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Health care veteran tries to upend the system and bring drug prices down (statnews.com)
47 points by vo2maxer 6 days ago | hide | past | web | favorite | 26 comments

It is unclear what differentiates EQRx from other pharma companies. As the article points out:

>The idea of creating a “fast-follower” — a new drug that is much like an existing one — is anything but new.

All I see is the claim to come in with competitive pricing - something else that is anything but new.

>But fast-followers do not compete on price, because lowering price has not historically resulted in selling more units of a drug.

It is also weird that he talks about the reason he raised prices at companies in the past was because it was fiduciary to shareholders. Then he starts a new company with VC money. I might be more believing if the company was a B corp.

We need a different approach to drug development that is not this. The big issue with drugs is that there are only legal protections for generics and other countries have far different bargaining power. We need some kind of shared risk and reimbursement model with every country having access to the ability to buy or create generics based on them paying to support the research. This is something that could be easily spearheaded by a Gates foundation or its ilk.

What do you mean by there are only legal protections for generics? As I understand it, original developers have the protections, not generics .

that last quote seems strange to me. There are certainly instances where fast followers price lower and got significant share. The hepatitis c market is a good recent example. Gilead had the first drug and then two other companies followed shortly thereafter pricing at ~20-50% discounts and got significant share

Yeah, I believe a number of biosimilars have entered the market with steep discounts as well.

'Robert Nelsen, of ARCH Venture Partners, said he invested because “I think it’s really cool and I like throwing rocks into the pond.”'

Definitely a bold approach that will require lots of cash up front, which explains the $200M round. It will be interesting to see how many VCs let their FOMO get the best of them and fund the first credible copy-cat pitch they hear. After all, there is only one Alexis Borisy out there.

It will also be interesting to see what kind of tech or novel operational methodology is developed to deliver on their promise to lower costs. I'll also be interested to see whether they demonstrate substantive progress by the time they raise their next round.

> “I’ve spent the last 25 years creating breakthrough new medicines,” Borisy said in an interview. “We’ve ratcheted up the prices on them ever higher, frankly, because we can,” he said. “And the reality is we can create a lot of these great new medicines, and turn that into a viable business charging a lot less for them. This is not fantasy world. This is something that can be done.”

Is he saying that he has participated in price increases because he could?

yea i suppose so, but then something in his world changed. And he thought maybe we can change this for the better. I would be interested to see what it was. Maybe he can just make more money doing this.

It sounds like the idea is to spend less money on research by seeking to make equivalents (but not generics? and not infringing patents) and then sell them for less. And, presumably, encourage pharmacies to fill with theirs instead of the original.

If the development costs really are lower, and the targeted drugs have enough of a market, it seems totally reasonable to reduce end user costs and still make a bunch of money.

I'm still skeptical. It seems like this approach would be harder than making a biosimilar drug, which still takes >$100 million and 5-8 years.

Pharmacies are not allowed to fill will biologic generics without FDA bio-interchangeable approval, which no biologic in the US has obtained. They would not be able to substitute an alternative drug either.

If I could get a few million dollars _mostly_ at the expense of big businesses/insurers, I would to... Hell, having even 25k in disposable income makes starting a new business a reality... Which is inconceivable when you can pocket less than $1000/paycheck. And competition is what makes other's lives better under a capitalistic economic system (not saying that's the best, but it's what is most of us have)

>Gleevec, the Novartis cancer drug, was approved in 2001 and turned a form of leukemia into a chronic disease. It initially cost $24,000 a year, but the list price reached $100,000 a year by the time it went generic in 2016

Novartis increased the price by about $5k a year. That's insane, I don't think this should be legal. How come there are no laws that keep the prices of medication under control?

Many years ago I worked for a lab that was bought out by Novartis. We started running lots and lots of tests for chronic myelogenous leukemia for free, since showing they had a particular mutation indicative of CML would qualify them for Gleevec.

I don’t even know how I feel about that, but Novartis as a whole is a shitty company. Quit a year after their buyout because they completely ruined what was once a great place to work.

In the best functioning capitalist systems it's the role of government to prevent monopolies. This is why I enjoy living in Europe, where we have reasonable costs for things like medicine, mobile plans, internet costs, insurance and the like. It sounds like the US has devolved to a crony capitalist system and it's not working for the benefit of the citizens.

The common trope is that European price controls hinder innovation in pharmaceuticals [1]. I've read that American pharmaceutical firms spend 4x in R&D per capita than European counterparts.


[1] https://www.nature.com/articles/nrd2293

The 4x spend on research per capita seems to be true. I looked into that before and found that the absolute spend is about $59 billion in the US and probably about $30 billion in the EU [0,1]. With the US population at 327 million and the EU population at 514 million the 1:4 factor seems about right.

But there is another factor which IMO is important: The domestic spend on pharmaceuticals. The US healthcare system seems to be more pharmaceutical friendly. Yearly US spend on pharmaceuticals alone is about $330 billion [2], while yearly EU spend on "medical goods", which I assume to include pharmaceuticals, seems to be only €120 billion [3].

So pharmaceutical spend per capita is also about 1:4 when compared to the EU, not just R&D.

As production usually follows consumption (which is why e.g. every US and EU car producer has domestic factories in China), one could also argue that the high US health care costs are the reason why so many US pharma companies exist.

[0] https://www.healthaffairs.org/do/10.1377/hblog20170307.05903...

[1] https://www.vfa.de/download/the-pharmaceutical-industry-in-g...

[2] https://www.actuary.org/content/prescription-drug-spending-u...

[3] https://ec.europa.eu/eurostat/statistics-explained/index.php...

OECD tracks pharmaceutical spend directly. It’s about $1,200 per capita in the US, versus about half that in say Spain or France. https://data.oecd.org/chart/5OrU. Richer countries like Australia, Canada, and Switzerland spend $850+.

Thanks! Way better source.

Size of spend by pharmaceutical firms does not necessarily indicate more or better R&D is going on.

Factors that could reduce such spending without impacting research output include:

* Lower costs (e.g. salaries for early career researchers don't have to be as large to cover their university debt).

* More research done in publicly funded universities or other research institutions (including where a pharma firm funds a project).

* Better cooperation between companies (e.g. Research Council joint programmes).

* Better controls against overspending on dead-ends (cultural or legal).

* Different reporting on what, exactly, counts as "R&D" spending (e.g. does everything a researcher does at work count as Research? Does maintenance of research facilities count?)

I'm not saying that all of these represent the actual difference. I'm just saying that using spend in a given sector as a proxy for output seems a bit odd.

I don't understand how researchers can meaningfully separate European and US RND. The pharmaceutical Market is international and both us and European companies expect to commercialize in both regions

So, I don't know much about pharma or the US drug development/purchase systems. And I don't know if this drug is under or over priced. But before we just look at single numbers and declare them insane, we should really think quite carefully...

The generic alternative costs about $9000 a year, so it's clearly a difficult drug to manufacture and supply. And 100k a year makes a great headline, but what does the average consumer actually pay? 100k a year is the starting point for negotiations for insurance companies not the price they pay. Wikipedia says the NHS (UK) is getting it for about 30k USD and the average in the US was 85k USD


Plus, Companies profit or die based on revenue and costs, not prices alone. Since only about 6000 people a year get the main form of Leukemia this drug was developed to treat, it's pretty niche. Assuming all 6000 people are diagnosed in time and all are treated with this drug and all pay the 85k (or their insurer does), that gets you $510m a year.

But wait! We already said it costs about 10k for the generic. So when you take that off, the gross profit is $450m (per year for the US market).

Multiply that up by the 10 year average use span and you get 4.5bn a year and a 10 year patent gives you 45bn. Very juicy!

Except that developing a new drug costs 5-10bn USD


And the success rate is something like 38% from Academia to Approval. So if you spend 7bn each on three drugs, it's cost you 21bn to develop the one that gets approved.

So about half of that juicy 45bn is gone just on development costs. Plus you're investing in development for a product that won't sell for maybe a decade and you need to factor in the risks (that none of your drugs work, that someone else beats you to market, that a better drug comes along, that some other treatment cures the disease you're targeting, that your drug works but turns out to be toxic in some other way and you have a huge lawsuit to settle).

Suddenly, if I were an investor, that 85k average price suddenly looks ok but not amazing. And remember, the price hasn't been 85k the whole time, it was 24k (or rather it was whatever insurers negotiated below 24k) in year one.

This math rests on two constants being true:

1. The generic for Gleevec (imatinib mesylate) costing $9k

2. Gleevec costing $100k retail

Neither of which have been true since Gleevec went generic (sensationalist reporting). Brandname imatinib mesylate costs $9-12k depending on insurance. You can get a rebate card that lowers that to around $200. Generic it's around $100-150 for a month's supply.

I really dislike pharmaceutical practices, but there are systems already in place that will allow actual "consumers" (patients, not hospitals and other orgs) to pay a reasonable price for the medication they need.

This really is no different than the Shkreli debacle.

Really, the maths only relies on the cost of new drug development and the number of (potential) users per year. Everything else is minor. For instance, if the cost of producing and supplying the drug were different, that would add only 10 percent to the final profit, that is easily offset by factoring in inflation.

And that's the point here: developing drugs is expensive and risky. So you need a big potential profit to do it. That means big revenue. Big revenue and small numbers of users means high prices.

EQRx could potentially lower drug prices, but only because of competition and not out of the goodness of their hearts. Few companies deliberately lower profits without exogenous pressure. If a company has a 20 year monopoly on a drug and a similar drug shows up before the patent expires, competition will somewhat bring down prices. I say somewhat because healthcare is a convoluted opaque mess.

>Drug companies like to quote statistics that prescription drugs represent only a tenth of medical costs.

How true is the claim that drug costs are ~10-15% of the final cost to patients? Apparently, It's the caregivers (hospitals, doctors, nurses etc.) who make up the vast majority of the final bill.

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