Big Pharma claims lower prices means giving up miracle medications. Ignore them(vox.com)
vox.com
Big Pharma claims lower prices means giving up miracle medications. Ignore them
https://www.vox.com/future-perfect/368538/medicare-drug-prices-pharma-negotiations-innovation
119 comments
US pharma already benefits from academic research which is paid for by tax money. This is a classic example of socializing the costs and privatizing the profits. Often times, you’re looking at 10-100x the cost for “statistically significant” uplift in efficacy. What happened to value-based medicine?
The vast majority of the costs aren't in the early stages that happen at academic institutions.
No. 99% of the costs are put on patients who take these drugs that are often ineffective. Heck, they give dying patients placebos. Yes, patients are willing to give up everything to live (and sometimes merely for weeks/months), and pharma is using them for experiments. Do you want to put a price on that? What a cynical thing to say. This isn’t some AB testing for a new web app feature.
I'm not sure what you're saying, are you against clinical trials?
I think they could be, because I think you're looking for that 1/1000. Doing 1000 things and throwing away 999 is expensive. So sure, when you look at that 1/1000 you might say "oh the 1 isn't expensive". But you're also paying for the 999, and you have to in order to get that 1.
True that a big part of the cost is absorbing the costs of failed drugs, but most of it is in clinical trials, which is normally past the academia setting.
If I had to guess, a tiny tiny percent of all potential drugs make it to clinical trails. So again, now you're looking at 1 in 10,000. You're only looking at the 1, ignoring the 9,999, and saying "look pharma pays for all of it!"
How much research at unis ends up being completely worthless from a pharmaceutical product perspective? Almost all of it. But how many products began based on research conducted at universities? ... all of them.
How much research at unis ends up being completely worthless from a pharmaceutical product perspective? Almost all of it. But how many products began based on research conducted at universities? ... all of them.
Most of the costs of drug development involve clinical trials. Basically none of that is supported by academic research because it is so expensive.
We spend more money on the NIH alone than on drug trials. This is completely false.
The trick here is that you exclude fundamental research by definition when you talk about "drug development". But the fundamental research is necessary for drug development, and it's just as if not more expensive.
The trick here is that you exclude fundamental research by definition when you talk about "drug development". But the fundamental research is necessary for drug development, and it's just as if not more expensive.
Most in the industry would not include fundamental research in drug development, so it's not just me.
That said, fundamental research is very important, and so is the NIH. The NIH also funds many clinical trials, specifically those that the industry is not willing to.
That said, fundamental research is very important, and so is the NIH. The NIH also funds many clinical trials, specifically those that the industry is not willing to.
Sure, and that's a choice that's useful to the industry. It doesn't change that the fundamental research is a necessary part of the drug development process, and that our taxes pay for because the industry won't and can't.
That’s such a cynical thing to say. I guess in your mind, drug companies carry out these trials in a complete
vacuum. Patients take on all the risks.
Nobody is forcing you to buy the more expensive drug. You can always use the older generic version.
You cannot always obtain a generic version; sometimes not even the original version.
Drug manufacturers regularly take approved medicines, which are off-patent and non-exclusive, due to safety reasons (side-effects, risks to patients) or due to commercial reasons: high cost of production, low demand, or possibly to increase demand for an exclusive alternative.
The FDA maintains a list of "List of Off-Patent, Off-Exclusivity Drugs without an Approved Generic": https://www.fda.gov/drugs/abbreviated-new-drug-application-a...
See also: https://en.wikipedia.org/wiki/List_of_withdrawn_drugs
There are also perverse incentives at play and it often isn't easy to get a generic approved, especially if the original drug was already removed from market, under biosimilar regulations:
https://prospect.org/health/2024-03-14-novo-nordisk-disconti...
Drug manufacturers regularly take approved medicines, which are off-patent and non-exclusive, due to safety reasons (side-effects, risks to patients) or due to commercial reasons: high cost of production, low demand, or possibly to increase demand for an exclusive alternative.
The FDA maintains a list of "List of Off-Patent, Off-Exclusivity Drugs without an Approved Generic": https://www.fda.gov/drugs/abbreviated-new-drug-application-a...
See also: https://en.wikipedia.org/wiki/List_of_withdrawn_drugs
There are also perverse incentives at play and it often isn't easy to get a generic approved, especially if the original drug was already removed from market, under biosimilar regulations:
https://prospect.org/health/2024-03-14-novo-nordisk-disconti...
> Drug manufacturers regularly take approved medicines, which are off-patent and non-exclusive, due to safety reasons (side-effects, risks to patients) or due to commercial reasons: high cost of production, low demand, or possibly to increase demand for an exclusive alternative.
One of the big reasons is the cost of regulatory approval. Most drugs are cheap to make per-unit but if you're only going to sell to a few thousand patients, the fixed cost of regulatory approval means nobody does it at all, and then the patient has to buy a patented drug that costs a lot more.
Lower the cost of making generics and more people will do it.
One of the big reasons is the cost of regulatory approval. Most drugs are cheap to make per-unit but if you're only going to sell to a few thousand patients, the fixed cost of regulatory approval means nobody does it at all, and then the patient has to buy a patented drug that costs a lot more.
Lower the cost of making generics and more people will do it.
>Drug manufacturers regularly take approved medicines, which are off-patent and non-exclusive, due to safety reasons (side-effects, risks to patients) or due to commercial reasons: high cost of production
Sounds like the new drug is providing value, contrary to what the parent poster is claiming.
> or possibly to increase demand for an exclusive alternative.
Aren't generics typically produced by a manufacturer other than the original manufacturer? Sure, the original manufacturer might have a generics division to compete with generics, but if they're the sole provider there's no reason to offer a generic to undercut their brand-name variant. This theory makes no sense.
Sounds like the new drug is providing value, contrary to what the parent poster is claiming.
> or possibly to increase demand for an exclusive alternative.
Aren't generics typically produced by a manufacturer other than the original manufacturer? Sure, the original manufacturer might have a generics division to compete with generics, but if they're the sole provider there's no reason to offer a generic to undercut their brand-name variant. This theory makes no sense.
When a drug first stops being protected by a patent, in order for another company to begin making a generic version, they have to pay some up-front costs (of course).
If the government requirements for starting a generic for it are particularly stringent, it seems like these up-front costs might be particularly high?
I feel like there may be a strategy stealing argument that might apply here?
If it would be profitable for another company to pay the upfront costs to produce a new generic, then it seems like the company that is already producing the drug could undercut them, by producing the same drug as they are already making. (perhaps under a different brand name as they were already doing?)
This seems like it would discourage other companies from trying, as there might be a significant chance they don’t recoup their up-front cost?
If the company with the patent releases a new improved version of the drug, which is under a new patent, it seems like they could potentially phase the old one out of production, getting people on to the new one? If they didn’t need to lower the price of the old one due to no generic being produced, then even if the improvements are marginal, it might not be hard to get people to switch to the improved-and-still-under-patent version (just by telling people it is an improvement and that old version might not be available soon).
If they then stop producing the old version, then a company that makes generics could then make a generic without worrying about being undercut by the original company, but if people are switched to the improved version, will they notice that there is a generic of the version they used to take, and, if so, will they trust it? Maybe? I don’t know. Maybe they would. (Oh, especially if the out-of-pocket price is the same, due to insurance, they might be less inclined to try switching to it..)
If it is unclear whether people would switch to it, then the company considering making the generic has a significant wager to make. Would they make it?
Maybe they would. Maybe the chain of events I described falls apart at some point. I don’t think it is obvious that it does, but it seems reasonably likely that this chain I described doesn’t work and isn’t a real phenomenon. But I don’t think it obviously doesn’t work.
If the government requirements for starting a generic for it are particularly stringent, it seems like these up-front costs might be particularly high?
I feel like there may be a strategy stealing argument that might apply here?
If it would be profitable for another company to pay the upfront costs to produce a new generic, then it seems like the company that is already producing the drug could undercut them, by producing the same drug as they are already making. (perhaps under a different brand name as they were already doing?)
This seems like it would discourage other companies from trying, as there might be a significant chance they don’t recoup their up-front cost?
If the company with the patent releases a new improved version of the drug, which is under a new patent, it seems like they could potentially phase the old one out of production, getting people on to the new one? If they didn’t need to lower the price of the old one due to no generic being produced, then even if the improvements are marginal, it might not be hard to get people to switch to the improved-and-still-under-patent version (just by telling people it is an improvement and that old version might not be available soon).
If they then stop producing the old version, then a company that makes generics could then make a generic without worrying about being undercut by the original company, but if people are switched to the improved version, will they notice that there is a generic of the version they used to take, and, if so, will they trust it? Maybe? I don’t know. Maybe they would. (Oh, especially if the out-of-pocket price is the same, due to insurance, they might be less inclined to try switching to it..)
If it is unclear whether people would switch to it, then the company considering making the generic has a significant wager to make. Would they make it?
Maybe they would. Maybe the chain of events I described falls apart at some point. I don’t think it is obvious that it does, but it seems reasonably likely that this chain I described doesn’t work and isn’t a real phenomenon. But I don’t think it obviously doesn’t work.
Well, 'somebody' might be forcing you, the illness itself, because the generic drug might not be good enough in your case.
>because the generic drug might not be good enough in your case.
The comment I was replying to:
>Often times, you’re looking at 10-100x the cost for “statistically significant” uplift in efficacy. What happened to value-based medicine?
If that's the case, sounds like the extra cost is worth it.
The comment I was replying to:
>Often times, you’re looking at 10-100x the cost for “statistically significant” uplift in efficacy. What happened to value-based medicine?
If that's the case, sounds like the extra cost is worth it.
"privatising profits" is a bit vague term. May suggest that simply everyone but government benefits.
I think it's better to say that it is socialising losses and making the rich richer.
I think it's better to say that it is socialising losses and making the rich richer.
Drug for discussion:
Bimzelx (for psoriasis). This costs six figures or more per year, from what I can glean. Watching baseball a lot, I see this advertised multiple times per game, and God only knows what else they spend on marketing.
> they will help the Medicare program cap what individual patients spend out of pocket on their prescriptions in a year at $2,000.
So if you want clear skin, you probably have to pay big bucks. But maybe these immensely profitable drugs subsidize the life-saving ones.
Bimzelx (for psoriasis). This costs six figures or more per year, from what I can glean. Watching baseball a lot, I see this advertised multiple times per game, and God only knows what else they spend on marketing.
(I don't have psoriasis or know anyone with it, if that matters)
> they will help the Medicare program cap what individual patients spend out of pocket on their prescriptions in a year at $2,000.
So if you want clear skin, you probably have to pay big bucks. But maybe these immensely profitable drugs subsidize the life-saving ones.
Clear skin is the least of the problems with psoriasis. From their website:
On top of that, psoriatic arthritis is degenerative, if you're unlucky enough to get that too, so not treating it means not only constant pain, constant threat of skin infections from scabbing, but permanent joint damage.
I ended up on Taltz, another very expensive biologic, but the eli lily foundation covered almost all of the cost since my insurance wouldn't. Before then, I looked like an alcoholic, because my nose was constantly red and inflamed, and I didn't have anything safe to put on it- glaucoma runs in my family, and I wasn't brave enough to risk anything strong enough.
If that was the only problem, I might not have even gone the route of Taltz, but I was also developing it all over my body, and there wasn't much that was helping.
Bimzelx, alone or in combination with methotrexate, is indicated for the treatment of active psoriatic arthritis in adults who have had an inadequate response or who have been intolerant to one or more disease-modifying antirheumatic drugs (DMARDs).
On top of that, psoriatic arthritis is degenerative, if you're unlucky enough to get that too, so not treating it means not only constant pain, constant threat of skin infections from scabbing, but permanent joint damage.
I ended up on Taltz, another very expensive biologic, but the eli lily foundation covered almost all of the cost since my insurance wouldn't. Before then, I looked like an alcoholic, because my nose was constantly red and inflamed, and I didn't have anything safe to put on it- glaucoma runs in my family, and I wasn't brave enough to risk anything strong enough.
If that was the only problem, I might not have even gone the route of Taltz, but I was also developing it all over my body, and there wasn't much that was helping.
Thanks.
I finally realized I was seeing this ad constantly and decided to look into it.
I finally realized I was seeing this ad constantly and decided to look into it.
It may not qualify as a life saving drug, but really it ought to be. The long-term quality of life with untreated and/or resistant psoriatic arthritis is awful.
Also, biologic drugs are money printing machines if they survive the FDA approval process, as they can manage the symptoms but the disease itself is incurable. Since they are brand new, they need promotion to raise awareness, and they pay for themselves after a few years.
Given all of that, irritating as they may be, the major ad spends make a lot of sense.
Also, biologic drugs are money printing machines if they survive the FDA approval process, as they can manage the symptoms but the disease itself is incurable. Since they are brand new, they need promotion to raise awareness, and they pay for themselves after a few years.
Given all of that, irritating as they may be, the major ad spends make a lot of sense.
I mute the commercials anyway, so I wouldn't call them "irritating." They're no worse than the Toyota lady in red.
Looking at all the other messages here, it's interesting that they don't emphasize the "horrible, life-threatening" aspects of the disease. It's all happy people enjoying life, now that their skin is clear.
Looking at all the other messages here, it's interesting that they don't emphasize the "horrible, life-threatening" aspects of the disease. It's all happy people enjoying life, now that their skin is clear.
Assuming this is post-Obamacare, do you know why your insurance didn't cover it? I had this simplified model that insurance covers everything once you hit maximum out of pocket and I'd love to learn how that model breaks down in practice.
Your insurance has a pharmacy benefit manager (PBM) that has a formulary (the list of drugs they cover). Multiple insurers might use the same PBM. New drugs aren't automatically covered, as they haven't necessarily made the calculation that the cost of it justifies using it versus the alternatives.
It's intentionally complicated in order to fracture responsibility, avoid paying out claims and extract payment from publicly funded insurers.
It's intentionally complicated in order to fracture responsibility, avoid paying out claims and extract payment from publicly funded insurers.
If the medication is on the formulary the max out of pocket is usually somewhere around $12K. It's not capped if it's not on the formulary. And fancy new drugs are often off the list.
My insurance company would have, but wanted me to try an older, cheaper drug first. Since the older drugs have a much more dangerous list of potential side effects, including lymphoma and skin cancer, and since the eli lily foundation would have covered it regardless, it was a no-brainer.
The co-pays on tier 3 (i.e. super spendy specialty drugs) are crazy anyway, so insurance covering it wouldn't have really changed the affordability aspect one way or the other.
The co-pays on tier 3 (i.e. super spendy specialty drugs) are crazy anyway, so insurance covering it wouldn't have really changed the affordability aspect one way or the other.
The insurer is supposed to cover everything, as long as it is justified by the prevailing evidence and there is no alternative treatment.
However, you may have to fight for it.
https://www.healthcare.gov/appeal-insurance-company-decision...
However, you may have to fight for it.
https://www.healthcare.gov/appeal-insurance-company-decision...
My insurer wanted me to try a different, older biologic first. My dermatologist recommended going with Taltz instead because
- the eli lily foundation pays for it anyway
- the older biologics have far more serious side effects profiles
Given that, it was kindof a no-brainer. I would have needed to go through the foundation anyway, since the co-pays on these drugs are insane regardless.
- the eli lily foundation pays for it anyway
- the older biologics have far more serious side effects profiles
Given that, it was kindof a no-brainer. I would have needed to go through the foundation anyway, since the co-pays on these drugs are insane regardless.
My feet have had open wounds for the past year due to psoriasis (and I've gone to every dermatologist I can). It's not just clear skin, it gets very bad with quite painful wounds from the scratching. Especially in hot humid conditions, and I play tennis a lot. 3 people I train with have bad cases, as in having to stop playing for a while
But presumably the advertising department pays for itself, right? So if they cut the advertising department, wouldn't they have less total money in the end? The advertising supports the R&D, not competes with it.
(The one exception is when two pharma companies have competing drugs that are basically equivalent. So they get trapped in a "Red Queen's race" where they both spend money on advertising to try to gain market share. In the end they've both spent a bunch of money on ads and ended up back where they started. For those cases, I think government regulation would be valuable.)
(The one exception is when two pharma companies have competing drugs that are basically equivalent. So they get trapped in a "Red Queen's race" where they both spend money on advertising to try to gain market share. In the end they've both spent a bunch of money on ads and ended up back where they started. For those cases, I think government regulation would be valuable.)
You seem to have supplied your own conclusion here. I didn't say UCB should do anything in particular: cut it, increase it, or keep it the same.
If there wasn't a competing drug there would be no need for ads, the only drug would get prescribed anyways.
They want the "ask your doctor about..." bits to be heard and followed, I'm guessing. People who thought they just had to live with it will now go in and ask for Bimzelx.
As someone with psoriasis, I seriously doubt anyone with severe plaque psoriasis is going to go from no treatment to monoclonal antibodies. In fact, your insurance won't even pay for it no matter how good it is unless you try other courses of treatment first. The effect is going to be changing from one course of treatment to the next, asking your doctor about it is a call to action.
To counter a Red Queens race is to spend twice as much in advertisements?
Like many a disease with an old name, Psoriasis refers to a localized cutaneous autoimmune disease usually treated by dermatologists, and a severe family of Rheumatic (autoimmune) diseases, part of the Spondyloarthropathy family, that happens to have a cutaneous element which is the same (and often is the first symptom). This treats the latter, debilitating and possibly life-threatening variety.
Obviously you need to subtract costs from that, not just production costs for this year but development costs, and the development costs of other drugs that didn't even make it to production.
> Obviously
Yes, it is. I didn't say it was all profit.
Yes, it is. I didn't say it was all profit.
> (I don't have psoriasis or know anyone with it, if that matters)
Psoriasis is very common, especially the mild forms. You probably know people who have it.
Psoriasis is very common, especially the mild forms. You probably know people who have it.
You seem to be implying the advertising costs are a significant driver of the price for drugs. They are not. The significant driver of the cost in drug is the development costs, including the cost of the many failures along the way. Also, in general and not specific to this case, the prices need to targeted high enough to encourage investors to invest in the first place. If prices are not set at a sufficient premium to offset the volatility and risk, in the future investors will realize biomedical research is a poor investment and put their money in less socially beneficial investments like Facebook.
> You seem to be implying the advertising costs are a significant driver
No, I'm not. That's in your mind.
The advertising costs can be justified by their return. Business 101.
No, I'm not. That's in your mind.
The advertising costs can be justified by their return. Business 101.
Ok good, thanks. I just wanted to clarify that point for other readers.
As an aside, as someone who works in the life sciences field, I’m a bit conflicted about advertising new therapeutics. I see why it is an often necessary practice in order to raise awareness among potential patients. On the other hand, in an ideal world, primary care physicians would be up on the latest therapies and recommend them to their patients as appropriate. Sadly, that is not always the case.
As an aside, as someone who works in the life sciences field, I’m a bit conflicted about advertising new therapeutics. I see why it is an often necessary practice in order to raise awareness among potential patients. On the other hand, in an ideal world, primary care physicians would be up on the latest therapies and recommend them to their patients as appropriate. Sadly, that is not always the case.
Good, I thought we were about to have a flame war there. People are so accustomed to everything having an ideological point that they infer one if you don't say it.
Putting myself in the place of the doctor: if I say "hey, there's this new drug Bimzelx!" and then I have to tell the patient what it costs, I can imagine being happy to wait until THEY bring it up. Of course, if they just ask "are there any drugs for this?" I'd be duty-bound to answer.
Putting myself in the place of the doctor: if I say "hey, there's this new drug Bimzelx!" and then I have to tell the patient what it costs, I can imagine being happy to wait until THEY bring it up. Of course, if they just ask "are there any drugs for this?" I'd be duty-bound to answer.
C6552 H10132 N1750 O2029 S42, 147229.87 g·mol, what a monster. Probably not making that one in your garage.
It's apparently a monoclonal antibody (https://en.wikipedia.org/wiki/Bimekizumab). That's just a protein, so it might actually be easier to make in your garage than your average small molecule ;) ... not that either would be practically possible, but it might be available in countries where they don't care too much about patents and such
And if you're really willing to DIY, easier to make in your body than in your garage.
> So if you want clear skin, you probably have to pay big bucks.
The price is determined by what the market will bear. So, yes.
The price is determined by what the market will bear. So, yes.
What needs to happen is more and more money has to go to pharma from tax payers for novel medicine research. Today there is some, yes. But the vast majority of money comes from the markets. And anyone that has invested across the bio sector knows it’s capital intensive and almost everything fails. Money is just burned through so quickly.
So yes with lower returns investors will look elsewhere. Especially since overall pharma doesn’t really outperform. There’s no alpha across the sector.
So the money has to come from somewhere. If not then yes, innovation will slow down.
So yes with lower returns investors will look elsewhere. Especially since overall pharma doesn’t really outperform. There’s no alpha across the sector.
So the money has to come from somewhere. If not then yes, innovation will slow down.
To add to your point about expensive failures, this weekend it was announced that Tome Biosciences is going belly up. This is only a few years after being founded on some very promising research out of MIT. That’s $213M in investor money gone.
https://www.statnews.com/2024/08/22/tome-biosciences-gene-ed...
https://www.statnews.com/2024/08/22/tome-biosciences-gene-ed...
There's a problem with this line of thinking: the rest of the world already pays the same medicines less.
You’re not serious, are you? The USA consumer subsidizes everyone else in many cases. Similarly to how the USA taxpayer subsidizes the protection of trade, supply lines, and logistics through her mighty military.
Just compare the small and mid cap bio market of the USA to the rest of the world. These are the companies that get acquired by the large caps once they’ve gone through a P1 or P2 successfully. But most die before acquisition. This is where the real work happens in most cases.
Just compare the small and mid cap bio market of the USA to the rest of the world. These are the companies that get acquired by the large caps once they’ve gone through a P1 or P2 successfully. But most die before acquisition. This is where the real work happens in most cases.
The problem here is the idea that medicines have a particular price.
In reality you have a very big bill for developing it. A substantial bill for tooling up to actually be able to produce it. And typically a small bill for each unit you produce.
Now, I would like to see the developed world all pay the same price. But it wouldn't end up being the UHC-negotiated rates. I actually consider negotiation (or this dictate pretending to be negotiation) a bad thing. Instead:
You must sell to the US market at a rate no greater than you sell to any developed country. This is measured as net $ vs doses. No playing games with rebates, no playing games with giving them some for free. Reciprocity is encouraged, make the playing field level.
The US would benefit, the rest of the developed world would be screaming bloody murder.
In reality you have a very big bill for developing it. A substantial bill for tooling up to actually be able to produce it. And typically a small bill for each unit you produce.
Now, I would like to see the developed world all pay the same price. But it wouldn't end up being the UHC-negotiated rates. I actually consider negotiation (or this dictate pretending to be negotiation) a bad thing. Instead:
You must sell to the US market at a rate no greater than you sell to any developed country. This is measured as net $ vs doses. No playing games with rebates, no playing games with giving them some for free. Reciprocity is encouraged, make the playing field level.
The US would benefit, the rest of the developed world would be screaming bloody murder.
The rest of the world has governments that negotiate directly the Pharma companies and strike up deals that subsidize the first X doses per year per Y number of people. Once the limit is passed it's the same for everyone - pay the price or find an alternative. NB that this doesn't happen only with US companies, e.g. Roche is very profitable selling Million-dollar-per-course cancer treatments.
But in general, the fact that Pharma companies can sell at "full price" in the US subsidizes the drugs for the rest of the world.
Why not make these same arguments for cars, food, or anything else that we buy? Just have the government negotiate maximum prices that manufacturers can charge. Maybe AI will help make cars cheaper in the future.
Car, food manufacturers etc... operate in mostly free market - pharma, insurance, hospitals operate in highly regulated markes and 'somehow' for all of them is better if the price goes up, because 1% of 10mio is more than 1% of 1mio.
And what is maybe also important, when buying car you pay for it directly, and know the price in advance and there is no urge to buy it just to stay alive...
Is the US government not already negotiating the prices for cars and food it buys?
The US government typically puts out purchases for bidding. They need so many SUVs of a particular size so they receive bids from Ford and GM and whoever else and pick the lowest bid that satisfies the contract. They aren't setting the price, the sellers are, by bidding on the contract. The government just picks the lowest one.
The issue with drugs under patent is that the alternatives are often not as good. If the FBI needs a vehicle, it doesn't really matter if it's a Ford or a Chevy, but sometimes a drug under patent is quite a lot better than the available generic and then the seller can command a much higher price than the competition. Which is whole point of the patent system. In exchange for funding the research/trials you get a temporary monopoly on the drug and get to charge the monopoly price until the patent expires.
They're now proposing a different system where instead of taking bids, the government dictates the price and can blacklist the entire drug company if they don't accept the government's price for every individual drug. That's price controls and the result is consistently under-production. For commodities that means shortages, for R&D it means fewer new drugs.
The issue with drugs under patent is that the alternatives are often not as good. If the FBI needs a vehicle, it doesn't really matter if it's a Ford or a Chevy, but sometimes a drug under patent is quite a lot better than the available generic and then the seller can command a much higher price than the competition. Which is whole point of the patent system. In exchange for funding the research/trials you get a temporary monopoly on the drug and get to charge the monopoly price until the patent expires.
They're now proposing a different system where instead of taking bids, the government dictates the price and can blacklist the entire drug company if they don't accept the government's price for every individual drug. That's price controls and the result is consistently under-production. For commodities that means shortages, for R&D it means fewer new drugs.
If the Secret Service doesn’t like what GM charges for a few dozen black Escalades, they can’t take a haircut on GM’s revenue for every one it sells to the general public.
But that’s how the IRA works.
Also, the way Medicare Part D was set up, the government doesn’t buy the drugs in the first place. Private insurers negotiate their rates and then are reimbursed. They already have significant market incentive and power to negotiate lower prices.
But that’s how the IRA works.
Also, the way Medicare Part D was set up, the government doesn’t buy the drugs in the first place. Private insurers negotiate their rates and then are reimbursed. They already have significant market incentive and power to negotiate lower prices.
I'm not sure why you are being downvoted. Import bans on food and vehicle tariffs suggest the US has to deal with a lot of complexity regarding cars and food prices. Drugs are no exception. If only there were any easy answer.
If funding pharmaceutical research is a common public interest, then it should be funded the way all common public interests should be: taxes. Taxes pay for the weather predictions that make modern agriculture possible. Taxes pay for the basic physics research that keeps Moore's Law on track. Taxes pay for the transportation and logistics infrastructure that make the modern economy possible. Taxes pay for the fire engines that might keep your house from burning down some day. Taxes can and should pay for the pharmaceutical research that makes modern medicine effective. This kind of generalized "everybody needs it but no single person can pay for it and trying to do it through capitalism distorts everything" benefit is precisely what taxes are designed for.
Taxes do pay for pharmaceutical research though private funding makes up the majority of the funding. For example, NIH, DoD and CDC all provide funding.
NIH has an annual budget of $45 billion - all taxes.
[1] https://www.nih.gov/grants-funding [2] https://jamanetwork.com/journals/jama/fullarticle/2775400
NIH has an annual budget of $45 billion - all taxes.
[1] https://www.nih.gov/grants-funding [2] https://jamanetwork.com/journals/jama/fullarticle/2775400
Then why do legislators not finish funding the "minority" of the funding? The clinical trials are the most expensive and risky part. There is a reason the US government (and other governments) step away at that point.
Well think about it. You are asking for nationalization of drug research and production.
Clinical trials are expensive and private companies specialize in the later stages.
There is also the idea of shared risk. Government does not want to take on the entire risk
Clinical trials are expensive and private companies specialize in the later stages.
There is also the idea of shared risk. Government does not want to take on the entire risk
I don’t get what point you are trying to make.
If the people of a country want the lowest prices for medicine, they can pay for them via taxes, and that includes clinical trials. Then there would be no middleman with a patent to collect profit.
If taxpayers do not want the risk, then of course they will have to compensate businesses to take the risk.
And there is no “nationalizing”. The government paying for clinical trials and FDA approval does not preclude pharmaceutical businesses from doing the same.
If the people of a country want the lowest prices for medicine, they can pay for them via taxes, and that includes clinical trials. Then there would be no middleman with a patent to collect profit.
If taxpayers do not want the risk, then of course they will have to compensate businesses to take the risk.
And there is no “nationalizing”. The government paying for clinical trials and FDA approval does not preclude pharmaceutical businesses from doing the same.
I’ll repeat again: USG does not want to take on the risk and Congress will not fund the full cost. USG does not want to be in the drug production business either.
Right, but what sort of taxes? If the answer is "just an overall tax on everything", then that's basically the status quo, with all the accompanying "socializing the costs and privatizing the profits" (eg. [1]). If it's tax on the industry in question specifically, then that's something that's not usually done. For instance, you mention "Taxes pay for the basic physics research that keeps Moore's Law on track", but to my knowledge there's no semiconductor tax to attempt to recoup the cost of that research. The same goes for agriculture. You might have a point for roads since they're financed via a fuel excise tax, but it doesn't generalize to ocean/air freight.
[1] https://news.ycombinator.com/item?id=41351872
[1] https://news.ycombinator.com/item?id=41351872
Half-joking, half-serious counter: why not socialize the costs and socialize the profits, too? Think big!
Public universities and their hospital systems are the largest employers in many cities and states. The status quo is already somewhat socialized. Like some dollars from expensive hospital procedures and drug research royalties go to the insanely bloated admins of these university-hospital systems, paying salaries of people who basically could be eliminated overnight and no one would notice, who are working 11am to 4pm 3 days a week, and whose primary qualification is graduating the same university system and occasionally being the partner or relative of another employee of it. On the one hand you imagine something that is Socialized, in some imaginary way, in your head, that only you know, fine. But think critically about whom is employed by pharmaceuticals, how did they get to that station in life, and maybe it starts to look like things being socialized more than they seem.
Pharmaceutical research is a common global interest.
But there is no way to levy any global taxes to pay for it. That makes this idea practically impossible.
But there is no way to levy any global taxes to pay for it. That makes this idea practically impossible.
Am I summarizing this article right?
* The US premium paid is 150% of R&D costs, therefore cutting it will only cut spending on the costs that aren't R&D
* M&A did not drop in the first year of the program, which covered 10 drugs, therefore the program will have no effect once phased in
* We think AI might develop new drugs for us someday, so it's safe to throw away the existing system today
Not very solid reasons to go after the golden goose!
* The US premium paid is 150% of R&D costs, therefore cutting it will only cut spending on the costs that aren't R&D
* M&A did not drop in the first year of the program, which covered 10 drugs, therefore the program will have no effect once phased in
* We think AI might develop new drugs for us someday, so it's safe to throw away the existing system today
Not very solid reasons to go after the golden goose!
You forgot putting “price controls” in scare quotes while describing the program matter-of-factly as “negotiation”.
If you dive into the details of the law, it’s a “negotiation” only in the sense that drugmakers can choose to sell anything to Medicare or nothing at all if they don’t like the proposed price on any one drug. The penalties for “walking away” from that price are not limited to failing to make sales to Part D insurers. (Remember: Medicare doesn’t have its own formulary, that’s the Part D insurers’ role.)
Also you don’t have to know much about the history of this law to know the non-partisan Congressional Budget Office thinks we’re going to fail to achieve a dozen or so blockbuster drugs over the next decade due to this “negotiation”:
https://www.hks.harvard.edu/publications/biopharma-venture-c...
If you dive into the details of the law, it’s a “negotiation” only in the sense that drugmakers can choose to sell anything to Medicare or nothing at all if they don’t like the proposed price on any one drug. The penalties for “walking away” from that price are not limited to failing to make sales to Part D insurers. (Remember: Medicare doesn’t have its own formulary, that’s the Part D insurers’ role.)
Also you don’t have to know much about the history of this law to know the non-partisan Congressional Budget Office thinks we’re going to fail to achieve a dozen or so blockbuster drugs over the next decade due to this “negotiation”:
https://www.hks.harvard.edu/publications/biopharma-venture-c...
Note that the track record of government dictating what they'll pay for drugs is shortages. You drive prices as low as the drug companies can afford and the result is the drug companies don't make enough to pay for ensuring regular supplies even when things go wrong.
One plant has a problem and a whole bunch of patients don't get what they need. The government has caused chronic supply problems this way before and I do not trust them not to do so again.
One plant has a problem and a whole bunch of patients don't get what they need. The government has caused chronic supply problems this way before and I do not trust them not to do so again.
The flip side, government paying X for Y doses of drugs, is a captive market where the drug companies will charge what they like because they know the government has little to no choice but to pay.
That’s not how Part D works. There is no standard Medicare formulary, and the federal government isn’t buying medications directly: Seniors pick a Part D plan from a private provider—typically a large insurer with plenty of their own negotiation power.
First, one thing to keep in mind: "Big Pharma" is the medical equivalent of "venture capital" in technology. They buy up a lot of patents and very early stage startups in the hope that 1 or 2 of 100 investments actually strike it big, and that explains a part of why new medical innovations cost so much - all the loss has to be distributed.
> It is a harrowing proposition: that in trying to control drug prices for 67 million Medicare patients now, we might inadvertently prevent the development of future drugs that could save lives. Implied, if not stated outright, is that we’re putting a cure for cancer or Alzheimer’s or some other intractable disease in jeopardy.
Well... given that a lot of the fundamental research in pharmaceuticals happens at universities and/or on taxpayer grants, what exactly is preventing the US government from taking over the later stages of development and the associated risk itself, and only use external providers for manufacturing at scale?
Of course, it's a rhetorical question. The answer is two-fold here - primarily the obvious: large parts of the US (and most Western nations facing similar questions) prefer a "small state", preferably as small as possible. But there's also a second answer... the US' very dark history in government-run medicine. The Tuskeegee syphilis study, the consistent discrimination against PoC and women in medical research, MKULTRA or the US just about permanently burning all of its trust across the world by using "vaccination drives" as a pretext to verify Bin Laden's presence in that compound in Pakistan [1] - antivaxxers, Covid deniers and their ilk didn't sprout up from nothing, they have very fertile soil.
[1] https://www.npr.org/2021/09/06/1034631928/the-cias-hunt-for-...
> It is a harrowing proposition: that in trying to control drug prices for 67 million Medicare patients now, we might inadvertently prevent the development of future drugs that could save lives. Implied, if not stated outright, is that we’re putting a cure for cancer or Alzheimer’s or some other intractable disease in jeopardy.
Well... given that a lot of the fundamental research in pharmaceuticals happens at universities and/or on taxpayer grants, what exactly is preventing the US government from taking over the later stages of development and the associated risk itself, and only use external providers for manufacturing at scale?
Of course, it's a rhetorical question. The answer is two-fold here - primarily the obvious: large parts of the US (and most Western nations facing similar questions) prefer a "small state", preferably as small as possible. But there's also a second answer... the US' very dark history in government-run medicine. The Tuskeegee syphilis study, the consistent discrimination against PoC and women in medical research, MKULTRA or the US just about permanently burning all of its trust across the world by using "vaccination drives" as a pretext to verify Bin Laden's presence in that compound in Pakistan [1] - antivaxxers, Covid deniers and their ilk didn't sprout up from nothing, they have very fertile soil.
[1] https://www.npr.org/2021/09/06/1034631928/the-cias-hunt-for-...
The main expense is the testing needed to bring the drug to market, the cost of initial research is peanuts compared to that
Yep and that should be taken on by the government.
What good is a miracle if the only people who can afford it don't need it because they can afford to maintain their health?
Would you rather live in the world where we don't have a solution or the world where the solution is expensive now but will eventually become cheap?
Under our current system, the trend is for drug prices to increase
https://www.aarp.org/politics-society/advocacy/info-2024/rx-...
https://www.aarp.org/politics-society/advocacy/info-2024/rx-...
https://pubmed.ncbi.nlm.nih.gov/34904207/
https://www.statista.com/statistics/825214/atorvastatin-out-...
https://www.statista.com/statistics/825187/lininopril-out-of...
https://www.statista.com/statistics/825259/albuterol-out-of-...
https://www.statista.com/statistics/825193/levothyroxine-out...
https://www.statista.com/statistics/825244/amlodipine-besyla...
https://www.statista.com/statistics/822626/gabapentin-out-of...
https://www.statista.com/statistics/825200/metformin-hydroch...
https://www.statista.com/statistics/825281/losartan-potassiu...
These are some of the most prescribed drugs in America, the trend is quite clear. Every drug except albuterol and levothyroxine has decreased dramatically in price. Levothyroxine's patent expired this year so there will be some time before prices go down. Albuterol is expensive because the inhaler had to change the propellant to remove CFCs and there is a new patent on the hydrofluoroalkanes (HFAs) that has yet to expire.
https://www.statista.com/statistics/825214/atorvastatin-out-...
https://www.statista.com/statistics/825187/lininopril-out-of...
https://www.statista.com/statistics/825259/albuterol-out-of-...
https://www.statista.com/statistics/825193/levothyroxine-out...
https://www.statista.com/statistics/825244/amlodipine-besyla...
https://www.statista.com/statistics/822626/gabapentin-out-of...
https://www.statista.com/statistics/825200/metformin-hydroch...
https://www.statista.com/statistics/825281/losartan-potassiu...
These are some of the most prescribed drugs in America, the trend is quite clear. Every drug except albuterol and levothyroxine has decreased dramatically in price. Levothyroxine's patent expired this year so there will be some time before prices go down. Albuterol is expensive because the inhaler had to change the propellant to remove CFCs and there is a new patent on the hydrofluoroalkanes (HFAs) that has yet to expire.
This doesn't really say what you think it says.
In fact there is a great deal of uncertainty regarding future drug prices, and it is one of many factors rattling biotech investment.
In fact there is a great deal of uncertainty regarding future drug prices, and it is one of many factors rattling biotech investment.
It seems I didn't say what you think I said.
And we're talking pharma inflating prices to increase dividend/buybacks/exec compensation rather than investing in R&D. Different ball of wax from biotech startups looking for investment
And we're talking pharma inflating prices to increase dividend/buybacks/exec compensation rather than investing in R&D. Different ball of wax from biotech startups looking for investment
That would be an odd epidemiological profile...
Even at worst, when the patents expire after 17 years the miracle becomes affordable for all.
Even at worst, when the patents expire after 17 years the miracle becomes affordable for all.
If you can buy it. My mother had chronic nutritional issues because of rationing stuff to those who needed it the most. Cheap generic, just without enough production capacity because the price was forced too low.
> Most other wealthy countries, like Australia and the UK, use the government’s central role in their health care system to negotiate lower prices while also fostering their own medical innovation sectors.
These wealthy countries are relying on the US to subsidize their medical innovation. The US drug market is the one where the profits are and which determines how much investment is worth it.
These wealthy countries are relying on the US to subsidize their medical innovation. The US drug market is the one where the profits are and which determines how much investment is worth it.
How would this be disproven? What would you observe?
This should hint to you why, despite sounding reasonable, what you said isn't a common-sense, no-evidence-needed or even wholly-formed idea.
This should hint to you why, despite sounding reasonable, what you said isn't a common-sense, no-evidence-needed or even wholly-formed idea.
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-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.
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-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.
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)
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)
I do agree there would be a benefit from removing the marketing. But the benefit would be little more than what is spent on said marketing.
It comes back to the same thing--where is the money going to come from? Few medicines actually have a high per-unit production cost. The cost is usually mostly amortizing R&D and the production equipment. (And looking at R&D overall--you have to count the spending on the failures as well as on the successes.) Sell fewer pills and you don't cut that R&D cost, you just distribute it across fewer pills.
It comes back to the same thing--where is the money going to come from? Few medicines actually have a high per-unit production cost. The cost is usually mostly amortizing R&D and the production equipment. (And looking at R&D overall--you have to count the spending on the failures as well as on the successes.) Sell fewer pills and you don't cut that R&D cost, you just distribute it across fewer pills.
Hmmm, the marketing question is complicated and I'm not sure what to think.
From a profit point of view, presumably the advertising department pays for itself; in other words, the advertising department generates money for the R&D department, rather than taking money from the R&D department.
But, the advertising presumably increases the number of people taking the drug. If it's teaching patients/doctors about a valuable new drug that will make peoples' lives better, then it's a social good. But if it's persuading patients/doctors to buy the drug unnecessarily, then it's a waste.
(Also, sometimes two pharma companies have competing drugs that are basically equivalent. So they get trapped in a "Red Queen's race" where they both spend money on advertising to try to gain market share. In the end they've both spent a bunch of money on ads and ended up back where they started. For those cases, banning marketing would be a clear win.)
Edit: Also, keep in mind that "ban/regulate pharma advertising" is a different proposal than "medicare negotiation".
From a profit point of view, presumably the advertising department pays for itself; in other words, the advertising department generates money for the R&D department, rather than taking money from the R&D department.
But, the advertising presumably increases the number of people taking the drug. If it's teaching patients/doctors about a valuable new drug that will make peoples' lives better, then it's a social good. But if it's persuading patients/doctors to buy the drug unnecessarily, then it's a waste.
(Also, sometimes two pharma companies have competing drugs that are basically equivalent. So they get trapped in a "Red Queen's race" where they both spend money on advertising to try to gain market share. In the end they've both spent a bunch of money on ads and ended up back where they started. For those cases, banning marketing would be a clear win.)
Edit: Also, keep in mind that "ban/regulate pharma advertising" is a different proposal than "medicare negotiation".
You're thinking at the level of one drug. But that's not the right level, it misses too many second order effects.
If someone is sick, they've likely been diagnosed by a doctor, who will treat them. This is how the consumer will know at all they might want to take the drug.
So the effect of the advertisement is to change the course of treatment as the consumer will ask their doctor for that drug ("ask your doctor if $drug is right for you"), and a doctor needs to prescribe it to begin with.
So the "Red Queen's Race" is not a sometimes. It's in fact almost always the situation at hand, generally between multiple courses of treatment.
We can observe from countries with no prescription drug advertising and similar levels of development that health outcomes are broadly similar. So we can be quite confident that this kind of advertising doesn't lead to significantly more appropriate treatment in aggregate, and it's therefore most likely to be a race to the bottom.
If someone is sick, they've likely been diagnosed by a doctor, who will treat them. This is how the consumer will know at all they might want to take the drug.
So the effect of the advertisement is to change the course of treatment as the consumer will ask their doctor for that drug ("ask your doctor if $drug is right for you"), and a doctor needs to prescribe it to begin with.
So the "Red Queen's Race" is not a sometimes. It's in fact almost always the situation at hand, generally between multiple courses of treatment.
We can observe from countries with no prescription drug advertising and similar levels of development that health outcomes are broadly similar. So we can be quite confident that this kind of advertising doesn't lead to significantly more appropriate treatment in aggregate, and it's therefore most likely to be a race to the bottom.
I'm not an expert on this stuff, so I'm not sure what's the answer. But this article says that about 90% of pharma marketing dollars are spent on marketing to doctors, not to consumers: https://www.pewtrusts.org/en/research-and-analysis/fact-shee... So it seems like pharma companies are mostly spending money on R&D and on advertising to doctors, not on direct-to-consumer advertising.
This is not true anymore, as advertising to patients has been the major driver of growth, perhaps due to Medicare and the rise of expensive biologics, leading to advertising to consumers becoming the predominant sink.
In 2016, pharma companies spent more on direct to consumer ads than they spend on marketing to doctors (excluding free samples, which are somewhere in between, though ultimately the drug being free is really of concern to the patient far more than the doctor), see: https://jamanetwork.com/journals/jama/fullarticle/2720029
In 2016, we have 9.6 billion in direct-to-consumer spending, 13.5 billion in free samples, and 6.8 billion in everything else. So clearly, advertising to consumers is the dominant venue.
In 2016, pharma companies spent more on direct to consumer ads than they spend on marketing to doctors (excluding free samples, which are somewhere in between, though ultimately the drug being free is really of concern to the patient far more than the doctor), see: https://jamanetwork.com/journals/jama/fullarticle/2720029
In 2016, we have 9.6 billion in direct-to-consumer spending, 13.5 billion in free samples, and 6.8 billion in everything else. So clearly, advertising to consumers is the dominant venue.
That hasn't been true for awhile, mostly since it's now illegal to send doctors on expensive junkets or offer more than the smallest dollar amount inducements. So Big Pharma has intensified D2C marketing, where they can exercise much more leverage and prey on the relative ignorance of the average person.
In Australia, prescription drugs generally cannot be advertised to consumers. Additionally, prescriptions for all drugs are written in the generic drug name form and not the branded form.
That said, where this currently seems to fall apart is the pharamacies.. most only stock a single "brand" and pricepoint for many drugs, two at most. Most pharamcies aren't online so you can't easily compare prices. In practice, I have frequently observed over many different prescriptions a price different of 1-2x between pharamcies in the same area for the exact same thing and dosage. Additionally, the way we fill scripts here you don't even get the price until you go to pay and theyve already labelled your box with your script, etc.
There's also largely no pricing on the shelves, even if you can see the behind the counter ones.
The only thing that saves us, is that "many" but not all drugs are subsidised by our public health care and the government negotiates the price. But for any non-subsidised drug it's open season and also much of the pricing is "per dispense" and not at all related to the drug quantity.
e.g. 4x10mg or 28x5mg of the same drug has the same price.
Also recently the much-publicised Ozempic which is used for weightloss and diabetes which is $150/dose here, because the price is fixed by that government negotiated price for diabetic patients but off-label prescribers get the same price even when not subsised by the government and they actually have to pay the full $150. They launched the literal exact same drug for weight loss as "Wegovy" but they vary the recommended dosages a little so that in practice you can't cross-fulfill the prescription. The exact same 1mg is $150 when sold as Ozempic and $250 when sold as Wegovy :) And for some straight reason the weight loss dose is "2.8mg" but the diabetic doses are 1mg and 3mg.
That said, where this currently seems to fall apart is the pharamacies.. most only stock a single "brand" and pricepoint for many drugs, two at most. Most pharamcies aren't online so you can't easily compare prices. In practice, I have frequently observed over many different prescriptions a price different of 1-2x between pharamcies in the same area for the exact same thing and dosage. Additionally, the way we fill scripts here you don't even get the price until you go to pay and theyve already labelled your box with your script, etc.
There's also largely no pricing on the shelves, even if you can see the behind the counter ones.
The only thing that saves us, is that "many" but not all drugs are subsidised by our public health care and the government negotiates the price. But for any non-subsidised drug it's open season and also much of the pricing is "per dispense" and not at all related to the drug quantity.
e.g. 4x10mg or 28x5mg of the same drug has the same price.
Also recently the much-publicised Ozempic which is used for weightloss and diabetes which is $150/dose here, because the price is fixed by that government negotiated price for diabetic patients but off-label prescribers get the same price even when not subsised by the government and they actually have to pay the full $150. They launched the literal exact same drug for weight loss as "Wegovy" but they vary the recommended dosages a little so that in practice you can't cross-fulfill the prescription. The exact same 1mg is $150 when sold as Ozempic and $250 when sold as Wegovy :) And for some straight reason the weight loss dose is "2.8mg" but the diabetic doses are 1mg and 3mg.
I hear that a lot, but have never seen numbers. Googling it doesn't help me either. Would you know of any resources?
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-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. :-)
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. :-)
I think the main difference there is that tech companies don't spend 67% of their marketing money schmoozing your doctor.
Of the $30 billion that Pharmas spends marketing in the US, $20bn is aimed at doctors.
There's about a million doctors in the US.
That's ~$20,000 per doctor, each of whom has a significant degree of implicit trust and authority.
Even if a doctor believes they are not swayed by marketing, studies have shown that these efforts can subconsciously affect their decisions.
And $20k/year/doctor just seems awfully high. There must be a more efficient way to help doctors make those sorts of decisions...
***
Responding by edit due to rate limit:
> Who else should they advertise to then?
No one. It's not a brand affiliation issue, it's a facts and awareness issue. Doctors can read journals and papers and peer reviews just fine!
There's no need for them to be told what to do on paid Hawaiian vacation weekends in 5 star hotels. You can see why they prefer things this way though.
> it is morally worse to advertise and influence people who don't know any better.
So don't.
Of the $30 billion that Pharmas spends marketing in the US, $20bn is aimed at doctors.
There's about a million doctors in the US.
That's ~$20,000 per doctor, each of whom has a significant degree of implicit trust and authority.
Even if a doctor believes they are not swayed by marketing, studies have shown that these efforts can subconsciously affect their decisions.
And $20k/year/doctor just seems awfully high. There must be a more efficient way to help doctors make those sorts of decisions...
***
Responding by edit due to rate limit:
> Who else should they advertise to then?
No one. It's not a brand affiliation issue, it's a facts and awareness issue. Doctors can read journals and papers and peer reviews just fine!
There's no need for them to be told what to do on paid Hawaiian vacation weekends in 5 star hotels. You can see why they prefer things this way though.
> it is morally worse to advertise and influence people who don't know any better.
So don't.
Who else should they advertise to then? The consumers aren't knowledgeable enough to make the decision on which drug they should take. Doctors are the only one qualified.
In fact, it is morally worse to advertise and influence people who don't know any better. At least, doctors are educated and it is their duty, both ethically and professionally, to learn about new drugs that best treat their patients. That is the whole point of a Medical Science Liaison. They are the "advertisers" for a pharma to make sure doctors know about the drug their companies make.
Mind you, at this level, advertising is a bit different. These MSLs are legally required to disclose both the indicators and the side effects and have strict rules in what they are allowed to give and say to doctors. There are hundreds of laws in place to prevent corruption/bribery. Of course there are bad actors everywhere, but at least, it is more regulated than Congress's "lobbying" and Supreme Court's "gifts".
In fact, it is morally worse to advertise and influence people who don't know any better. At least, doctors are educated and it is their duty, both ethically and professionally, to learn about new drugs that best treat their patients. That is the whole point of a Medical Science Liaison. They are the "advertisers" for a pharma to make sure doctors know about the drug their companies make.
Mind you, at this level, advertising is a bit different. These MSLs are legally required to disclose both the indicators and the side effects and have strict rules in what they are allowed to give and say to doctors. There are hundreds of laws in place to prevent corruption/bribery. Of course there are bad actors everywhere, but at least, it is more regulated than Congress's "lobbying" and Supreme Court's "gifts".
The US and NZ are the only two countries in the world that allow direct-to-consumer advertising of prescription medications - and New Zealand is trying to get rid of it (and only allowed it following pressure from the US for a trade agreement).
You can't gift doctors a paid vacation, there are rules and laws already in place. Also, MSLs are not simply "salepeople". They often require a PhD so their job description is more about "spreading knowledge" than "advertising" a drug.
Like it or not, having an expert in the hospital who know everything there is about a specific drug is a lot more effective than requiring every doctor to read about every new drugs. By your argument, this type of job should be removed and doctors are responsible for finding out about new drug themselves.
Maybe that is better, maybe not. But the first thing that would happen is adoption rate of new treatment would drop and people who would otherwise recover may die because their doctors were too busy trying to treat people instead of reading journals.
Like it or not, having an expert in the hospital who know everything there is about a specific drug is a lot more effective than requiring every doctor to read about every new drugs. By your argument, this type of job should be removed and doctors are responsible for finding out about new drug themselves.
Maybe that is better, maybe not. But the first thing that would happen is adoption rate of new treatment would drop and people who would otherwise recover may die because their doctors were too busy trying to treat people instead of reading journals.
> You can't gift doctors a paid vacation
They don't call it a vacation, they call it a conference.
An hour or two of "information sessions", with a big goody bag, and 2 or 3 days of fine dining, tours, and golf; all held in a plush 5 star hotel at $500 / night or more with all travel included.
> there are rules and laws already in place
What rules there are are not enforced. The regulatory office is flooded [0]:
"With the risks clear, Schwartz and Woloshin took a look at regulatory activity by the Food and Drug Administration and Federal Trade Commission and state attorneys general. They found a lackluster response to the skyrocketing medical marketing across the board. In fact, the FDA’s Office of Prescription Drug Promotion, which regulates consumer and professional promotional material, actually saw a decrease in regulatory activity. Though submissions increased from 34,182 in 1997 to *97,252* in 2016, violation letters dropped from 156 to *11* in those respective years. The finding “suggests the possibility of less oversight,” the authors conclude, possibly because FDA reviewers may be “overwhelmed by the massive increase in promotional submissions.”
Emphasis added.
> Like it or not, having an expert in the hospital who know everything there is about a specific drug is a lot more effective than requiring every doctor to read about every new drugs.
Do you think unbiased third party sources can't perform this role? And having an expert in every hospital is not what we're talking about [0].
If you think these companies are spending twenty thousand dollars per doctor per year just to better educate them and get better outcomes, I don't know what to tell you. That's a lil naive bud.
To take just one example of many: Remember Purdue? Remember how they told doctors that their new form of opiates (Oxycontin) was non-addictive and so much safer? ... Remember how few doctors made noise about this, compared to the massive number who swallowed it whole and prescribes the shit like candy? Remember how those brave doctors were ruthlessly and relentlessly smeared, and how Purdue got away with all this despite there being mountains of evidence for so, so long?
> the first thing that would happen is adoption rate of new treatment would drop and people who would otherwise recover may die
To me that just sounds like scare mongering and an imagination deficit. There's better ways of doing this, and no excuse for the current system.
0 - https://arstechnica.com/science/2019/01/healthcare-industry-...
They don't call it a vacation, they call it a conference.
An hour or two of "information sessions", with a big goody bag, and 2 or 3 days of fine dining, tours, and golf; all held in a plush 5 star hotel at $500 / night or more with all travel included.
> there are rules and laws already in place
What rules there are are not enforced. The regulatory office is flooded [0]:
"With the risks clear, Schwartz and Woloshin took a look at regulatory activity by the Food and Drug Administration and Federal Trade Commission and state attorneys general. They found a lackluster response to the skyrocketing medical marketing across the board. In fact, the FDA’s Office of Prescription Drug Promotion, which regulates consumer and professional promotional material, actually saw a decrease in regulatory activity. Though submissions increased from 34,182 in 1997 to *97,252* in 2016, violation letters dropped from 156 to *11* in those respective years. The finding “suggests the possibility of less oversight,” the authors conclude, possibly because FDA reviewers may be “overwhelmed by the massive increase in promotional submissions.”
Emphasis added.
> Like it or not, having an expert in the hospital who know everything there is about a specific drug is a lot more effective than requiring every doctor to read about every new drugs.
Do you think unbiased third party sources can't perform this role? And having an expert in every hospital is not what we're talking about [0].
If you think these companies are spending twenty thousand dollars per doctor per year just to better educate them and get better outcomes, I don't know what to tell you. That's a lil naive bud.
To take just one example of many: Remember Purdue? Remember how they told doctors that their new form of opiates (Oxycontin) was non-addictive and so much safer? ... Remember how few doctors made noise about this, compared to the massive number who swallowed it whole and prescribes the shit like candy? Remember how those brave doctors were ruthlessly and relentlessly smeared, and how Purdue got away with all this despite there being mountains of evidence for so, so long?
> the first thing that would happen is adoption rate of new treatment would drop and people who would otherwise recover may die
To me that just sounds like scare mongering and an imagination deficit. There's better ways of doing this, and no excuse for the current system.
0 - https://arstechnica.com/science/2019/01/healthcare-industry-...
At that price they might have teams dedicated to groups of a few dozen doctors, perfecting the company's manipulation to each of the doctors' personality. Somehow for-profit pharma always finds a way to be even more horrifying...
They are already doing this, without doubt.
They identify thought leaders, analyze their data (who knows what data and how they analyze it?) to identify the best approaches, and have salesfolk and MSLs assigned to specific doctors, all to build relationships with tailored approaches and proven strategies. This is coupled with gifts disguised in various ways.
It bears repeating: submissions to the FDA’s Office of Prescription Drug Promotion, which regulates consumer and professional promotional material, hit 97,252 in 2016. This resulted in 11 violation letters.
Ninety-seven thousand submissions. Eleven violation letters. No typo.
$20k/doc/yr.
There may be more recent stats; I'm not finding them right now.
They identify thought leaders, analyze their data (who knows what data and how they analyze it?) to identify the best approaches, and have salesfolk and MSLs assigned to specific doctors, all to build relationships with tailored approaches and proven strategies. This is coupled with gifts disguised in various ways.
It bears repeating: submissions to the FDA’s Office of Prescription Drug Promotion, which regulates consumer and professional promotional material, hit 97,252 in 2016. This resulted in 11 violation letters.
Ninety-seven thousand submissions. Eleven violation letters. No typo.
$20k/doc/yr.
There may be more recent stats; I'm not finding them right now.
Here's a report from the Congressional Budget Office [1] that states that as of 2019 the Pharma industry in the US spent $83 Billion on R&D. And here's a Statista link with the total Pharma advertising in the US per month. About $1.1 BN, which would annualize to less than $15 BN per year.
So no, the Pharma industry does not spend more on advertising than on R&D, not even close.
[1] https://www.cbo.gov/publication/57126
[2] https://www.statista.com/statistics/1407234/pharma-ad-spend-...
So no, the Pharma industry does not spend more on advertising than on R&D, not even close.
[1] https://www.cbo.gov/publication/57126
[2] https://www.statista.com/statistics/1407234/pharma-ad-spend-...
You're not comparing the same numbers as Lowe did. So first thing, I was just summarizing what Derek Lowe wrote in 2013. If you click through, what he's comparing is SG&A to R&D. Quoting his post:
We're talking SG&A, "sales, general, and administrative". That's the accounting category where all advertising, promotion and marketing ends up. Executive salaries go there, too, in case you're wondering. Interestingly, R&D expenses technically go there as well, but companies almost always break that out as a separate subcategory, with the rest as "Other SG&A". What most companies don't do is break out the S part separately: just how much they spend on marketing (and how, and where) is considering more information than they're willing to share with the world, and with their competition.
That means that when you see people talking about how Big Pharma spends X zillion dollars on marketing, you're almost certainly seeing an argument based on the whole SG&A number. Anything past that is a guess - and would turn out to be a lower number than the SG&A, anyway, which has some other stuff rolled into it. Most of the people who talk about Pharma's marketing expenditures are not interested in lower numbers, anyway, from what I can see. So we'll use SG&A, because that's what we've got.
What he found is that SG&A spending was about twice R&D spending in 2013, then compared that ratio (2x) to large tech companies where the ratio was even worse (up to 8x).
For the pharma companies, SG&A was about 30% of revenue while R&D was anywhere from 12.5%-25% of revenue. (See his post I linked for the exact numbers he used.)
Now, looking at your CBO report, one thing I note is this tidbit:
The share of revenues that drug companies devote to R&D has also grown: On average, pharmaceutical companies spent about one-quarter of their revenues (net of expenses and buyer rebates) on R&D expenses in 2019, which is almost twice as large a share of revenues as they spent in 2000.
So R&D spending as a percent of revenue has increased to 25% industry wide since Lowe's post where it seemed to be a bit lower.
Search for SG&A spending in the pharma industry, I ended up like you did at statista:
https://www.statista.com/statistics/266321/sganda-to-sales-r...
The range is 38%-52%. So SG&A spending (50% of revenue) is still about 2x R&D spending (25% of revenue), with the numbers being a bit better than when Lowe wrote his post in 2013.
Now, whether SG&A is the right number to use as a stand-in for advertising, I don't know. I was just going by what Lowe wrote since he works in the pharma industry and is a well-respected name on this site.
We're talking SG&A, "sales, general, and administrative". That's the accounting category where all advertising, promotion and marketing ends up. Executive salaries go there, too, in case you're wondering. Interestingly, R&D expenses technically go there as well, but companies almost always break that out as a separate subcategory, with the rest as "Other SG&A". What most companies don't do is break out the S part separately: just how much they spend on marketing (and how, and where) is considering more information than they're willing to share with the world, and with their competition.
That means that when you see people talking about how Big Pharma spends X zillion dollars on marketing, you're almost certainly seeing an argument based on the whole SG&A number. Anything past that is a guess - and would turn out to be a lower number than the SG&A, anyway, which has some other stuff rolled into it. Most of the people who talk about Pharma's marketing expenditures are not interested in lower numbers, anyway, from what I can see. So we'll use SG&A, because that's what we've got.
What he found is that SG&A spending was about twice R&D spending in 2013, then compared that ratio (2x) to large tech companies where the ratio was even worse (up to 8x).
For the pharma companies, SG&A was about 30% of revenue while R&D was anywhere from 12.5%-25% of revenue. (See his post I linked for the exact numbers he used.)
Now, looking at your CBO report, one thing I note is this tidbit:
The share of revenues that drug companies devote to R&D has also grown: On average, pharmaceutical companies spent about one-quarter of their revenues (net of expenses and buyer rebates) on R&D expenses in 2019, which is almost twice as large a share of revenues as they spent in 2000.
So R&D spending as a percent of revenue has increased to 25% industry wide since Lowe's post where it seemed to be a bit lower.
Search for SG&A spending in the pharma industry, I ended up like you did at statista:
https://www.statista.com/statistics/266321/sganda-to-sales-r...
The range is 38%-52%. So SG&A spending (50% of revenue) is still about 2x R&D spending (25% of revenue), with the numbers being a bit better than when Lowe wrote his post in 2013.
Now, whether SG&A is the right number to use as a stand-in for advertising, I don't know. I was just going by what Lowe wrote since he works in the pharma industry and is a well-respected name on this site.
> Now, whether SG&A is the right number to use as a stand-in for advertising, I don't know.
It is not. SG&E [1] includes a lot of things, including all labor costs (all the salaries for all the employees) and all rent.
As an example, Novo Nordisk, the maker of Ozempic, has annual operating expenses of about $20 billion and in 2023 launched an advertising campaign for Ozempic/Wegovy of a bit less than $0.5 billion/year.
[1]https://en.m.wikipedia.org/wiki/SG%26A
[2]https://www.macrotrends.net/stocks/charts/NVO/novo-nordisk/o....
[3]https://www.opensecrets.org/news/2024/07/ozempic-producer-no....
It is not. SG&E [1] includes a lot of things, including all labor costs (all the salaries for all the employees) and all rent.
As an example, Novo Nordisk, the maker of Ozempic, has annual operating expenses of about $20 billion and in 2023 launched an advertising campaign for Ozempic/Wegovy of a bit less than $0.5 billion/year.
[1]https://en.m.wikipedia.org/wiki/SG%26A
[2]https://www.macrotrends.net/stocks/charts/NVO/novo-nordisk/o....
[3]https://www.opensecrets.org/news/2024/07/ozempic-producer-no....
> SG&E [1] includes a lot of things, including all labor costs (all the salaries for all the employees)
Lowe addresses that: Interestingly, R&D expenses technically go there [SG&A] as well, but companies almost always break that out as a separate subcategory, with the rest as "Other SG&A"
Lowe addresses that: Interestingly, R&D expenses technically go there [SG&A] as well, but companies almost always break that out as a separate subcategory, with the rest as "Other SG&A"
https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p...
https://www.ahip.org/news/articles/new-study-in-the-midst-of...
I'm sure there's plenty more out there.
https://www.ahip.org/news/articles/new-study-in-the-midst-of...
I'm sure there's plenty more out there.
[deleted]
This is especially true since marketing drugs is essentially a negative sum game, it's banned in most developed countries with no discernible drawback.
> 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?
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?
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.
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]
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.
But yes, balancing incentives is critical.