
Show HN: Drug Pricing Calculator - aaavl2821
https://www.baybridgebio.com/drug_pricing_calc.html
======
vikramkr
This falls prey to a common misconception: drug companies do not price drugs
in order to recoup the cost of r&d. R&d is a sunk cost, the pricing of the
drug is determined by what the market will bear. Ability to cover r&d is
important _before_ beginning the development project- the company needs to
believe that bn it will be able to price a drug in a way that is NPV positive,
but when the drug is approved, pricing is based purely off of the laws of
supply and demand.

~~~
aaavl2821
That is correct. I did not make this sufficiently clear, but this model is
supposed to reflect the perspective of an investor / startup deciding whether
to invest in a drug development project. The model calculates price required
for breakeven NPV using a discount rate of 20%, which is roughly in line with
cost of capital for startups. Since most FDA approved drugs these days are
developed by small companies, i thought it appropriate to use a small
company's cost of capital

~~~
vikramkr
I see, then I guess more accurately the page doesnt fall prey to the
misconception as much as accidentally perpetuates it. Maybe it would be a good
idea to clarify using the tenses of the verbs and the wording that this is
about the co considerations for the future pricing of the drug for a decision
made before investment, and that the actual price of the drug will be dictated
by supply/demand curves? If the model is presented as an investment go/no go
calculator rather than price calculator, then that could make a lot of sense,
and from that perspective it's a really cool model, I love how comprehensive
it is! One nitpick, breakeven price and the word "breakeven" often refers to
accounting profit, it might help to clarify that this is the price where you
hit NPV>0, and maybe include the details of what the post patent cliff market
size assumptions were (although that probably contributes very little given a
20% discount rate). It really is quite thorough!

~~~
aaavl2821
Thanks, that is helpful feedback. I changed the first sentence to make it more
clear that this reflects an investor's go / no-go model.

