Why not publicly fund R&D all the way up to when a drug passes FDA trials, then allow any private company to produce a generic version of the drug? That way you have competition on the price of manufacturing without all the unnecessary costs involved with private IP
I think the answer is that drug development is the kind of process which public institutions are particularly ill suited to manage. That isn’t to say it’s impossible, but the chance of messing it up is very high. A public institution simply cannot fund a research process purely based on facts. There are always other political motivations involved, about where the money goes, who gets the money, who is getting too much money etc. A drug company is free to pursue and fund development of drugs based on merit alone.
> A drug company is free to pursue and fund development of drugs based on merit alone.
The argument that only they can provide what the public needs is just an excuse to avoid competition, as it is everytime you hear it being made in any industry: Municipal broadband is not able to fulfill the requirements of the fast-pacing telecommunications market so we should outlaw it and subsidize the private sector even more so you can finally have that 1MB dsl line you were due in 1999.
The Pharma industry has been "caught" many times preferring and in some cases preventing development of "cures" to instead sell long lasting treatments. Like most businesses, the only merit they care about is what makes them the most money, and there is nothing wrong with that, but let's not make them the gallant saviors of the masses when their evident greed becomes apparent every quarterly report and lobbying all over the world to avoid any form of competition is just the latest example of it.
It is however an indisputable fact that big pharma have delivered novel drugs which do make a large difference to many patients’ lives. The scale of their research operations dwarfs all other biomedical research by orders of magnitude. It is highly speculative that a public institution could do research at this scale. If you have ever worked in an academic department this would be immediately obvious.
I'm not trying to. I'm refuting the argument that they "develop drugs based on merit alone" and thus somehow because of that don't need competition.
US developed products and research used to be free to everyone (the US govt funded BSD). The US govt stopped that when Japanese companies started bring new inventions to market that American companies didn't want to because it threatened it's current product line.
With tax shifting strategies and countries negotiating deep discounts while Americans pay much higher prices; it is difficult to justify the current practice now.
Edit: which is considerably more expensive than it should be.
The State of New Jersey actually sued a Florida pizza place for trademark violations: https://www.nbcnewyork.com/news/local/New-Jersey-Loses-Trade... they lost, however, because nobody ever confused a Florida pizza place with a New Jersey highway.
The bizarre part is trying to apply their trademark to an area of business that is not related to what USPS does. USPS does not play music gigs. There would be no danger of someone confusing USPS with a band. Trademarks are also limited to the line of business that the trademark holder operates in. This is why Apple Computers and Apple Records (the record label for the Beatles) were able to operate without trademark conflicts for decades until Apple Computers started getting involved with music and then needed to come to an arrangement with Apple Records.
Under the name "The Postal Service" and within US borders? Yes, they do think that, and their trademark would agree with them.
More widely, if someone argues that changing the law to do X is a good idea. You can’t argue that the law prevents Y because changing the law is the idea.
Fine, that small part about filing is incorrect. But most of my argument is correct.
The US govt allows private companies to monopolize public funded research to keep jobs and tax revenue that research would make in the US, because the US govt can't legally restrict them by filling patents of it's own (except for certain secret patents I read in Wired magazine).
> More widely, if someone argues that changing the law to do X is a good idea. You can’t argue that the law prevents Y because changing the law is the idea.
I was answering OP's question. The US govt wanted a return for it's funding of ALL RESEARCH and this was a way to deal with it ~40 years ago. This is now having issues with drug patents today.
If you actually read my argument more carefully you would see I agree with OP at least with drug patents.
> With tax shifting strategies and countries negotiating deep discounts while Americans pay much higher prices; it is difficult to justify the current practice now.
Please actually comment instead of just downvoting; this isn't reddit.
Also, it honestly probably will be about as efficient, since we subsidize a lot of medicine’s private R&D already (eg orphan drugs), not to mention eliminating the rentiership of private IP and (some of) the waste of pharmaceutical marketing
It's not at all clear that it wouldn't be markedly more efficient in terms of public health outcomes.
Drug company R&D productivity has been declining for years, and probably will be zero or negative in a decade barring breakthroughs. From my limited experience working with NIH and FDA, the government would be way, way worse -- there is very little accountability so simple things are really hard and slow.
NIH spends ~$34B on R&D. Private industry spends over $200B (mostly US pharma companies, with a good number of EU and some Japanese as well). Top 15 biopharma companies spend like $70B per year on R&D in aggregate. Global venture funding is on pace to be $15-20B this year for biopharma
Despite all this money, we got 47 new drugs in 2017 in the US. Most for cancer and rare disease, because those are the only remaining therapeutic areas where you have enough of a shot of making money to attract private capital. If you look at the top 10 causes of death in the US, only one -- cancer -- receives much private funding and new drugs -- very few new drugs for diseases like heart disease, diabetes, mental illness etc. That doesn't even account for the world's most devastating diseases, many of which receive very little funding and innovation, because the economics dont work
To replace for-profit R&D with government R&D in the US, we'd need to probably quadruple or quintuple the NIH budget -- assuming NIH is just as efficient as private industry. If we wanted to allocate spend to the biggest unmet medical needs rather than those that can make a profit, we'd probably need to spend 10x the ~$300B+ the world spends now on drug R&D (that's basically a guess but I don't think it is crazy directionally, considering how little investment goes into cardiovascular disease, psychiatric disease, infectious disease, stroke, pretty much anything other than cancer)
Apologies for the rant and i know this is an unpopular opinion, but I think the public debate on drug pricing and healthcare costs in general is way off and is a huge obstacle to actually making healthcare better and developing new medicines
Additionally regarding the private industry paying $X while the NIH pays $Y, private industry would not have $X for funding (minus the money spent on new drug companies) without at least the prospect of consumers paying for those drugs - that is, the funding is still coming from taxpayers' insurance / Medicare / Medicaid / pocketbooks. If we ignore insurance (because that may introduce a lot more factors), this configuration can only be desirable if we determine that, dollar for dollar, government R&D is less effective than private industry's R&D + all other costs regarding marketing/executive comp/profit that wouldn't already be incurred from their drugs' manufacturing.
I'm in favor of letting industry compete with itself in a market as a way to keep things efficient - except this only works if things really resemble a market. The use of exclusive drug IP to extract money resembles a monopoly even more than regional hospital oligopolies, as need/choice of drug is not typically up to the user. If there were no private IP, nobody would develop new drugs, so why not just eliminate IP and pay for development with the money that taxpayers were going to be spending on R&D anyway?
But most importantly, nationalizing drug research would probably make healthcare more expensive, not less. It's a red herring in the healthcare cost debate. Honestly my tinfoil hat theory is that hospitals, which have a ton of political clout (AHA lobby spends about as much as Phrma lobby, but hospitals are top employers in most areas so have a ton of soft political power), drive the drug pricing narrative to distract from the bad stuff they get away with. Tinfoil theory but I don't think it's too crazy
That aside, US spends like $320B on rx drugs. Let's say that goes to zero with your plan. Then we increase NIH budget by $150-200B -- assuming government is just as efficient as private industry. That just covers R&D. You still need infrastructure covering prescription processing, drug manufacturing, distribution, quality control, etc. you'd need to set all that up from scratch, because you wouldn't have a private infrastructure. Could that be $100B? Maybe. So you're breaking even
And if government is half as efficient as private industry? If it's an order of magnitude less efficient? Ouch
My reasoning may be off bc it's Friday night but I think it's directionally correct.
But more importantly: why are we focusing on this in the first place? Do we actually think we can pass legislation to quintuple the NIH budget even if we should (And I don't think we should)
Wouldn't our efforts be better spent addressing the largest source of healthcare spend and biggest source of rent seeking behavior?
If we got rid of the tech industry and had the govt do all of it, do you believe we’d be where we are today?
I’d argue we wouldn’t be.
One of the big reasons why small biotech’s outperform big pharmaceutical companies is the lack of bureaucracy and high level of risk taking. Two things the govt is bad at.
As well, one reason why we have so many drugs is there are thousands of companies placing different bets on an idea. If that was all pulled under a centralized committee that made decisions on what to pursue, we’d be missing out on a ton of long-shots that every “smart” person said would never work.
You make it sound like there is a hard barrier between these two options but like most things in reality it is a continuum. You can have mainstream R&D be publicly funded all the way and not necessarily restrict private companies from competing.
I personally believe that there is a good chance that a centralized publicly funded and nonprofit pharmaceutical organization could outperform most for profits on various important metrics. At least something that should be investigated and not dismissed outright.
Regarding long-shots, I think you fall victim to the survivorship bias here. Even if some good things came out of it, the question is at what cost? If many tries fail you really need some big wins to cover those costs. Thus, it’s really something that you should look into on an empirical level before making strong judgements.
My contention is that drugs are expensive because developing drugs is expensive. Developing drugs is expensive because biology is hard. Public vs private funding would not change that
I am not an expert in the pharmaceutical space so take everything I say with a big grain of salt. I would think it could be possible to have some agency like NSF or FDA be tasked with financing studies to develop medicines and do medical trials, etc. I don’t think it would need to look much different what there is now, maybe higher and more long-term grants for applied R&D. Manufacturing could then be outsourced, Apple style. I guess the main challenge would be to have reporting and grants be distributed effectively and fairly. There should be some level of friendly competition/ cooperation to ensure that progress is being made. But I think, in principle this already works pretty well through peer review and on some level metric tracking for individual researchers (although I would argue we still often track the wrong metrics). So it’s all about designing the right incentives work work to get done, profit is but one of the possible metrics to achieve that.
This of course does not change that the work itself is incredibly hard. The benefit of doing it in a more „structured“ and nonprofit way is that it is possible to create a more specific/ tailored/ guided set of outcomes given the ability to align the incentives with societal goals. Everything you see going on in blockchain is work in that direction. How can we design economic systems where incentives are aligned to create an overall desireable outcome for individuals, the community and society at large?
Back in the 1960s no other organization but the government had enough money to fund something as ambitious as the space program. And the government spends a ton of defense research and always has. Sheer volume of capital can get things done, but that doesn't mean it is efficient
The belief is that private markets incentives more efficient research than public funding. So if there is enough private capital to support some r&d goal, it is preferred to fund it privately vs publicly
I'm sure there's research on this but as someone who has worked on r&d at small companies, large companies and with government funded grants, there's little doubt in my mind what groups are more efficient. If you look at r&d productivity at big pharma companies vs small, small companies are almost an order of magnitude better.
And out of 47 new drugs approved last year, 40% were developed by small companies, 30-35% by big companies, and 1 from a public private partnership (the rest were mid sized companies). That's despite small companies getting an order of magnitude less funding than big ones, and half as much funding as NIH
But if I’m right, and small companies usually can’t finish fully independently, that suggests a role for government drug development: funding the clinical trials and completing approval. Whether a government agency or GSK provides that funding doesn’t seem to much affect innovation of small companies in earlier stages.
That paper covers 1998 to 2010, roughly coinciding with the end of the booming era of cardiovascular and psychiatric small molecules (prozac, lipitor etc) and ending right before the patent cliff in 2012, which saw the pharma industry's revenue shrink for the first time ever
Since then, R&D has shifted strongly to smaller companies from big ones, as the data reflects.
Your proposal of having govt fund later stage r&d makes more sense to me that replacing IP altogether but i still think the current situation would be better at getting new drugs approved more cheaply
Reason being is that early stage innovation is tightly linked to what assets pharma companies want. Allocation of venture capital by therapeutic area is very close to allocation of approved drugs by therapeutic area and to big pharma acquisitions of small biotechs by therapeutic area
If government chose which drugs to fund at later stages, that would probably resemble the current NIH grant approval procedures which are fraught with politics and bureaucracy. There are some NIH / govt initiatives now to fund clinical studies (companies I've worked with have applied to two, CIRM and an NIH funded diabetes research group) and the application processes were brutal and took years. And I don't think those initiatives have yielded much in the way of approved drugs
I don’t think that lower drug prices is a panacea for health care costs in the US! Drug spending is a small slice of an oversized pie. But that pie is so big that even small improvements at the margin could save patients billions - mostly unnoticeable at the individual level, but worthwhile considered at the macro scale.
The profits in pharma accrue to the top 15 or so companies by revenue, because they have invested in this commercial infrastructure over decades. You could argue that having large scale clin reg and commercial infrastructure is actually more valuable than IP. Especially in the new era of large molecules and cell / gene therapy, where IP doesn't matter nearly as much as in small molecules. Regualtory and manufacturing issues are a bigger barrier to competition in those areas than IP is. Look at biosimilar development as an example -- patents gone, no new competing drugs in most areas. An exec at a top antibody developer told me they know competitors can work around patents, they just need a 6 month head start and then their best in industry antibody dev capabilities will get them the edge they need. Avexis, Kite and Juno were acquired for ~$10B each not because of their products, but because they had the largest scale manufacturing and clinical logistics set up in gene and cell therapy
I differ from most people on this forum as I fundamentally attribute the high price of drugs to the high cost of developing drugs, not to IP granting monopolies. IP does not exist to grant rent-seeking powers, it exists to incentive publicly useful research that otherwise would not get done. I think that if you look critically at the cost of drug development and the economics of the industry, that's the only conclusion you reach
There's a lot of emotional and biased information about drug pricing out there. It is one of the top political issues of the day, one of the few with bipartisan supprt, it has become an emotional punching bag for a lot of people who have been really poorly treated by an opaque and impersonal healthcare system, and i can understand the frustration people feel. But if you look at the facts and take an objective standpoint, and invest the time into understanding the industry, the public dialogue becomes quite concerning
edit: apologies if this comes off as aggressive, i just feel strongly about this :)
I agree with you more on this than I disagree. Biology is hard. It is getting harder to find new pharmaceutical interventions that treat currently untreatable conditions, or that are enough better than old ones to repay developing them.
I don't think that government involvement can change the shape of the cost curve for new drug development. I think that government involvement may be able to reduce costs of completing drug development, essentially because it doesn't need profit on top of R&D costs. (Not reducing the big-O cost of drug development, but improving constant factors, if you'll permit the mixed metaphor.)
You seem to think that the costs of reproducing private development infrastructure would be prohibitive, and that no private company will let the government pay for use of its infrastructure toward the development of drugs that are born patent-free. You may be right about the costs of infrastructure. As for the latter, a government agency could offer quite a bit of money to become that partner with institutional knowledge and existing infrastructure. (If you think that private drug companies are in a prisoner's dilemma regarding cooperation with a government looking to undermine their long term profitability, you might substitute "defector" for "partner.")
This has to be my last post of the day but I've enjoyed your responses and perspective.
Don’t get me wrong, I think the gov’t should still play a role in funding “big ideas” that the market won’t. Antibiotic development is a good one.
The other thing to keep in mind are all the failures. By pushing R&D to private companies, the tens of billions spent on Alzheimer’s drugs, of which every single one has failed, didn’t come from the pockets of tax payers, rather they came from private investors.
Aren't a lot of core inventions/breakthroughs in most of our current technology (at least in USA) made by Military?
Imagine how much worse that would be if it was govt rather than a big company
I suspect it was argued that people betting their own money will be better at choosing winners from the pool of results coming out of publicly funded labs. I doubt that this effect is large compared to the rent-seeking it enables, though.
It's a system designed to help only the wealthy with costs to match.
Hospital price for a bandaid: $100
Blue Cross says they want 80% discount
Hospital says ok
Blue Cross looks good because of how much money they saved
Hospital still makes good profit
I’ve talked to hospital administrators about what price they think is fair for a new drug. They say “$100”. I asked what about a higher price and a discount ($200 and a 50% discount). They tell me “Even better! I can go to my boss and tell him I got a lower price which is great since that’s a big component of my bonus!”
Non profit's still need to play the game to stay in business because their costs are no lower.
Even worse (in my mind), the hospital bears the name of a major religion. As if God needed this kind of PR...
Spoilers: you won't find big profit margins.
Yes, if you are paid to argue against price caps you argue against price caps.
An interesting question that a scientist would ask: how does that book argue against price caps and monopsony buyers, considering that that approach works extremely well in the civilized world. Health expenditures in all other OECD countries are about 1/4 of what they are in the US.
Additionally, the government should backstop everything with catastrophic insurance as is done in Switzerland, so if cancer hits you don’t go destitute.
Also, we should drastically expand retail medical care, with advertised prices, as it has routinely been shown to reduce costs through competition and price shopping (LASIK, Botox, vasectomies, etc. all prove this out).
They go in great detail about pharmaceuticals and the suggestion that a prize based system would be better than the current system of the government paying for all the research and then letting a private company gouge the consumers who paid for it with tax dollars.
The book is very detailed, if you are interested in this subject I highly recommend it. Keep an open mind, clearly neither the American left or right has solved this issue and this book is very refreshing.
That's covered by the parent's catastrophic scenario, which would be backstopped by the Federal Government. If you have a diagnosed chronic illness, you are no longer operating under any semblance of normal health terms, it's catastrophic.
The US could easily segment itself into these two systems (Federal catastrophic program, eliminating most bankruptcies; and a market system, for routine and trivial healthcare items), and it would be a drastic improvement over how the healthcare system works today.
Medicaid is 22% of all health coverage today, expand that to 25-30%. Medicare is 15% of the population, expand that to 20%. Use that 50% leverage to aggressively deflate pricing in healthcare (which is a stick the government largely refuses to use). Create a Federal catastrophic program for the other 50% of people.
Now to implement this obvious, dramatic improvement, all you have to do is change everything about US politics and remove nearly every politician.
But the problem with American healthcare isn’t those situations - it’s when a hospital charges $500 for a couple Tylenol, because they can.
There is no need to moral grandstand. The situation is so beyond messed up and corrupted that we really need to change the entire system from top to bottom.
We had this, sort of, with HSA legislation in the mid 2000s. But... you still need some sort of guarantee or insurance to deal with catastrophic issues. This is essentially what a high-deducticle insurance instrument provided. I had a $5k deductible and... $240/month premium for 2. Now.. 9 years later, it's a $10k deductible and $1300/month.
> Additionally, the government should backstop everything with catastrophic insurance
Agreed, whatever it looks like, yes, something like this. It doesn't matter how 'frual' I am or how much 'comparison shopping' I do, when I'm still on the hook for $25k out of pocket before the insurance company steps in. It is only useful for the direst of emergencies at this point, but is costing $15k/year just to have that catastrophe safety net.
And, no one does price shopping or engages in frugality when they're in any type of accident.
The concept of health “insurance” is a misnomer when it’s used to pay for routine, expected care. That’s just pre-paying for services that you must use or you are wasting money. We don’t sell home insurance that pays out for painting your house or mowing your lawn. Home insurance covers you if a fire destroys your house, pools risk, and is pretty cheap.
Health insurance should cover disaster. Routine care should have a robust free market, where I can shop around for my allergy shot and MRI. This already happens for some big ticket procedures such as knee and hip replacements, where foreign hospitals compete directly with US hospitals, and even domestic competition between states.
All researchers have bias, some much more severe than others. The existence of bias does not invalidate their research. Rather, the manifestation of it does, and that is determined by critically analyzing it and exposing where it has warped the research.
In the realm of politics it's foolish not to take someone's motivation into account and assume they are interested in an honest debate. Pointing this out isn't "anti-intellectual tribalism".
Besides, generics aren't the "expensive drugs" most people think of when they talk pharmaceuticals. Hospitals will do nothing to fight those high prices because they can't -- pharma companies need to recoup their R&D. The alternative is having less R&D, which I believe nobody to be in favor of.
Profit, while useful in the market, has an upper limit before it can be considered a lack of efficiency, IMO. In some sense, it is the stripping of productive economic value, which is then given to shareholders. It is basically a tax that produces wealth rather than wellbeing.
When shareholders have this money, do they use it wisely in the economy? I don't think that this is an absolute truth. Can the government do better? Yes, if we abandon the conceptual thought that government is always the problem, or by default inefficient, when in fact it can be demonstrated that governments around the world, and here, do many things very well.
The thing about finance is that facts trump opinion. No amount of handwaving will untie reward from risk.
It's silly how much we pay for basic services, but it's OK because the government isn't attached. It's taxes in all but name only, with worse services and less guarantees. Where we pay much more than the wealthy.
Plus it would rid of the monthly premium 'tax', the out of pocket costs, and the giant deductibles. You get all of that money back in your pocket, but have to pay an automatically deducted tax instead. I'm all for it.
Nuclear power. Highways. Satellite communication. The internet itself. These are all products of long-term thinking, not short term profit.
If you want lower taxes there's one thing you can do to cut them by half: Dramatically shrink the US military and stop building new nuclear weapons.
The amount of money put into programs like pharma is a drop in the bucket.
So if a hospital doing it is good, why isn’t having the largest insurer plus a huge hospital/care center/doctor group doing it better?
India is big enough that it can push back against big pharma.
That's assuming the prices set by those drug R&D organizations are fair and reasonable given the work they're doing. However, if they're engaging in predatory pricing in pursuit of maximum profit (which is almost certain), the world could probably get along just fine with all medical R&D being performed by nonprofits at-cost.
> OH WAIT.
The USSR actually did a lot of interesting work developing phage therapies which could become increasingly important as current antibiotics become more and more ineffective due to antibiotic resistant bacteria.
And it's not like any of the vaccines you listed were developed by corporations following capitalist profit-motives. The ones I checked were developed by researchers focusing on contributing to the public good, for instance:
> Salk [developer of the first successful polio vaccine] campaigned for mandatory vaccination, claiming that public health should be considered a "moral commitment." His sole focus had been to develop a safe and effective vaccine as rapidly as possible, with no interest in personal profit. When asked who owned the patent to it, Salk said, "Well, the people I would say. There is no patent. Could you patent the sun?" (https://en.wikipedia.org/wiki/Jonas_Salk)
But of course, you probably didn't know that. People who write comments like yours usually don't know much beyond certain ignorant dogmas.
But if Salk had made 100M dollars, would that have been bad? Lebron is worth way more than that. He plays basketball.
We as a society should be recognizing and paying for talent, not pretending workers co-ops and non-profits are effective or that capitalism hasn't produced all of the good things we enjoy.
That's pretty stupid snark, by the way. More evidence of unthinking dogmatism and rather limited understanding.
No one sensible seriously claims the Soviet Union had a model worthy of emulation. However, it's foolish to think it was totally flawed or that its flaws somehow prove "capitalism is best, the more the better."
> But if Salk had made 100M dollars, would that have been bad? Lebron is worth way more than that. He plays basketball.
> We as a society should be recognizing and paying for talent, not pretending workers co-ops and non-profits are effective or that capitalism hasn't produced all of the good things we enjoy.
Some segments of society need to stop pretending that capitalism is a suitable replacement for literally every other kind of human motivation. The main strength of capitalism is that it sometimes incentivizes the already greedy according to their own logic to behave in ways that are socially beneficial (at least more than some other systems), but that's about it.
It's a serious error to want to corrupt the noble people who raise above greed and want to do good for its own sake to the point they need to rely on capitalism to motivate them. It's also a serious error to think that capitalist motivations will accomplish all the good those people would have done for their more noble reasons.
If it had come with the cost of fewer people being vaccinated, probably.
Just a guess: existing high-priced generic pharma companies will react by offering similar long-term contracts. They'll try to do an end run around Civica Rx.
I will admit that I'm puzzled that the FDA has not reacted to the high prices and shortages by allowing more competitors to be licensed to create various drugs and to enter the market quickly and easily.
As such, the first generic is typically ~10-20% lower than the branded drug. Once the 6 months expire, other generic manufacturers pile in (assuming it's a big enough market) and the price drops 80-90%.
Not quite. The first patent that files a lawsuit challenging a patent on the non-generic drug and wins said lawsuit gets 180 days exclusivity.
This rule was established to incentivize generic companies to challenge drug patents and get their products to market sooner.
In the case where the patents aren't being challenged, there's no exclusivity for generic drugs.
In practice, this 180 day exclusivity is a very big deal to generic companies, because typically the first to market among the generics will have a big edge in capturing the market (once a drug has a generic, pharmacies will typically automatically fill prescriptions for the brand name drug with the equivalent generic unless the doctor specifies not to).
From the FDA guidance[1 - page 6]:
When filing an ANDA, the sponsor can do one of the following 4 things to gain 180 exclusivity: (1) indicate no patent exists in the Orange Book (paragraph I cert), (2) that the patent has expired (paragraph II cert), (3) that the patent will expire on said date (paragraph III cert) or (4) that the patent is invalid, unenforceable or will not be infringed (paragraph IV cert)
But you are correct in that it's the status of the patent and how it relates to the filing that drives the 180 day exclusivity. My comment was a simplification, since I can't think of anyone who would file and not do that.
If they do this then won't Civica Rx have done exactly what they wanted to do?
but the situation makes me think about the way OPEC nations tried to fight back against Texas shale oil production: lower the price per barrel for a while and squeeze highly leveraged shale producers and their financiers -- make it more risky for them.
I wonder about the longer term equilibrium.