Hacker News new | comments | show | ask | jobs | submit login
Non-profit’s $300 hepatitis C cure as effective as $84k alternative (theguardian.com)
874 points by lnguyen 7 months ago | hide | past | web | favorite | 295 comments



The latest episode of Econtalk "Vincent Rajkumar on the High Price of Cancer Drugs" is relevant to this subject: http://www.econtalk.org/archives/2018/04/vincent_rajkuma.htm...

It discusses structural issues relating to why drugs are so expensive (mainly in the US). Some of it's regulatory (e.g. Medicare not being allowed to negotiate drug prices), or there being no ceiling on prices related to efficacy as in many other countries.

But some of it's because nobody in the system seems to have a real incentive to reduce costs, even when the benefits are worth it. E.g. an example that's mentioned is that doctors will usually describe the latest brand medicine that's outrageously expensive, instead of a generic that's cheap and statistically almost exactly the same thing when it comes to efficacy.


But some of it's because nobody in the system seems to have a real incentive to reduce costs, even when the benefits are worth it

This is a really underrated point and part of the reason I'd like to start by seeing price transparency: http://seliger.com/2018/03/27/preventive-care-doesnt-save-mo... . Bizarrely (or at least, bizarrely to me) this doesn't seem to be part of the political discussion at all.


I am very strongly with you here. Why can’t we get an exact cost upfront before Abby services are rendered? A doctor can make orders and should be able to get the exact cost to you before submitting them.

These prices should all be public and comparable. Common reasons to go to the doctor should be shown alongside their costs.

We got a surprise $19k bill that we were told would be $160 and our insurance would cover the rest. We’re letting them fight it out but would be very disappointed if we had to pay that out of pocket. We would never have ordered the test then, or would have tried to shop around


This is how we run our medical clinic in South Carolina. All of our prices are public and we try to get you the lowest possible cost. You will never receive a bill for which you did not know the price ahead of time. We support this by having a $49/month membership fee and by not accepting insurance. (Most additional charges are under $20)


> We support this by having a $49/month membership fee and by not accepting insurance.

This is the trick. Accepting insurance - in particular, Medicare and Medicaid, because of their particular reimbursement model - makes it impossible for most providers to provide up-front pricing.

Typically the providers who can are for specialized treatments that don't intersect with other specialists much, like outpatient psychiatry or psychotherapy (you'll see this a lot in places like New York, where the demand is high enough that good psychiatrists can ensure a steady stream of patients even if they don't accept any insurance, and they rarely need to refer people to other specialists). I'm glad you're able to operate a practice like this elsewhere, especially for a non-psychiatric (I'm assuming) medical clinic.


> Accepting insurance - in particular, Medicare and Medicaid, because of their particular reimbursement model - makes it impossible for most providers to provide up-front pricing.

I must be missing something. Suppose I tell the provider I am going to pay them cash, directly; I will not use Medicare, Medicaid, or any other insurance. Are you saying that because said provider accepts Medicare/Medicaid for other patients, it is impossible for them to tell me ahead of time what they are going to charge me?


Yes. I believe the problem is that they negotiate the prices with the insurance companies. They have to start high, so they can negotiate down. They actually do have a price list, that you can sometimes bully them into giving you, which are the prices that they submit to begin negotiations with the insurance companies. But, as you can imagine, those prices on that list are crazy high, as they are intended to be negotiated down, not actually paid.


Insurance contracts also often include "most favored nation" provisions or equivalent, where any discount you give other people must also be given to the insurance company.

This is also why commercial/retail space will generally negotiate on almost anything but the rent per square foot, since if they lower that, all the other tenants will immediately demand lower rent.


So, if I understand you correctly, every time someone visits a health care provider under insurance, they have to perform the billing like they're buying a house or car?

No fucking wonder health care costs a goddamn fortune.


No, that's wrong. It is far worse than that.

There's an entire industry of entities involved with medical pricing. One of the players in one of the larger niches, a Pharmacy Benefits Manager[1], recently bought an insurer[2]. Manipulating, negotiating and offering various financial and marketing products (it gets really blurry) around medical pricing is huge business.

[1] https://en.wikipedia.org/wiki/Pharmacy_benefit_management

[2] https://www.nytimes.com/2017/12/03/business/dealbook/cvs-is-...


> I must be missing something. Suppose I tell the provider I am going to pay them cash, directly; I will not use Medicare, Medicaid, or any other insurance. Are you saying that because said provider accepts Medicare/Medicaid for other patients, it is impossible for them to tell me ahead of time what they are going to charge me?

Yes. Medicare and Medicaid generally reimburse rates that are below COGS, so providers have to make up the difference with what they charge private insurers. If they didn't, they would literally go out of business - if you have to pay $100/unit wholesale to purchase a vaccine and Medicare only pays you $93 for the entire visit during which you administer the vaccine, you won't be around very long unless you can get private insurers to pay much more, to cover not only the $7 unit loss, but also enough to pay for all the overhead of running a practice (wages, office space, etc.)[0].

They'll make up the difference by requesting much more from private insurers, though they don't know a priori how much they'll get. In the end, private insurers typically peg their rates to multiples of what Medicare reimburses (for example: "we'll agree to pay 350% of Medicare's reimbursable rate for all reimbursable billing codes").

For various reasons (including both logistical and legal ones), they can't present one bill to private insurers and a different bill to self-paying patients. The amount that they'll accept to settle the bill may be dramatically less than the amount they bill for[1], but they can't provide different bills up-front.

So, any provider that accepts insurance is basically incapable of providing you in advance with a price quote that represents what you'll actually pay, regardless of whether or not you are actually on insurance.

In theory, providers who only accept a very small set of insurances and accept no Medicare patients would be able to do this. But in this day and age, you're almost never going to find one of those providers - the overhead of accepting insurance is large enough that it's to their advantage either to accept several different forms, or to refuse insurance altogether. And once you're taking insurance, you basically can't refuse Medicare patients (logistically and legally: some Medicare patients receive dual coverage or receive their Medicare coverage wholly under private plans, and you can't turn a patient away just because you discover that they're on Medicare if you're otherwise capable of accepting their insurance).

[0] These numbers are illustrative; Medicare (in aggregate) reimburses 7% less than costs.

[1] If you're insured, every time you visit the doctor, you probably receive an explanation of benefits statement, which shows that they were billed $1000, but their maximum reimbursable rate is $300, and they'll cover $250, so you're required to pay $50. The difference between $1000 and $300 is what I'm referring to here.


>Medicare (in aggregate) reimburses 7% less than costs //

So, do I have this right, Medicare is state funded - they pay the doctor less than the cost of manufacturing the medicine and the doctor over-charges other people's insurance companies so as to pay for fixed costs and add profit, to the drug company and themselves?

Your expansion under [1] makes no sense - you were billed $1000, the insurance paid $300 and charged you $50 of that; who is paying the $700? Are you just saying that those at the point of delivery barter by trying to charge $1000, hoping you'll pay it, but the insurance company negotiates a 70% discount? Rather than having an actual cost for a treatment.


Re: your last paragraph: yes, that is how it works. That $1000 rate is known as the "chargemaster" rate and it's absurdly, incredibly inflated. A hospital maintains a chargemaster list, which is how they bill uninsured patients. Insurers negotiate rates which are a fraction of this chargemaster rate. The chargemaster rates are also not public, I believe.

So, unintuitively, uninsured people (at least the ones who can pay their bills) are great for care provider revenue.


Here's where I am further confused, then. If the provider has this list of chargemaster rates (inflated though they may be), and I tell them I'm paying cash, no insurance of any kind involved, shouldn't they be able to tell me at that moment what they will charge me?


"So, do I have this right, Medicare is state funded - they pay the doctor less than the cost of manufacturing the medicine and the doctor over-charges other people's insurance companies so as to pay for fixed costs and add profit, to the drug company and themselves?"

For certain things, yes that is the way it works. I believe most medical practices are losing money when they administer a vaccine.[0]

[0]: http://pediatrics.aappublications.org/content/124/Supplement...


Because hospitals use those prices to negotiate with insurance and other parties. I'm not saying it's right, but it's what happens in a broken system:

https://en.wikipedia.org/wiki/Chargemaster


My wife and I visited the Mayo Clinic this year, and I was surprised and relieved that they had a giant PDF file of every service they offer (which is a lot) and the associated price. I don't understand why all hospitals don't have this. The price we ended up paying, since it wasn't covered by insurance, is basically exactly what it said on the pricing sheet.


The doctor doesn't know what the claim is going to be. It takes sometimes weeks to know how much you charge at all.

This is because insurance companies pay in base on what you did or how long you did it. You itemize each visit like a tax return that later gets reviewed. Then someone reads the return and thinks if it makes any sense.

After that, they pay back the doctor, but according to the plan, they also have to charge the patient the copay.

That said, a doctors office that is only cash will get very little patients. Because people that are employed will not go to a cash-only doctor's office.


Not true. I own and run a cash only doctor's office. Coming to us is cheaper than most insurance co-pays.


Your posts are pretty interesting. If you don't mind a couple questions:

- What range of services do you offer? Do you take care of broken bones? Long-term illnesses? What kinds of things do you refer people to a full hospital for?

- Are there many offices like yours around? How unusual is your office?

- How easily could you build an entire hospital on this model? What would the limits of that be?


We run a primary care clinic. The specific type of clinic we run is called "direct primary care". There are around 800 clinics like ours in the United States but the service is generally catered to the wealthy. For more details about the scope of practice you can read the following link.[0] When we cannot provide a service in house we usually help someone navigate the medical system. There is a lot of information asymmetry when dealing with healthcare and we help even that out for our clients. We also partner with other companies to get reduced prices on imaging, labs, and other services.

I don't believe you can run an entire hospital on this model. Hospitals/insurance are best suited for unpredictable events. Our model is great for chronic and predictable events.

[0]: https://en.wikipedia.org/wiki/Primary_care_physician#Scope_o...


Not OP, but I'm familiar with a couple primary care providers that don't file insurance claims. It's refreshing to see up-front pricing on their website for services they offer, e.g.: https://www.palmettoproactive.com/services-pricing


I agree! Its great, but lots of people have insurance already so they want to use that to get their primary care, so that 200 dollar visit becomes 40 bucks.


Are you primary care? Because I cant see a primary care competing on price vs insurance that charges 20 dollars/30% on copay.


It depends on what your deductible is. With the increasing cost of healthcare, we are seeing companies go with higher and higher deductible plans. We don't compete solely on price, however our prices are extremely competitive even for people who have insurance. (we are often cheaper than medicare/medicaid) We also work with businesses as part of their benefit plans. The major benefit of this system is time, we can schedule longer appointments with a more flexible schedule than most other doctor's offices.


Wow, so do I understand right, that in USA you don't know the cost of medicine before buying them? What's the reasoning behind that?


Third parties payers is the reason. As a general matter if you have insurance - private, medicare, medicaid - and the reason isn't anything crazy / chronic then the price is never out of the world. Chronic conditions add up but the people in those cases generally know what the cost is ahead of time. And if you don't have insurance either you're able to pay out of pocket or you just don't pay and then get care anyway.

Which is to say it's all madness.


For a script you fill at a pharmacy? Sure, you can find out exactly what it will cost before buying.

Medical treatment by a physician or hospital? No, you can't really find out.


These guys

https://surgerycenterok.com/

are able to provide up front pricing. But if they were to accept medicare, they wouldn't be able to.


Price transparency makes a lot of sense in general. With Hospital EHR purchases IIRC there was a ten time difference in price between similarly sized organizations as an extreme.

Here is a version of price transparency as a bill: https://revcycleintelligence.com/news/house-reps-introduce-h...


there should be a law in the US about price transparency for healthcare

You should be able to see a common list of treatments and work done for general practitioners and specialists and it should be searchable on the internet.


Price transparency is the crucial reason why markets can claim to propagate information quickly and lead to efficiency.

The opacity in the labor market and the drug market is not an accident.


In fact who care most about cost actually have a perverse incentive to increase costs!

Health insurance is tied to your job, and your company pays most of the costs for you. If you choose to get your own insurance you don't get to take the amount your company pays, so you cannot afford to. This ties you to your company making it harder to just leave, first you have to find a new job. The more prices go up the harder it is to leave and live off your savings for a few months.

Obama promised "if you like your insurance you can keep it". However what wasn't said is "if hate your insurance you have no choice but to keep it". I don't like my insurance, but since I otherwise like my job there is nothing I can do about it.

Until the government changes the above prices will get higher.


Obama promised "if you like your insurance you can keep it". However what wasn't said is "if hate your insurance you have no choice but to keep it". I don't like my insurance, but since I otherwise like my job there is nothing I can do about it.

To be fair, this was a worse problem prior to Obamacare. At least now we have the exchanges, and companies can't deny you coverage for preexisting conditions. I agree with what you're saying, and the current system certainly has big problems, I just don't think you can blame Obama for that.


I blame Obama for not fixing it. You are correct about problems with the old system, but since I had insurance that didn't affect me.


I think you can be disappointed Obama wasn't able to fix it. But blaming him for something that ultimately involves thousands of politicians and special interest groups is, I feel, unfair.


a much better question would be "who in congress was responsible for our not being able to crate modern public healthcare system?"

The answer is certainly not the liberal/progressive wing of the Democratic party.

The existing policy is a compromise that liberals signed off on to improve the conditions of the worst off, but they were not able to create the kind of conceptually coherent total overhaul we would require to make the system rational.

I agree with you that blaming Obama for a failure of leadership in this situation is borderline absurd, but it's a simple narrative that is easy to regurgitate in a complex, frustrating world, so we have to forgive people for believing it, to some extent.


What's absurd is that there were many problems in healthcare 1.0 that needed fixing, and Obamacare chose to instead solidify the position of health insurance providers, which was central to the problems in 1.0. Now we have 2.0 and the insurance companies have their business model baked into the law even more strongly.

A one page bill could probably fix the whole thing

* move tax benefit of buying insurance from employer to employee (why is my company involved in my health insurance anyway?)

* allow buying of insurance across state lines

* require same price for all services, tests, medicines regardless of payer

* require those prices to be public

* declare a single 'pool' or market for insurance (just like federal employees have)


sure, but that wouldn't even get 40 votes in the Senate, much less 60.


I was curious about who did vote for the bill so I took a look:

https://en.wikipedia.org/wiki/Patient_Protection_and_Afforda...

The bill passed in the Senate by 60-39 with all republicans voting against except for Jim Bunning who did not vote. With 58 Democrat and 2 Independent votes the Republicans weren't able to filibuster. After the bill passed the senate a special election to replace Ted Kennedy in the senate was won by a Republican, so the Democrats no longer had a super majority in the Senate, and so the decision was made that the house should pass the Senates bill as they didn't think voting on a house bill would pass the senate now that the Republicans had 41 votes which was enough to filibuster.

> The existing policy is a compromise that liberals signed off on to improve the conditions of the worst off

The only compromises happened between members of the Democrat party, between moderates and progressives.

> I agree with you that blaming Obama for a failure of leadership in this situation is borderline absurd

I agree that there are likely a lot of compromises that happened behind the scenes that we didn't see, but there has to be some ownership of that bill by President Obama. It was his marquee bill at a time when some Democrats were urging him not to tackle it, he had a super majority in the senate and the house. He signed it into law, he set the agenda, I think it's fair to hold him accountable for the outcome, even if it's not exactly what he wanted, it's still what was passed and if he didn't like it they could have scrapped it to try again.


great response and research. I agree with you that Obama shares a solid share of responsibility - but more importantly I think the enormous amount of effort required to keep a supermajority in line to pass the legislation is the real story.


the healthcare reform was a result of complicated partisan maneuvering to get over the finish line. many of those bandaids people complain about are a direct result of strong republican opposition. so much so that the final bill that passed was nowhere near what obama or anyone wanted. Blaming Obama and not the opposition in congress for any of this mess is really shortsighted.

if you really want to know the gory details of this process and healthcare in america read the excellent book by Steve brill:America's Bitter Pill.

and one more thing, you had insurance now but what happens in you lose your job or god forbid take a break for a few month to care for somebody.


The Democrats passed the bill in the senate 60-39, with 2 independents voting for, and all Republicans voting against. Then that bill was passed in the house with a vote of 219–212 with 34 Democrats and all 178 Republicans voting against it. This wasn't partisan, this was Democrats passing a bill without any Republican votes. The band-aids were to get moderate Democrats on board.

https://en.wikipedia.org/wiki/Patient_Protection_and_Afforda...


Lieberman singlehandedly killed the public option, though. Obamacare would have looked very different if that had survived.


Irrelevant since he never tried to fix the problem.

He did try for the other problems, and there was a lot of opposition.


are you trolling? if you are serious about finding out read the book, he explains the horsetrading that was needed to pass the bill.

for a complex bill like that you cannot take one thing in isolation and complain you have to look at the context. Also, again, its congress not him. if you are gonna complain, complain about republicans that kept watering down the obamacare under bad faith negotiations (though eventually it passed without any red support).


Obama couldn't fix anything because he was the president and he couldn't make laws. He barely even had the political clout to get ACA passed.

The blame is on Congress.


The way the current tax regime and economic system are setup in the US, they both favor the employer-employee relationship heavily and, in a way, penalize a worker for existing outside of it.

Personally, I don't think that's a coincidence.


See self-employment tax for a good example. Yes, it really is just the other 7% of the FICA (payroll) tax that an employer would normally pay, but I've seen people get thrown for a loop when another 7% of their 1099 or self-employment income gets taken away than they were "expecting" because it gets hidden from normal W-2 employees.


>> Obama promised "if you like your insurance you can keep it".

And, of course, this was a massive lie. Personally, I loved my previous insurance but after ObamaCare, it went away and my replacements were far more expensive.

It was the 2013 Lie of the Year by Politifact, even.

http://www.politifact.com/truth-o-meter/article/2013/dec/12/...


And part of the ACA capped profit percentages of the insurance companies, meaning that in order to increase total profit they need to increase revenue and spending quarter after quarter.


In every US state that I know of - a generic will be substituted for a brand name drug unless the doctor specifically specifies that it should not be.


There's a subtle difference between what you're describing and what the parent post describes.

You are correct - in cases where there is a brand-name version of a dug AND also a generic version of the same drug, the generic is usually provided unless the brand-name is specifically requested.

But, the parent post is describing cases where there is a new, brand-name drug that fills the same niche as an existing generic. Two different drugs, but often only slightly differing results. MDs often prescribe the newest, assuming it's better than the generic. MDs receive much of their ongoing education about drugs from the pharmaceutical sales reps, so they are bombarded with ads and samples (just as consumers are with ads on TV).

As an aside, my dermatologist has been good about ensuring the costs of any treatments I receive are managed. She's recommended specific pharmacies, brand-name vs generic, and other tips/tricks to reduce the costs. This despite the fact that I don't directly bear any of the costs because I have a decent medical plan.


MDs often prescribe the newest

That is not always a correct assumption. Due to the way some programs like Medicare pay out, doctors are sometimes strongly incentivized to prescribe the most expensive drug.

Ophthalmologists are the usual notorious example, prescribing for macular degeneration. Medicare's reimbursement for drugs administered in-office includes paying the cost of the drug plus an additional percentage.

For macular degeneration, research showed Avastin and Lucentis are basically equally effective. But Avastin is ~$50/dose and Lucentis is ~$2,000/dose. If you're going to get a "bonus" payment equal to a percentage of the cost of the drug, which one would you use?

Lucentis has at times accounted for 10% of the entire Medicare part B drug budget because of this.


Wow! I didn't know about that quirk of the Medicare system. That's a pretty horrific incentive to overspend.

My comment was based on the more typical situation, where the physician sends the patient to a pharmacist.


It sounds like your dermatologist is not just a good doctor but also a good person.

Giving the same (high?) standard of care to patients without regard to their financial resources.


I was unclear, the podcast discusses cases where there's no generic version of the latest drug, and the latest drug is marginally more effective than whatever the latest generic is.

So the generic just doesn't get considered, even though it would be suitable for the patient at much lower costs. This is unrelated to the situation you're describing.


Having a medical condition that requires long term medication maintenance - every single doctor I've had is very well aware of what is a generic and what is not - and tends to prescribe a generic, as they are often an ER version of the regular med, or a compounded version of two medications that can be taken separately.


Former pharmacist here. I think most doctors do try to be cost conscious for the patient. But there are some who prescribe the newest and expensive brand name drug, and I can’t think of any reason why except some sort of incentive program.

Many ophthalmologists will give the most expensive post surgical drops. When I called one to have him change it, he was like “uh, there’s no substitute.” I thought to myself, “then what did you guys do before these drugs came out a couple months ago?” Example: post cataract surgery people usually get an antibiotic, a corticosteroid, and an anti inflammatory. These generic drugs have been on the market for years. But new ones come out here and there that are hella expensive, we’re talking a copay of $5.00 vs $100+ per eye drop.

Also there are prescribing guidelines called step therapy. For example for diabetes: https://emedicine.medscape.com/article/117853-treatment#d10 doctors will skip the first few steps and prescribe a brand name drug immediately that’s like step 3.

Insurance companies try to stop it by requiring authorization but... I feel like we’re fighting an uphill battle with perverse incentives.


In my former job, I talked to a lot of doctors about this stuff.

What I found was that a lot of doctors look at the decision from a clinical lens only. Why not prescribe the latest branded product, even if it's only marginally better than the generic? Patients deserve the best, right?

Making a cost vs. benefit trade off wasn't a universal process for many physicians.


I've actually run into a very similar example, I was prescribed a $400 dollar bottle of antibiotic eye drops, which my insurance fought and eventually paid for. I asked why that was chosen and if there were other options that I could pursue in the future. I was told that "these are your eyes and I'm not going to [fuck around] when it comes to your vision."

I can't really disagree with that logic.


True, but what did doctors do before these new drugs? “Fuck around” with “inferior” products... reason I’m cynical is because many new drugs that hit the market are not novel - for example loteprednol (older drug) vs difluprednate (newer): https://www.ncbi.nlm.nih.gov/m/pubmed/28628490/

By the way, some of these newer drugs don’t have to be “superior” to be approved, they just have to be none-inferior to current therapy. https://www.raps.org/regulatory-focus™/news-articles/2016/11...


From what I gathered, it was more effective than the cheaper options, not that it was chosen because it was new and shiny.


"a generic will be substituted for a brand name drug"

We had a similar corruption here, in Lithuania, until the law has been passed that pharmacist must offer a generic alternative. But there again, world is seen very differently in EU than USA, so I don't expect that to apply on the other side of the pond.


And drug makers are aware of this fact thus they incentivize doctors to specify the brand name drug.


And this makes the pharmacy give you the brand name drug?

That's surprising. Over here (Germany) the doctor can fill in the name of the brand in the prescription, but unless he ticks a special box you'll automatically get the generic.


Why would a pharmacy give you a brand name, the generic is chemically identical, the doctor can give a brand name - they've done their part. The pharmacy could then offer you the brand name, or the generic, as long as they make the generic cheaper then the pharmacy can make more money; save you money and give identical service.

Some people will still opt for the more expensive, of course, but where's the incentive for the pharmacist to fill a script for Neurofen RTM with anything other than ibuprofen? Why even is there a special box -- if the generic isn't the same drug (tested, licensed, etc.) it's not a generic. Might as well have a "are you getting a kickback for prescribing this" box?


Generics aren't always chemically identical. The active ingredient might be the same, but the binders may not be. In the majority of cases, that's fine - you only really care about the active ingredient - but in certain cases, such as a sensitivity to one of those ingredients, it might not be. My sister has had to have specific brands of certain medicines prescribed due to a sensitivity to certain types of sugars. For instance, compare Neurofen:

> Each tablet contains Ibuprofen 200 mg Also contains: Sucrose, Sodium Citrate, talk, Croscarmellose Sodium, Stearis Acid, Titaniu, Dioxide, Silicon Dioxide, Acacia, Carmellose Sodium, Sodiu, Laurilsulphate, Macrogol and Blank Ink(contains Shellac, Iron Oxide Black (E172) and Propylene Glycol) or Opacode S -1 -8152 HV Black (contains Shellac, Iron Oxide Black (E172, Antifoam DC1510 and Soya Lecithin

https://www.boots.com/nurofen-200mg-tablets-16-tablets

to generic ibuprofen:

> Ibuprofen 400mg, sodium starch glycollate, croscarmellose sodium, sucrose, E171, E127 and E211

https://www.chemistdirect.co.uk/ibuprofen-400mg-tablets/prd-...


> And drug makers are aware of this fact thus they incentivize doctors to specify the brand name drug.

That's a bold and unfounded claim. Drug makers do not incentivize doctors to write DAW on a prescription.


> That's a bold and unfounded claim.

Forbes and the New York Times have written articles on it. The Affordable Care Act has a provision that requires Doctors to disclose payments.

Empirically, I dated a girl for about 2 years who was a sales representative for a major pharmaceutical company. When I asked about her job she said it was mostly dropping of brochures, swag, free lunches, and holding contests to promote products. Top producers (doctors) received all expense paid trips to medical conferences held in exotic locations or were invited to be paid speakers at said conferences. It was not too different from what the marketers did at the insurance broker I worked for at the time to cater Agents to write their lines.


> Empirically, I dated a girl for about 2 years who was a sales representative for a major pharmaceutical company. When I asked about her job she said it was mostly dropping of brochures, swag, free lunches, and holding contests to promote products. Top producers (doctors) received all expense paid trips to medical conferences held in exotic locations or were invited to be paid speakers at said conferences. It was not too different from what the marketers did at the insurance broker I worked for at the time to cater Agents to write their lines.

Your anecdote is about which drugs the doctors choose to prescribe. It has nothing to do with incentivizing doctors to prevent patients from filling generic versions of drugs and forcing them to purchase the brand-name version of the same drug, which is what this thread is about.


They weren't compensating them to fill scripts for the generic. She made more frequent visits to top producers based on filled prescriptions. I asked her how she knew who to visit and she said she was emailed regional reports with prescription numbers.

I don't know how those reports are generated. Do pharmacies report that information back to pharmaceutical companies? Are they based off of shipments to regions?


> They weren't compensating them to fill scripts for the generic.

They're not out there to make sales for old drugs (drugs that have gone generic). They're out there to make sales for new drugs, which don't have generic equivalents at all.

No pharmaceutical company is going to waste money on sales for drugs that have gone generic, and certainly no pharmaceutical company is going to try and incentivize providers to DAW prescriptions. Aside from being already illegal, even an unscrupulous company wouldn't bother because it'd be a tremendous waste of money.


None of those points apply here, where the new branded drug is a revolutionary advancement over the previous drugs. (This non-profits new drug is something newer still).

Saving a life creates some aggregate economic value (the person will not die and instead will continue contributing to the economy for X more years). Drugs are expensive because in the first world, that amount is a lot and the entity creating a cure can reasonably expect to capture a substantial portion of it, either because the person will pay it or because governments will.

Neither is intrinsically a problem. $84,000 to cure HepC is a bargain, because people die from that quite young and on the other side of the equation is potentially millions of dollars of saved economic productivity. That’s not an argument for not charging $84,000 for HepC drugs. It may well be an argument for having the government foot the bill.


It’s important that we incent what we actually want. As it stands the science is often done in universities funded by federal grants. The monopoly owner—which is allowed to capture much of the value—is responsible for the drug testing process and marketing.

The drug testing process is no doubt important but is it so much more important than the initial drug discovery that the entity that funds it should be where all the profits go?


That’s a misleading characterization of the industry. There is a huge gap between university research and products people can sell, and its not just drug testing and marketing. (Think of the difference between the Google patent developed at Stanford and Google’s real search engine.)


The value of academic findings is only apparent in retrospect, after a drug has been shepherded through the development process by a biopharma company. The govt spends maybe $25-30B a year on drug research. The top 15 pharma companies alone spend like $70B a year on R&D

It costs over $200M to take a drug from academia to market just including out of pocket costs. Including the drugs that fail at various stages within industrial drug dev -- 90%+ of drugs -- and the cost to get a drug approved is $2.6B, not including academic costs

Compounds discovered in academia have like a 1 in 10,000 chance of getting approved. The group that analyzes which of those drugs have a shot at getting to market and funds the cost of that R&D are biopharma companies


Reducing life to exploitable profits is just wrong. If it's the only way to incentivize drug testing and marketing then the companies involved in those pursuits ought to struggle under the weight of sin taxes.


You can ignore economics, but economics won’t ignore you (especially when you do stupid things like tax industries that create a benefit because you deem that benefit too important.)


If taxing price gougers seems stupid you're going to hate the pitchfork-toting mobs.


In litigation, the cost of a decade of life can be valued at a million dollars or more. Saving the life of a 45 year old for $85,000 isn’t “price gouging” it’s a huge bargain. And taxing industries that create those outcomes, like we do with industries we want to discourage (such as alcohol or tobacco) is economically irrational.

Of course you expect the pitchfork-toting mobs to be irrational. But that’s not a basis for arguing in favor of something as a matter of sound policy.

Trying to set drug policy ignoring the economics of human life is like trying to design an airplane while ignoring gravity. You can’t will physics into submission through moral outrage. There is, as far as I can tell, no proven correlation between scientific talent and altruism. If you make it so you can’t get rich saving lives, many of the best and brightest will go work making better advertising technology instead.


You're making this very hand-wavy calculation. Hardly any 45 year olds were dying of hep C, even the older ones had lots of comorbidities & other risk factors, which is what one would expect for a disease acquired through intravenous drug use, and often transmitted in prisons or unsanitary tattoo parlors, and the drugs don't have a perfect cure rate.

In any case it's nearly irrelevant because this was a completely post-hoc rationale for pricing this drug. I am not opposed to large cash bounties for major advances but our current system is not remotely designed around that principle. Forgive me for thinking you are defending the wrong system.


In one study, 60% of the people who died of Hep-C were between 45 and 59: https://www.hepmag.com/article/death-risk-24659-138388084. More than half of cases aren't the result of intravenous drug use: https://aasldpubs.onlinelibrary.wiley.com/doi/pdf/10.1002/cl....

> In any case it's nearly irrelevant because this was completely post-hoc rationale for pricing this drug

Drug development, like tech startups, is high risk, but every now and then creates a lot of economic value. To make the system sustainable, there must be a way of capturing a significant chunk of that value from those "unicorns." So yes, it's post hoc in the sense that you don't know until after you roll the decide whether a particular drug is going to create a lot of value or not. That's the case with most high risk investments.

> Forgive me for thinking you are defending the wrong system.

Forgive me for thinking that people are completely nuts for thinking it's a good idea to lower the potential rewards to investment for industries that are "more important." It's completely ass-backward.


Those studies don't say what you're claiming.

I meant the pricing was post-hoc in the sense that they came up with a story like yours for why it was worth $84,000 when they were bringing it to market. There was no precedent for a pill that costly when the research was undertaken. Even in the case of HCV--the best case to be discussing if you're an advocate of for-profit medicine--it's not a good example of an incentive structure.


You need to do a bit more reading. The latest Hep C drugs have cure rates of over 99%. Even NICE, the UK's cost-effectiveness committee said that Sovaldi is cost-effective.


Look, if you would rather those companies not even exist in the first place, the cure not invented, and the people suffering from the disease die, then go ahead and say so.

This way, you'd have no one to blame for all the problems.


In the US efficacy is typically measured through estimates of DALYs (disability-adjusted life years). Following WHO guidelines, cost of an intervention (or drug) up to three times the national per-capita GPD (~3x50K in the US) is considered to be cost-effective.


That is fascinating. Would love to read more about how this is determined and applied.

To me a big issue is, does this drug cure a condition or merely treat and contain it...?


> But some of it's because nobody in the system seems to have a real incentive to reduce costs

And I think a large part of this stems from insurance companies paying for most of the cost of care (if you're insured) rather than the person who is receiving the care, which leads to a market failure because the insurance companies aren't incentivized to keep costs down like an individual would be.


A couple of problems with the idea of "incentivizing" individuals to keep the cost down, by forcing them to pay more of the cost out-of-pocket (ignoring the moral question of whether people with less money should in fact receive inferior health care):

People will pay almost anything to stay alive and healthy, or to keep their loved ones alive and healthy; few people are willing to turn down the more expensive option even if the increased benefits are minor, and even if it means going bankrupt in the process;

Health-care costs are not very transparent, and bills are often computed after the fact; it is much easier to find out the price and quality of a washing machine, than the price and quality of a doctor. In other words, shopping around (assuming you have time and energy to do that while sick or dying) is not easy.

Rich countries outside of the US manage to spend much less money per capita on health care than the US, with similar health outcomes, and with a much lower rate of people forced into bankruptcy by medical expenses. They don't do this by pushing more of the cost of care onto the patient. Perhaps we in the US should try to learn from them.


Yes, I agree. I was just pointing out one reason the current system doesn't control its costs very well. There are lots of potential ways to improve the system, some of which are already implemented in other countries.


"Generic" is a legal term for a drug not subject to patent controls. "Alternative" is a medical/practical term for an alternative drug that may or may not still be under patent.

Alternatives can be cheaper, or useful if a patient cannot tolerate the first choise.


Although most generics are for drugs no longer under patent protection this is not always the case. A more accurate definition of a generic is the one from Wikipedia, "A generic drug is a pharmaceutical drug that is equivalent to a brand-name product in dosage, strength, route of administration, quality, performance and intended use, but does not carry the brand name. The generic drug may differ from the original in non-essential characteristics such as color, taste and packaging."


Incentives! That is 100% the only right answer to healthcare problems in our country.


Care to elaborate?

Analogy: How do you get people to win the game? "Reward the winner". Sure, but what's the game, how do you win it, what's the reward, how do you distribute it.


Have a free market in health care. (The U.S. health care market is anything but a free market.)


What do you mean by that? I'm sympathetic to making healthcare look more like a free market, but I don't know what a free market in health care looks like.

If you don't have money, society shouldn't just let you die. The second you try to fix that (with government) you don't have a free market.


The US had a free market in health care before the 1960s.

Health care was a lot cheaper then, and charity was available for poor people.


And health care was a lot worse in the 1960s and before. Let's not pretend that before the 1960s were some golden age. In 1965 infant mortality was 24.7 deaths per live births, in 2016 it was 4.3.

Sources: 1965 number from: https://www.cdc.gov/nchs/data/series/sr_20/sr20_020acc.pdf 2016 number from: https://en.wikipedia.org/wiki/List_of_countries_by_infant_an...


They've been trending downward in the US since 1800.

https://www2.census.gov/library/publications/1960/compendia/...

You can see by the other stats in the PDF that all measures of health improved dramatically 1800-1960.


The best case scenario is that each person is empowered to answer those questions themselves. The worst case scenario is to have someone else define for you what winning is and how you should go about doing it.


That's somehow even more vague than GP. I think the issue is pretty clear: The US has too expensive healthcare, and too low quality in relation to that price.

The solution "incentives" isn't really constructive in solving that issue, if you don't suggest what those incentives are.

And as for your comment: within this problem space, everyone defining their own healthcare system and solving it is even less constructive.


The point is that the "healthcare system" should be an emergent one where each person is maximally in control of their own destiny. The idea that a few wealthy, connected, buyable people could get to "define the healthcare system" is terrifying.


I think you're describing a separate problem, of campaign financing, lobbying and/or corruption.

> The point is that the "healthcare system" should be an emergent one where each person is maximally in control of their own destiny.

Again, this is a nice sounding platitude. What does it mean? Since you want everyone to be "maximally in control", does that mean Mad Max-style anarchy? Representative democracy ensuring everyone gets a voice and securing of rights?

Both ensures freedoms, but in very different directions.


Mad Max isn't anarchy, it's a centralized authoritarian dictatorship. What you're talking about where you want me to suggest a definition of "the game," how it's played, how to win, etc. is closer to Mad Max.

With regards to healthcare, the best system is one in which each individual person has autonomy over themselves. Each will have its own desires: making money, saving money, receiving treatment, etc. The "system" emerges from the accumulation of human desires and abilities. I can't tell you exactly what it looks like because I can't pretend to know what everyone will want, nor can I tell you what is best for everyone. They are best left to determine that themselves.


Mad Max was anarcho-capitalism reaching its logical conclusion, a monopoly with a financed militia.

> With regards to healthcare, the best system is one in which each individual person has autonomy over themselves. Each will have its own desires: making money, saving money, receiving treatment, etc. The "system" emerges from the accumulation of human desires and abilities. I can't tell you exactly what it looks like because I can't pretend to know what everyone will want, nor can I tell you what is best for everyone. They are best left to determine that themselves.

So basically no health care system and no social security, and bartering for whatever you want.

Just say you want libertarian minimal government and we'd have saved 10 minutes of our lives instead of vague platitudes.


>Mad Max was anarcho-capitalism reaching its logical conclusion, a monopoly with a financed militia.

Authoritarianism comes in many stripes. Capitalism can be authoritarian, but forced socialism always is.

>So basically no health care system and no social security, and bartering for whatever you want.

Emergent systems exist all over the place. The very language we're using right now to communicate is an emergent system. There is not a central authority which dictates how we must converse, and yet here we are.

>Just say you want libertarian minimal government and we'd have saved 10 minutes of our lives instead of vague platitudes.

I didn't try to give you a platitude. You wanted me to define what is best for everyone and I tried to show you that your question implies that authoritarianism is best. I disagree with your implication.


> I didn't try to give you a platitude. You wanted me to define what is best for everyone and I tried to show you that your question implies that authoritarianism is best. I disagree with your implication.

Cooperation and synergy isn't the same as authoritarianism. There's a reason that civilization and societies reached all major advances and discoveries, and not hermits or tribes.

There's immense value in limiting overhead by delegating fundamental services into a collective pool.

But all that is besides the point. On topic:

I wanted neither you or OP to define what is best, I wanted OP to clarify what he was suggesting since he was suggesting something. I wanted you to clarify what you were saying, since I didn't understand how it fit into my response to OP. Apparently it didn't.


>Cooperation and synergy isn't the same as authoritarianism. There's a reason that civilization and societies reached all major advances and discoveries, and not hermits or tribes.

You explicitly asked questions like, "how do you get people to win the game?" "How do you win it?" "What's the reward?" "How do you distribute it?"

In other words, you wanted us to dictate what "winning" means, what the rewards are for winning, and how the rewards would be distributed. That's not cooperation, that's dictation. Each person may have their own definition of winning and as long as they're not infringing on the rights of another, they can do whatever they wish to accomplish their goal.

>There's immense value in limiting overhead by delegating fundamental services into a collective pool.

Please don't forcibly dictate to me what is valuable by forcing me into a system that maximizes what you personally find valuable. I will offer the same kindness in return. That is the crux of the problem with the set of questions you asked originally and why what I've said does fit into your response to OP.


Since you bothered to reply, and completely ignored the paragraph that answered your (now repeated) comment, I have to assume that you're not here for a genuine discussion.


I would also like to recommend this Nature article, from August 2016, on the same Drugs for Neglected Diseases initiative (DNDi) discussed here.

"Busting the billion-dollar myth: how to slash the cost of drug development"

https://www.nature.com/news/busting-the-billion-dollar-myth-...

> In just over a decade, the group has earned approval for six treatments, tackling sleeping sickness, malaria, Chagas’ disease and a form of leishmaniasis called kala-azar. And it has put another 26 drugs into development. It has done this with US$290 million — about one-quarter of what a typical pharmaceutical company would spend to develop just one drug. … In that vein, the DNDi has started research on alternatives to pricey drugs for hepatitis C…


It has done this with US$290 million — about one-quarter of what a typical pharmaceutical company would spend to develop just one drug

What a poorly researched article.

Of course they have. If you only measure the successful drugs, the cost of R&D is much lower. The question is, how do you identify those drugs?

Plus, DNDi is not creating brand new molecules. Their molecules are either:(1) old drugs that we already know work but were never formally approved, (2) cast-off drugs where someone already spent a shit-ton of money, but never took them to the finish line or (3) me-too drugs, where they just tweak a known drug. All of those are much lower risk than creating a brand new drug with a new MOA.

When they come up with a new drug with a truly novel mechanism, then we can find out how much it cost them.

Derek Lowe from the "In the pipeline" blog put it well:

"As pointed out in that previous post, the initiative, for the most part, is repurposing drugs that were discovered and at least partially developed by someone else, using someone else’s time, money, expertise and infrastructure."[1]

[1]http://blogs.sciencemag.org/pipeline/archives/2016/08/26/gos...


Isn't most drug developments just incremental improvements on previous drugs?

Don't most drug companies stand on the shoulders of giants, starting of from public basic research?


It's very rare that someone does everything from the basic science to approval.

However, there are varying degrees of incremental. I would say DNDi is on the very incremental end.


Not to discount the significance of providing new treatments for things like malaria and sleeping sickness, but that's a pretty different category of problem altogether. The model described in that article is aimed at solving a different issue: providing medications for treating illnesses that are largely (though not exclusively) found in the developing world, and for which there is little investment from existing pharmaceutical R&D centers[0]. By contrast, Hepatitis C is the most deadly infectious disease in the US (and is comparably bad in Europe - arguably worse, actually due to inferior treatment options at the moment compared to the US).

The cure for Hepatitis C came from a US-based company, out of research conducted on US patients and funded largely by the US pharmaceutical market. You wouldn't see groups like the DNDi tackling that kind of work, because they have vastly fewer resources than larger players do, and they ultimately wouldn't be able to compete, nor would they be able to establish distribution in the markets where they would need to have an impact[1].

Now that chronic Hepatitis C is a curable[2] disease, it's not surprising that other players will focus on providing cheaper alternatives to the treatment course, but again, that's a different problem from what the large pharmaceutical companies in the US and Europe solve.

[0] The US is the largest of these, producing half of the world's R&D medical and pharmaceutical research, and Europe is another hub. China and India are the fastest growing, but have only been players on this scale in the last few years.

[1] Producing the medication is, in some ways, the "easy" part - actually ensuring that it reaches the patients who need it is the really difficult part, and honestly the more impressive aspect of DNDi's sort of work.

[2] Expensive, but curable


I worked with a hepatologist once who donated his services to low-income patients with hep c. Encouraged by his selfless act, I called him to learn more about how our services could help him (he was asking for a discount).

Well, it turns out that while his services were donated, he also owned a pharmacy and stood to make a lot more by using the donated time as what we might call a “customer acquisition cost”.

I would be surprised if he continues treating patients if the payout for treatment really goes down 30 fold. For what it’s worth, that’s a pretty typical physician I’ve worked with and I’ve worked with hundreds.

I don’t know why I expect more from physicians, but I do and they usually let me down.


Money as an incentive allows a lot of bad behaviour to exist, and regulating and enforcement bodies don't seem to have proper processes for self-regulation - which would catch this kind of conflict of interest, as one example.


I'm guessing you're in the US where this type of behaviour is typical.

Fortunately that is not the case in many other parts of the world where incentives are not as perverse.

(physician here)


> Fortunately that is not the case in many other parts of the world where incentives are not as perverse.

Incentives absolutely are structurally perverse in other parts of the world.

They're just perverse in different ways, which often mask the effects to patients.


My immediate question was "how are they getting sofosbuvir for $300?" That is literally Sovaldi and one of the components of Harvoni, which is what the article is comparing this to?

Well, they are getting it that cheap because Gilead (the company selling HCV drugs for $84k in the US) licensed it as a generic for sale for this purpose[1].

So, no, this nonprofit didn't discover some cure out of nowhere, they created a combination therapy that uses one of the components of the $84K drug that is available inexpensively due to the owner of the $84k drug licensing that component for generic manufacture in that area of the world.

[1] https://in.reuters.com/article/gilead-sciences-india/gilead-...


From what I understand, Gilead and many other companies do provide some meds at cost to countries that don't have a system to pay for high priced drugs, especially if they are important drugs for large groups of sick patients

Part of this is a corporate social responsibility thing, but part of it is because many of these drugs are purchased and distributed by entities that sometimes cut and dilute expensive drugs and resell them. This hurts patients and tarnishes the brand of the company. Selling their products at cost removes this incentive and allows patients to access the medicines in their unadulterated form

So the pharma companies incentives aren't entirely altruistic but it helps patients in the end


This and just the economics of it. It makes sense to sell at what price the market can handle, as long as it's above direct production cost (which it is). It's basically cheap marketing that happens to align with patient interests.

edit: A lot of it is also politics with the host country. India for example has said it will produce cheap generics of drugs if it wants to, ignoring patents: https://www.forbes.com/sites/johnlamattina/2013/04/08/indias...


I am curious about the age of that particular component (and skimming the linked article didn't seem like a detailed read would reveal anything of substantive detail).

Maybe the modern expensive pre-packaged mixer of drugs is an attempt at re-patenting the actually effective and already existing drug and keeping generics (which could be manually prescribed with the other beneficial ingredients as separate medications) off the market.


The components of the drugs are individually not generic and very expensive in the US. Sofusbuvir was discovered in 2007

Sofusbuvir is combined with other drugs (specifically ledipasvir) because it improves cure rates. Because the individual components are still on patent, prescribing each individually would cost more than prescribing the combo


One day, we will look back and not understand how this was even possible. You come up with a cure for something and you make the price so high that it is cheaper to die from the disease.


I think there are two contradictory conditions in this. The reality is that just because it saves lives doesn't mean it should be free. The US is the only country in the world that spends a billion dollars to develop a drug for a disease that helps 1000 people. It is kind of amazing, but ultimately economically terrible: half a billion can save a lot more than 1000.

We have to bear the cost of accepting that lives are not worth infinite, and that its not okay to spend irrationally to save one.

That said, the US has deep issues in its pharma, like extreme regulatory restrictions and importation restrictions that can be tear down overnight and would drop drug prices to the floor very quickly.


>> I think there are two contradictory conditions in this. The reality is that just because it saves lives doesn't mean it should be free.

If the economy can't support peoples' lives, what's the point of having an economy in the first place? Is it just so a very few people can accumulate most of the available wealth and leave everyone else unable to access vital goods and services?


There arent infinite resources, the whole point is how to manage them. The US has millions of malnourished kids, Something that can be solved with a lot less resources than obscure diseases that will affect only a handful.

That said, let the billionaires spend their money on such cures if they wish (and they do). If we talk about what is the role of government in spending money to save lives, expensive pharma isnt one of them.


Imagine we could choose between living miserably and never progress, or let one person die one hour earlier than they normally would and the rest would live immortally and thrive in luxury forever. I think most people would pick the latter.

Now, we're in a situation similar to this, although much much less extreme. But the point is, trade-offs exist. And this is one of them.


The current economic situation is a lot closer to "what if one person could live immortally in luxury, at the cost of everyone else dying an hour earlier than they normally would".


What. How did you come to this estimation?


An economy isn't something you choose to have or not have. It arises naturally as a matter of fact. Our legislation and rules and laws that govern it are a consequence of its existence, not its cause.


It's a feedback cycle, not a one-way arrow.


> what's the point of having an economy in the first place?

Ask yourself who established the rules for our economy and who stands to benefit from them. If you ask them, things are working just as they are meant to.

Our country owes its roots to a wealthy, merchant class uprising. The system they setup benefited people like themselves.


> We have to bear the cost of accepting that lives are not worth infinite, and that its not okay to spend irrationally to save one.

This is a key point and one I see a lot of people lose track of in these debates. Nobody is entitled to have millions and millions spent on keeping them alive, and this is one of the key moral hazards of public healthcare (though one we mostly bear the cost of already with Medicare).


"Nobody is entitled to have millions and millions spent on keeping them alive..."

I agree. The F35 cost has gotten way out of hand.


Isn't it always cheaper to die from disease instead of treating it? Purely economical obviously.


Only for the patient and only in the immediate term. But if you could increase your wealth by more than the cost of the cure by living longer, then you could say dying is more expensive. And the same for society, if your future contributions (taxes and others) are worth more than the cost of the cure.


Only if you treat people as cattle and expect returns (taxes and others) from them. A very common but inhuman way of treating people.


True, including lost knowledge, etc.

It makes sense to invest as much money possible in returning someone to being the most productive they can in a society, especially if you think about automation systems that will lower costs of everything more and more - assuming a profit layer isn't gouging unreasonably; that is if you are following trusted processes and carefully following them as to not make mistakes, and directing investment towards fixing source causes and not simply symptoms, when possible. The problem I have personally been facing the past two years relating to this kind of process is from human error - incompetence (inability to do something successfully) - whereby I've observed that it seems doctors are selected for their memorization skills to regurgitate information on tests (etc) and not critical thinking skills, to understand more complex, less straight-forward scenarios. And this will likely lead me to ending my life; I have chronic pain I have been problem solving, had success with healing, but have been stonewalled by illogical thinking. I am trying to write my story out, though it's difficult for me to organize thought and focus/concentrate enough for longer form.


Also take in count the psychological impact for relatives and close ones.


You can find infinite varieties of confounding variables and perform infinite levels of indirection to find effects.

Maybe the death of someone will motivate someone to perform better. Maybe if a relative dies of lung cancer from smoking, I will be motivated to quit, which thereby increases my productive output (healthier, less time smoking). Maybe keeping the person alive longer will increase the total number of visits to them in the hospital, which could be considered lost productivity time.


Even just factoring in purely lost output from compassionate leave would probably contribute significantly to bridging that gap (not that any employer should even try and quantify it, but if we're looking at the "system cost" of treatment vs non-treatment, the wider impact is probably staggering).


That depends on circumstances and how expensive treating the disease is.

For the patient, it depends on the care you'll need while dying from it. If it takes 5 years, the first two missing lots of work and the last 3 taking increasing amounts of care, either through home nursing, family member, or nursing home... well, it depends on how much the medicines cost, both for the disease and symptom management. I'm assuming we are minimally letting folks die comfortably.

Then there are outside costs to dying. Children or a spouse might need extra help for years - and the younger you die, the more likely this is. Therapy for younger children costs money. The family income has likely been greatly reduced (assuming both adults are working). If you rent, the landlord might lose some money, possibly more if you live alone and die at home since the landlord not only is responsible for cleanup, but is losing money until the apartment is rented again. MInimally, a funeral is required, often costing at least $15k. Workplaces often have to deal with some of the fallout of a death. Then there are other things: Money owed to various places and so on.


That's a short def of cheaper. It only is true if on average being a human costs net money, and that's obviously not the case. Life is quite an investment. It follows from your logic that it's cheaper to not have life saving tech at all, yet human value took off when we got it. Old people have wisdom, and information is valuable.


I think, if you try to prove that it makes economical sense to make peoples' lives better and longer, you will always fail- it will always be more profitable to treat people like cattle and let them die quickly. Economic thinking is broken like that: the highest value is money, there isn't any value that doesn't translate into money and there is no way to justify losing money to gain anything else.

Reality doesn't really work like this, or in any case that's just a twisted interpretation of reality.


When we began to acquire the ability to improve life, the value of humanity went up, and even proposed a mechanism (that with age comes more value). You didn't say anything about it, nor did you support you "cattle is cheaper" assertion.

If it's cheaper to let people die, then it follows that med tech is a waste of money, which (almost) anyone can see is not true.

Consider a simple example, Vitamin C. Cheaper to not know it's necessary for life? Things we consider expensive treatments now, become cheap in the future; hence this thread.


My point is that you can't use money to measure the value of life. And that if you do, you'll eventually find that life is, well, worthless.


I cant imagine where you get that idea. We easily assign minimum values (in any store of value you want) to life constantly. People are what make things valuable. Using "money" to talk about value seems to be the hang up, but you haven't said why.


>> Using "money" to talk about value seems to be the hang up, but you haven't said why.

I'm specifically discussing the use of money as a measure of the value of life- not of anything else.

Why is it wrong? Because we use money to set the exchange rate of commodities, but life is not a commodity. For example, all modern societies have laws against slavery, which is precisely treating human lives as goods to be exchanged for money.

Further, money can be hoarded and there are great inequalities in income. If people are worth as much money as they have, the worth of human life will be as unequal as peoples' bank accounts. However, again, all modern societies have laws that recognise any human life is as valuable as any other, at least for the puprose of protecting and taking those lives - e.g. I don't really know that any modern societies have any laws that prohibit the murder of high-income individuals but not of low-income ones.

Finally, you can always make more money, as, to a certain extent, you can always make more of a valuable commodity. Human beings are unique entities- a person is born once, lives once and dies once. In that sense, one person is a distinctly different quantity than one kilo of oranges, one litre of milk, or one karat of gold. It is really not obvious how we can extend the use of a measure of the trade value of goods to the "worth" of human beings.

And by the way, we haven't even begun to define what this "worth" is that money is a measure of (or rather, a proxy). The worth of one kilo of oranges is that they can be eaten. The worth of a person is...?


I def did not mean to suggest human value is tied to a persons fortune. Before this much more insightful comment you argued that the value of a human was zero (worthless), now you argue the opposite, that human life is priceless. If that's an accurate summary of your position, we agree.


I don't understand this because a living person is (usually) productive, producing value for the remainder of their life. It's like saying it's cheaper to never repair or improve a rental property because it costs money to do so.


Sometimes repairing a property or a car is more expensive than buying or building a new one. This is why cars don't last forever, even if it is possible in theory to maintain it in good condition forever. It is all a matter of math and math does not lie (just the assumptions used for the calculation can be wrong).


Depends, if the disease can be transmitted to other hosts and doesn't kill patient 0 in a reasonable time the economical advantage is nil, or even negative.


No unless your future net worth is less than the cost of the treatment.


Funerals can be expensive...


Funerals are a given, so they make no difference.


Years of tax payments lost. Sometimes socialised healthcare costs are actually not costs.


The alternative is to have no cure at all. The businesses need that money as incentive to develop new cures. If we don’t want it to work this way, we need government to spend much more on research, otherwise we will just get fewer new drugs.


That's not really always the case. In the case of orphan drugs it would often be much cheaper overall to have the government fund production instead of granting new exclusive rights to out of patent medications to entities like Skhreli.

Aside from that, more than half of pharma budgets are spent on spent on marketing and patent-workaround redevelopment than on actual productive drug research (even after accounting for new discoveries that sometimes come out of workaround research).

> If we don’t want it to work this way, we need government to spend much more on research,

NIH already funds something close to half of drug research. Even more if you include basic research that has a longer time horizon.

Overall spending would go down, with the side-effect that there would be less penis pill popup ads and way less funding for the Super Bowl halftime show.


> That's not really always the case. In the case of orphan drugs it would often be much cheaper overall to have the government fund production instead of granting new exclusive rights to out of patent medications to entities like Skhreli.

You're conflating two things. Orphan drugs are drugs that aren't profitable to produce, for whatever reason. Shkreli did something a bit different and more complex:

https://en.wikipedia.org/wiki/Pyrimethamine#Availability_and...

> NIH already funds something close to half of drug research. Even more if you include basic research that has a longer time horizon.

The NIH spends 32[1] billion per year, whereas the global spending is ~160[2] billion. So around 20%. That's a lot, but not nearly half.

> Overall spending would go down, with the side-effect that there would be less penis pill popup ads and way less funding for the Super Bowl halftime show.

That's a fairly simplistic interpretation of the world. In general, companies tend to be much more efficient at spending their money than governments. We should expect a substantially higher level of productivity per dollar from businesses than we get from government spending.

There's definitely a reasonable debate to be had about public funding models, but it ought to be properly contextualized by the realities.

[1] - https://www.nih.gov/grants-funding

[2] - https://www.statista.com/statistics/309466/global-r-and-d-ex...

The global R&D spend is


> The NIH spends 32[1] billion per year, whereas the global spending is ~160[2] billion. So around 20%. That's a lot, but not nearly half.

I don't understand how comparing the spending of an American institution to worldwide spending is relevant. NIH isn't the only governmental institution doing research. But I may not understand something.


I was just responding to his point.


> We should expect a substantially higher level of productivity per dollar from businesses than we get from government spending.

Private industry has been very effective indeed at hooking millions of people on opiates. Meanwhile, where are all those new antibiotics?

Market competition is an important element missing from government research, but commercial entities have their own pathologies.

> There's definitely a reasonable debate to be had about public funding models, but it ought to be properly contextualized by the realities.

I favor acknowledging that all markets are constructed, even supposedly "unregulated" ones. The trick is then to construct hybrid models incorporating marketplaces and informed by the limitations of both government and industry.


> Private industry has been very effective indeed at hooking millions of people on opiates. Meanwhile, where are all those new antibiotics?

I'm not sure what your point here is. Do you think pharmaceutical companies aren't trying to produce new antibiotics? Do you think there isn't any money in that? Because there most certainly is. It's just a hard problem, we've mined a lot of the low hanging fruit in the antibiotic space and squandered it on colds and farm animals.

> Market competition is an important element missing from government research, but commercial entities have their own pathologies.

I agree with this.

> I favor acknowledging that all markets are constructed, even supposedly "unregulated" ones. The trick is then to construct hybrid models incorporating marketplaces and informed by the limitations of both government and industry.

I'm not sure what you mean here by 'constructed'. Unregulated markets are genuinely not 'constructed', they are truly organic. That doesn't mean they are morally good, just that they aren't constructed.

I agree that hybrid models are desirable. I'm not sure what the right answer there is. My intuition about markets tells me that the best approach might be for the government to provide guaranteed cash prizes for drugs meeting certain criteria, rather than funding specific projects. That would allow the market to choose how best to meet those criteria, while still incentivizing the stuff the public wants incentivized. That being said, if you define metrics, they can get gamed, so figuring out how best to define those things is difficult and essential.


> Private industry has been very effective indeed at hooking millions of people on opiates.

Opiate addiction is a direct result of government policy regarding drugs going back over a century. You can't put the blame for that on pharmaceutical companies.

> Meanwhile, where are all those new antibiotics?

We're literally commenting on an article about curing Hepatitis C. Not too long ago, chronic Hepatitis C was a long and slow death sentence. There was a time during which having HCV was considered worse than being diagnosed with HIV, because the prognosis and treatment was so bad. Now, it's completely curable in just a few months. The cure for Hepatitis C was funded and developed in the US off by private industry, using funds obtained from pharmaceutical sales.

Incidentally, there have been discoveries recently about developing new lines of antibiotics, though that's not really the issue. The point is that you're missing the forest for the trees, if you ignore all of the unbelievable advances that have been made in pharmaceutical development in the last 25 years alone. Almost all of that - including pharmaceuticals developed by European companies - was funded from US pharmaceutical sales.


I love how you managed you blame the opiate crisis on pharma companies, when it's directly tired to the consequences of drug prohibition by governments.


Oxycontin is legal.

Many of those who became addicts would not have save for sinister machinations by Purdue Pharma. See this article on "Oxycontin's 12-hour problem":

http://www.latimes.com/projects/oxycontin-part1/

I don't like prohibition and the recreational drug market is ripe for reform. There are better and worse ways to do that -- see Mark Kleiman's writings for strategies to construct legal marijuana markets where the incentives for companies to manufacture addicts are minimized.

But the opiate crisis is not an example of supply inadequacy due to prohibition. The pharmaceutical industry has artificially increased demand.


They've increased demand for their drugs by limiting supply of other drugs.


Who is "they" -- government or industry?

If you believe that we should be skeptical of both, perhaps there's common ground where we can agree. Power corrupts, power collects within both government and industry, and they constantly reinforce each other through corruption and regulatory capture. The state has the monopoly on violence so it deserves special care, but commercial entities (especially multi-national corporations) have plenty of power to threaten and ruin individuals.


Is the opiate crisis really tied to drug prohibition? I'm sympathetic to the idea of reducig restrictions on dru use, but drugs are prohibited all over the world, and yet it is the US where opiate painkillers are overproscribed that has a big opiates afdiction problem...


> In general, companies tend to be much more efficient at spending their money than governments.

True, though one has to remember three things: more efficient is not necessarily very efficient; a companies goal is profit, not the best product/result; and companies factor in the ability to fail. The successful company was more effective with their money, but there may be numerous failed efforts and if you factored in their costs the balance is different. After the fact we ascribe great intelligence to the choices of the successful companies rather than the same intelligence but more luck than the unsuccessful companies.

Which doesn't contradict any of your points - I'm just pointing out to others tgat it isn't as simple as industry good with money, govt bad with money.


Dollar value is a meaningless comparison. The cost of running a tiny drug study in the US is insane and only done because of how the FDA operates. It's really bad incentives all around.

Consider, how much money drug companies spend advertising, now reolise there are basically one new drug per week or less if you exclude packing drifts A and drug B in one pill and calling it something else. Doctors can easily keep up with that rate of new drugs without a lot of effort.


I think your 160 billions include advertising and lobbying.


The NIH spends 32[1] billion per year

That's true, but a fraction of that is spent on actual drug discovery. The NIH funds a lot of non-pharmaceutical research.


Most tech companies also spend more on sales, advertising, and other overhead (SG&A) than on R&D. If you look at the ratios, Microsoft or Google aren’t that far off from say Pfizer.


> Aside from that, more than half of pharma budgets are spent on spent on marketing and patent-workaround redevelopment than on actual productive drug research (even after accounting for new discoveries that sometimes come out of workaround research).

Do you have sources for this? It could really change my point of view on the issue but I need something more...


I suspect the previous poster is referring to data like this: https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p...

...which shows that big pharma generally (Roche excepted) spends more on marketing than R&D.

Of course, it's not actually half of all spend, as suggested, as this ignores other operating costs.

For example, to take Roche in 2017, sales and royalties brought in ~55.5m CHF. On the flip side, 14.4m CHF was spent on 'cost of sales' (= production costs, overheads, royalties, etc.), 9.5m CHF was spent on 'marketing and distribution', 10.3m CHF was spent on R&D, and 2.5m CHF on 'general and administration'.

So in the best case from the WP, R&D > Marketing & distribution, but R&D spend was roughly 28% of total spend.

https://www.roche.com/dam/jcr:b70415c0-954f-4a2a-a0e2-47f94b...


I would be fine with this narrative if it were true - but it's a load of bullshit to justify plain greed.

Most of the people actually doing the research and the boring (but thorough, and necessary) test studies are paid a pittance, while the company has every incentive to do some hollywood accounting and overstate what they spend on everything. In the end it's mostly profit for execs and shareholders.


I once read an article on some of these practices. From memory, one company claimed the opportunity cost of investing in the stock market and gaining an assumed 12% per annum as part of their 'research cost'.

Edit: I think the article referenced Joe DiMasi's work [0], which uses a Capital Asset Pricing Model for cost of capital. Essentially, it says there's only one source of risk in the world, and you get paid 11% per annum for taking that risk. I'm pretty sure this work really informed public policy. Shitty economics strikes again.

[0] https://www.ncbi.nlm.nih.gov/pubmed/12606142


I understand the drug companies ("pharmaceutical industry" in the link below) pay about 60% of the research costs. It's a lot of it, but it's not orders-of-magnitude bigger than the public contribution.

https://www.thebalance.com/who-funds-biomedical-research-266...

Some would suggest that the drug companies actually take on the lower risk research, leaving the high risk work to be funded by other sources:

http://www.latimes.com/opinion/op-ed/la-oe-1027-mazzucato-bi...

There are more questions opened by these pieces, sure, but it's clear that we would still have research and still have cures without the businesses stumping up for research.

otherwise we will just get fewer new drugs.

I thought I had a link here somewhere, but can't find it; I have a strong suspicion that the companies have a preference to repackage or reformulate existing drugs, and that basic research on new drugs is disproportionately covered by the public purse and charity.


> I thought I had a link here somewhere, but can't find it; I have a strong suspicion that the companies have a preference to repackage or reformulate existing drugs, and that basic research on new drugs is disproportionately covered by the public purse and charity.

Absolutely there are companies which do this, and there are some very interesting examples of somewhat shady practices, but the vast majority of companies which you think of as 'pharma' --i.e. big pharma, and the big biotechs-- survive by discovering or insourcing and then developing new drugs, and/or developing their existing drugs in new indications.


In general, I tend to agree. But isn’t this particular case a counter example? The non profit was able to develop a drug that doesn’t cost 84k for a course. That implies that the incentive structure you’re referring to isn’t in fact necessary.


IMHO the fulcrum of your parent's comment was exactly how bad we are at helping those in need, and the fact that we assume government regulation would fix our greed is the proof.

Hasn't Shkreli' story shown us that medication prices are made up? A fraction of those $84,000 might be necessary to keep new cures being researched, but most of it is pure speculation on sick people's lives.


This is empirically false as Boldrin & Levine describe in chapter 9 of their book Against Intellectual Monopoly that countries which had no patent protection for pharmaceuticals had a high innovation rate in this field.

Link to chapter: http://levine.sscnet.ucla.edu/papers/ip.ch.9.m1004.pdf


A lot of discoveries are also made by academic and non-profit institutes. The IP is then sold to a pharma giant to fund more long-shot research or give the employees a bonus. Or the group that made the discovery starts their own company and adopts the amoral big pharma model. Why would a government-run agency do things any differently? Sell IP, lower taxes, win elections.


I don't mind increased government funding, I just want people to be aware of the fact that the monopoly of the patent is the award for the cost they have beared developing the patented drug. If we stop incentivizing that, we will need to increase government funding to make up for the loss of private research funds.


Aren't most actual medical research done with public funding... Or at least partial public funding?

IMO we should make drug research a public endeavor. Probably EU level. We'll pay the costs anyways, as taxes fund pricy healthcare/drugs.

Besides the private sector is very risk adverse, that bad when you're developing drugs.


The private sector is risk adverse when tax policy encourages risk aversion. Look at the capital gains tax for example, the existence of that tax means that you have a n% lower risk tolerance since you would have to exceed the cost of the capital gains tax plus make a profit.

If taking a moonshot costs $1000 and if it’s successful, you make $10000, but after capital gains you net $5000, that means it cost $1000 to make $5000, however if the percentage chance of success is just 5%, private markets would be less likely to invest compared to a $1000 investment that has a 90% chance of making $2000.

Which means you get a lot of the “safer” investments and very few of the high risk investments because the risk/reward ratio is destroyed by high confiscatory taxes.

But, if capital gains taxes were zero, you would have a necessarily higher percentage because the reward side of the ratio is much better.

This somewhat explains why a French VC is much more risk adverse than a Silicon Valley VC. My point is risk aversion is a function of the risk/reward ratio.

Since government isn’t really directly accountable to anyone, they can pour money into highly risky “investments,” because they really aren’t beholden to anyone. The US, for example wasted billions on so-called green energy investments in companaies that no sane private investor would have supported: Solyndra as an example. In Houston, taxpayers are being forced to pay for Astrodome renovations to turn the aging structure into a parking facility; government promised that the facility would be “profitable,” yet, if that were that case, they would have had no trouble raising private capital for such a “profitable” endeavor.

My other point is that governments have a long, illustrious history of treading in areas that are actually terrible investments, but since they can literally print money (and provide payoffs to various constituencies,) they are under less pressure to actually do their diligence (or ignore diligence that counter argues their project viability.) As long as the right groups “get theirs,” a government effort continues unencumbered by pesky ideas such as return on investment.


Don't capital gain taxes zero out wrt. to risk, since you also get tax deductions for money lost?

There's waste in both private and public institutions. They work in different ways, and when you make a public institution work it can be extremely efficient in terms of value per dollar.

My point was that maybe public funds could play a bigger role... Imagine a drug being developed by many private subcontractors the same way the space program worked.

I'm sure private competition would be good at optimizing cost of drug trials.. just an example..

I don't have a recipe... Just the feeling that the big picture risk is probably better absorbed by public investments.


It's not really true. Have you heard of pharma boy? There are alternatives/solutions to regulate the market.


That isn’t the alternative. That’s the status quo. Name another cure to a chronic illness that’s been developed. You can’t unless you go back to penecillin.

The pharma industry makes money by not curing disease and treating the symptoms. They want people to be addicted to their pills. Curing a disease means you can stop taking the pills and stop paying for them.


Society needs to create a payout/reward system, on top of a universal basic income (that society as a whole is serving and working towards using automation to increase everyone's quality of life exponentially) for breakthroughs in effort - following a chain and distributing pre-determined amounts to those who contributed (trickling into early research that's referenced) and perhaps taking into account the number of people that benefit from it -- and perhaps ongoing or future payments if the people who benefit, a royalty of sorts, increase or is a constant over time, perhaps with a cap.

Edit: To add, if everyone earns "$500,000" per year (the quality of life they have, based on what $500k of today's money could buy) and your life's work leads to rewards/payout of $5,000,000 ... the buying power of that $5M will buy you a lot more than 10 years worth of improvements to quality of life, etc.


>To add, if everyone earns "$500,000" per year

The global GDP per capita is more like $10k/yr. That's a much more realistic number.

>Society needs to create a payout/reward system,

Society already has a payout/reward system. Unless by "society" you mean the government. And by government I assume you mean Donald Trump.


You misunderstood me. Money is a human-made concept, it's simply a promise of work to be done or resources provided. So let's take that $10k/year number (I don't know if it's accurate), what I'm saying is that we could provide everyone else with $490k/year more worth of value into their lives - at "no cost" to anyone else, because it would be value created through automation; we have to of course account for resources used and create/produce in a 100% sustainable way.

What payout/reward system are you referencing?

Society, in the best case scenario, elects the government - puts people in a position to make the right decisions for them. One problem with the current political system and structure is that if you have only a 4-year term, then people game/play the system to give them the best looking perception so they get elected again; this in part is why I feel it will be private organizations that don't have a 4-year elected cycle process will solve this problem, be examples for wider society, and then adopt or join those systems.

I don't understand your reference to Donald Trump.


>You misunderstood me.

You painted a picture that sounded like if we could just redistribute all the wealth that everyone would live like people making $500k/yr. Except that's 50x the total economic productivity of the entire planet.

>What payout/reward system are you referencing?

When people want some of what you produce, they pay you for it.

>Society, in the best case scenario, elects the government - puts people in a position to make the right decisions for them.

Society sometimes elects Trump. And Trump is an angel compared to history's worst case scenarios. So be careful about what "right decisions" you want Trump making for you.

>this in part is why I feel it will be private organizations that don't have a 4-year elected cycle process will solve this problem, be examples for wider society, and then adopt or join those systems.

Wait, is it government or not? Because this sounds more like corporations than government.


Only when the day arrives that extraordinarily talented scientists don't need to be paid high salaries, labs are free, manufacturing facilities are free, quality control & distribution are free, decades of research are free, etc.

Quick math example: how much does it cost - all in - to hire & retain just 100 top notch biotech personnel for 10 years?

The $300 HepC cure mentioned can only exist because of the extremely expensive R&D investment made over many years by the companies (such as Pharmasset) & public health entities that made HepC cures possible in the first place. They're free riding, so of course their context is always going to be far cheaper: they don't have to recoup nearly as much investment, and they have no concern for generating a profit at $300 so they can invest saved capital into the next 20 years of paying for expensive research.


>Quick math example: how much does it cost - all in - to hire & retain just 100 top notch biotech personnel for 10 years?

I'm going to guess close to $180M in present-day dollars.

Edit:

And that's just if they sit around doing nothing but collecting salary and benefits. Facilities, equipment, and supplies will be much cheaper than personell, but still expensive.


Its late stage capitalism at its finest. Profiting off mass suffering is to be applauded and rewarded, not considered immoral and illegal. We would rather let each other die of treatable conditions than have slightly lower profit.


There's nothing "late stage" about it, it's been going on forever. Literal wars have been fueled just to sell more product.


I was reading about Res Rubber and the Belgian Congo yesterday.

Horrific period in a time full of them.


Any data on how many cures are being invented in communist or socialist countries, compared to capitalist countries?


Probably better to ask how many drugs are developed without public funding.

Usually, the private sector finds public funds for the risky parts.. or starts off from discoveries made with public funds in a University.


To be able to provide public funding, you also need to have public money. So it still seems valid to compare productivity of countries (in terms of cures invented).



Fine - so that is one. Any more numbers?


That is one? _That_ is one? Have you heard of cancer?

That is _everything_!

So what did we achieve with our superior capitalistic systems when it comes to fighting one of the worst threats to our species?

Look, I ain't a communist, but I ain't in favor of capitalism either. What I know is that cheerleading will get us nowhere. We need to critically think about our course as a human species and if you think we're on a proper trajectory, think again.


There has been a lot of progress in fighting cancer. Survival rates for many types of cancer have increased tremendously. I assume this medication from Cuba is just one of many specific approaches.


It's one specific type of cancer (although it is for the most common subset of the most common type of cancer), not a panacea.


Regulation has nothing to do with capitalism. Capitalists (as in people believing in the free market) are actually opposed to what you're describing. What this non-profit did would happen immediately if there was no government to shut it down because there are high margins and so it's very desirable to enter the market with a lower price - and also charity.


If there was no government to shut down the nonprofit, the company wouldn’t have spent billions to develop the cure in the first place. Why would you do that, if anyone could just copy your work and profit for themselves?


Yes, I would, and then I'd pay for an army to go shut down my competitors because there's no government to stop me and then 10x my profits.


You're very naive if you think that's worth it even in the slightest. See army budgets - and remember that no one will fight for you for your ideas, since you have none. And people (read: other armies) will oppose you.


As a charity, for example. The market would find a way, I'm sure. This is already well thought out, if you're truly interested, I recommend this article by a well known economist: https://mises.org/library/pharmaceutical-prices-patents-and-...

And also this one: https://mises.org/library/advancing-pharmaceutical-and-medic...

It's in no one's interest to have people dying instead of buying and selling services.


I cannot imagine charity ponying up $11 billion on anything at all, much less the development of a single drug. Of course, a lot of this cost is due to excessive FDA requirements, but the charities are not funding drug development right now, and I imagine there is better use of charity money, for things that aren’t worth for companies to get into.


You're thinking about a whole different world with mentality from this one. Right now the system works like it does - drugs get developed - and so there is no need for charity to do it. Charity is not just taking money and redirecting it, it's also operating a business - yes, you actually can run a business without taking massive margins and being greedy, that's what government tries to do (but fails because of involuntarity and lack of competition).

Don't forget that the charities don't have the 11 billion now because the money goes elsewhere (to pharma corps), but people might give it to the charity if the corps didnt't exist.

The same development could possibly cost less, that's another thing to consider.

Overall my point is that the greed of pharma companies is not because of capitalism because it wouldn't be possible in pure capitalism. It's enabled by the government.


Imagine that you, a regular person, invest all of your family's pension and other savings in a company that specializes on drug research.

How would you feel about drug prices then?

Would you be OK if all your investment went towards research that could never be paid back for? It would cure a lot of people and do a lot of good in the world, you know. Are you OK with spending all of your family's money for a good cause like that?


pretty financially irresponsible.

As to your point, making an emotional plea works against you in this case, because there will always be a point where the greater good trumps pure profits.

Take the simple thought experiment that 99% of the world will die in 1 month unless they get treated with this new drug. Would you really argue we should seal it off from the general public.

Now just move the slider to the left (98%) and repeat the experiment.

My point being, there certainly is a middle ground, where regulation and free market enterprise meet when it comes to medicine.


Imagine investing all your family's pension in arms manufacturers, and then a war not starting. How would you feel about that?


I would feel bad and not invest in these companies anymore.

Is that what you want for companies that research drugs?


People always get really upset with drug pricing, which makes for great headlines but not for rational decision making.

In 2030, would we as a society rather have a generic, cheap, openly available HepC cure or not? That is the question you need to ask, and I don't think anyone would say no to that. The $84K drug will fall off patent by then, which means the system we currently have, flawed as it is, will produce that outcome.

It doesn't cost $84,000 to manufacture that drug compound. That $300 one even has the expensive drug formulated in it! The $84,000 covers the cost of developing the drug, along with the 56/57 other drugs that generally fail for every one that hits the market, along with a profit incentive to run a pharmacuetical company in the first place. And yes, it's grossly unfair for the patients currently requiring expensive treatment, though solving that through insurance is almost certainly a better idea than regulating prices. If you start regulating drug prices, as have many other countries outside of the US, you disincentivize development.

If there is a better way to create cures, that would be wonderful, and I think we would all welcome suggestions. However, there is a reason the US invents the majority of the world's pharmaceuticals. Nothing to date (everything from regulating prices aggressively to prolifigate government spending projects) has worked as well as what we have now for long term results.


I think you kind of gloss over the core issue that most people have with drug prices. I don't think most people have a problem with pharmaceutical companies pricing drugs such that they pay for the R&D costs (or more generally the overhead) of the company plus some reasonable profit margin.

The problem is that with the inelastic demand inherent in life-or-death treatments, there is no incentive for pharmaceutical companies to stop there. If pricing a pill at $200 could cover costs and provide 30% profit margin, why not double the cost and make a 50% profit margin? Or triple the cost and make a 60% profit margin? With inelastic demand that is governed only by a person's ability to pay, rather than their willingness to pay or competition, the demand drops far slower relative to the increase in price compared to normal supply-and-demand economics. It's the tendency (or at least perceived tendency) of taking advantage of someone's desire to live to extract as much money from them as possible in order to increase profit margins that people tend to have a problem with. This is called exploitation.

I think it's a bit disingenuous to spin outcry over how expensive a drug is (in a relative sense) as being a simplistic outcry over a drug just being expensive (in an absolute sense).

That said, it's possible that some of it comes from the fact that R&D is so expensive, and a pharmaceutical company never really knows how long their drug will be bought before some other company discovers something that outperforms it. I am by no means an expert on pharmaceutical company economics.

EDIT: And the above argument is just one possible argument to make if you assume that drug development should be a function of capitalism in the first place. There's another viewpoint that drug development shouldn't be a responsibility of capitalism at all, in part because perverse incentives often times unavoidable in capitalism are especially unethical when applied to people's health.


>of taking advantage of someone's desire to live to extract as much money from them as possible in order to increase profit margins that people tend to have a problem with. This is called exploitation

It's not just about exploiting the people paying either, it's also about restricting access to people who can't afford it.

If you don't have an easy way to do price differentiation, inelastict demand encourages a situation where it's more profitable to charge $1million to 1 person than it is to charge $100k, to 10 people.

One way drug companies try to get around that is with price differentiation, but it's not very precise and effectively charging for a product as a percent of your income comes with it's own problems.


It kind of feels inevitable in America, but Goldman Sachs analysts questioned the wisdom of using gene therapy to cure people - because that cuts off pharmaceutical companies from a steady income stream keeping them alive through selling them drugs. https://www.cnbc.com/2018/04/11/goldman-asks-is-curing-patie...


Gilead bought Pharmasset for about $10B after clinical trials were complete on their $84k HepC drug. The R&D was priced in to that acquisition. Medicare and Medicaid spent $10B on that drug in 2015 alone (https://www.statnews.com/pharmalot/2016/11/14/medicare-medic...). Our current public health economics are very distorted and institutions are not set up to create affordable outcomes.


yes there is, and its called public finance

medicine, and health care, in my opinion, seem to fall nicely in that category

you as someone who is not infected with the hepatitis C virus, would benefit from others getting cured from it, to reduce the possibility of you catching it

and this is just one example

and to be clear, i am not saying, that all health care should be exclusively public

i am just saying that public finance of not for profit organization working on creating medicine, should be an option


There are two orthogonal issues here: 1) how do you finance drug R&D? 2) how do you pay for people to get the resulting drugs?

Public finance is a reasonable option for (2). It is not a reasonable option for (1). If you made it so, for example, going into drug development meant a career stuck on the GS scale, you'd drive away huge numbers of highly capable people.

There is no link between technical competency and altruism. If there was, you wouldn't have huge numbers of people at HYPS jumping at the chance to go work at Wall Street and FANG companies instead of more altruistic pursuits.


What do you think about government-financed prizes for private-sector drug development, e.g., the government pledges $X billion if you develop an Alzheimer's cure and place it in the public domain? Bernie Sanders has a proposal like this: https://www.vox.com/2015/9/25/9397069/bernie-sanders-drug-pr....

It seems like that retains most of the advantages of the current system, incentivizes private-sector development, but also eliminates the problem of high prices at the point of delivery. (i.e., it correctly prices the marginal cost of treating someone at the marginal cost of producing the drug, which is generally low).


I think they would work if the government priced them appropriately. But the government is terrible at pricing things. E.g. how nearly every government under prices water/sewer and public transit, leaving those systems in a state of decay.


Government provided services are not necessarily meant to be profitable in the business sense. It is enough if their global benefits are worth the cost, even if those benefits cannot be captured as direct profits.

For example public transit is worth a lot more in external benefits than just the fares paid.


It’s not about making a profit versus not—these prizes would almost certainly not be profitable for example. But you have to set high enough prizes to create the right level of incentive. Likewise, your (prices + subsidy) for transit or water/sewage must be high enough support an efficient level of infrastructure spending. With transit, the government underpriced and undersubsidizes. With water/sewage, the government under prices and doesn’t subsidize at all.

The government underprices for the same reason it underfunds pensions and over promises pension benefits. It’s a way of pushing costs into future generations while buying votes in the short term.


The idea of a prize is interesting a first glance, but it also creates a lot of additional risk.

If you get $1B for creating the first drug that cures X, what does the person who creates the 2nd drug get? $0? What if it's better than the first? Who makes the judgement as to which is better drug?


> If you made it so, for example, going into drug development meant a career stuck on the GS scale, you'd drive away huge numbers of highly capable people.

How do you get from publicly financing drug R&D to everyone working on drug R&D must be a government employee?


The federal government also puts significant pressure on government contractors to not have employee salaries out of line with the federal scale.


You only have to look at a management salaries at any large defense contractor to find counter examples.

And even if this were a problem, there are so many easy fixes to this that it makes me think you weren't really thinking it through when you listed it as a reason to prevent public funding of R&D.


> You only have to look at a management salaries at any large defense contractor to find counter examples.

First, defense is by far the government-affiliated industry with the most leeway salary-wise. But even there, outside the C-suite, there's a $500k salary cap. That sounds like a lot, but many people in tech and finance make more than that, especially if they start their own business (even one that has a modest exit).


There are software engineers working for firms with government contracts making way more than the federal salary scale too. Take a look at large IT contractors, they have numerous employees making more than GS-15 and above. There are plenty of exceptions, and there is absolutely no reason drug R&D couldn't be another one.

>But even there, outside the C-suite, there's a $500k salary cap.

How many biotech researchers outside of their respective C-suites are making >$500k? There are plenty of people who have gotten wealthy on government contracts, there's no reason they couldn't do the same in biotech.

>especially if they start their own business (even one that has a modest exit).

And if you start your own business pursuing government contracts, you can make more than $500k too.

There are reasonable arguments to make against publicly funded R&D, but "the federal payscale is too low" just isn't one of them.


> yes there is, and its called public finance > > medicine, and health care, in my opinion, seem to fall nicely in that category

Then get your government institutions to spend your taxes to do the legwork.

Meanwhile, don't hinder progress by barring everyone else from doing the job your state is incapable of doing or doesn't want to do.


We already put tax dollars into research. Huge amounts of tax dollars into research. Some quick Googling says in 2016 just the federal government -- not counting state/local grants -- dedicated $145 billion to R&D.

We just also let that research be locked up with patents and published in pay-to-read journals, because apparently "we pay for your R&D" is not enough "incentive" to get people to invent/develop new things, we also have to give them additional millions/billions of dollars in later sales.


> We just also let that research be locked up with patents and published in pay-to-read journals, because apparently "we pay for your R&D" is not enough "incentive" to get people to invent/develop new things, we also have to give them additional millions/billions of dollars in later sales.

In the R&D sector, the government is an investor like any other. Imagine a VC that offered you the following terms: we'll pay your salaries (which we'll heavily scrutinize) while you get your product a third of the way towards being commercial ready. After that, you can keep commercializing on your own dime, but we'll own anything you developed up to that point and give it away to your competitors for free.

Would anyone with other options take that offer? But that's exactly the offer the government would be making if research initially funded by government grants wasn't eligible for patent protection.


Flip your argument around: suppose a startup walked into a VC firm and said "we want you to fully fund us for our first couple years, which will be expensive, and in return we expect to give you nothing -- no equity of any sort, no shares of future profits, nothing".

Would anyone who had the ability to invest in something that actually provides a return take that offer?

But that's exactly the offer researchers -- many of whom work at publicly-funded universities -- are currently making.


Except you can’t flip it around because it’s not symmetric. From the point of view of the investee, the government is just another investor and can’t demand more onerous terms. From the point of view of the government, it’s not just another investor, because it can capture public benefits private investors cannot.

At most, you might be able to argue that the government should be able to seek an equity stake in return for funding R&D. That’s not enough to support your original point however, which was that government funded research should be in the public domain.


the government is just another investor and can’t demand more onerous terms

Companies with different classes of investors, who have different rights, are common.

can capture public benefits private investors cannot

And if that stops happening -- as it is, when government-granted monopolies are used to gouge -- then it's time to make the companies involved suffer a bit until they remember where their R&D money came from.

At most, you might be able to argue that the government should be able to seek an equity stake

This lacks imagination.

You could impose limits on the term and scope of patent for inventions resulting from public funding. You could prevent patenting of, say, modified formulations of a publicly-funded drug whose only purpose is to secure a new patent and another term of monopoly. Or you could make publicly-funded patents expire sooner. Or you could impose price caps on patented products derived from public funding, until the amount of "lost" profit from the caps equals the amount of public money put in. Or you could use tax penalties against companies who price-gouge -- say, if you acquire an unpatented drug, obtain a monopoly on its production and start jacking up the price, you immediately get taxed into bankruptcy.

There are all sorts of possible ways to do something here.


> Companies with different classes of investors, who have different rights, are common.

Sure. But simply funding costs for a few years of a project that’ll take a decade to bring to market isn’t really that attractive, and the government can’t expect to get a lot of rights in return.

> monopolies are used to gouge

“Gouging” is a nonsense concept. Many things that people consider “gouging” are actually economically efficient (surge pricing, raising prices during disasters, etc). So using perceptions of “gouging” as a metric for setting policy is a terrible idea. What you really care about is whether drug companies are seeing excessive ROI, which would mean the patent monopoly is creating greater incentives than necessary to attract investment relative to the other investment opportunities in the market. And drug company ROI is high, but not out of line with other high risk, high tech, capital-intensive industries.

This is orthogonal to the issue of who pays. I think the government should pay. It shouldn’t pay too much, of course, but that should be gauged by reference to ROI, not whether prices for specific drugs “feel” too high to lay people or politicians.


> In 2030, would we as a society rather have a generic, cheap, openly available HepC cure or not? That is the question you need to ask, and I don't think anyone would say no to that. The $84K drug will fall off patent by then, which means the system we currently have, flawed as it is, will produce that outcome.

I think if we look at the shenanigans around Avastin and Lucentis we'll see that patents and drug companies don't always work in the public interest.

http://www.bbc.co.uk/news/health-30138097


These price comparisons are almost always disingenuous. One price only includes the cost to produce the medicine, and the other also includes years of R&D, 10+ years of trials, marketing, and distribution. Sure, the $84000 probably still includes a hefty profit margin, but with all those extra costs the $300 medicine becomes a lot more expensive.


No, this is the common lie they tell you.

The majority of money spent in R&D is public money. When they say "It cost $10 million to develop" it doesn't mean that's what they paid out of pocket. Most of it is research done at universities through grants.

My wife was treated for MS using a cancer drug developed in the 50s. If you have cancer, the drug costs about $20. If you have MS, the drug costs $450,000+ (that was my bill). The only difference is FDA approval.


> The majority of money spent in R&D is public money. When they say "It cost $10 million to develop" it doesn't mean that's what they paid out of pocket. Most of it is research done at universities through grants.

Do you have some citations for that?

Public grant money may pay for some early-stage basic research, but clinical trials (especially the later ones) are almost always run and paid for by pharma companies, aren't they? And those are the really expensive part.

> My wife was treated for MS using a cancer drug developed in the 50s. If you have cancer, the drug costs about $20. If you have MS, the drug costs $450,000+ (that was my bill). The only difference is FDA approval.

No, the difference is that someone actually went and spent years researching MS, figuring out that this cancer drug could potentially treat it, ran multiple phases of clinical trials to show that it was effective and THEN got FDA approval. Why would any company go through all this trouble if you could just buy the generic cancer drug from a competitor at the end?


I'm assuming your wife was treated with Lemtrada? That was a unique circumstance.

The drug was originally priced for cancer and required a high dose. Better drugs came out, so they repurposed it for MS, but at a much lower dose.

As such, they repriced it and give it away for free for cancer.

Not sure why your bill was $450,000. Most MS drugs run around $60-90K per year.


> The majority of money spent in R&D is public money.

No, most of the money spent on R&D in the entire world is funded though pharmaceutical sales in the US. The amount that comes from truly exogenous sources is vanishingly small.

> My wife was treated for MS using a cancer drug developed in the 50s. If you have cancer, the drug costs about $20. If you have MS, the drug costs $450,000+ (that was my bill). The only difference is FDA approval.

You're proving the point. It's more expensive because they have to go through the research and approval process all over again for the new usage of the drug. The marginal cost of producing the medicine isn't the issue.


> most of the money spent on R&D in the entire world is funded though pharmaceutical sales in the US.

This is not true, and I've already told you this.

Pharmaceutical R&D spending in 2015: USA $47B, Europe: $33B.

Total drug sales Europe 2015: $190B


> This is not true, and I've already told you this.

And as I've already told you, those statistics aren't remotely relevant to this discussion. That tells you the amount of money that's spent on research inside each region, not where the money actually comes from.

You've used that statistic in the past to "prove" that European drug sales could cover the R&D expenditures in the US, because $190B > $47B, but that's not a mathematically valid analysis. The profit margins in the industry are nowhere near large enough to absorb a $400B hit, which is what it would be if the US drug market had the same price levels as Europe.

Based on previous discussions, I can predict where you're trying to to lead this next, which is to claim that they could absorb that massive loss, because they could just take it away from excessive compensation and marketing expenses. Except, the numbers don't add up there either. SG&A is the largest expense in pretty much every industry, and pharmaceuticals are naturally reliant on personnel. Executive compensation is a drop in the bucket.

And, as you've already been told by others, pharmaceutical companies spend much less on marketing or SG&A expenses than most comparable tech companies do. Even if you assumed that marketing has zero impact on revenue (hint: it doesn't), or that pharmaceutical companies have a lower return on investment for marketing expenses than Google does (hint: they don't), cutting all marketing expenses would still not account for the difference, and that's before the massive drop in sales that would result.

Of course, once again, this set of statistics all entirely irrelevant to the original point at hand: regardless of where the R&D physically takes place, and regardless of the headquarters of the company that's conducting the R&D, the underlying flow of funds is disproportionately and predominantly reliant on the US market.


> And as I've already told you, those statistics aren't remotely relevant to this discussion.

No you didn't. I posted those figures exactly once in this comment: https://news.ycombinator.com/item?id=16585982

which you did not reply to. Stop lying.

> You've used that statistic in the past to

Another lie.

> Based on previous discussions, I can predict

Not had previous discussions with you. Exactly one, the previous one which you did not reply to.

And seriously, you think $70 Billion is a massive cost for the world's governments? You really need to learn some basic arithmetic.

I suggest you stop and think instead of posting these mindless talking points. Go look up the numbers for yourself.


I’m not buying it. Nothing justifies a 300x markup for drugs. State and federal grants cover most of the research. Drug companies only enter the picture near the late stage and only if it’s a viable project.


> State and federal grants cover most of the research.

That's straight up not true. Most of the money spent on research is obtained directly through pharmaceutical sales in the US, and a large chunk of the rest is obtained indirectly in the same manner.


You keep stating this as if it were a fact, but did it occur to you that delineating what research spending in fact contributed is complex?

Medicine is perhaps the industry that most exemplifies one with large confluent streams of money from public, private, and charitable sources involved at different levels of training, research, and practice.


> You keep stating this as if it were a fact, but did it occur to you that delineating what research spending in fact contributed is complex?

Yes, as someone who's actually done this sort of tracking and research extensively, it has, in fact, occurred to me that it is a complex task.

More

Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | Legal | Apply to YC | Contact

Search: