
The Best Fix for American Drug Prices Is Already on the Books - toomuchtodo
https://www.bloomberg.com/view/articles/2018-05-11/to-lower-drug-prices-trump-should-boost-generics
======
khazhoux
Crazy idea: all pharmaceutical research should be publicly funded and
publicly-owned. No private ownership of drug patents, period.

"But this will disincentive research!" Maybe. Or, tax people more in order to
fund the research. The tax revenue would go directly to researcher salary,
equipment, expenses. Even a large tax increase can't be worse than today,
where people have to pay huge $$$ anyway, of which a large cut goes to
executives, shareholders, the marketing machine, etc.

I believe by and large, people that go into pharma research do it because
they're interested in the science and the cause, not because of any privatized
profit motivation. Which is to say, people will still go to grad school in the
same fields and continue carrying on the research work (so long as the
facilities and equipment is available, which we can solve). The downside is
that many senior executives would be displaced or be forced to accept lower
compensation.

Someday in the distant future, people will look back and be as shocked that
private companies profited from medicine, as we're shocked today about the
for-profit firefighters in ancient Rome.

~~~
jandrewrogers
The reality is that governments have demonstrated limited interest in
effective biomedical R&D. Europe does not invest proportional to their
population or economy, their governments are happy to outsource it to the US
(and Asian) private sector. And there is the longstanding issue that what
governments do fund is biased by political fashion and not the areas of
research that will maximize benefit. There has been a huge growth in private
foundations that fund biomedical research that governments should fund but do
not.

Also, pharma researchers will accept massive pay cuts "for the science and the
cause" as soon as Silicon Valley software engineers take massive pay cuts "to
make the world a better place". I have many friends in biotech and they are as
interested in maximizing their paycheck as software engineers, it would be
naive to expect anything different.

~~~
danShumway
Many software developers do take massive pay cuts to make the world a better
place. People like Linus Torvalds could be much, much wealthier if they wanted
to. Jason Scott is probably the single most important digital archivist alive
right now; he's currently running a podcast to help himself get out of debt
while he works for a company that doesn't offer a pension plan.

I'm not just talking about fringe developers either[0]. A huge portion of our
modern tech industry is built on the backs of people who made a conscious
choice to prioritize public good over their own good.

I've nothing against developers who make money, but my takeaway from the tech
industry has actually been that pure profit-driven motivations are simply not
enough to build sustainable, resilient technology. I really hope it's not
naive to expect at least some small portion of the population to be charitable
because my experience has been that it's often the charitable people who end
up getting crap done.

Pharma research may be different, because that comes with equipment costs. You
need access to that equipment. But if that's the case, the software industry
is maybe a bad example to compare it to.

Generally agreed on government funding though; maybe I'm too pessimistic but I
just can't see the US government investing serious effort into drug research.

[0]: [https://arstechnica.com/information-
technology/2014/04/tech-...](https://arstechnica.com/information-
technology/2014/04/tech-giants-chastened-by-heartbleed-finally-agree-to-fund-
openssl/)

~~~
rayiner
Don’t look at anecdotes, look at the numbers. How many brilliant Stanford
graduates are going to work for the advertising industry every year instead of
something that’ll make the world a better place? There is no correlation
between brilliance and altruism.

~~~
danShumway
> There is no correlation between brilliance and altruism.

That's not really relevant to what was being discussed above. The question
isn't whether smart people are altruistic, it's whether there's a correlation
between altruism and _effectiveness._ The question is whether charitable
individuals are capable of building better products than profit-driven
individuals.

And given that depending on who you ask anywhere from around 60-90% of modern
businesses run Open Source software, it does appear that statistically (not
just anecdotally) there are parts of the tech industry that are better served
by non-commercial, charitable entities. If that wasn't the case, businesses
would use closed source software instead.

When Heartbleed came out, nobody suggested "well, maybe we should just all
switch to a proprietary for-profit solution instead of using SSL," because a
good, proprietary, for-profit alternative doesn't exist and probably never
will. It's just not the type of technology that Silicon Valley is good at
building.

Note that this is something that seems obvious in hindsight, but it was up for
debate early on in the software industry. Companies like Microsoft went so far
as to compare Open Source to communism. There was a strong belief that people
opening up licenses, giving away software for free, and even (the horror)
requiring other licensees to give _their_ software away for free would remove
any incentive for businesses to innovate and that in the long run it would
strangle new technologies.

~~~
rayiner
Most open source development is done by for profit companies. Not through
altruism, because software just happens to be an input into more profitable
businsss activities. If Google licenses Android to smart phone manufacturers,
maybe it gets $5-10 once every two years. But by giving it away for free and
creating an Android user, Google makes that much _every month._

~~~
danShumway
The fact that many companies incorporate Open Source into their profit models
does not diminish or remove the enormous number of unpaid, volunteer hours
that have gone into those projects.

It's simplistic to the point of insulting to claim that the Free Software
movement can be completely encapsulated by Capitalism. You have to ignore vast
swaths of the history of the Internet, Linux, and the origins of Copyleft
itself. You have to either ignore efforts by organizations like Mozilla or the
Internet Archive, or claim that those efforts aren't important.

Richard Stallman's original announcement of GNU included the following
message: " _I consider that the golden rule requires that if I like a program
I must share it with other people who like it. I cannot in good conscience
sign a nondisclosure agreement or a software license agreement. So that I can
continue to use computers without violating my principles, I have decided to
put together a sufficient body of free software so that I will be able to get
along without any software that is not free._

 _If I get donations of money, I may be able to hire a few people full or part
time. The salary won 't be high, but I'm looking for people for whom knowing
they are helping humanity is as important as money._"

This is the environment that Linux came out of - people who decided they cared
about something more than they cared about money. You don't have to be an
absolutist like Stallman, but you also can't pretend that absolutists like
Stallman haven't played important roles in building our modern computing
world.

------
pg_bot
I would suggest anyone who is interested in reducing drug prices listen to
this econtalk episode with Robin Feldman[0]. They discuss her book "Drug Wars
how big pharma raises prices and keeps generics off the market"[1]

In the episode they discuss all sorts of shenanigans that pharmaceutical
companies pull. If you want real reform you need to look at weak patents,
eliminating "reverse payments" to generic companies, and obstruction to
bioequivalence testing. Drug companies routinely manipulate the current laws,
specifically Hatch-Waxman in order to stifle competition from generics.

[0]
[http://www.econtalk.org/archives/2017/06/robin_feldman_o.htm...](http://www.econtalk.org/archives/2017/06/robin_feldman_o.html)

[1] [https://www.amazon.com/Drug-Wars-Pharma-Raises-
Generics/dp/1...](https://www.amazon.com/Drug-Wars-Pharma-Raises-
Generics/dp/1107168481)

~~~
refurb
I'm going to go on a bit of a rant. I agree blocking access to drugs for
bioequvalence is bullshit. Drug companies can do it by claiming that the law
doesn't allow them, but it's BS.

The reverse payments I see nothing wrong with. Imagine you're a drug company
holding a patent. A generic company decides to try and invalidate it. You
think there is a 50% chance they'll win. The generic company agrees.

You have two options: 1) spend a ton of lawyers and still possible lose, 2) go
to the generic company and agree to let them produce the generic 5 years
before patent expiration.

With the 2nd option, you're basically agreeing to split up the pie evenly
rather than risking it all.

In every case where reverse payments are made, the drug goes generic _earlier
then if they went to court and got the patent upheld_.

Eliminate reverse payments and what you're doing is making lawyers rich. In
many cases the branded drug company would win and block generics for many more
years than if a reverse payment was made.

------
torpfactory
Here’s the rub with developing something as important as a medicine. If it
works, people often _need_ it to prolong their life or improve their health.
What drug companies are selling... isn’t like what other companies are
selling. We ought not look at it through our normal understanding of goods in
a free market.

Take, for example, Sovaldi, a drug which cures Hepatits C. After discovering
this drug and confirming its efficacy and safety, the next question should be,
IMO: how fast can we possible scale production to quickly stop liver damage
and cure those suffering. Instead we have Medicaid setting absurd rules
([https://www.chlpi.org/wp-content/uploads/2013/12/Annals-
of-I...](https://www.chlpi.org/wp-content/uploads/2013/12/Annals-of-Internal-
Medicine-HCV_July_2015.pdf)) whereby sufferers must get sicker before they are
eligible to be cured. That is seriously fucked up.

Edit: to be clear on why states must do this: Gilead Sciences is charging
$84,000 for a course of treatment and there isn’t enough money to treat every
patient. Gilead offers the same treatment in Egypt for $900.
([https://www.reuters.com/article/us-hepatitis-egypt-gilead-
sc...](https://www.reuters.com/article/us-hepatitis-egypt-gilead-
sciences/gilead-offers-egypt-new-hepatitis-c-drug-at-99-percent-discount-
idUSBREA2K1VF20140321))

~~~
AnthonyMouse
> If it works, people often _need_ it to prolong their life or improve their
> health. What drug companies are selling... isn’t like what other companies
> are selling.

It is very much like many other products. If you don't have food you will die
of starvation, if you don't have shelter you will die of exposure, etc.

The real issue is drug patents. Nobody is complaining about the price of
ibuprofen any more than they complain about the price of eggs. But the patent
system is doing what it's supposed to here -- twenty years ago any patented
drug didn't exist, and it nominally only exists now because the inventors
judged it to be sufficiently profitable to conduct the research. If you make
it less profitable, you'll get less research.

There is no drug research fairy. If you don't want the money to come from high
insurance premiums that pay for high drug costs, it has to come from somewhere
else. And just devising some other method (like taxes) of extracting the same
money from the same general public isn't really going to change much.

~~~
peterashford
But drugs are produced in other countries, too, and they manage to do so
without charging what US companies do.

~~~
dagw
Those companies charge exactly the same as the US companies when selling to
the US. Much like US companies charge the same as European companies when
selling to Europe.

------
tomohawk
One of the biggest reasons is that the US essentially subsidizes drugs for
many other countries, such as Canada, that impose price controls, and threaten
to allow other manufacturers to provide the drugs in their countries if the
companies don't accept the imposed price. This enables these countries to get
access to new medicine without paying the cost of developing the new medicine.
Its time to end the trade war on medicines.

~~~
jerrysievert
are you sure that the cost of development is the real issue?

the last numbers I saw, 2015, showed marketing budgets for medicine to be
often times twice what was being spent on R&D in the US. currently, only four
countries allow this time of marketing: New Zealand, Brazil, Hong Kong, and
United States.

it sounds like the US isn't necessarily subsidizing drug R&D, and instead is
subsidizing marketing.

~~~
AnthonyMouse
> the last numbers I saw, 2015, showed marketing budgets for medicine to be
> often times twice what was being spent on R&D in the US.

The marketing expense isn't necessarily avoidable.

Suppose it costs $50M to research a drug and patients will pay $1000 for a
course of treatment. If you do no marketing then you get forty thousand
customers and can't recover your R&D. If you spend $100M on marketing then you
get two hundred thousand customers and more than recover both your R&D and
your marketing expense.

Spending more on marketing can allow them to do R&D they otherwise couldn't by
providing more customers to spread the R&D costs over.

~~~
disordinary
Surely though the best marketing is the effectiveness of the product, if it's
a good product then doctors will prescribe it.

I don't know if it's true or not, but looking at US movies/tv shows it seems
like everyones taking medication which I doubt they actually need. Here I
don't know very many people who actively take regular medication, I know that
people who move here complain at how doctors are stingy with prescriptions,
yet life expectancy is longer than the US.

~~~
refurb
_Surely though the best marketing is the effectiveness of the product, if it
's a good product then doctors will prescribe it._

That's true for very few physicians. The ones that are leaders in their field
and do research know the ins and outs of new drugs, but your average doctor
knows very little.

~~~
disordinary
But, they all have access to knowledge bases and information and guidelines
provided by the government.

~~~
refurb
That is true, but setting aside time to do research is a much bigger hurdle
than taking 10-15 min to listen to someone give you the highlights.

And in case anyone was wondering, doctors are very skeptical of drug reps and
always verify anything they say before believing it. But it gives them a
starting point.

~~~
stinkbug
"always verify". Well that's obviously not a true statement but (not singling
you out) I wonder why there is such a compulsion to defend the honor, as it
were, of medical doctors.

It's not exactly the same as pharma, but in the medical device field
salespeople are commonly in operating theatres. Clearly the surgeons doing
this do not have time to "verify" what they are being told.
[https://www.washingtonpost.com/national/health-
science/why-i...](https://www.washingtonpost.com/national/health-science/why-
is-that-salesperson-in-the-operating-room-for-your-knee-
replacement/2016/11/14/ab8172fa-78e6-11e6-beac-57a4a412e93a_story.html)

Americans would do well to stop idolizing doctors and realize that huge
numbers of them are lazy, incompetent shills who routinely do a lot of
preventable damage.

------
olog-hai
There's a newer Bloomberg article with a matching title that's different from
the one linked to here.

[https://www.bloomberg.com/view/articles/2018-05-13/trump-
dru...](https://www.bloomberg.com/view/articles/2018-05-13/trump-drug-plan-
shows-why-high-prices-persist)

~~~
toomuchtodo
Your article was the content of the link I originally submitted.

Mods: Can you update thread to point to the above link? Bloomberg bamboozled
my post.

------
robbiep
The example of Humira is a terrible one: as a monoclonal antibody, to produce
the exact molecule would require another company getting its hands on the
plasma cells that produce it.

It is not as simple as copying the chemical steps to produce the drug, as in
Lipitor.

Complicating this, there is evidence that not all Monoclonal antibodies that
act on the same receptor are made equal - some might be antagonists whereas
others are agonists.

------
brushyourbat
We have compulsory copyright licensing for sound recordings - if you pay the
statutory license fee (9.1 cents per song or 1.75 cents per minute) to the
original publisher, you can press records of their song, whether or not the
original publisher approves.

Why not have compulsory patent licensing for drugs?

------
aaavl2821
More generics isn't really the solution. The US actually has more generic
prescriptions as a percent of total prescriptions than most developed
countries and US spend on drugs as % of healthcare spend is similar to other
OECD countries. The cost comes from high priced innovative meds. They are high
priced bc they are expensive to develop -- $2.7b to get a drug approved per
most accepted estimate. Most of that is cost of failure. So the issue is if we
cut those prices we stop innovation. R&d in most disease areas has already
slowed dramatically bc it's too expensive / risky

------
rayiner
> Over time, Big Pharma learned how to game the law. As the patent for the
> original drug approached expiration, companies added wrinkles — a new
> coating for the pill, a time-release version, and so on — that they then
> patented. If the patents were approved, and they usually were, the
> exclusivity clock would start ticking all over again.

This is so misleading. When this happens, only the new "wrinkles" are
patented. The drug itself becomes free for everyone to use.

> Hatch-Waxman worked exactly the way it was supposed to for a long time. For
> many high-priced drugs, once the generics flooded the market, the price went
> down by as much as 90 percent. Statins are a good example: The price of
> generic Lipitor is about $19 for 90 tablets, while the price of branded
> Lipitor is $165 for 30 tablets. The market share for the branded drug often
> dropped by 75 percent or more. Over time, Big Pharma learned how to game the
> law. ... The rheumatoid arthritis drug Humira is a perfect example of what
> has happened.

Humira is not an example of "gaming" Hatch-Waxman. Hatch-Waxman assumes that
the secret sauce is a drug's chemical formula. It creates a process for
generics to be created when the patent on that formula expires. Humira is
what's called a biologic, where the secret sauce is not only the active
ingredient, but the process of manipulating bacterial cells into manufacturing
the drug: [https://www.bloomberg.com/view/articles/2017-09-07/why-
the-b...](https://www.bloomberg.com/view/articles/2017-09-07/why-the-
biosimilar-drug-revolution-hasn-t-arrived). AbbVie has another five years left
on those patents.

The Hatch Waxman equivalent for biologics ("BPCIA") was only enacted in 2010:
[https://www.fda.gov/drugs/developmentapprovalprocess/howdrug...](https://www.fda.gov/drugs/developmentapprovalprocess/howdrugsaredevelopedandapproved/approvalapplications/therapeuticbiologicapplications/biosimilars/default.htm).
Because the law is so new, it will take time before the generics industry
figures out how to navigate the new process.

The article's list of policy recommendations is also ignorant:

> First, shorten the patent exclusivity period to 10 years. (Drug companies
> say they need the longer time to recoup their research and development
> costs, but the truth is most companies spend more on marketing than R&D.)

Drug companies have similar SG&A (overhead) to R&D ratios as tech companies:
[https://news.ycombinator.com/item?id=16585194](https://news.ycombinator.com/item?id=16585194).
The point, though oft-repeated, is completely nonsensical. Nobody _wants_ to
spend money on marketing. If drug companies could recoup their investment
faster by spending less on marketing, they would.

> Second, outlaw the practice of paying companies to keep generics off the
> market and similar forms of gamesmanship.

It's already a violation of antitrust law: [https://www.ftc.gov/news-
events/media-resources/mergers-comp...](https://www.ftc.gov/news-events/media-
resources/mergers-competition/pay-delay).

> Third — and most important of all — don’t allow companies to extend the
> period of exclusivity beyond the original 10 years.

That incorrectly assumes that patenting improvements to a drug extends the
period of exclusivity of the original drug.

~~~
danShumway
> Nobody wants to spend money on marketing. If drug companies could recoup
> their investment faster by spending less on marketing, they would.

This doesn't pass my sniff test. The original article's point isn't that
companies are marketing just so they can flush money down the toilet. Of
course it's profitable. The article's point is that _we as a society_ want
them to spend more money on R&D; and our current strategy seems not to be
working.

Companies would prefer to spend no money at all. If they could recoup their
investment by spending no money on marketing, research, development, or
production, they would. So a good company does the next best thing: they find
the least costly, most efficient way to make money and prioritize that.

If companies are investing the majority of their resources into marketing,
that at least suggests that they view marketing as the most efficient way to
make money. Since we as a society would prefer that R&D be the most efficient
way for them to make money, it may very well be reasonable to look for ways to
decrease the cost of R&D and/or to _increase_ the cost of marketing.

Shortening the exclusivity period of a patent might be an effective way to
decrease the value of marketing, since marketing returns likely benefit from
exclusivity.

~~~
rayiner
Shortening exclusivity would _increase_ the need for marketing, because
companies would have to get the word out to consumers and doctors much more
quickly.

~~~
danShumway
Again, that _might_ be true, but it rings multiple alarm bells when I actually
think about it.

First, it assumes that the profit margins of a company remain constant. Again,
companies want to make money. Period. So say that you're a pharmaceutical
company and you're currently getting back 250% of your costs for a drug over
the exclusivity period.

If we double that exclusivity period, you are not going to decrease the price
you charge or the amount you invest into marketing so that your return on
investment remains 250%. At least, not if you're a good business owner. You're
going to double down on the exact same strategy and make 500% return. If I
later halve your exclusivity period, you won't stay at 500%. You'll go back to
250%.

The fact that a company has less time to do marketing does actually suggest to
me that marketing becomes a less bulletproof, desirable strategy for making
money - which is exactly what the author wants. It might still be a bad idea;
maybe pricing becomes the most efficient way to generate profit, or maybe the
drug industry has such tight margins that there is no efficient way to
generate profit and everyone closes up shop.

But it seems at least somewhat reasonable to say that if you expect the cost
of marketing to remain constant, and the return per dollar to go down
severely, you invest less into the now inefficient strategy.

The other reason that I have difficulty accepting this claim at face value is
because I can think of markets where it just isn't true: for example, mobile
apps. Nobody smart is investing huge amounts of money into marketing a mobile
app. What they're doing is churning out five apps a week on the hope that one
of them goes viral.

The lack of exclusivity in that market means that constant development is
basically a requirement to keep your head above water.

Now, do we want our drug industry to look like the mobile app market? The
mobile market is so opposed to long-term investment that the majority of games
and apps developed there are rushed-to-market crap. So we probably don't want
our drug research to operate the same way.

But I don't think it's immediately unreasonable that there might be a middle
ground we could hit between 20+ years of exclusivity and 4 days of
exclusivity.

------
jancsika
> Over time, Big Pharma learned how to game the law. As the patent for the
> original drug approached expiration, companies added wrinkles — a new
> coating for the pill, a time-release version, and so on — that they then
> patented. If the patents were approved, and they usually were, the
> exclusivity clock would start ticking all over again.

I don't understand how that would ever work.

Time-release version of X, now with new coating: patented

Old version of X, with no time-release and without new coating: patented
expired, correct?

If so, what stops the generic manufacturer from just manufacturing the old
version of X?

~~~
refurb
There is nothing to stop them. The only reason why "evergreening" works is
because doctor's write scripts for the "new" drug.

Sometimes it's worth it! If you need to take a drug three times a day and the
new version is only once, that can improve patient adherence and outcomes.

However, sometimes the added value is minuscule. In that case insurance
companies should just say "we're not paying for it since the added cost is not
worth it".

Problem solved.

~~~
jancsika
> Sometimes it's worth it! If you need to take a drug three times a day and
> the new version is only once, that can improve patient adherence and
> outcomes.

For the moment, let's ignore that case by simply calling the improved drug a
new drug.

> However, sometimes the added value is minuscule. In that case insurance
> companies should just say "we're not paying for it since the added cost is
> not worth it".

I'm still lost.

1\. Doctor writes prescription for "B", which is really "A" with an
insignificant change and a price bump.

2\. Patient goes to pharmacy and looks at their copay for "B." Whoa! they
say-- that is surprisingly high.

Wouldn't the pharmacist then have the responsibility to jump in with their
expertise at this point? Say: "B" is just a slightly altered "A" to get you to
pay more, so call your doctor and ask them if you can take "A."

~~~
refurb
The pharmacist should do that, but they don't.

I've done it before at a doctor. "Here is the latest drug!!". "Can we start
with a generic?", "Sure".

My co-pay just went from $50 per month to $5.

I work with a lot of doctors, they don't think it's their job to save patients
money. They'll do it if asked though.

~~~
IneffablePigeon
I find that kind of astounding. In the UK you pay a flat fee per prescribed
medication, and multiple times I've had doctors prescribe me larger amounts on
my repeat prescriptions so that I have to pay the flat fee less often -
completely unprompted by me.

~~~
refurb
Docs will do that in the US too sometimes, but one challenge is that the "fee"
you owe with private insurance differs from plan to plan. Doctors can't track
the hundreds of different plans, so they don't know if the more expensive
branded drug will cost you $10 more per month or $100 more per month. If you
share that info with your doctor they are more than happy to work with you.

~~~
jancsika
I'm still confused.

Isn't it simply a matter of asking, "Is there a generic for this, doc?"

Both $10 and $100 are greater than $0, the patient almost certainly always
wants $0, and a doctor can do that math without referring to your plan.

Or is this a case of this particular method being combined with N other
methods such that the doctor has trouble getting the correct information to
the patient?

Edit: By $0 I mean "$0 more than the cheapest generic." :)

------
tracker1
I'd go a step further... you cannot sell a drug unless there is another
company prepared to sell a generic version. It's a national security issue.
Dual vendor required.

Also, no blocks on re-imports from foreign nations.

~~~
refurb
So under your system, a drug for a super rare, low sales product would never
get produced because no generic company wants to make it?

~~~
DomreiRoam
Under a pure market approach, if a drug is not profitable it will not be
produced ans sold. If you have a rare disease, you would probably prefer a
mixed approach like a mix public and private medical research.

~~~
refurb
There is a middle ground where it's profitable for one company to make a drug,
but not profitable for two companies to do it.

~~~
DomreiRoam
I agree with you and in a pure profit oriented you will always have rare
diseases without remedies. You may even have curable patient that are non-
economical to save for for-profit health-care company.

Imagine you have only pure market that provides 80% total availability for
disease remedies. If you want to cover the 20% uncovered case by bringing a
non-profit player, you may threaten some of the pure market player. At the end
you may have a 60% coverage by for-profit and 40% by non-profit.

The end solution may seems to be less economically efficient but it covers
more of the population and I think it is a good thing.

------
mnm1
The title posted here makes no sense at all. It's not the original and it has
nothing to do with the article. The moderators should really change it as it
implies somehow that the high cost of drugs is the fault of the American
people, not the horrible patent laws that we have no control over or the
actual drug companies exploiting ill people for mass profits.

