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How pharmaceutical industry financial modelers think about rare diseases (cureffi.org)
341 points by refurb 57 days ago | hide | past | web | favorite | 152 comments



This is an impressive article and an impressive couple. From the site's about page:

My name is Eric Vallabh Minikel and I’m on a lifelong quest to develop a treatment or cure for human prion diseases. I originally trained as a city planner at M.I.T. and was working as a software engineer and data analyst in the transportation sector when, in December 2011, I got some bad news. My wife and the love of my life, Sonia Vallabh, tested positive for a mutation (PRNP D178N cis-129M) that causes genetic prion disease, and that had claimed her mother’s life one year earlier. Sonia was 27 at the time. The mean age of disease onset for her mutation is around 50, and the mutation is highly penetrant, meaning she is exceptionally likely to develop the disease unless a treatment or cure is found.

Sonia and I set out on a quest to re-train ourselves as scientists. We both started taking night classes, reading papers, calling up scientists, going to conferences. We left our old careers and found jobs in research labs, and eventually enrolled at Harvard Medical School, where we are now PhD students in biological and biomedical sciences.

One thing I've learned from smart family and friends about medical care is that you can sometimes improve outcomes quite a lot if you apply brains and effort. I have relatives who managed to convert their dad's brain cancer outcomes from a couple of months in palliative care (which the doctors were recommending) to five more mostly-good years, by finding better surgeons, signing him up for clinical trials, and getting to the cutting edge of the research and applying it. For example they switched him to a ketogenic diet back when this was just starting to show results for cancer. These guys are taking this approach to the extreme! I hope they get the result they're looking for.


> I have relatives who managed to convert their dad's brain cancer outcomes from a couple of months in palliative care (which the doctors were recommending) to five more mostly-good years

That's literally NOT how this works and this line of thought is VERY dangerous.

You have an N=1 sample size here.

Doctors use probability distributions when making prognosis and recommendations for treatment.

It's far more plausible that he was just an outlier.

By all means take care of your family members but you have NO idea that this behavior changed his outcome.

Correlation != causation.


I would echo similar experiences. Healthcare is extremely bureaucratic, and there is an art to navigating it. While I have more than a sample size of one throughout my extended family, I can share my own experience when I had appendicitis right before my sister's wedding in my early 20's.

My initial action after I started having symptoms was to go to the ER. I waited five hours in the waiting room, and then decided to go home due to my pain and fever condition being intolerable. I then learned that I could have my primary care doctor call the ER to fast pass me from having to wait in feverish pain. Then, once my diagnosis was official, the resident on call recommended that I elect him to perform the surgery overnight. Since it was during my sister's wedding, my parents were able to come by after the rehearsal dinner, and insist that I wait until the morning for the doctor to perform the surgery. The doctor, who had a national reputation, came in at 6 AM, and with the confidence of Steph Curry lining up for a three point shot, changed the operating procedure due to specific circumstances. As a naive 20 year old, I would have just elected to do what the resident was recommending, and it probably would have been ok. Yet, I think I ended up better off with having family present, pressing back on the recommendation, and waiting for the doctor to arrive.


This was far more than just random chance. It's clear as day that quality of medical care makes a difference in outcomes, right? I have sent this discussion to the relatives in question so forgive me if I get the exact details wrong. But the median survival time for glioblastoma is fourteen months, and they were quite a while into that. Their original doctors were recommending palliative care (giving up on further medical treatment) with a couple of months expected survival.

My relatives live in a small city not known for its quality of medical care. They found the very best neurosurgeon in the country for glioblastoma and transferred him over with some difficulty. They learned that the initial surgeries were not done to a high quality or possibly even slightly botched - and the new surgeon was able to perform additional surgeries that were able to remove a significant amount of the tumour (and did follow-up surgeries later on). Of course this would extend a patient's lifespan!

The ketogenic diet now seems to be becoming a standard recommendation for glioblastoma treatment. There are TON of studies now. Here are a few more more. [1] [2] [3] Note the dates on these studies (2017-2018). Back when they looked at this, this was absolutely bleeding-edge stuff. Of course going to the cutting edge of the research, speaking to professors and using your brain to figure out what might help in your case will improve outcomes!

Regarding clinical trials, one can read up on / sign up for trials of treatments at different stages of the drug research pipeline. As the modelling spreadsheet in the link above shows, between 1-in-10 and 1-in-2 of these trials will result in FDA-approved treatments that will hit the market between 2 and 10 years from now. If your current expected survival time is in months, it is statistically worth implementing as many of these as possible, because at least one of them will probably work, and you don't have the time to wait for the FDA! You don't really care which one as, like you say, your sample size is N=1.

I shared this in the hope that some of the smart people on this forum would read this and know that this is something you may be able to do. We are engineers and scientists. We can read studies and think critically. We can spend a ton of time absorbing specialised information about the N=1 case that matters to us. Death comes for everyone and the above may not make a difference in many cases. But it turns out that sometimes it does! Don't treat medical care like a black box.

[1] https://www.practiceupdate.com/content/sno-2018-clinical-tri...

[2] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5834833/

[3] https://www.sciencedirect.com/science/article/pii/S104084281...


I get that people would try anything to help their loved ones. This in itself is admirable and goes to show the guy was truly loved.

We are beyond discussing the scientific value of your approach, so I'll try to communicate what you say conveys for a professional.

This is the typical american cancer story. The guy did not want to die, and his family and himself forced him through loads of invasive/experimental procedures because the success of treatment was viewed as a meritocratic achievement, which it is within the bounds of established treatment. I've seen this too many times to count and it saddens me greatly that already sick people get a substantially added dose of suffering on the basis of wishful thinking.

If the guy wanted to help OTHERS through his participation in trials, then that's really nice. His family, although very nice people I am sure, should not have had anything to do with his decision.

PS: the "best" surgeon wanting to operate on someone most of his colleagues would not touch with a 10-foot pole should have you start running.


I understand what you mean by the typical American cancer story. But I do get the sense you have pattern-matched this story for what I shared and may have missed the value of it.

We're not talking about quack treatments and unnecessary procedures here. Being intelligent about diving into the medical literature for a specific cancer, and consulting with academics and professionals in the field, in order to correctly identify treatments that may be effective for this case at the cutting-edge years before they enter the mainstream - this seems like an eminently correct thing to do. A simple Google search of "glioblastoma ketogenic diet" should show you the growth of research and good results now emerging in this area. They were ten years ahead of the curve on this.

And it's a fact that some medical professionals are better than others and this makes a quantifiable difference. There are bad doctors. And this is reflected in the studies. Doctors fall behind on recent developments, or have different levels of experience with specialised procedures (say, due to being in lower-population rural areas, as in this case), or just plain have worse manual dexterity. [1] [2] The original hospital did a bunch of damage, and I believe they even tried to sweep things under the rug in some way (I don't remember the exact details unfortunately).

What I am describing is not something the average person can do. Which is why it is not a mainstream recommendation on how to interface with the medical system. The average person will probably end up suckered into magic cancer beads, quack doctors, and then into the story you describe. This takes intelligence, effort and time. And risk-reward calculations. My relatives are quantifiably in the top one percent on measures of intelligence and education. As mentioned I chose to share this here specifically because many of us here fit the same kind of demographic.

[1] https://well.blogs.nytimes.com/2013/10/31/a-vital-measure-yo...

[2] https://www.theatlantic.com/health/archive/2017/02/when-evid...



> One thing I've learned from smart family and friends about medical care is that you can sometimes improve outcomes quite a lot if you apply brains and effort.

I'd be very careful with this sentiment though, because it is easy to turn it into the toxic notion that if a loved one dies from some disease (which is pretty inevitable), you didn't put enough brains or effort in it.


Unfortunately, every medical "support group" I have ever belonged to bent over so far backwards to not "blame the victim" that you absolutely couldn't talk about what worked because, inevitably, the sickest people with the worst war stories were the same ones who smoked, actively dismissed the idea that replacing carpeting with wood and tile floors might make a difference, etc. No, it absolutely wasn't socially acceptable to suggest that there was some correlation between the folks being proactive and having positive outcomes and the people shit-talking such approaches and their horrendous prognoses.

It creates an atmosphere where we can't realistically even try to investigate or develop a mental model for what actually works. So we just pretend that success or failure is some random number generator outcome. That always has me wanting to pointedly ask "So, why go to a doctor at all if it is basically totally random?" But I know how well that will go over, so I usually bite my tongue.


Off topic: why would replacing carpeting with wood and tile floors make a difference?


It's cleaner.

I'm referencing discussions about lung issues in specific, if that helps you make sense of things.


Maybe... but more likely no, this is random luck.

What's sure is that you do not understand the medical system at all. I hope this poor man's family did not force him through too much suffering.

FYI clinical trials, despite what some would like you to think, are absolutely not designed to help those participating in it.

FYI 2: "average doctors" have to follow guidelines like everyone else. The "exceptional doctors" proposing "advanced new cures" are either dishonest or failed to communicate properly with their patient. It's always astonishing to me when I realize people think that practionners have such freedom in deciding their treatment plan. This is not how it works.


>For example they switched him to a ketogenic diet back when this was just starting to show results for cancer

I'm curious as to how this would have an impact. Is there any research demonstrating that keto slows the development of cancer? Or hypotheses on why that would be the case?


Though it's incredibly dependent on the type of cancer, it's history, it's environment, and it's genome, it is related to the metabolic pathway that you shut off.

This is known as the Warberg Effect [0]. Essentially, for some reason, some cancers will start eating only via glycolysis and not via oxidative phosphorylation. Glycolysis requires glucose (sugars, like carbohydrates), so if you just stop eating foods that turn into glucose, those types of cancers will starve. Low sugar diets are ketogenic diets.

I'll be clear here, this is super speculative. Cancer isn't something like measles, each one is super specific to the organism and evolves over time. Keto diets may work for a while to harm cancers, but may also select for more 'hearty' cancers over time. It's not very well understood, even still.

[0] https://en.wikipedia.org/wiki/Warburg_effect_(oncology)


Cancer isn't something like measles, each one is super specific to the organism and evolves over time.

My preferred phrasing of this is "Cancer is a symptom, not a disease".


But if you've been handed a death sentence, why NOT try a keto diet? That's a rhetorical question btw of course the is no reason not to try it.


Each cancer is unique to the organism. Not all cancers are death sentences. Nearly every sunburn you or I have had has been cancerous to some degree; the inflammation and reddening are your body fighting those cancers (among many other issues). Some cancers can be benign, some can be handled quite easily, some can be treated in other ways. Again, each is unique.

The data on Ketogenic diets and cancer are showing a lot of promise, but you should follow the advice of you oncologist/s. They have dedicated some portion of their lives to helping you out with your cancer. You do not want to end up in a situation where you have convinced yourself that kale is better than chemo. Again, each cancer is unique though.


Palliative care is an admission that chemo won't help and pretty much all options have been tried. At that point one can sit back and die, or try something.


Again, it depends on the situation at hand. Though ketogenic diets are showing promise, it depends on the cancer, as such diets may aggravate the cancer. One should follow the advice of the oncologist/s as well as research on their own.


If you google for studies, at this point you'll see an abundance of research on this with positive results, which apparently was just getting started when they dug into it and perhaps not well known to the average doctor. My memory plus a quick look into one [1] suggests it's because brain tumor cells largely feed on glucose, whereas normal brain cells can also metabolise ketone bodies for energy. So you're starving the cancer of resources.

[1] https://nutritionandmetabolism.biomedcentral.com/articles/10...


[1] was a mouse study. Do you have any examples of human studies? I have this picture in my mind of someone showing up to a doctors office with a thumb drive of 30 PDFs of nonclinical studies they found through a Google search and demanding treatment x, diet y, and so on.


And the effect seems mostly due to caloric restriction, not the (C)KetoCal bla bla diet.


Why throwaway?


Provably an affected person.


Another factor is that cancer cells act more aberrantly under stress. Fasting (not sure if this also applies to keto) creates resources competition by which cancer cells neither compete as effectively and make theme-selves more apparent to the body’s immune system. Lot’s of anecdotal information here with some evidence but as a hypothesis with reasonable with reasonable biological justification it makes enough sense to me that I’d be personally comfortable taking some of these risks for my self or my family.


I wouldn't expose my family to my own pet theories. I'd choose to listen to the oncologist. There is a downside to fasting as well. Removing the pleasure and normal lifestyle may isolate the patient from social interactions that involve food. Those social interactions could be really important to personal well being and staving off depression.


Partially related to insulin and blood sugar levels largely.

IGF.

Depends on the cancer though, etc.


It's instances like these that I believe why the medical-pharma industrial complex isn't necessary, and likely more inefficient and soaking up more money - directing them towards profits, or other less efficiently than individuals who are passionate for a solution; yes, we need the institutions like Harvard Medical School to support these people - however the capitalism that then takes advantage of innovation through rent-seeking behaviour for cures is questionable.


[flagged]


News just from today: "Whistleblowers: Company at heart of 97,000% drug price hike bribed doctors to boost sales" - https://www.cnn.com/2019/04/30/health/mallinckrodt-whistlebl...


HN is community property. The community decides what is relevant and what is not.


Having been through the early phases of this (both as bench scientist and management, up through Phase II) I can say that this author's analysis is right on.

There is a macro wrinkle he doesn't mention and that makes things worse: as we increasingly succeed on stopping the big killers (e.g. lung cancer, CIs, various accidents that constituted most of the causes of death into the 1990s) the histogram of death starts to flatten out. That is, an increasingly larger set of conditions kill people, each condition killing a smaller number. At the limit, everybody would die of a unique condition.

This "problem" has been well understood for decades. The current model doesn't really work as this process continues, but nobody really knows yet what would be a reasonable replacement. This is one reason you see more and more ads for drugs that don't solve anything life threatening but have a larger prevalence (e.g. incontinence, insomnia, et al).


> histogram of death

Not something you read everyday!

How does your "wrinkle" make things necessarily worse? All [men] must die (sorry) at some point so succeeding at removing the biggest killers would give more people a second chance to die of something else later. Just because we cure cancer won't mean that there are suddenly more causes of death, just that the people who would have died from cancer will die of a variety of other existing things.

Anyway, your point likely still stands. It makes sense that companies will have to spread resources across a diversifying research field once the big killers become treatable.

edit: format


> How does your "wrinkle" make things necessarily worse?

If a small number of causes continued to be responsible for a large fraction of all deaths even as causes were defeated/delayed by medical interventions, then a continuous application of research resources could plausibly lead to consistent increases in life expectancy. For instance, if as heart disease deaths are being reduced by endovascular procedures those people are dying mostly of colon cancer, then we could divert resources to colon cancer research and hope for continued progress. But if, once the major diseases are suppressed, the number of causes of death explodes into a diverse spectrum of unique illnesses, there is little hope that constant (or reasonably increasing) resources can do much.


It's not absolutely worse, but the first derivative is worse -- marginal improvements get worse ROI as time passes and progress gets made.


Reminds me if improving process performance, getting from 60% to 80% is easy, 80 to 90ish already hard, 90-95% really hard and everything above 98% is either luck or killing single deviations or both. Not counting for all the new causes that pop up. Anyway, it is an interesting angle, also economic wise. As causes are getting narrower all the time the increasing development costs can be shared by a lot less patients. I can see the incentive of not going after these treatments.


> This "problem" has been well understood for decades. The current model doesn't really work as this process continues, but nobody really knows yet what would be a reasonable replacement.

Instead of targeting individual conditions, we'll probably see increased emphasis on common factors that can exacerbate many conditions, but aren't really considered "diseases" per se. The accumulation of changes due to aging would be a plausible candidate.


That's an interesting point, but I wonder how big of a problem it is? The way drug R&D dollars are currently allocated, it actually seems like we are steepening the histogram of death

These days it is actually easier and more financially viable to develop drugs for rare diseases than highly prevalent diseases. 58% of new FDA approved drugs in 2018 were for orphan disease [0]. This is consistent with other measures like % of pharma M&A, % of venture deals across indications, etc. This suggests that it's more profitable to develop drugs for rare disease -- otherwise we'd see more funding for more prevalent disease

Since we focus more on rare disease, we won't be making as much headway on "big killers". And since developing drugs for rare disease is more profitable, it seems the drug development model may actually work better in a world with more rare diseases.

Looking at some CDC numbers [1], in 1980 85% of total deaths were caused by a top 10 cause of death. In 2015, 74% of all deaths were caused by a top 10 cause of death. Cancer and heart disease are still up at the top, and cancer deaths have increased 43% since 1980 (with US population growth of 42%). We will make more progress on cancer, but the "big killers" will remain so for a while, esp as little is spent on cardiovascular disease R&D or mental health (which shows up in the top 10 as suicide, which in 90% of cases is mental-illness related, and "unintentional injuries" which include a lot of drug overdoses). Rare disease in aggregate would probably make the top 10 causes of death. It would be interesting to see how rare-disease related mortality has changed in the last decades

[0] http://www.hbmpartners.com/media/docs/industry-reports/Analy...

[1] https://www.cdc.gov/nchs/data/hus/hus16.pdf#019


This is a well researched, informative and infuriating article. Within the system I cannot think of a better or more determined approach to this problem, but as this is HN I need to lay out a few points.

As we mint more billionaires they are going to do an end-run around the FDA. If I were a billionaire there is no way in hell I'd wait for a standard drug trial to progress on an FDA timeline.

Eventually one or more of the ultra wealthy is going to survive a disease that government sanctioned healthcare says is incurable. This will make its way through the network of the wealthy, and with some luck the whole process of how a drug was developed outside of the system will come out.

The bloat and overhead of the current process is intolerable. We've managed to elevate caution to a crippling set of shackles and at the same time put control of the process into the hands of people who only care about the calculus the OP so carefully describes. We pay unending lipservice to process and safety but drug companies are only act in proportion to potential liability.


> If I were a billionaire there is no way in hell I'd wait for a standard drug trial to progress on an FDA timeline.

You don't have to be a billionaire for this. There aren't many drugs which sit between proving efficacy in clinical trials and FDA approval, and ones that are like that only sit there for a few months. Of course, those could be important months for a particular patient, but there are ways to handle this. One such program is called "compassionate use". The idea is that if you have no other hope, you can be prescribed a non-approved treatment.

There aren't as many potholes in this as you seem to believe. Drugs which are proven efficacious and safe usually are submitted for approval, because it's expensive to run trials. It wouldn't be the first time a billionaire decided to do something medically unwarranted or ambiguous, but that doesn't mean it will become a norm.


Your comment made me realized I forgot an important predicate.

I think we're near an explosion of drug targets. That the front-end of the pipeline is about to get very full very fast.

That's one of the forcing factors I didn't mention.


Ordinary joes are already finding loopholes in the medical system, such as this article from yesterday about the popularity of old insulin pumps with an exploitable security flaw:

https://news.ycombinator.com/item?id=19781118

Eventually one or more of the ultra wealthy is going to survive a disease that government sanctioned healthcare says is incurable.

I knew a woman who used chelation to resolve issues in a child diagnosed as autistic. The world did not clamor for her story. She began finding more socially acceptable ways to describe the child that didn't ask the world to believe that a lawyer and mom had fixed the unfixable.

I have a similar story for a different condition. Nope, no one is clamoring to hear my story. Quite the contrary.

So you may find that it doesn't quite go like you think it will. A rich person might just sweep their miracle cure under the rug, claim they were "misdiagnosed" and mysteriously got better while on vacation and not admit that it was really a case of medical tourism.

There is a long history of, for example, American women from wealthy families just flying to Europe for an abortion if if it is too hard to get one here. Then poor women get back alley coat hanger abortions that leave them scarred for life because they can't afford to fly to Europe for excellent care.

Rich people who do things like that probably have the good sense to not say too much about it lest some nutjob bureaucrat try to interfere with their ability to do things like that.


You may be right but now I want to hear your story!


- once upon a time, roughly 18 years ago -

They found a better name for my condition than "hypochondria." They renamed it atypical cystic fibrosis.

It's a variation on a dread disease with a short life expectancy.

I began getting healthier. My doctor expressed zero curiosity and scheduled me fewer appointments.

Fast forward 18 years, the internet likes to claim I have Munchausen. In other words, I've come full circle from "crazy" to "legitimate medical condition" to another variation of "crazy" for the crime of rudely getting healthier when the world says "You can't do that!"

- the end -


I was surprised that this article didn't mention the Orphan Drug Act of 1983, which was passed by congress to facilitate the development of drugs for rare diseases (many other countries have similar legislation).

This act gives tax incentives, subsidies, lowers clinical trial requirements and increases exclusivity for the development of "orphan drugs", which otherwise might not be economically viable to develop. That said, if a condition is rare enough, there's probably no amount of tax incentives that's going to induce a for-profit company to go through the significant costs and hassle of bringing a drug to market.


These drugs will be registered as an orphan drug, it's a rare disease this guy is writing about, his sheet estimates 200 living individuals in the US. These days, many if not most drugs are registered that way. The author assumes an orphan drug registration for this drug.

The pharmaceutical company usually tries to register all their new drugs as orphan drugs initially, and as a drug becomes profitable for a certain disease, other diseases (more common diseases) are included in the registration to maximize profit.

As an addendum, the development costs for orphan drugs are not magically low, it's still multiple hundreds of millions that the company has to put up with before approval.


The calculus for determining whether an indication is worth pursuing is probably determined more by 1) potential pricing and 2) translational risk than by total number of patients, tax incentives or added exclusivity, although shorter clin development requirements are hugely important

If the translational risk is high (i.e. what works in mice / other disease models prob won't work in humans), the probability of success approaches zero. So the expected value approaches zero. It doesn't matter how many patients there are, the magnitude of the unmet need or how nice the molecule is if it isn't effective.

With a high enough price, you can get a billion-dollar drug from a few hundred patients. Avexis, which was acquired by Novartis for $8.7B, had a lead drug targeting Type 1 SMA, which has only a few hundred patients worldwide. If they charge $2M / patient (which they might) it only takes 500 patients for $1B annual revenue. Of course they were pursuing other indications, had other development projects and had valuable manufacturing assets so the $9B wasn't all for that one indication, but a lot of it was

And while $2M is prob high, the reason they can get away with even tossing out prices like that is that their drug is a potential cure for a disease that kills 90% of affected infants before 2 years of age. potential cure in that it has only been studied in a few dozen patients (thanks to ORphan drug act shorter cook studies) and that patients haven't been followed more than a few years, so who knows how durable the treatment is

Is a medicine that adds 70 years to someone's life worth $2M? What about 40 years? 10? 5? Hard to know.


Avik Roy has an absolutely blood-boiling section of this report devoted to ways companies are gaming the Orphan Drug Act

https://docs.house.gov/meetings/GO/GO00/20190129/108817/HHRG...


Not really. While he makes it sound bad, what is happening is that in exchange for actually proving that drugs we "know work" actually work companies get a monopoly for a short time. I'm glad some of the treatments doctors have been using for years now have science behind them so we know more about how well they work.


I met a PHD chemist who spent 30 years developing drugs. Over that period he developed 20,000 APIs. 4 were approved. 1 made it to the market.


Sounds like a very fruitful career then.

A recent read of mine was "The Drug Hunters" [1] which talks about the "highly improbable quest" for a drug that actually makes it to market, and the history of those that have.

Author stated it was not uncommon for some researchers to never have a single discovered API make it to market in a total 20-30 yr career.

1 - https://www.amazon.com/Drug-Hunters-Improbable-Discover-Medi...


I wonder how many times over tests were done by competing companies, duplication, and how much waste/inefficiency there was because of data not being shared - and how much further duplication may continue to happen.


My project in University (and now my company) annoyed a lot of companies when we first published DrugBank in 2006. We basically opened up the data on potential APIs and their targets into a downloadable and useable data set. I remember going to conferences and being both lauded by academics and maligned by pharma folks. This was before Wikipedia or things like Pubchem and ChEMBL were really a thing.


Why would a drug company care if you share public information? Because you make it easier to search?


Good question. They had built a lot of internal tools and datasets that we rebuilt and released. It was a competitive advantage before.


Weren't these things already public knowledge? Did the pharma folks just dislike that you made it easily accessible?

How do you make money off of DrugBank now?


Much of the information about existing drugs was organized, but within textbooks (Merck manual, etc).

It had never been systematically structured and organized online (but likely internally within pharma). The data was (is) manually curated, included off-targets and potentially new targets, along with a suite of deep chemistry features and spectra that linked small molecules to their targets. In addition it was really the first place to organize biologic drugs, with their sequences (largely extracted manually from patents).

DrugBank was all part of a larger goal, which was to decipher the human metabolome. However, it turned out to be more successful that than (http://www.hmdb.ca is the current version of the human metabolome database, something I was also intimately involved in).

In terms of how we make money, we sell access to additional manually curated datasets (with the help of a bunch of NLP stuff for initial extraction and for QA). These datasets are structured for ML applications and integration into pharma pipelines or medical software. Additionally we sell access to an API that provides advanced queries useful for drug discovery, repurposing, and generally looking up drug information in a more uniform way. We focus on developer happiness, good documentation, and speed. Even just getting a drug product list from various jurisdictions, and keeping it up to date, is a surprisingly hard problem that the API solves.

However, keeping the data open and available for academic / student research, as well as publishing and updating drugs through the website is something we love. It's been nice to find a balance where we can get out of the cycle of grant funding but still offer something to the community and general public.


Probably lots. Its a huge issue thats driving the reproducibility crisis in science and academia, so I imagine it would also be a problem for industry.


That's more than what most PHD produce in their careers (in terms of go to market).


Sure, in large part because "going to market" is not the primary objective of many PhDs.


It's still very fruitful compared to PhDs in terms of the pharma industry.


When the whole Martin Shkreli saga was making the news I ran across his youtube channel and did end up watching his 'How to analyze a clinical trial' series of 4 videos to understand the process .. they're long but it was interesting to some extent as someone from outside that industry .. https://www.youtube.com/channel/UC8gjB1PSXv_oAUSAQ16S0fA/sea...


I also followed his saga and watched both this series and his general stock picking analysis videos.

If you can separate yourself from the persona he tried to cultivate and enjoy having your excel skills emasculated there both great watches


If your goal is to have your ego deflated in Excel, this is always a good place to start .. "You Suck at Excel with Joel Spolsky" .. https://www.youtube.com/watch?v=0nbkaYsR94c but I agree, Shkreli definitely had the whole speed run thing down with Excel.


Is that a parody of "You Suck at Photoshop" tutorials?


Funny, I never even noticed that, but apparently so .. his last comment in the description is "Apologies to Danny Hoyle" and a (now broken) link to "You Suck at Photoshop" videos.


Pharmaceutical companies typically claim that the reason for high drugs prices is because of the amount that they spend on research and development (R&D). According to the industry, it costs USD $2.6 billion to bring a drug to market [1]. Critics counter that companies are more focused on and spend more on promotion than on R&D. Gagnon and Lexchin produced figures that showed that in the United States in 2004 the industry spent USD $57.5 billion on promotion versus USD $31.5 billion on R&D [2]. A report from the California-based Institute for Health and Socio-Economic Policy stated that in 2015 out of the top 100 pharmaceutical companies by sales, 64 spent twice as much on marketing and sales than on R&D, 58 spent three times, 43 spent five times as much and 27 spent 10 times the amount [3].

[1] https://www.ncbi.nlm.nih.gov/pubmed/26928437 [2] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2174966/ [3] https://nurses.3cdn.net/e74ab9a3e937fe5646_afm6bh0u9.pdf


Your second article is very sketchy. It basically evaluates two different sources for various categories of promotion, takes the larger number of the two in each category, and adds a $15 billion vaguely-defined "unmonitored promotion" category. Some of the underlying expenses should not even be counted as "promotion." A quarter of the $60 billion is free samples, which generally are ultimately given out to patients. Other estimates put free samples at more than half the cost of drug "marketing": https://en.wikipedia.org/wiki/Pharmaceutical_marketing.

A better way to look at it is R&D expenditures as a percentage of revenue: https://blogs.sciencemag.org/pipeline/archives/2013/05/20/ho.... (That is, after all, what we care about at the end of the day--what customers are paying versus what is invested in future development.) Drug companies are in the same ballpark on that metric as tech companies, spending 10-20% of revenues on R&D.


I work in pre-clinical pharma research, so I would love more pharma R&D spend more than most people, but I don't see a problem with promoting approved drugs for their approved indications. The industry has to get the word about new approvals to physicians as quickly as possible, because the patent term is limited. It would be foolish to trickle a new drug into the market post-approval, and it might even be unethical, as patients who could benefit would be less likely to have access. How to structure that marketing spend is another discussion (and could use a good deal of overhaul in my opinion), but the need to market new products is not that unusual.

I'm not super familiar with costs in tech startups, but do most companies spend less on marketing than product development?


And? The arguments about marketing are completely non-sensical. People treat pharma companies marketing budgets being as large as they are as some indictment of the industry, but its not like they are just throwing money at marketing because they like to burn cash. Money spent on marketing is money that the company has determined will result in a greater return in sales and is therefore a calculated investment. If the company were to learn that their marketing was more costly than the money it generated, they would be eager to cut back on marketing. The revenue then available for the company to use for operating expenses, including R&D, is therefore greater than it would be if the company conducted no marketing.

There are plenty of arguments to be had about how the pharmaceutical industry operates and how/should they be regulated in ways that other industries aren't, but the idea that marketing budgets are the reason for high drug prices is moronic.


Companies don't spend $X on promotion unless they gets $X+ back. Otherwise why bother? So overall, promotion is a net positive to revenues.


The criticism is more that instead of increasing sales by developing more drugs, they focus their resources on marketing instead. This makes more money for them but is bad for society.


> The criticism is more that instead of increasing sales by developing more drugs, they focus their resources on marketing instead. This makes more money for them but is bad for society.

The original point was that advertising increases their resources by more than its cost. If they spend $X to get $X+ then the "+" is additional resources that both increase the incentive to do R&D and provide more resources to do it with.

Moreover, the only way advertising makes them money is by more people using the drug. Presumably the additional people taking the drug derive some value from it (or why take it?), so that isn't inherently a loss to society. If the value of taking the drug is worth more than what they're paying then it's a benefit.

The biggest problem here is probably when you have insurance paying most of the price of something, so then the patient sees an ad for a drug which is 2% better and costs 2000% more, but the fact that the benefit isn't worth the money is removed from the patient's calculation when the insurance is paying for it, and then that causes everyone's premiums/taxes to go up. But the problem in that case isn't the advertising -- that's just the mechanism -- the problem is the misalignment of incentives caused by widespread low deductible insurance.


To play devil's advocate, imagine a drug that costs $1b to develop and would only break even in costs - obviously drug companies wouldn't pursue the drug. But suppose spending $1b to develop and then $2b to market the drug does better than break even - possibly way better, with the right advertising agency. Then the drug company would pursue the drug. So advertising can lead to more drugs being developed overall, since it can do so much to improve the cash flows that accrue to any given drug.


I still don't understand why it's bad for society? It seems like this is a common point that implies something, but I can't figure out what that thing is.


well in the context of developing drugs that cure disease (esp rare ones), pharma says its so expensive to do, it costs billions to develop a drug. but if in fact it "costs" billions to "market" a drug then is that the same thing? i dont have a strong opinion on this


I'm not super familiar with the numbers, but I believe the "billions to develop" number is a development number, if a little juiced. I think they take the total amount of R&D spend and divide it by the number of drug launches for a given period of time. So it's a good idea of how much money you have to spend to get a new launch, but it is higher than the cost of a single project, the majority of which are terminated before launch (many well before clinical trials).

After you spend a couple billion per launch to make a new drug, then you spend another couple billion on marketing. Again, I could be mistaken, but I'm pretty sure that's the position of pharma.


This is a fantastic writeup. There isn't a lot of great info online about the business of pharma but this is a great intro that hits on a lot of key concepts.

If you play around with a model like this you see how important biology is. the risk that something that works in mice but fails in humans is the biggest reason drugs are so expensive to develop. Front loading this risk / lowering the cost to "derisk" this risk is one of the most important things to focus on

One other concept that's incredibly important but not discussed is "unmet need", i.e. How underserved are patients by standard of care. For a fatal rare disease, unmet need is high; for a disease with drugs that already work pretty well the unmet need is low. Unmet need + clinical benefit (how much does your drug make patients better) determines clinical value, which is roughly correlated with price you can charge. Price isn't directly determined by cost-benefit calculations in the US, but it's harder for payers to deny a drug if it would save lives, while payers can easily sideline for ex another slightly better yet more expensive insulin

Some people view the phenomenon of higher prices for higher benefit as exploiting sick patients; I don't think that's entirely fair although in cases like Martin shkrei it is. I've always thought of it as aligning drug makers incentives with the sickest patients -- you only have a viable product if you are providing immense clinical benefit to very sick patients. So r&d is very focused on diseases with severe unmet need. These days roughly half of drugs are developed for patients with severe rare disease or late stage cancer, as most other diseases aren't financially viable


Looking at these numbers, I wonder whether the FDA process is a bit too conservative with respect to safety.

There were the articles yesterday about diabetics yesterday creating closed-loop feedback systems out of old insecure parts, because a FDA-certified alternative is decades out.

I've heard also of folks joining studies for newer-and-better IUDs that are approved by European regulators, but need to be re-certified for the US market.

Politics and lobbying are hard, but would some regulatory changes result in a 10x reduction in R&D costs?


Many people have asked that question, it is a hard complex problem. If the FDA approves a drug and it turns out bad we hate them, if they fail to approve a drug we hate them without knowing if it is worse than nothing.

Those old parts work. Is modern technology better? Sometimes yes, but sometime change for the sake of change is bad (I hate modern bathrooms cause the water never comes on, old manual valves worked)


Generally when the FDA fails to approve a drug nobody outside the industry ever hears about it. It's only in rare cases where you have lethal infections that take a very long time to kill, such as with AIDS, that the FDA faces strong political blowback over non-approvals.


Simple answer is probably not; even a lowering of standards you still need to know if it works - so still doing studies. You'd also then get more drugs like Lily's recently that in post-marketing turns out not to work, but ate of half a billion in sales, and a lot of patients who got not benefit.

There is no simple easy answer, it's a massively hard problem. The regulators have to balance benefit and risk, and for the most part do a hugely impressive job where they already have to add in judgement.


"you still need to know if it works"

No, you do not. Just look at the market of dietary supplements.


That's actually a very interesting one, and has been written about at length by a number of medical stats people.

Hopefully I do them justice to their arguments by saying that the benefits from supplements (if any) are tiny - as in a hazard ratio of death is pretty much 1 unless you are actually deficient. Equally however the potential downside of them is pretty much zero - expensive wee is what they can mostly be summarised as. Whilst they may be money wasted, the're mostly benign, save the odd tragic case.

If supplements had the side effects of chemotherapies however, they'd be banned straight away - without evidence of benefit, the risks would be too high.

For a more authoratative take, one of my heroes: http://www.dcscience.net/2013/11/18/we-know-little-about-the...


Potential downside is pretty high if you consider that some people tend to take supplements and other sorts of snake oil instead of working medicine.


The thing is, the big established pharma companies don't necessarily mind the difficulty in bringing a drug or device to market since it makes competition more difficult. And it's a politically difficult move to support loosening regulations and restrictions here, because some people will inevitably die due to the lower standards, and everyone will remember those dozens/hundreds of people rather than the hundreds of thousands who are able to get new treatments faster


Your comment reminded me of the (ridiculous but sadly necessary) "Sunscreen Innovation Act" passed a few years ago.[1]

U.S. financial regulators often "vet" their equivalent foreign agencies and whitelist those whose processes are sufficiently analogous and in some cases allow US entities to rely upon the work done in those whitelisted jurisdictions. I've always wondered why the FDA can't work out a similar system. If the EU has approved a drug and done all of the studies and asked all of the questions surely we don't need to do all of the same studies and ask all of the same questions just so we can approve the drug a decade later.

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


I've always wondered why the FDA can't work out a similar system. If the EU has approved a drug and done all of the studies and asked all of the questions surely we don't need to do all of the same studies and ask all of the same questions just so we can approve the drug a decade later.

The reason is thalidomide. The US was one of the few countries that chose not to approve it despite other countries doing so. Saved a lot of US children from birth defects.


The studies performed are the same ones, but companies submit it to the FDA first, who are more likely to approve, and approve faster than European regulators (the European Medicines Agency, EMA). The FDA are the most permissive regulator is what has been seen in the literature - there was a really good study looking at the same drugs (TKIs) submitted to various agencies (it's not the only one, but is the cleanest):

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3769667/

As for thalidomide, yep the FDA had an amazing employee who saved a lot of damage being done, and shows exactly why regulators exist, and assess the safety and efficacy before you can sell things!


Ah yea, thalidomide. That drug is often used to justify poor policy decisions at the FDA. It's the reason the FDA banned women of child bearing age from clinical research.[1] In the late 80's there was even a study conducted to determine the relationship between obesity and risk for breast and uterine cancer. Guess how many women were enrolled? Zero. Thanks to the FDA's misguided knee jerk policy response to thalidomide.

It seems to me the FDA's process might "protect" a small number of people but that comes at the expense of many thousands of lives.

[1]https://www.drugwatch.com/news/2018/07/25/excluding-women-fr...


Hey, I don’t disagree that that FDA is very conservative. My comment was more around the politics of it.

Look back at the Vioxx hearings. People crapped all over the FDA because they didn’t catch an increased risk of CV issues until post-approval.

If you’re the FDA, it’s “damned if you do, damned if you don’t”.


That’s fair and the struggle for all regulators I would imagine (though the stakes are higher with human health).

The crypto people drive me nuts the same way. One minute they’re extolling the virtue of markets “free” from regulatory interference but the second it turns out the market was a scam they want to know what the government plans to do to get their money back.


I agree, safety is very important but so is actually getting the drugs to people at prices they can afford. Perfect drugs are still useless if no one can buy them.

An international certification, recognized by all the major countries, could work very well


Every study I'm aware of that's looked into this issue says that the FDA is too conservative and we'd be better off using the looser systems found in other developed countries. Though it's gotten a lot better over the last few decades, we probably aren't going to get a repeat of the early beta blocker situation where the FDA saved 100s of people from liver failure from early drugs at the cost of 100,000s of excess deaths due to heart failure.


This article does a good job showing how big an impact the concept of "time value of money" can have on a multi-year investment of any kind - pharmaceutical or not. (Particularly since many of us in software are effectively investing nontrivial amounts of our salary in illiquid investments.)

I'd imagine that many tend to think of a $X investment as a $X investment... but if that investor could get effectively compounded interest/returns, even at a single-digit rate, in another investment, they could be risking many times $X by forgoing that investment to take the one in question. Take a look at the chart and formulas in https://en.wikipedia.org/wiki/Time_value_of_money and https://en.wikipedia.org/wiki/Discounted_cash_flow . Important stuff to know regardless of how large a financial decision one wants to make.

And in the context of highly risky drug development, in a capitalist society it's a miracle that niche drugs are researched at all. It speaks to the passion of scientists like the author who endeavor constantly to develop tooling and processes to accelerate/de-risk drug research enough to be an attractive investment in today's increasingly optimized society.


The more I learn about finance, and the better I grok money, the more I start to think of money as a substance that represents time-travel, in a sense. Current amount of money you have on your account is always tied up to your past decisions or to a space of your possible decisions about it, and so well-quantified, that the worth of basically anything is always tied up to a dynamic process which is always, in the end, measured in time.

(OK, I just understood that what I wrote reads as a horrible unintelligible mess, but I didn't yet grok this idea well enough to put it down elegantly.)


In certain ways the entire concept of retirement saving is an investment in the ability to time travel later in life!


Also a bet that you will live to later. I've known a few people who died young: on hindsight they should have lived life better and not saved so much (I have no idea how much they saved, but even 1 penny in their pocket...)


I agree completely, most people overlook the "opportunity cost" of investments. If an investment makes %3 per year but you could invest in something else that makes %4 per year, while you did make profit, you actually lost money, because you missed an opportunity to make an extra revenue equals to %1 of your money (or %33 more profit).


Or more common, knowing how to balance a smaller payout now vs. a larger payout in the future. If you are investing, the smaller payout might be the more valuable option. Of course most people don't invest, which is why future discount isn't widely understood.


You see people do this a lot with housing. They make $100k after 5 years and pat themselves on the back.

They ignore that if they had put their down payment in the market, they would have made $110k.


The difference is that they can buy homes on margin, whereas no one would lend to them to invest in the market on margin. Return has to account for only putting 5% to 20% down. Not that I think homes are a good investment outside of the few burgeoning cities in the US, compared to index funds, time/labor costs included.


My comment ignores the leverage and just looks at the downpayment alone.

To your point, their $100k gain at 5x leverage kind sucks compared to a $110k gain at zero leverage.


They must be a shockingly good investment in my city from all the junk mail I get advertising shared equity contracts.


Most equities are already leveraged.


You also see this kind of argument against housing a lot, which also ignores that housing is one of the few highly leveraged investments an individual can/will make, and that even if you don't buy a house you will have to pay for housing, all of which goes to someone else's pocket.


Your summary is missing a critical factor: you probably need somewhere to live. Let's simplify that to the binary choice of rent or buy, so now your decision is: what is the risks and rewards for my "portfolio" after X years renting versus after X years buying.

For your incomplete example, if the summed cost of rentals was $10k higher than cost of owning the home, then they made a profit.


This is nicely stated. There is much wrong with the pharmaceutical industry including pay-to-delay generics, and abusive pricing non-innovative drugs, and that needs too be fixed. Maybe more importantly, effectively communicating the costs and risks of drug development has, and the magnitude of the impact of successful drugs have on the improvement of health care is something the industry has done poorly.


There is much wrong with the pharmaceutical industry including pay-to-delay generic

I disagree on this one.

Pay-to-delay is just the branded drug manufacturer and the generic company splitting the difference through negotiation. What you end up with something in-between the two potential outcomes.

Situation: branded drug has 2 more years of patent life, but generic company wants to challenge it; neither party is sure they will prevail.

Outcome 1: patent holds and branded manufacturer gets entire market for two years/generic company loses money on legal fees

Outcome 2: patent holder loses patent and money on legal fees/generic company gets entire market for two years (yes, typically this doesn't happen, trying to simplify)

Instead of each party going to court and paying a ton in legal fees with an uncertain outcome, the pay-for-delay is splitting the difference. The branded manufacturer pays the generic company $X to delay entry until year 1. Everybody gets something from the deal.

They call it "pay-to-delay", but that ignores outcome #1, where the generic is delayed for an even longer period.


> Everybody gets something from the deal

Everyone except the patient, who continues to pay the exclusivity premium but would (assuming option 2) have paid less.


But you don't know option 2 would have been the outcome. Rather than both companies duking it out in court for a few years, the patient benefits when the generic entry happens quicker than if the patent held.


I guess the concern is that paying a company not to challenge the patent(and start the 6 month clock if the patent is lost) is anti-competitive and collusive.


I can see how that could be the perception. However, if the generic company is certain they could successfully challenge the patent, they'd never enter into such an agreement because there is a far higher payoff to move forward with the patent challenge.

It's the gray area cases that end up in pay for delay deals. The ones that neither party is sure they will win. So they cut their loses and negotiate middle ground where each of them get a piece of the pie.


That depends entirely on how much they are paid to delay. A successful pay to delay settlement can be more profitable for the generic than entering the market. That is to say, it is more profitable to share revenue from a monopoly than race to the bottom.

A classic example is GSK and TEVA with Lamictal. GSK priced the original drug at $465/dose with $1.5 billion in sales. Teva's Generic was $14/dose. TEVA happily agreed to be paid by GSK because if TEVA had won in court, entered the market, and captured 100%, they would only bring in 50 million a year

https://www.fiercepharma.com/regulatory/more-scotus-fallout-...


Do you have another source? The one you shared is light on details.

I'm not sure why TEVA would price at $14/dose at launch - most exclusive generics price at ~95% of the branded therapy, then drop once other generic entries happen. If the TEVA generic were to capture 50% of the market over 6 months, that's $600M+ in revenue, not $50M.


If the patent is invalidated, then what provides the generic company with exclusivity for two years-- I thought the regulatory exclusivity provided to first-in generics was only 6 months?


I'm not at all an expert on generics, but the company suing to remove exclusivity has almost certainly done some groundwork needed to produce the generic drug. They likely need to figure out how to produce the drug as well as some business stuff like market determination, so a second generic manufacturer is probably a bit behind.


for significant small molecule drugs, there is commonly a cohort of generic firms ready at expiry. There is usually little barrier to entry beyond the patent or regulatory exclusivities. Prices are typically crushed after the 6 months. Biologics (antibodies/ vaccines) are a different story because of the complexity of their manufacturing and characterization.


It was just an example. You are correct that the first generic entry gets just 6 months of exclusivity.


The author ignores two obvious, extremely high leverage changes that would solve the problems in his model.

First, on the revenue side, extend patents on pharmaceuticals as long as possible. His model assumes a very narrow window of payback; quadrupling or quintupling that window would make many more drugs feasible to investigate.

Second, to use the author’s word, “de-risk” all trials. The best way to do this would be to end the FDA. But an intermediate step would be to eliminate the requirement to show efficacy, only retaining the requirement to show safety. Safety is orders of magnitude cheaper to prove.

Trials could be conducted much more cost effectively with these two changes. There would be more time to form patient and investigator networks, the structure of trials would be less complex, many more drugs could be tested, and many more drugs would be profitable.


Extending patents wouldn't work that well in his model - as you can see from the graphs it is already discounted crazily (I'd argue for a 6% discount rate, not 8, but it hadly changes the calculus). Besides market exclusivity can often be extended by adding indications and pediatric studies, so they aren't as short as first stated. Plus on some drugs you then get other patents - see inhalers where you have patents on the devices as well as the drugs.

Equally asking to prove safety only... you still have to do the studies, and need a lot of exposure so why not capture outcomes too? I'm not convinced it would be a lot cheaper to omit the outcomes - you still have to recruit the patients, and monitor them. Take HIV, if you don't test blood, you don't know what is happening to patients blood counts, since you have the blood, why not also check for efficacy in viral supression?

Regulatory is also based on benefit:risk, without evidence of benefit, why tolerate any risk? Also how many clinicians would give new drugs with only theoretical efficacy?Hopefully none. All the drugs that fail trials we also think should work, and spend money to prove it! Not to mention the market for pharmaceutical is worldwide, the EMA, Health Canada, Swissmedic and others would throw something out with no evidence of benefit, greatly limiting your market, even in the US.

Are the FDA perfect? No. Are they excellent? Yes. Some of my research touches up against what they do, and my respect for them grows with every interaction. They're also continually improving. The fundamental problem is that we're looking at a 'better than the Beatles' problem https://en.wikipedia.org/wiki/Eroom%27s_law

What might work? More collaboration between companies. If we can enrol one placebo arm, but test 4 active products against it, we cut the costs (and improve the ethics by giving fewer patients placebo). There are a few other minor tweaks too, but it is something we all want to improve, and are trying to do so!


Safety is the largest component the FDA analyses for, not exactly "orders of magnitude" less than efficacy.

Increasing the patent length, however, would increase the payback. Not as much as one might think, however, because the time-value-of-money analysis means that money far in the future is worth less, so there is diminishing returns at work.


So I work on the opposite end to discovery, in the interpretation, and estimation of outcomes seen beyond the studies i.e. what impact will the drug have. Applied statistics essentially.

The author is completely right about the raw mechanics of investment decisions (and sometimes they are just that when a pharma company is sizing up buying an asset), but has written up a really thought provoking piece which was interesting to read. Though I deal with time preference every day, I hadn't quite internalised how much influence it had for early spending.

In terms of my experience, very similar, I worked in global HQ for a large pharma company, responsible for my small part of things for 4 products. 2 failed in Phase 2, and the other 2 failed their Phase 3s. I moved to another pharma company where I was focussing on launch products, but every now and then one would disappear off the radar. For other the trial results would come in, and it only worked on half the patients. We expected all these to work - the science was impeccable, the animal models demonstrate a good basis for belief... it just didn't happen. Every drug that works really is a needle in a haystack.

On the making development attracting, I've been forutnate enough to be able to volunteer some of my professional time to a patient group trying to attack the problem in a different way, and make it possible to get medicines commercialised in Duchenne Muscular Dystrophy. The approach is led by a couple of really impressive executives* and is trying to get companies to collaborate to pull together some of the materials the author mentions (rather than all do them in isolation with variable quality). They recently won an award for their work, and thoroughly deserve it. These kind of initiatives are what can really make a difference, and de-risk an area for many companies - the lay of the land is known, and there is high quality understanding of what matters to patietns, and the natural progression of disease. It also means that companies developing medicines can engage to make sure their trial program targets the right patients, and measures the right things. If anyone is interested: https://hercules.duchenneuk.org/publicity

* I say executives because that's what they are, and the role they play. They all have sons with DMD which is their motivation, but that label that doesn't do justice to the amazing work the group does - as an example where there are generic medicines that might help, they are funding trials to find out!


This is a pretty solid breakdown. IRR isn't mathematically valid though. I might take a run at cleaning up this spreadsheet tonight to make it look a little more professional. Need to include things like tax and exit valuations to get to the correct decision.


There are a few very important caveats that they miss though. Revenue determinants are heavily based on conversations with healthcare payers to determine market size which dramatically effects revenue projections. Most firms that do deep development plan to sell successful drugs and exit as early as possible so transaction costs need to be included in the terminal value, which isn't calculated terribly well in this model.


I'd also use corporate bonds for pharma companies (or biotechs, depending on which you are looking at) for the cost of capital, as ultimately that's what debt costs


Here's non-profit startup trying to tackle this kind of stuff: https://www.youtube.com/watch?v=v7V8-dfQ7bM&feature=youtu.be


Great article. Best of luck to them.

Anybody knows about efforts to lower trial phases costs down ? (without lowering quality of course). Any out of the box idea ?


Collaboration - one control arm, 2+ active drugs from multiple companies (why not 6+?). Fewer patients exposed to placebo, less paperwork, same statistical power, more so if you randomise 2:1:1:1:1:1 rather than a standard trial with 1:1 or 2:1


Shorten or remove the patent benefits awarded to new drugs, and the calculus changes dramatically.


The only change I can see is needing to increase the cost of the medicine to make up for the reduced exclusivity period, or a reduced incentive to research medicine.


You can't just reduce the patent period without reducing the regulatory process that is required to get stuff approved. It would not work otherwise.


I hope we're not on the path to reducing rigorous testing and vetting of medicines in exchange for cheaper prices. Medical science is extremely hard, and verifying cause and effect in a system as complex as the human body takes significant resources.

People want cheap, people want safe, people want well qualified individuals pursuing these advances. What people don't want is higher taxes to enable government funding for this research, and would rather have private investors pick up the tab. And then they scoff at high medicine prices. I'm sure there's some corruption and paper pushing waste going on, but fixing that is not going to remove the need for costly triple blind studies that span years, only to result in failure the vast majority of the time.

That's the cost of good science, and if society wants the fruits, they need to pay for it.


This is exactly correct. Also there is a good incentive structure in there - a well designed clinical trial program will move between phases, collect all data possible to support an application, and have all the relevant data to get a timely approval. The better you do on evidence collection, the sooner you are on the market, and more you have to work with


Note that even if government pays, the costs still exist. Maybe the government can decide researchers are worth less money, but or some such - if they are willing to drive researches in it for money out (everybody is in it for money at some point, as you need to eat and you like other luxuries money can buy: the only question is when it is worth leaving).


> I hope we're not on the path to reducing rigorous testing and vetting of medicines in exchange for cheaper prices

The FDA has extremely long review cycles. To say that this could be not be improved, while still keeping the same standards (or even better ones) is unlikely. Anyway, I don't think it's likely that we will see anyone touching the patent system anytime soon, so it's merely a thought exercise at this stage.


The FDA has a mechanism (market exclusivity) that is intended to compensate for regulatory delays.


The two are interlinked and I believe it would happen naturally in large part. Long patents buttress profits for drug makers, allowing for increased regulatory capture and increased FDA power. The opposite is also true.


With shorter patents, or no patents, the business model changes. What is changes to is hard to predict. However, we can guess that drugs would price out LESS on average due to generics coming in sooner.


In the absence of patents, who is going to pay for the expenses of developing the medicine? It's not hard to predict that smart people don't work for free, nor is specialized lab equipment available for free.


We can also guess that few drugs would come out.


How about go the other way? Make the patent term much longer, but add a compulsory licensing system that allows anyone to make and sell the drug if they pay a royalty at a rate set by regulation.


> How about go the other way? Make the patent term much longer, but add a compulsory licensing system that allows anyone to make and sell the drug if they pay a royalty at a rate set by regulation.

Who sets the rate then? Regulation means government, which will be massively lobbied for increasing licensing fees in the favor of the industry. If you want to shake things a little better to massively decrease the patent period instead, since it makes everything way too slow.


How, specifically? Most people would expect that if the patent benefits were reduced, there would be reduced incentive to invest the absurd sums required to develop a drug.


Throws a little doubt on those who say the money is in the treatment and not the cure :).


not exactly -- it's more that the money is in whatever they can get passed through clinical trials. if that's a cure, great. if not, it'll still sell.

there is no inherent incentive to deliver a cure from a drug product, provided that there is no competitor drug. luckily, there's also no realistic incentive to sit on a cure because it can be priced to be profitable even if the cure makes itself obsolete, which is extremely unlikely in any event.


I was joking a bit.

I agree with your last statement, and I'd argue as well that if you had the cure to say, cancer, you could charge whatever you wanted for it (at least in the short term). When it comes to money, you just can't take it with you, and you'll spend pretty seriously to improve your lifespan.


The people who say pharma don't want cures generally don't understand the industry. A cure is worth more than a chronic treatment, and the article does an excellent job of explaining time preference (his 8% discount) - having a treatment you can sell for more years isn't worth much when you discount it all.

Fundamentally companies have to follow the science. If the science is there for cures, that is what is pursued. If the science is on life extending treatment, that's what gets followed up. You don't get to pick and choose what you want - both can be lucrative, and both can be failures!


I truly believe that people don't really understand how difficult cures are. It's not that we in pharma don't want to cure things, we just don't know how. Also, most pharma and biotech companies are built around a small number of mechanisms. Many pharma companies only make small molecules or large molecules, but don't touch potential siRNA, CRISPR, or stem cell therapies.

Take diabetes for example. By the time a Type I diabetic is diagnosed as diabetic, they've lost a huge portion of their beta cells (something like 80% if I remember correctly). It is very hard to slow the destruction of those cells and harder to completely stop future islet mayhem. It's nearly impossible to regrow them with the information we have now. Even if it is possible to regrow those cells, can it be done by giving a drug, or a drug coctail? Maybe not. Maybe it has to be a stem cell treatment. Or an order of magnitude more difficult to discover: a stem cell treatment in conjunction with drug(s). Will that kind of therapy come out of a big pharma company? Maybe with partnerships with other companies or an acquisition, but the people who make small molecules probably don't know a whole lot about convincing stem cells to become beta cells; it's just a different set of skills.


Fully agree - I work with pharma as an independent (and used to work at GSK & Sanofi before that - effectively medical statistics). I'm currently working on a gene therapy from a biotech, if it works it'll be amazing, and be a semi-cure, holding functionality where it is, but even that isn't a perfect cure.

I've also worked on 2-3 immunotherapies, they again can be amazing and turn previously uncurable cancer to long term survival (of duration unknown), but only in a fraction of patients - to work on them was an honour. Most therapies are incremental improvements, which can make a big difference to patients, but there is still unmet need.

GSK when I was there were explicit, half the drugs they wanted to develop internally, but using the commercial knowledge and experience guiding drugs though trial and approvals, also wanted half of drugs to be invented outside, and be commercialised by a company who knew how to do that!


I would assume that somewhere on the bottom line there is an analysis of what the drug itself is doing. For instance, does the drug cure something or does it treat the symptoms of something? I imagine most of former are thrown out right off the bat. What we need is a system for testing, developing and selling medications that is less effected by the human condition. Perhaps, we should close the private sector and hand this off to the government or at least breakup the process by allowing the private sector to sell without the burden of testing and development? Perhaps, we as taxpayers, should be handling the burden of cost for testing and development?


> I imagine most of former are thrown out right off the bat.

Why? You don't think cures have monetary value?


The problem is as a taxplayer I have a cost/benefit that is different depending on if I know someone with the condition in question. Have same cancer as my mom: throw a ton of money at it. Have some other cancer not in my family: waste of money, people die all the time. Of course that is a strawman, nobody is that bad, but the point is eventually we have to decide how much to put into trying to find a cure. However the point still stands, whoever is going to pay for this needs to decide how much is worth spending and that will be argued.




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