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Dutch join backlash at expensive drugs by making their own (reuters.com)
353 points by patman on Mar 9, 2019 | hide | past | favorite | 121 comments

One thing that is typically not mentioned in these debates is the fundamental structure of the industry. Let's say someone finds a research compound which looks to be promising, and they start a new company to try to commercialize it. Often, they are looking at at least 1-2 decades to get that product to market. Assuming they don't sell out to a big company, they almost certainly have to go public before starting trials in order to amass the required funds. Normally, a public company is expected to show regular profits and growth. This is impossible for a new pharma company because they don't have a product yet, so they are expecting investors to foot the bill for years and years of development and trials. During this time, if the compound fails a major trial, the entire company can go under because it may be prohibitively expensive to start over again if there is a problem. Therefore, not only is there a massively delayed ROI but a lot of risk. As such, when a company gets something to market, investors expect massive profits for shouldering that risk and delay. It is simply not feasible for companies to charge small amounts of money because no investor could justify locking up capital / taking those risks for something other than a huge return.

It's true for new drugs, but insuline price have been multiplied by 5 during the last decade (https://www.ontrackdiabetes.com/type-1-diabetes/insulin-pric...), which is a drug that should actually cost less to make, since we know it very well, and have a lot of demand now with the obesity epidemic.

What troubles me about insulin prices is that raising prices can simultaneously be used to satisfy shareholders with growing profits AND be used to fund new drugs (revenue from existing drugs obviously must fund the creation of new drugs). I am a little worried that if strict financial controls are put in place, then the companies will just turn into cash cows for existing drugs because a limit has been put on the profitability of new ones.

I believe we need to trudge further and further because even though we are creating new therapies that are wildly expensive, we are moving closer to truly cost effective therapies and best-in-class therapies. Though, we are certainly not there yet.

If someone can explain to me that my fears are unjustified about price controls diminishing capital invested into new treatments, I'd happily join the chorus of people calling for price controls in medicine (US citizen here with a chronic disease treated by TNF inhibitor which can cost 30K+ a year but through employer insurance, I pay nothing except for a copay which the manufacturer pays for).

> What troubles me about insulin prices is that raising prices can simultaneously be used to satisfy shareholders with growing profits AND be used to fund new drugs (revenue from existing drugs obviously must fund the creation of new drugs).

That's not obvious at all; there's no reason creation of new drugs couldn't be financed by raising capital through either debt or equity issues, which are then paid back, in effect, by the profits from the drug itself; in fact, a fair amount of drug development is funded that way, because it's done by startups which are acquired by major firms, if at all, only after doing much of the development work; obviously, that's how every firm’s first drug is financed.

It may be that firms want to eventually shift business models, so at some point they take their existing stake of drugs and body prices so instead of paying off their own development, they are doing that and paying forward development, and after that switch to internal financing, but there is no reason that is obviously a necessity.

Fair reply, and thank you for replying. While I agree the funding mechanisms you mentioned certainly must exist, I imagine things like unexpected delays for a given therapy or complications with a clinical trial (not with the medicine but with some procedural stuff) must happen. Times where existing room in revenue streams is vital for the development.

Secondly, if a publicly traded company already has a significant amount of equity in the hands of the public, issuing too much debt can mess with the balance sheet, right?

I hear you though, I still worry that price controls is attacking the issue in the wrong way. I don't know all the specifics, but I feel like protections to competition would be a better way to ensure the competitive market?

This is an area I'd really like to understand more from a non-partisan perspective, especially understanding the current nature of which countries actually do develop the most drugs. But every piece of information I find on this subject has a partisan bent. Anyone got a source they'd recommend?

At some point, medications like insulin should be de-patented so that they're in the public domain.

Similar thing happened to dexamphetamine, an ADHD medication. It's not quite as bad (also because people need insulin to live, but dexamphetamine to function), but it just shows how tremendously STUPID this whole business is. Note that dexamphetamine is an old, very well-known medicine, just like insulin, none of the bullshit about pharma-startups business plans and research costs apply.

So, basically someone bought the rights to the 5mg tabs, and now those are uninsured and would rack up 100s of euros per month. So instead you get the same prescription but in 2.5mg tabs, which is available as a generic brand and therefore just about free under Dutch healthcare. This may seem like a small difference, but we're talking about people with attention-deficit disorder, having to count and not get distracted twice as many pills, right at the moment the previous dose wears off. Taking them at a very precise regular schedule at the right dose really can make a huge difference in effectiveness. You don't want to get it wrong.

Sure it's not insulin, and it's mostly an inconvenience, but it's just so STUPID. I mean who the hell obtains the rights to 5mg dexamphetamine tablets? How? Why? And could the same happen to paracetamol?

That's why drug bounties, or even "promising compound bounties", can be good for researchers too.

Maybe drug "companies" should be government entities then and not for-profit at all.

That's a viable stance to take, but it's not without problems:

1. The time horizons involved don't work well with government. The US can't get anything done over a 20 year time horizon, and the highly delayed ROI means projects would always be first on the chopping block when it came to cost cutting. As a side note, currently we can't even agree to adequately fund basic research in the country, let alone drug development.

2. R&D would inevitably be politicized. Some senator would want disease X researched because their kid has it etc. Some tax payers won't want to fund disease Y.

3. It places R&D and regulatory in the same high level entity. That sets up all sorts of conflicts of interest.

4. It complicates international trade. What if the US develops most drugs. What should Europe be charged for them? Surely products can't be open sourced because one group of tax payers paid for them and would want ROI etc.

5. Similarly, who decides pricing for all the US buyers? Get ready for massively complicated procurement based on tons of different rules.

You mention problems, and to be sure there would be problems, but we're also awash in the problems of the current system as well.

I am ignorant of these things so I have to ask if it is assumed that your assertions are common knowledge. For example: "the US can't get anything done over a 20 year time horizon".

If international trade is a larger sticking point then I would suggest an international consortium? Like a WHO entity that collects dues from member states and member states in turn benefit from drugs produced?

Just spit balling here to be sure.

Lately, with respect to the government, I think it's fair to shorten the statement to simply "the US can't get anything done."

And maybe that's not such a bad thing. There's a ton of space between "things companies" should do and "things government should do".

In the US, the policy agenda is (still) broadly defined by tribalism along polarizing issues (e.g. abortion). In other countries, it's slightly less bad but the phenomenon is similar. If less social goods were coupled to politics the world might be a better place, but it also might take a paradigm shift where we don't dualize social activity into two bins: stuff you do because you make money doing and stuff you get done by taking from your neighbors because they "owe it to everyone".

I think the US needs a paradigm shift where it stops thinking of income taxation as taking something from someone. It's not, because under the rules of society, that person is never due that money in the first place. That money is the portion of the nominal sum that is "earned" that accrues to society for the support and conducive living environment that the provide to the individual.

It's true that it is coercive: that the individual may not want to live in a society where that is the rule. But this is also true of all laws, including private property laws. The idea that property laws are natural and obvious, whereas other laws are impositions is utterly unhelpful and the source of a lot of issues, especially in the US where it seems pretty much all non-military public programs are underfunded.

who's suggesting that property laws are obvious? Property laws exist because property is rivalrous, and the commons are generally abused, for example how the #1 polluter in the US is the US government, how the soviet bloc and china were far worse per capita polluters than the US.

> But this is also true of all laws,

Yes, that's true for all laws. It's funny that no one says it's part of the "social contract" when someone gets choked out and killed by the police for selling bootleg cigarettes on the corner.

I'm also going to point out that the central problem with income tax is that we think it's great because it's "punishes" the wealthy, but the equilibrium state is that due to bracket creep, it winds up screwing over the poor and middle class while the wealthy find escapes. Of note: I remember a year when I paid more in income taxes (as a proportion of my income) having made 30k than Bernie Sanders did.

The general paradigm among the liberal left is that the poor are screwed over by the political power because they are poor. I think it might be worth rethinking that - the poor are and continue to be poor because they don't have political power. The problem is that political power is a zero-sum game, so any solution that gives those in power more power will only make matters worse.

> who's suggesting that property laws are obvious?

Anyone who says they believe in "small government". That small set of rules always happens to include property laws.

> when someone gets choked out and killed by the police

That's also illegal. I would also advocate enforcing the law against law enforcement officers. Stronger than against ordinary citizens if anything.

> we think it's great because it's "punishes" the wealthy

Actually, I think that (even assuming that it were enforced) it does little to no harm to the wealthy. They have sufficient wealth that having less has almost no impact on their well-being.

> The problem is that political power is a zero-sum game, so any solution that gives those in power more power will only make matters worse.

Giving money to the poor gives them political power. Or rather economic power, which is a good substitute, and often what the rich use to gain political power.

Ideally we'd have some kind of basic income which provides this function directly. But other socially funded initiatives such as healthcare and education are also helpful in this regard.

Disagree. We get daily weather reports from Mars [1]. SpaceX can still get approval to lift to ISS. Social Security checks still get cut and clear every month. I'm able to get into national parks daily.

Legislation is stuck in the mud, but government is very much still getting things done.

[1] https://mars.nasa.gov/insight/weather/

In general, government policy does not plan beyond getting reelected for the next election.

One could make a pretty good argument that a government funded drug research system would end up with more expensive drugs (in the form of higher taxes) than a for profit system

Drugs, as a whole, aren't that expensive today compared to other healthcare. They make up 9.8% of US health care expenditure, which is pretty much middle of the pack compared to OECD countries. Hospitals, largely "non profit" (but sometimes massively profitable) make up 35%. But drugs feel more expensive bc copays are typically higher for drugs than for medical care

As it stands today the drug industry spends ~$200B a year to get 20-50 new FDA approved drugs a year. Virtually no fda approved drugs are developed solely by academia. NIH budget is $30-35B and on a steady long term decline. So you'd have a massive taxpayer expense just to build out that r&d function

Then you'd have to build out manufacturing. And some sales and marketing analog -- even if you aren't trying to profit, somebody needs to go out and tell doctors about your new drug and share with them very detailed data about how the drug works, what patients it works for, compared to the competition. Doctors can't stay on top of this themselves -- they are too busy and there's too much info

Then you'd need to build out some administrative function and some way to decide what projects move forward at what stage. This is where publicly funded drug research would probably massively underperform private for profit r&d

If you are making drugs for profit, you have a strong incentive to be efficient with your research. If not you go out of business. The more these decisions are driven by politics rather than profit motive, the less productive r&d is. And r&d cost and productivity is the reason drugs are expensive

There's evidence that startups are 10x more productive at r&d than pharma and it isn't crazy to attribute a lot of that to less politics

As of now something like 30-50% of published academic findings are thought to be false. 30%+ of all NIH money goes to "overhead", i.e. Profit to universities. And yields no fda approved drugs without private company investment

One could make a pretty good argument that a government funded drug research system would end up with more expensive drugs (in the form of higher taxes) than a for profit system.

That sounds like a pretty interesting argument, but I notice that you didn’t actually make it. The rest of your post is full of claims sans evidence, and a lot of numbers out of context. For example how many of those newly approved drugs are novel therapies vs. rejiggered stereochemistry to keep a patent or compete in an existing field? How many are significant improvements over existing therapies and not just potential profit centers?

Yeah making that argument would be beyond the scope of a HN post. I've also never seen a good argument that publicly funding drug research and dev would get us to a better place than today

Those approvals are all for new molecular entities. In 2018 39% of those were first in class, i.e. Drugs with a new or unique mechanism of action. The percentage of first in class drugs approved among all NMEs has been trending upwards. My guess would be that most of the rest are second / third in class, not just "lifecycle management" plays

It's actually much harder to do lifecycle management bs in pharma these days compared to 20 years ago. Yeah you can get patents, some may be enforceable, but insurance companies will not put up with that unless the "new" drug provides a real clinical benefit


> rejiggered stereochemistry to keep a patent

Can someone tell me how this patent extension works? If they improve on something, is that a new patent? Does the original patent expire or gets extended? Why couldn't someone else have discovered the new stereochemistry before the original inventor dose so? If the new discovery is not significant, wouldn't its be sufficient to use the generic form of the original chemistry?

A great, easy to understand example is found in the drug Prilosec vs. Nexium, the latter of which is a stereoisomer of the former. Prilosec is Omeprazole, which is part of a class of drugs called Proton Pump Inhibitors (PPI’s) which treat severe recurrent heartburn and GERD, as well as esophageal erosion from those conditions. Prilosec (Omeprazole) was due to go generic, so the company decided to isolate and purify the S isomer and worked hard to convince the FDA that it represented a truly new treatment. IIRC the rationale was that the enantiopure drug was half the dose of the racemic mixture, and regulatory capture did the rest of the work. Of course there was no tangible benefit to taking 10mg of Esomeprazole vs 20mg of Omeprazole, except the monetary benefit for the company.

As to why some other company didn’t snap up the patent, it’s an expensive proposition and not trivial to make enantiopure drugs, so a lot of the R&D budget touted by apologists and shills is entirely self-serving. Now sometimes an isomer is actually superior to a racemic mixture and there are plenty of cases where one isomer is therapeutic and the other is ineffective or toxic. Of course in those cases none of this patent fuckery applies, and there is no way to get a new patent issued or FDA writ because only one viable form of the drug exists.

It’s also true that a generic in the case of something like Esomeprazole vs. Omeprazole is viable, and that’s where the astronomical marketing budget that dwarfs R&D comes into play. Advertising directly to patients and doctors ensures that plenty of people won’t understsnd the value of a generic is they were even aware of it. You also get cases, as with Epi-pens, where supplies of the generic are scarce compared to the expensive branded version.

Good list of this kind of thing found here: https://en.m.wikipedia.org/wiki/Enantiopure_drug

That patent gamesmanship is part of a strategy of "lifecycle management" where pharma tries to extend monopoly pricing beyond main patent expiry. It used to be much more effective. basically companies could do something like patent for ex a pill you take twice a day vs 3 times a day. Other companies can make generic versions of the 3x a day pill

Unless you provide a real clinical benefit, most payers will make docs write an rx for the 3x a day generic vs new 2x a day patent. So these lifecycle extension games certainly happen but it's not really that effective

It is a new patent and the original can made generically once the old patent expires. Marketing is the difference. For example, you may have seen people talking about the excessive price of insulin in the US, but they ignore the fact that you can still get the old versions for very cheap. It's also done with "extended-release" versions of the old version.

The NIH is by far the single largest contributor to drug R+D in this country. Pretty much every big pharma company is cutting R+D.

Johnson and Johnson invested $10.8B in r&d in 2018 compared to $34b nih budget. Merck spent $9.6b. Pfizer spent $8b. Bristol Myers spent $5b

Yes NIH is biggest single spender but pharma industry as a whole spends much more

> One could make a pretty good argument that a government funded drug research system would end up with more expensive drugs (in the form of higher taxes) than a for profit system

Please, do.

Meanwhile: https://news.ycombinator.com/item?id=19264699

I think the government can definitely fund certian types of research but in most developed countries the private sector commands so much more wealth that it would be a waste not to allow companies to develop drugs for profit. I would rather have expensive drugs than no drug at all. This isn’t even an argument about government efficiency but rather about the relative size of what can be done when the private sector is much larger than the government.

NIH funding has been highly stagnant for sometime as well as NSF funding. Drug development and research timelines are much longer than any single politician's term. What successful government projects inspire your confidence that they would do a good job innovating for future medicines? Moon Landing? Look at NASA's budget changes to see the rewards for their efforts.

Has this been successful anywhere? What purely run state enterprises that are charged with creating new and innovate things have been success stories?

I think that while private enterprise has had a jaded role in healthcare, I'm not sure what the better alternative is.

Funny how HN contributors can be simultaneously in favor of not "socializing losses", and something like this where the taxpayer would pay for someone else's gleam in the eye (often a multi-billion dollar gleam) and there would be no accountability whatsoever if it doesn't pan out or runs over budget by a factor of like 5x (see just about any large, complex government project as an example). That 20 year deathmarch often ends in an FDA not approving your thing.

Or start out as a generic company as clearly there is room for SOMEONE to make generics that are reasonably priced.

Maybe the government shouldn't have created a system so bad that one would make such a suggestion.

In Denmark I recently saw a discussion between politicians and the just resigned head doctor of a major hospital where he said he no longer could bear the responsibility of “optimizing” and that there was not enough money in the coming years no mattter how much money the politicians were promising in their soon to be election campaigning.. and his belief was we had to decide what we can afford as a country in regard to medicine. Meaning we had to choose who should live or die or die sooner as medicine treatment prices were too high and new treatments are coming all the time.

I am wondering if any cost-analysis studies have been done to assess the trade-off between lengthy end-of-life terminal care and the corresponding cost. Doctors seem to make such decisions all the time; but we may have at some point to discuss collectively how much of the public money involved in end-of-life terminal care (last two months, say) for elderly should be used instead for better care earlier in life.

In countries where such care is provided by private insurance and not the state, I am wondering why this trade-off is not given as a choice to the consumer. Many people might be OK to get smaller premiums and better coverage throughout their life by explicitly rejecting coverage of end-of-life care.

In the US a while back there was a lot of political drama over "death panels". For the record it was all BS there were no "death panels" proposed in Obama care and it was nothing like the people who used that phrase implied.

Interesting enough the one thread that the folks pushing that concept picked out was a provision that paid doctors for consulting with people about what kind of end of life care they would like. That's all it was. There had been strides that showed individuals chose all on their own to refuse some of the most expensive late stage life care after having talked to a doctor about it. The result also meant there was significant cost savings, reduced stress for those dying and their families.

Sadly the BS surrounding "death panels" meant that provision was left out of Obamacare.

I don't know if there is an afterlife with any sort of destination based on people's choices, but I like to think if there is there's a special room in hell for folks who used that provision to score political points, and likely meant that some folks may have suffered more because of it.

For better or worse, people don't apply purely rational thinking about trade-offs to healthcare. I think it would make a lot of people squeamish to hear this argument about why somebody, where somebody might be mom or dad, isn't going to receive certain care because they didn't pay for it earlier in their life.

Unfortunately the trade-offs don't go away, and we haven't figured out a way of making these trade offs that doesn't feel horribly statist (so called "death panels") or callous (private insurance denying care).

> Unfortunately the trade-offs don't go away, and we haven't figured out a way of making these trade offs that doesn't feel horribly statist (so called "death panels")

These already exist. Donor organs are a scarce resource and there aren't enough to go around, so some person(s) has to decide who lives and who dies. People already regularly die in the United States because it is uneconomical to have Level I/II trauma centers within emergency response distance of the entire country.

People have very different ethical standards for how people should act in advance planning scenarios versus in the moment. I think most people agree with the unreasonableness of arranging to have an on call neurosurgeon in a small town in the middle of nowhere. But I think people would have a very different reaction if the same neurosurgeon refused to skip a day of teaching medical students to instead walk across the hospital and carry out a 12 hour brain surgery on a 90 year old patient with dementia who will be dead from lung cancer in two months anyway.

I think people will just have to get over it. There aren't alternatives.

> Many people might be OK to get smaller premiums and better coverage throughout their life by explicitly rejecting coverage of end-of-life care.

This never works out. Right now many people buy low quality high deductible health insurance expecting never to get sick and then balk when they suddenly get ill and end up paying a huge deductible. People don't assess correctly what they need later in life. When people are denied the health care later due to these decisions, the death panel rhetoric will be brought up.

Yes, less payout on rare disease drugs is less of an incentive to research them. But:

* Drug companies have profit margins of 15% on average indicating there is room. * many recent 'orphan drugs' were not newly developed, but off-label uses registered with the FDA for a whole new patent. * these drugs rely heavily on research done by universities through public funding. It stands to reason the public should get to benefit. * there is something morally wrong about setting the price of drugs purely based on demand. It is essentially blackmail: pay me or die / suffer.

The blackmail part is literally by-design. They call it value-based pricing, where the price of the medicine is not related to its cost plus a profit margin plus a margin for research and development of new or improved medicines, but on what each nation (pricing is adjusted per country) is willing and able to bear to keep a small group of people alive (or at least comfortable).

It puts quite a dent in public health care resources.

People who are in this business to actually help the sick hate this system with a passion, and some national governments are now willing to allow hospitals and pharmacists to experiment with creating their own medicine again as a result.

This model is perfectly fine for most of the economy, but is a perfect example that for-profit medicine is inherently flawed.

Drug companies increasingly fund r&d with their balance sheet, not with internal r&d. So the money they pay for new drugs is not reflected in the profit and loss statement.

There are maybe 15 pharma companies that commercialize a large portion of the drugs developed in the world. The vast vast majority of drug companies never make a penny in profit. They sell their products or companies to bigger, commercial companies

So the profits in the industry all accrue to a few big players, and the losses largely accrue to companies you've never heard of

Something like 65% of FDA approved drugs are developed by small companies that will never generate revenue. Bigger companies buy these drugs and plug them into their established sales forces

Virtually (probably literally in the last few years) no drugs emerge fully formed from academia. For profit companies bear the brunt of the r&d costs. 30% of public r&d goes to academic "overhead" and much goes to research that will never come close to informing drug r&d. The NIH spends $30-35B a year, the top 15 pharma companies spend $75B in r&d

R&D spending has been relatively stagnant. While industry revenue increased by 45 percent, or $241 billion from 2008 to 2014, industry spending on R&D increased just 8.5 percent in that same period, from $82 billion to $89 billion (GAO 2017). By some measures, R&D expenditures are actually falling, as more firms are outsourcing R&D to third parties. In that seven-year period, purchased R&D increased from $20.5 billion to $31.2 billion while in-house R&D fell from $61.7 to $58.2 billion (GAO 2017). Finally, the industry can only claim partial credit for recent medical breakthroughs. The federal funding provided by taxpayers contributes around 25 to 30 percent of all R&D spending per year, and a Bentley College study found that all 210 drugs approved between 2010 and 2016 were rooted, in whole or in part, on National Institute of Health (NIH)-funded research (Cleary et al. 2017).


That links a 404 for me but I'd want to investigate the methodologies. The r&d numbers for the industry seem low as do the revenues, I don't know what sample of companies they used

Also don't know what criteria Bentley used to determine how much NIH research contributed to new drugs

This report provides another perspective and highlights the role of industry


Sorry, copy-pasted from anotger comment without checking the link. Here’s the proper link: http://rooseveltinstitute.org/wp-content/uploads/2019/02/RI_...

The HBM partner report seems to somewhat confirm some of the findings in the report I linked and quoted:

- 50% of drugs come from outside “Big Pharma”

- Less than 50% drugs developed in-house (mostly coming from licensing and acquisition)


- 58% approved drugs are orphan drugs.

Orphan drugs may mean government incentives, funding, public policy.

> the top 15 pharma companies spend $75B in r&d

Large sum of that money is wasted because incentives are perverse.

Developing new molecular entities (NME) that do the same thing as already approved new chemical entity (NCE) just for competitive reasons is wasted R&D from the public health perspective.

Evergreening and pay-for-delay costs additional billons for pharma companies and it's just zero-sum game between manufacturers.

I am pretty uninformed in this space, but the D in pharma R&D includes the cost of direct to consumer advertising, correct?

I see a lot of expensive looking ads on TV. Those ads were made legal in my lifetime. Maybe it’s time to ban prescription ads again?

The "d" is for development. Basically "research" is finding a potential drug (making a chemical that has an effect on disease in animal or in vitro models and has good pharmacological properties) and "development" is testing it in tox studies, scaling up manufacturing, testing it for safety and effectiveness in humans. There is a ton of risk and cost in the "development" stage

DTC ads would be in the marketing budget under SG&A

Too late to edit my original comment, but here is the history of direct-to-consumer marketing of prescription drugs.


> Yes, less payout on rare disease drugs is less of an incentive to research them.

What is just one more reason for the government to bear that risk, from research up to distribution.

> Drug companies have profit margins of 15% on average indicating there is room.

This seems to contradict itself. 15% profit margin is not that great compared to the opportunity cost. Someone working at a drug company could in theory switch (retraining etc.) to working at, say, Google which has a 22% profit margin. I realize it’s not apples to apples, but that’s not a huge, monopoly level profit.

The situation described in the article doesn’t seem to be related to patents. Rather this appears to be a generic drug with a very small market.

There is only one producer of an approved formulation and they are charging too much.

The article mentions that the compound (lutetium octreotate) has been in use for a long time, suggesting that any patent term on the compound has lapsed. Novartis’ specific preparation has been approved for this use by the EMA. Compounding pharmacies have the right to prepare the drug without this approval, which they could not do if the compound was subject to a patent.

Theoretically another company could make a generic version of this but the market is probably too small to justify the approval costs.

Strange that the article doesn't mention Oncode institute [1], which has specific goals of repurposing generic and patent-expired drugs in combinations to lower costs and there were some discussions about making the drugs themselves

[1] https://www.oncode.nl/research/programs

This reminded me of an incident in which the Netherlands intercepted generic drugs en route to Brazil from India.


That's strange. Reading your comment, my first thought was WTF is the Dutch Navy doing intercepting shipments from India to Brazil.

Then, I read your link and had another WTF moment: why is a shipment from India to Brazil travelling through the Netherlands and thus subject to their customs? India->Netherlands->Brazil seems like an incredibly inefficient trade route.

Central economies gain a lot from simply being in the centre. That's why there has been an effort to promote South-South relations.

It's worth noting that pharmacists in The Netherlands have a doctorate and the same training requirements as MDs (the study last until 24/25 with no skip years). The requirements are considerably lower in other countries (in the UK for example they just need a BSc).

Source: my wife is a pharmacist and could have worked in the UK after only completing 1/3rd of her study.

In the US it takes:

* 4 years undergrad, of which 90 credit hours must be a specific series of courses * 4 years PharmD, doctorate program * 1800 hours of internship

At this point a student has met all requirements to sit for the two license exams (NAPLEX and MPJE[^1]):).

Many students will elect for an additional period of education due to the competitive nature of pharmacist jobs in the USA. Those two extra opportunities are:

* 2 years of residency; followed by, * 2-3 years of fellowship

Most pharmacists at a common drug store will not have the last 4 or 5 years of study. However most pharmacists in research or synthesis (including at both manufacturers and pharmacies) will have these two final steps of education due to just how competitive these jobs are.

Briefly there was also a 6 year accelerated pharmacy track (BS+) however this is no longer allowed and any practicing pharmacists with these credentials have to take a non-degree PharmD program to meet the new requirements. At this point in time I don't know if any practicing pharmacists still only hold the accelerated credentials.

[^1]: AK, CA, and VA have their own jurisprudence exams and do not accept the Multistate Pharmacy Jurisprudence Exam

12 years of training... does that even make economic sense? Do pharmacists get paid a lot?

Yes. The ones at local pharmacies make probably low six figures, that's the 8 year track. The 12 year guys are probably making high six to low seven. I used to live in Connecticut near Pfizer and that place was densely packed with large salaries. Granted, I think they invented Viagra so lots of money there

I know the pharmacists you see at CVS and other face to Facebook pharmacies make pretty good money. But those are the ones that only need 7-8 years as noted.

It's a 6 year study, but like the study for Medical Doctor, at the end you have a Masters diploma, not a Phd/Doctorate.

Source: apotheek.nl e.a.

That's what I said :)

A doctorate* (nl: doctorandus) which takes 6 years to earn (3-4 years BSc then 1-2 years MSc to use the English terms) followed by a 1 year specialization for public pharmacist. Exactly the same as the MDs (also doctorandus) have to do.

It's not a PhD; although I assume that you'd want to go that route if you're more interested in the research (I'm assuming that a PhD in Pharmacology is a thing). I tried convincing my wife to do it but she feels that she helps others more by being more hands on.

I think the confusion comes because a doctorate and a PhD are different things and different countries and disciplines use different terminology. I just about understand the Dutch system now but I'll never understand the German system.

Here's the correct usage of the terminology: https://en.wikipedia.org/wiki/Doctorate#Netherlands_and_Flan...

> in the UK for example they just need a BSc

That doesn't seem to be true? This page says you need an MSc, in the UK, to register and be a licensed pharmacist: https://www.healthcareers.nhs.uk/explore-roles/pharmacy/stud...

I think it would be better to have bounties for cures rather than patents for drugs you have to take forever. Pay a fixed price that is easy for innovators to understand and maybe the energy will focus on what we really want.

This is exactly the kind of excellent initiative that can save lives and benefit lots of patients, that could also, in principle, be completely obliterated by ISDS rulings.[1]

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

Majority of Big Pharma expanses are not R&D but sales and marketing.

It's really depressing knowing that no matter what policies other countries adopt to bring drug prices down it will never happen here in the US because there's too much money to be made from bribes^H^H^H^H^H^H donations from the pharmaceutical companies.

I agree, but it should be added that most other countries can have cheaper drugs because most drug R&D costs are eaten up by US drug makers and the US and state governments. Even if we cut out all the bad eggs rebranding old drugs at huge markup and/or selling generics are ridiculous prices, the US prices will always be higher because the US market is paying for 90%+ of all drug research.

Are there countries where drug research and production isn't privatized? I would naively consider it ideal if research and “recipes” were made in the open, shared between countries and the production wouldn't be the job of for-profits… what am I missing?

Cuba maybe?

The killer detail (in the article) is that 1/3 of the (small) development cost of 40 million were borne by the Dutch tax payer. How did that patent end up in a big pharma portfolio?

Who funds this and what kind of shit lawyers and economists draw up the funding schemes that give away full intellectual property, only with a (historic) backstop for individual preparation?

We need risked based co-funding, co-profiting (irregardless of wether it's governments or, say, insurers investing), a backstop on prices via qualy-s, relatively short patents, no gaming of patents via arbitrarily small changes, governments creating generics, ... And now I wake up.

> The killer detail (in the article) is that 1/3 of the (small) development cost of 40 million were borne by the Dutch tax payer. How did that patent end up in a big pharma portfolio?

It says so in the first few paragraphs: Novartis licensed (bought) the right to sell the drug in Europe. The patents remain with the hospital.

The hospital that developed the drug is a public hospital associated with a public university. So the government paid for development, and (indirectly) to government is benefitting from the license fees paid by Novartis. That is co-profiting.

The article reads as follows:

“Novartis bought the rights to Lutathera with a $3.9-billion-euro takeover of French company AAA last year.”

Where exactly does it say that the patents have remained with the hospital?

Buying the rights means licensing the rights of the patent, otherwise it would've said "Novartis bought the patent to Lutathera"

"Buying the rights means licensing the rights of the patent"

I don't think journalistic language necessarily so accurate.

I don't think we can say for sure what changed hands in the transaction, but it should not matter anyhow.

If they bought everything, then the total lifetime value of the asset would hopefully have been baked into the price.

There's an interesting Dutch article from January about how the rights ended up with this company [1]. It doesn't say anything about patents, but it does say (my translation):

> The producer (AAA, later bought by Novartis) gets exclusive rights to sell the drug, for ten years in the EU, and for seven in the US. The only exception is hospital pharmacies preparing the drug for their own patients.

[1] https://nos.nl/artikel/2266712-hoe-nederlands-kankeronderzoe...

> How did that patent end up in a big pharma portfolio?

While it may sound strange put that way, most universities spend a lot of time thinking about how spin off profitable companies from their research. It's a huge deal and public spending on research is often motivated like this. Universities and R&D companies have a codependent relationship and this is generally regarded as a good thing.

The morally dubious outcome of this is that a lot of research ends up locked away as intellectual property of some private entity, but it's not easy to question.

> Universities and R&D companies have a codependent relationship and this is generally regarded as a good thing.

Is it? At best, I'd say it's seen as a "necessary evil," where "evil" is much more certain than "necessary."

It stinks, I agree. What economic/social arrangement has done a better job in drug innovation?

Has there ever been made an effort with any other approach/arrangement, in modern times?

Any sources on this, anyone?

Publicly-funded research universities, along with the March of Dimes, funded the polio vaccine, which has almost entirely eliminated the disease, and was not patented.

I think so. Funding research is difficult as it is, and the potential to leverage that spending to create jobs and tax income is important. It certainly helps that it concerns an highly qualified academic workforce. Most universities tend to keep people employed just to expedite the process.

without for profit companies, all that taxpayer funded research would be sitting on a shelf, never becoming medicines to treat patients. In the last 2 years I think every drug that got approved by FDA was developed by a for profit company.

Drugs don't emerge fully formed from academia, just waiting for pharma to patent them and jack up the price. Pharma spends more on r&d than academia

Please provide conclusive proof this process is not consequence of neoliberal policies, aimed at defunding public spending and encouraging for-profit spinoffs, aligning the research process to its ideology

A very large portion of R&D costs for drugs are in doing phase 3 clinical trials. These will always be expensive because you have to recruit and closely monitor several thousand people with a relevant condition to determine if a treatment is better than existing alternatives and what sort of side effects a medication has. Many drugs which were developed by academia using federal dollars and which passed phase 1 and 2 trials fail phase 3. Pretty much every phase 3 trial is paid for by private industry.

I don’t agree that phase 3 trials must be that expensive.

Currently they cost ~19 million each which is frankly not that big of a deal. A larger issue is only ~15% of drugs make it through the process. With ~20 new drugs a year this only adds up to 2.5 billion per year which a frankly a drop in the bucket compared to drug costs.

If you're going to make such a conspiratorial claim, then the onus is on you to provide the proof.

I think the answer is probably a little bit more grey FYI.

Seems likely either drugs would end up being used, or government would stop funding drug R&D research.

Saying funding would continue without any benifits seems to be the least likely outcome. Personally, I would be fine stopping all public drug research, but I suspect more people would want to continue...

How would the drugs be used? They still need another 5 years and hundreds of millions of dollars before they are approved?

Presumably, if they continue to fund research, public entities would then pay to finish the process. This would mean either fewer drugs or more money for R&D.

In the end when you change one part of the process you need to assume other parts of a related system will change in some manor.

The ones doing basic research today have zero capability to do the development part. So you'd be looking at spending a ton of money to try and develop the needed expertise to bring a molecule all the way to market. Would that also include commercialization - things like marketing?

I don’t know. Clinical trials can already be outsourced, so that’s not a major issue. And only two countries allow for direct to consumer drug marketing so that’s clearly unnecessary.

Honestly, this is simply not going to happen in the US so it’s hard to say what’s realistic.

I wasn't referring to DTC marketing. DTC is a small percentage of the marketing companies do.

Any yes, you can outsource running a trial, but you still need someone to design it, process the data, put together an NDA and submit for approval.

I can only imagine the complete clusterfuck that would be if it was all done by public employees.

I understand you have some concerns, but it’s not like people doing cutting edge drug research don’t know how to do research.

Large drug companies are not bringing magic recipes to the mix here. Often it’s the same researchers who found the drug who end up starting drug a company to profit from their research.

As to advertising to doctors their is plenty of evidence this is harmful. It’s easy to for doctors to keep up with relevant drugs as so few are added each year and many are extremely specialized. Advertising results in over prescription which is known to be extremely harmful with opioids being an obvious example.

This is an important point. There's nothing to stop Harvard or Stanford from commercializing their research directly. They have massive endowments of financial and human capital.

The flip critique of the drug industry is to suggest they're basically taking miracle cures developed in toto in publicly-funded labs and taking pure profits.

If that were the case, shouldn't one of the dozens of well-capitalized research institutions just go to market?

The reality is the drug companies take on a tremendous burden turning high-level research into a product that works, including:

+ Formulating a product that will work at scale,

+ In widely diverse populations,

+ While eliminating potential side effects, + Adapting for human UX limitations,

+ Exhaustively guarding against adverse reactions,

+ At the same time, building production capacity,

+ Creates marketing materials for patients, but also to educate doctors who don't have scads of time to study new treatments,

+ Physically distributing the product

+ Monitoring the product fastidiously once it's on the market for negative reactions,

+ Sending humans to almost every doctor's office to answer any questions about the product,

+ While staffing a 24/7 customer service number to sort out any problems

It's not as easy as it's made out to be!

> relatively short patents, no gaming of patents via arbitrarily small changes

This, so much. I'd add no gaming of orphan drug patents. It's through the patent system that pharmaceuticals get their pricing power.


That's also not a silver bullet see CF where foundation funded research and sold the IP to pharma company for 3.3B$ and the patients were then charged 300k a year for it.


I think you have cause and effect reversed.

They helped fund the development of the new CF drug by Vertex, which Vertex sells for $300k. Because of the success of the drug, they were able to resell their royalty rights to another investor for $3.3 billion.

Funds which they will use to drive massive amounts of additional R&D to make even better treatments at lower costs. In the process they have created therapies which did not previously exist, saving and improving people’s lives.

You can debate the profit motive (as your link mentions) but the Foundation considers this a massive win for their ability to fight CF and make CF sufferers lives better.

The important question is... why is it ethical for a foundation to deliver a product at $300k/yr where the cost are borne by other people? [1] In my world that price would never be paid, since about €100k/yr would max out the qaly. They would still have their medicine albeit at a perhaps $1 billion profit / return on risk. I'll bet my ethical balls here that none of the small contributors to a CF foundation expect a billion dollar windfall to come out if there contribution, regardless the merits that billion goes to afterwards.

[1] Some economic reductionism here: if you know the cash flow, you can project the value and the other way around. So if someone offers you 3 billion and you know the effect of the medicine and the number of patients, you can infer the price of the medicine. This to establish the (moral) link between the selling of the IP and the price.

The pharmaceutical company Vertex sells the drug for $300k. Because CF Foundation helped fund the development, they get royalties, just like universities sometimes do when they help develop a drug.

This is great for CF because it’s mostly the insurance companies (and therefore healthy people) who are bearing the costs of the treatment.

So the CF Foundation is “forcing donatations” from the healthy populace through increased insurance premiums to bankroll their continued investments in treatments and such.

I don’t know if that makes it any more or less ethical, but certainly if it were mostly individual CF patients on the hook for the $300k (in aggregate that is — I’m not saying that never happens) then it would make less sense for the CF Foundation as a strategy.

> This is great for CF because it’s mostly the insurance companies (and therefore healthy people) who are bearing the costs of the treatment.

Don't we all bear the cost of treatment in the form of higher insurance costs because insurance companies are paying exorbitant prices on drugs (among other things)?

Sure, that's how insurance works. The crux of the issue is whether the prices are actually "exorbitant" or whether that's just political spin. I happen to think it's just political spin.

> Funds which they will use to drive massive amounts of additional R&D to make even better treatments at lower costs.

This is a _myth_

Big Pharma is an insanely inefficient structure for turning money into useful R&D results.

Big Pharma often spends on the order of 25-30% on marketing, vs 15% on R&D. From societal standpoint this is horribly inefficient considering that most medical costs are paid for communal money via taxes and/or insurance programs.

R&D should be paid by government funds. Testing should be transparent and open. Production should be done by private companies. This would be a significantly more efficient use of our money. It would also align R&D expenditures much better with actual costs to society for medical issues.

I do not concede the point as it relates to Big Pharma, but in this particular case I was talking specifically about the $3B that was earned by the CF Foundation.

Are you contending that the non-profit CF Foundation is going to take their $3B and not do something useful with it to serve the CF population?

> For well over a decade, CFF has employed a venture philanthropy model that provides upfront funding to pharmaceutical companies to help reduce the financial risk associated with the development of drugs to treat CF. As a result, the organization has a pipeline of drugs in various phases of development and reinvests the funds from any royalties it owns to advance drug discovery and efforts to find a cure.

> The proceeds of the sale will dramatically accelerate and expand the foundation’s research, care, and patient programs and significantly boost its funding of research targeting the genetic cause of CF. The organization also plans to use the funds to strengthen the specialized care and support that people with CF and their families receive at more than one hundred and twenty centers across the country and to expand its resources for people with CF and their families.

Typical R&D spend in pharma as percentage of revenues is 10-20%. That’s in the same range as Google, Intel, or Microsoft, which are widely considered to be very efficient structures for turning money into innovation. By your reasoning, we could cut out a lot of the fat and get better R&D for less by nationalizing Google.

Of the main customer of Google was the government itself then why not? (The point is: it’s not. So so what’s your point?)

Who the customer is has no bearing on whether a company spending 15% of revenues on R&D is a sign of efficiency or inefficiency. If your premise was true—that you can achieve increased efficiency by nationalizing research because it lets you cut out the other costs of running a company, then that principle would be applicable to Google as well as Novartis.

But if twice as much is spent on marketing then in the case of pharmaceuticals it appears this is inefficient. These drugs tend to be necessary for people in ways that Google is not. There are cases where people live in penury due to high drug costs. From the perspective of beneficial to society it seems from my perspective that this is inefficient. Whether or not Google is efficient isn’t relevant in this matter as far as I can tell.

The typical argument for justifying high drug costs is that it costs lots of money to do R&D. This argument loses weight when the marketing costs are twice the R&D costs. Further to this point is the fact that the actual discovers aren’t the ones getting the big rewards of their discoveries. So it all appears inefficient in ways that don’t matter when applied to Google due to the fact that ultimately we are talking about peoples’ financial and physical health.

> But if twice as much is spent on marketing then in the case of pharmaceuticals it appears this is inefficient.

Marketing includes the cost of bringing the new compound to the attention of medical professionals who might benefit from knowing about it. This means hosting conferences, having representation at conferences/trade shows/exhibitions, seminars and other educational material, etc. Medical professionals are busy people who don't have time to independently research every new compound being brought to market, so someone has to make it very easy for them to learn about new compounds and easy for them to determine if it's something they need to care about. Hospitals and pharmacies have to be convinced that it's something that should be stocked, insurance companies have to be convinced that the treatment is cost effective enough to justify covering.

> These drugs tend to be necessary for people in ways that Google is not. There are cases where people live in penury due to high drug costs. From the perspective of beneficial to society it seems from my perspective that this is inefficient.

The resources that are expended to create new drugs could in the short term be spent far more efficiently on saving lives were it all donated to the Bill and Melinda Gates Foundation. The benefit to society of drug research is not the well being of those people that a drug can treat when it is created, but rather that the drug now exists and will be available for all time. On the balance of the moral calculus, what happens during the 10-15 year window in which the drug is available and still protected by patent is totally negligible.

Lets not say that Google and Pharma companies operate under the same conditions. There are enough of brainjuice in the world to study both in isolation.

> Big Pharma often spends on the order of 25-30% on marketing, vs 15% on R&D.

That is also a myth, perpetuated by people who do not understand how to read an income statement. Please provide a source for that, and if the source is or is using the SG&A line from an income statement, it's wrong.

Do you really think that the marketing spend doesn't result in greater returns than without the spend in the first place?

If a company could increase its bottom line by cancelling marketing spend, that's an easy equation to figure out.

Or... maybe (profit after marketing - marketing spend) > (profit without marketing).

And as (in a reasonable stable company) the research spend will be related to profit... marketing spend likely does result in more money being available for research.

In European countries the marketing spend is essentially zero for all companies since they are banned from advertising. As you say, marketing clearly does increase profits for the pharmaceutical companies in the U.S. However, from a societal point of view it seems to me that it is much better for society for there to be no marketing of drugs. My wife is a physician and listening to her and her colleagues they all hate drug company TV commercials.

The current system seems to incentivize companies to hold on to patents by making minor, insignificant changes to drugs to maximize profits. They are incentivized to ignored exotic diseases that have too small of a market share for each individual disease but affect, collectively, a lot of people. There is also the fact that in a system like the U.S. where people have large out of pocket expenses at the point of contact with the health care system having companies maximize profits for a particular life saving drug causes some people to view said maximization with disgust.

> In European countries the marketing spend is essentially zero for all companies since they are banned from advertising.

Advertising direct to the public is banned in many countries, but not the US - I assume this is what you're referring to. However, pharma companies can and do spend billions on marketing to healthcare professionals within the EU.

> However, from a societal point of view it seems to me that it is much better for society for there to be no marketing of drugs.

Your point about the societal value of drug marketing is complex. In some cases, I totally agree with you that it's not money well spent - selling one beta blocker or statin against five others with broadly comparable data hardly helps the cause of humanity. However, in other cases the marketing/sales actually helps ensure that patients are given the drugs that they need - doctors aren't infallible, and not all doctors are created equally.

> The current system seems to incentivize companies to hold on to patents by making minor, insignificant changes to drugs to maximize profits.

This is actually relatively rare.

> They are incentivized to ignored exotic diseases that have too small of a market share for each individual disease but affect, collectively, a lot of people.

Like it or not, the overall cost of discovering a drug, then testing it all the way through the many phases over many years, is roughly billions. Rare diseases can be ignored because it's simply not sensible business to develop drugs for them. Unless a company can find a way of charging a very high price, or find short cuts to development, or the current system of regulations is eased, this won't change.

> In European countries the marketing spend[ing] is essentially zero for all companies since they are banned from advertising.

Companies are prohibited from advertising to doctors? I thought it was just direct-to-consumer.

It appears you are correct. Direct to consumer advertising is heavily regulated but not outright banned. In Germany in 2017 the advertising expenditure was around 1.6 billion euros. In 2017 advertising expenditures in the U.S. were 24 billion dollars. There appears to be a big disparity in advertising amounts in the EU vs. the U.S. Germany’s population is more than 1/5 the population of the U.S. and spends far less than 1/5 of the U.S. advertising budget.

From [1] it appears that U.S. sales for pharmaceuticals are double the figure for the EU. This suggests that advertising, lack of regulatory controls on pricing, and R&D account for this. Since medical costs are exspensive in the U.S. at the point of contact and the U.S. spends twice per capita GDP on healthcare people are indignant at the system and things like direct to consumer advertising is an easy target for our ire.

I don’t know if English is your native language but “marketing spend” is correct and “marketing spending” is not.

[1] https://www.efpia.eu/media/361960/efpia-pharmafigures2018_v0...

The pharma will likely also be employing people who were trained on the public bankroll. Not sure what's reasonable there though, it's not like society owns your output because you had your education paid for.

I'm not sure if we are thinking of different things, but in the UK I believe Drs and Nurses have to stay with the NHS (or at least not work for the private sector) for a certain period of time, if they got bursaries. That seems reasonable? Society benefits from their output, in return for paying for their education.

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