signals carrying information about how valuable consumers find a product. When you artificially dampen the signal, you reduce the incentive to produce below the societally optimal amount.
This is the Econ 101 argument. If you think drug prices are "too high" then you need to refute it directly.
This is the Econ 101 argument. If you think drug prices are "too high" then you need to refute it directly.
Because Americans earn way more money than the average person elsewhere. It‘s really just that simple.
Is the answer “because we can”?
Because we got people fat on processed foods for the benefit of shareholders, so why not get them when they're trying to lose that weight, too?
I wonder why are there so many people in this situation of obesity? I mean, really, what are the known causes?
I get that we are all dissimilar regarding how much our organism will assimilate and store this or that on the genetics lottery. My supposition here would be that, given the proportion at stake, the bulk of issue is more likely coming from a diet that should be improved.
What would it cost to pay people with public nutritional education and prescribing a catch for a few months, vs these drugs?
Once again, I don’t imply it could be panacea for every single case, and I humbly recognize my ignorance of the topic, so feel very welcome to point me to relevant resources.
I get that we are all dissimilar regarding how much our organism will assimilate and store this or that on the genetics lottery. My supposition here would be that, given the proportion at stake, the bulk of issue is more likely coming from a diet that should be improved.
What would it cost to pay people with public nutritional education and prescribing a catch for a few months, vs these drugs?
Once again, I don’t imply it could be panacea for every single case, and I humbly recognize my ignorance of the topic, so feel very welcome to point me to relevant resources.
Sucker Tax
"Because the average American, including you Mr. Senator, needs 15x the dose".
Oh snap!
How else will they pay for all of the marketing costs? /s
It's supply and demand. 75% of Americans can be classified as overweight or obese. For $150, I can get a doctor to write me a prescription. If I have that much money to throw around for "cosmetic" medication, it makes sense that the drug companies are going to increase their prices to take advantage of middle-class/rich Americans with too much disposable income.
This is also a side effect of the USAs lack of government subsidized healthcare. The gatekeeper to any treatment you want in America is $$$. That's fine for some things, but this is another aspect of that paradigm.
Here in the Netherlands, we've having discussions in the government about taxing or limiting certain types of unhealthy foods because it is lowering health outcomes AND it costs the government a lot more if everyone becomes metabolically unhealthy at 45 instead of 75 because their diet is crap. [0]
Until the paradigm changes, drug companies will keep milking Americans for all they're worth.
0: https://nltimes.nl/2024/06/17/health-disaster-making-netherl...
It's supply and demand. 75% of Americans can be classified as overweight or obese. For $150, I can get a doctor to write me a prescription. If I have that much money to throw around for "cosmetic" medication, it makes sense that the drug companies are going to increase their prices to take advantage of middle-class/rich Americans with too much disposable income.
This is also a side effect of the USAs lack of government subsidized healthcare. The gatekeeper to any treatment you want in America is $$$. That's fine for some things, but this is another aspect of that paradigm.
Here in the Netherlands, we've having discussions in the government about taxing or limiting certain types of unhealthy foods because it is lowering health outcomes AND it costs the government a lot more if everyone becomes metabolically unhealthy at 45 instead of 75 because their diet is crap. [0]
Until the paradigm changes, drug companies will keep milking Americans for all they're worth.
0: https://nltimes.nl/2024/06/17/health-disaster-making-netherl...
> drug companies will keep milking Americans for all they're worth
There’s a lot of blubber in them whales!
There’s a lot of blubber in them whales!
That’s the thing about socialized medicine. The government should put limits on what citizens are allowed to do because it impacts the bottom line.
In the US more people die per year of alcohol related diseases than by guns (1) (2). If we’re going to try to remove people’s rights to self defense, we need to remove people autonomy to purchase alcohol. The government would save billions of dollars a year on treatments if they just prohibit it.
The same goes for cigarettes, highly processed foods, and high fructose corn syrup. All of these should be banned because they lead directly to obesity, which costs trillions of dollars over a 10 year period. As the EU and even the US budget for their universal healthcare, they need to control the children, I mean citizens under their watch. The citizens show themselves unable or unwilling to control their consumption. Therefore such things should be out right banned.
1 - https://www.cdc.gov/alcohol/features/excessive-alcohol-death... 2 - https://usafacts.org/data/topics/security-safety/crime-and-j...
In the US more people die per year of alcohol related diseases than by guns (1) (2). If we’re going to try to remove people’s rights to self defense, we need to remove people autonomy to purchase alcohol. The government would save billions of dollars a year on treatments if they just prohibit it.
The same goes for cigarettes, highly processed foods, and high fructose corn syrup. All of these should be banned because they lead directly to obesity, which costs trillions of dollars over a 10 year period. As the EU and even the US budget for their universal healthcare, they need to control the children, I mean citizens under their watch. The citizens show themselves unable or unwilling to control their consumption. Therefore such things should be out right banned.
1 - https://www.cdc.gov/alcohol/features/excessive-alcohol-death... 2 - https://usafacts.org/data/topics/security-safety/crime-and-j...
That's only if prohibition works, prohibition of consumption does not have a great track record of actually accomplishing the intended outcome.
If instead you look at why people drink, why they over consume, you can work levers that way. Are people seeking out escapes? Why? What can we do to make it so they don't feel that need?
If instead you look at why people drink, why they over consume, you can work levers that way. Are people seeking out escapes? Why? What can we do to make it so they don't feel that need?
Actually health improved under prohibition. https://www.vox.com/the-highlight/2019/6/5/18518005/prohibit...
The provider of health care can require that individuals stop indulging in certain practices. In the EU they can say you stop drinking or no health care. A person would then be free to find an alternative provider of health insurance. Maybe the EU countries would allow private insurance.
The provider of health care can require that individuals stop indulging in certain practices. In the EU they can say you stop drinking or no health care. A person would then be free to find an alternative provider of health insurance. Maybe the EU countries would allow private insurance.
"health" did not improve, cirrhosis of the liver cases dropped. At the same time crimes related to drug addiction jumped 45% and all crime was up 20%.
That article is blinding the reader in its selective use of stats, by limiting the assessment to violent crime they ignore the wider social deleterious effect alcohol prohibition had.
The question is not "will this succeed in what it attempts to do", but rather "is it worth all the extra baggage", does it matter if alcohol prohibition works when it's also a weed and cocaine popularity campaign?
That article is blinding the reader in its selective use of stats, by limiting the assessment to violent crime they ignore the wider social deleterious effect alcohol prohibition had.
The question is not "will this succeed in what it attempts to do", but rather "is it worth all the extra baggage", does it matter if alcohol prohibition works when it's also a weed and cocaine popularity campaign?
Killing other people is significantly different from killing oneself.
More than half of all gun deaths are suicide related. The US is middle of the pack in suicides per capita, which I interpret to mean removing all guns would not significantly reduce suicide per capita.
Also death by alcohol impacts more than just the dead person. There is massive emotional and economic impacts. There is lost time and productivity by both the dead guy and survivors. For the sake of economic wellbeing we need to out law any and all things that raise the cost of healthcare.
Everyone should be required to join Government or healthcare provided zoom meetings where we are all watched exercising in unison.
Also death by alcohol impacts more than just the dead person. There is massive emotional and economic impacts. There is lost time and productivity by both the dead guy and survivors. For the sake of economic wellbeing we need to out law any and all things that raise the cost of healthcare.
Everyone should be required to join Government or healthcare provided zoom meetings where we are all watched exercising in unison.
Must be supply and demand based pricing, surely? /s
I think it’s easy to look at places in Europe that get drugs virtually for free, and want to be like that, but the US despite being 1/20 of the world’s population, funds something like 80% of the biomedical industry, due to our lack of price controls.
There’s so many areas of medicine where we don’t see progress because the ROI just isn’t worth it. Do we want to risk making all medicine like that?