You don't need to be an industry expert to grok that those numbers are wildly unsustainable. It is not possible to keep spending the amount companies spend to make new drugs. In the past, companies would inflate the price in the USA to make up for reduced prices elsewhere. But with all the recent healthcare reform in the USA, that strategy is ending.
To add insult to injury, the vast majority of the most commonly used drugs will lose patent protection in the next couple of years. In the industry they call this the patent cliff. There will not be enough new drugs to offset all the ones that go generic.
This move by India is a symptom of the wider drug industry problems. There will be more of these kinds of moves in the future. The industry has been searching for ways to more effectively make drugs and have it not be so expensive. But so far they have been striking out for 10 years running. The current strategy is to lay off most of their r&d workforce and offshore and outsource this part of the business.
Somewhere out there, a business model is waiting to be found. Whoever cracks that nut and becomes the Southwest of the drug industry is going to make a fortune.
Actually that's not true. Big pharma spends twice as much on advertising as they do on R&D:
They also spend a significant amount of money on government fines due to corrupt practices (i.e. killing people). They are now the single most corrupt industry, paying significantly more fines per year than the entire military industrial complex:
Trust me, having worked in an R&D organization, there was no want for more funding. There was an incredible level of funding. If the problem in the drug industry is simply that not enough is being spent on R&D, that is easily correctable. Unfortunately for all of us, that's not the problem.
First - and I know that I'm going to hear about this from some people - you might assume that different companies are putting different things under the banner of R&D for accounting purposes. But there's a limit to how much of that you can do. Remember, there's a separate sales and marketing budget, too, of course, and people never get tired of pointing out that it's even larger than the R&D one. So how inflated can these figures be?
We can discuss evidence when the CFOs of these corporations open their daily work to a public VNC session.
The problem with the drug industry is basically that many of their most important epistemological assumptions are largely incorrect. The reason the entire industry is about to go under isn't because all the easy cures have been taken, it's because they started to buy into their own bullshit. Their astronomical R&D costs and terrible success rates are largely their own fault, so I don't really buy this high cost of R&D argument as a reason for not making the drugs more widely available. I won't bother rehashing all of the epistemological problems with allopathic medicine here, but I was link to this video which talks about why the ubiquitous mouse model is so problematic:
Plus, many of the new drugs are just evergreens, so much of that 'R&D' is really just a clever way to screw the patients.
Pharmaceutical companies were spending around £10,000 per GP per year. (About 40,000 GPs in UK * £10,000 == £400,000,000) Because of our PPRS that figure is probably one of the lowest in Europe.
The UK spends about £11billion per year on medication. Of that about £8billion is spent on branded medication. We have regulation schemes aimed at driving costs down.
The market and regulation of medication is baffling with many hidden effects. Here's some ridiculously in-depth information about the UK Pharmaceutical Price Regulation Scheme, and about regulation of meds in Europe.
 - because any medication is only £7.40 per item (per month) and only about 15% of people need to pay because of all the exemptions. Also, because of the pay structure of prescriptions there's a split between doctors (who write prescriptions) and pharmacists (who earn money for dispensing).
The abstract indicates most of the fines come from "illegal off-label drug promotion" and "overcharging state governments". It could be argued that the first shouldn't even be an issue, and the second, depending on how "overcharging" is defined could be outright fraud on the part of big pharma, fraud on the part of state governments, or something in between.
Edit: Well, I'm a moron for talking before reading. Scratch that.
Because I read the study.
Or I could be wrong and those $12B really goes into equipment and lab workers wages, but you won't blame me for finding it real hard to believe until I see at least a rough breakdown of how those costs are summed up.
From the article: "Bayer tried to justify its high price by making claims of high R&D costs, but refused to provide any details".
That either means they don't know themselves, or it means that the larger part of the budget got "lost" in requesting approval forms paper pushing greasing cogs and lobbying politicians.
Preclinical and Phase I - II trials aren't too expensive, in the order of millions of dollars.
But also remember, for every ~10,000 candidates that enter preclinical trials, about 1-2 will actually pass FDA approval.
The billion number isn't just for one drug, it's also for the 10,000 failures that you had to weed through to find that one drug.
Phase I is safety trials in healthy humans (young males generally). Phase II starts using it in the target population (the sick) and begins looking at dosing requirements and preliminary efficacy data.
But the big one, Phase III, that's the big group, expensive, efficacy trial. This is the trial that has to prove, beyond a shadow of a doubt scientifically, that the drug does what they say it does. A good Phase III trial can cost in the hundreds of millions of dollars easy. I've heard of $250,000,000 Phase III trials before.
If "the most rigorous evidence requirement in the world" is your example of "inefficient and corrupt", than I guess we'll just disagree.
But the FDA is the most strict drug regulatory body in the world, and the amount of evidence for efficacy that they require from the industry is truly impressive and truly does warrant the billions price tag.
Funny how there are so many SSRI's on the market. Funny how this model results in the conclusion that it's a good idea to give kids amphetamines when they are known neurotoxins. Funny how medical marijuana is taking such a long time to break through into the mainstream. Politics play a huge role in business and tend to turn it into a theater of the absurd.
The FDA does something else: Drug company says they have a drug that does X. Does the drug do X?
That's it (okay, the FDA regulates a lot, but in the context of pharmaceuticals, this is their mandate -- "efficacy"). They require inordinate amounts of proof of efficacy.
Not the morality or ethics behind the application of the drug, but rather: does this molecule, in this concentration, in this delivery route, in this population, have the exact pharmacological effect that they claim it does.
From there, it is up to each person and their doctor to decide what treatments are needed!
Blame the doctors, then, or blame Congress, but the FDA follows it's mandate quite wonderfully.
Why? What's wrong with SSRIs?
> Funny how this model results in the conclusion that it's a good idea to give kids amphetamines when they are known neurotoxins.
Giving amphetamines to children is certainly debatable but amphetamines are not neurotoxic. Methamphetamines are neurotoxic, especially in recreational doses, but non-methylated amphetamines are not.
> Funny how medical marijuana is taking such a long time to break through into the mainstream.
Entirely different issue.
The reason why meth is a public health issue while addy arguably is not is mainly because requiring a Doctor rx, using an exact dosage with no refills, combined with the purity and safety of GMP-produced drugs, eliminates most of the issues behind meth.
I was shocked when I found how just how similar meth and adderall truly are.
Also, with Adderall, you can't afford to just take more to offset withdrawal symptoms, because you only have so much. The temptation to take another as it wears off is pretty substantial, especially for long-time users.
Nor have I ever had any compulsion to clean everything in sight or pluck every hair from my face. It certainly makes cleaning easier, but I certainly don't feel the need to do it anymore on or off of it.
You appear to have become addicted.
I didn't realize this was unusual.
Are you completely fucking stupid? Read these and stop spreading dangerously wrong information - http://www.amphetamines.com/neurotoxicity/index.html - http://www.aapsj.org/view.asp?art=aapsj080248
At least do your research if you're going to act so certain about something. This post has links to a few studies demonstrating said neurotoxicity - http://www.longecity.org/forum/topic/47231-amphetamine-neuro...
>Why? What's wrong with SSRIs?
Gee, I don't know. Maybe the horrible withdrawal (http://en.wikipedia.org/wiki/SSRI_discontinuation_syndrome) combined with the fact that their effectiveness is statistically insignificant (http://www.science20.com/natural_medicine_101_jeffrey_dach_m...).
That is exactly where so much of the inefficiency comes from! How rigorous does an evidentiary requirement have to be before it costs more than it's worth? If getting FDA approval for a new drug cost, say, $100 billion, would the added safety be worth holding back all the drugs that wouldn't be profitable enough to offset that huge up-front cost? A truly efficient FDA would take into account not just the harm of being too lax, but also the harm of being too strict.
(There's an even starker example of this in the Nuclear Regulatory Commission. Their regulations are so strict and red-tapey that the economics of nuclear energy in the US are inferior to those of coal, which is much more dirty and dangerous. Caution has costs.)
Orphan drugs are treated differently: http://en.wikipedia.org/wiki/Orphan_drug
The FDA also maintains a list of pre-approved substances that can be used without testing. I think this is it: http://www.fda.gov/Drugs/InformationOnDrugs/ucm129662.htm
It's insanely difficult to bring a new drug to market. Imagine all of the crazy combinations of people that take them and if you miss one small group that has an adverse reaction you could be talking 1000s of people that are lining up to sue you out of existence or if you're in another company the regulatory body doing it for them. People around the world benefit immensely from our "inefficient and corrupt bureaucratic machinery" because they get safe drugs.
Also, from the article, "Bayer tried to justify its high price by making claims of high R&D costs, but refused to provide any details". This is just plain rhetoric plain and simple. You see politicians do this everyday because there is no real way to refute it.
Now imagine how many labs, hospitals, scientists, doctors, statisticians, patients (oh they do get compensation), and auxiliary clerical workers need to be paid for the whole process.
Most research dollars go into new therapies with completely new mechanisms of action.
Companies are often working in similar areas, that's true. The best example of this is the statins. Lipitor was the 5th statin to hit the market. Was it a me-too drug? I guess, but it was also superior to the other 4 that came out first (less incidence of muscle damage, more efficacious). Did Pfizer say "Gee, let's copy that other statin?" Obviously not since getting a new drug to market takes 10 years and they came out only a few years later.
is this intrinsic to drug manufacture? would regulatory/tort reform help?
I guess you could say it's the price of having access to thoroughly tested drugs that are both safe and efficacious.
Even a common OTC drug like guaifenesin that has been around since the 50's is difficult to find by itself, except in the newly patented time-release formulation (ie. Mucinex). (Although it is an ingredient in many cold medicines.)
I hope so, because the current one isn't working for consumers. Even with the billions spent on R&D, it turns out that many of the drugs Big Pharma turns out are no better than placebos. It's not hard to see why: a big company spends X amount on each failure and needs a 10X hit to offset the costs. If one doesn't materialize, it's not hard to rig the statistics to show some marginal benefit for a chosen winner, and a big marketing budget and the placebo effect takes care of the rest. Thanks to this model, we've finally conquered the scourges of restless leg syndrome, overactive bladder, and general anxiety disorder.
I would argue that it's actually impossible to economically conduct sufficient studies to reliably predict the efficacy and long term safety of drugs in the general population. And you're right, every drug on the market has passed Phase 3 trials because they're cherrypicked. A big drug company knows how many drugs it needs in production to ensure that some percentage of them are statistically likely to get through Phase 3 trials. To believe otherwise is to believe a drug company would bet a multi-billion-dollar enterprise purely on a research gamble. Is it possible for them to lose? Sure, 'statistically likely' isn't a guarantee. But it's much better odds than depending on stumbling into an actual cure.
I'm not suggesting all drugs are worthless; only that drug companies do not need to produce effective drugs to stay in business.
Pretty sure the opposite has been proven, e.g. GSK's shenanigans with paroxetine.
On the net I don't think this is a good thing, but it should free up a lot of vary intelligent people to work on other lines of research. Hopefully, we may eventual start to develop the tools to build direct DNA specific medicines on the fly by using the fruits of those other lines of research.
As you mentioned the patent cliff is looming for a number of big pharma actors, and what this is going to result in is less innovation and more strategic moves to other "easier" markets such as generics or OTC drugs. This is just plain bad for everyone in the end.
I'm not willing to increase my chance of getting killed by medicine on behalf of someone else's profit margin. They have a big, powerful lobby, they should suggest process improvements. And make some on their end, as well, nobody's charging them billions in fees, they spend that money on the typical big-company waste in the process of complying with those regs.
At this point in time the FDA has incredibly high standards of safety for weight loss drugs and not without reason. But what are the costs of the 40% of obese Americans who will get diabetes, cardiovascular disease, etc, etc?
EDIT: I am trying to say that while obesity is 'bad', giving them a drug that adds to their risk levels is not a solution.
If you are still pro your position, bear in mind that you are now throwing dice and hoping that: (people who improve) >= (people who suffer + nothing happens).
Are you qualified to play dice with peoples lives?
Mind you, this drug is already approved for use in humans. The FDA made the call that preventing cleft palates in babies (mind you the company offered to restrict the label to "non-child bearing women") was more important that reducing levels of obesity.
The FDA "suggested" the company run a 10,000 person clinical trial (estimated at $100M) to prove it didn't.
From what it looks like the FDA is going to renew qnexa by April 2012.
And we have already gone past "letting the at risk group decide for themselves." it's hard to be succinct and explain the many reasons why we dont use that particular system when it comes to medication.
The communication to the patient should be fully transparent, and it should be up to the patient to choose what they want to do, not just regulators.
An excellent read on another case coming up before the Indian Supreme Court, regarding Swiss drug co. Novartis's blockbuster anti-cancer drug Gleevec.
I think that judgement might be more important, as the NYT article points out how the US govt is trying to influence the outcome.
What are your thoughts on Gleevec ?
First of all, you need the brains to develop the drug. I can't imagine that this involves a team much larger than a pre-series A startup.
Does the development process for creating a new drug promote failing fast?
Does keeping the entire R&D process in house help or hinder?
How far can a team get before it needs to try a drug on humans and how much does it cost to get that far?
Are there any startups that just manage a portfolio of patients with symptoms/diseases/disorders and automatically pair those patients with drugs that might benefit them?
Should the process allow the patient to "price" his or her own life/health, whereby patients can opt in to Phase 1 trials for a lot more money than Phase 2 for example and name their own price in the process?
How much of the money spent is actually (time*wages) for a lot of people for an unnecessarily long process? Is burn rate a consideration when creating a new drug? How long does it take to get a drug to market? Can price be reduced by half by reducing the time it takes by half? Do a lot of people in the process spend their time waiting?
Is drug development in the US far more expensive than elsewhere because the entire healthcare system here is more expensive (vicious cost cycle / positive feedback loop)
Anyways, just tossing some ideas out there because I get the suspicion that pharma R&D is ridiculously archaic.
Then large companies like Bayer acquire the research and spend millions on getting it through FDA process.
I know advancements are being made in automation for various research activities and I'm sure there will continue being a lot of advancements there. (The need for automation is fully recognized at the industry level)
Add to the fact that science progresses; we now know more about the human body and generally everything compared to 20 years ago, so more stringent rules and testing are required.
Classic example: before thalidomide, nobody cares about how drugs work in pregnant women. Now all drugs have pregnancy category (how safe it is to be used by pregnant women) approved by FDA, and figuring out this pregnancy category comes with a cost.
No it's not. Example:
1980: Drug A is invented to treat illness X, proves to be the most effective
1990: Drug B is invented for illness X, effectiveness is tested against Drug A
2000: Drug C is invented for illness X, effectiveness is tested against Drug B
2010: Drug D is invented for illness X, effectiveness is tested against Drug C
In other words, always compare effectiveness to the current few best treatments. Nothing spirals, nothing becomes harder to prove.
(EDIT: this assumes that drug A works "satisfactorily". Drug D still have a chance if it has markedly differentiating features, say if drug A is injected while drug D is taken orally.)
(as a side note, cancer drugs are hot because of precisely opposite of these -- most are fairly new, those that are old are not exactly pleasant to take, there is no "silver bullet" found yet so there are lots of room for improvement.)
Another take on the market saturation is that when the current therapy is simply already good enough, ie. the "silver bullet" has been discovered. That's the reason why there has been no new drugs developed for headache in recent few years (or pain management drugs in general). It's a totally different story when, say, aspirin was first introduced: there is a lot more room to improve on / differentiate from its side effect profile, pharmacological properties, etc.
i.e. if they see they got better on the placebo they won't care when they find out - they have clear evidence that it does work.
Tell you what. When these companies stop being the most profitable in America, or even just when their EPS starts declining, I'll believe you.
What are they going to do then? The only thing they really can, slash costs. It seems unlikely the all the slashing is going to come out of everything except R&D.
We're ultimately going to have to deal with the fact that as a society we've chosen to make it extremely expensive to bring new drugs to market. Basically, our extremely high standards are/were sustainable only because we also gave them patent protection. It is going to be economically infeasible to have both extremely high standards for new drugs, then refuse to protect them for long enough to recoup their costs. There is no law of economics that says a thing must be produced; raise the cost above what can be recovered and what happens is that it won't be produced.
(And don't even think of trying to sell me on it being a net money saver. It won't be after the special interest groups are done with it.)
I'd suggest it's much cheaper to look into how we could reduce the regulations making it so expensive, rather than throw government money at a problem of the government's creation. At the point where we are seriously talking about the entire edifice collapsing one must take seriously the question whether the costs of our regulatory regime have managed to exceed the benefits. Right now we have a terribly irrational balance between those who are hurt taking insufficiently vetted drugs vs. those who are hurt by not having drugs available for years that turn out safe. The former are visible and the latter invisible, but they are still real. A classic recipe for irrationality.
That part's pretty easy. Reduce the guarantees we require demonstrating the safety and effectiveness of new drugs.
We also took in hundreds of billions less than we would have if not for the avoidable economic implosion and earlier ill-advised tax cuts.
It seems to me that this is a large part of the problem and perverts the incentives in the industry not to produce what people need but what they can sell.
There has got to be a more efficient way for doctors to discover what drugs are useful to the patients they treat.
Heck, look at the tech startup industry. Very few if any of us learn about new startups from traveling salespeople. We learn about them from websites like Hacker News, TechCrunch, TechMeme, etc.
Do we have doctor bloggers that make an effort to learn about new drugs and discover what is and isn't worthwhile?
I would imagine that the very reliance on salespeople actually makes it harder to bring good, useful drugs to market because the industry generates its own noise for doctors that they themselves need to cut through.
Every pharma salesperson I've ever known has been for all intents and purposes indistinguishable from viagra spam emails in my inbox, except for they have a pulse and "pay" for readership through expensive dinners and other niceties.
The entire drug information dissemination machine is broken.
It's plenty corrupt when you look at the big fishes, just not as much as the pharmatical industry (yet).
The majority of blockbuster drugs are about to go off of patent protection. This is where the majority (if not all) of the profit in the industry comes from, as well as a huge chunk of the rests of their costs.
It's an interesting time in the industry but the patent cliff is real and the industry is going to change quite a bit more in the next few years.
The model is absolutely unsustainable - there isn't enough blockbusters in the pipeline to replace the current, not by a very long shot. And we know what is in in the pipeline because remember it takes 7-11 years to bring a candidate from preclinical through FDA approval, so we have a very good idea of what's coming out (and what's not).
I can't really think of any industry that had their business model collapse that didn't come out of it better than they had been.
Individual players, technologies and processes may disappear, but it's not like demand will, and so long as there is demand, there is a potential market.
But ultimately I agree, we may be in for a rough transitory period as far as drug research goes, but what arises from the ashes will likely be a far leaner and more effective beast. It's not like scientists care who is paying the bills.
If this is the case, I imagine that any disruptions will occur at the C-suite level mostly, paving the way for entirely new ways of looking at the problem of bringing a new drug to market.
Every once in a while an academic research lab will spin off a biotech to develop a new compound, but in general this is not how things have been done in the past. There is a current trend to in-license things from academia to lower the companies' exposure to early R&D risk. This ignores the fact that early research costs pale in comparison to the later clinical trials where most potential drugs go to die. Cancer is particularly bad with something like a 98% failure rate. In-licensing from academia isn't going to buy you much comfort when the thing doesn't work in a phase III clinical trial.
And that's exactly what Americans and American companies did - they went to Europe, took the latest IP, brought it back to America, and copied it. Charles Dickens went on a tour of America to try to get people to buy legitimate copies of his books, which no Americans were doing at that point. By the end of his tour, he realized this was a pointless venture, referring to America as a "nation of pirates". Doesn't sound that different from what contemporary American industry trade groups call China and India, does it?
And it wasn't just international - domestic IP rights violations were endemic as well. The reason the movie industry developed in California was because the movie studios (the same people that are now crying foul about copyright violations) were trying to escape Thomas Edison and his patents on moving picture technology. Not only was Edison's lab in New Jersey, distancing them geographically, but the Ninth Circuit Court of Appeals (which covers California) took a more "relaxed" view of IP rights.
It is a bit appalling that you expect nothing to change in 200 years though.
It has nothing to do with the year, it has to do with the position of the US (as developing or developed) changing its viewpoint vis-à-vis IP rights.
You can't compare developed vs developing using 2000s definitions and at the same time using 1800s definitions for IP laws.
You have to be consistent, pick one era and compare everything using the same definitions.
Not compared to Europe. There might have been some American inventions, but those paled in comparison to inventions from Europe. It wasn't until the late 1800s that things started to change.
> You can't compare developed vs developing using 2000s definitions and at the same time using 1800s definitions for IP laws.
> You have to be consistent, pick one era and compare everything using the same definitions.
For any sort of historical analysis, scientific levels of rigidity are impractical, because there isn't a large enough data set, so your point is moot.
A big case of 'do as I say not as I do' designed to retain the status quo in the order of the world.
The US approved IP protection for foreigners when Americans wanted to start having their copyrights protected in other countries - something that happened when it reached developed nation status. Now, the US is criticizing developing nations for taking the same approach for their own devlopment, and not respecting IP rights until they can afford to.
Not to mention that equating IP rights violations with acts such as enslaving people or not allowing them to vote is the epitome of absurdity.
Nonsense. The US was born as a developed nation, it never had a period of time when it wasn't.
You really need to study history again. There was a big gap between Europe and the US that wasn't closed until the late 1800s. In terms of scientific discoveries (which are often closely tied to patentable discoveries), Europe (Germany, more specifically) continued to lead until WW2, when we broke their PhD lineage with Operation Paperclip.
That said, what pricing would be fair? When people claim that these pills cost bugger all to make, the answer is (perfectly validly) that the second pill costs bugger all, the first one costs $$$$ in R&D. So I don't know how cheap they would have to be to be considered a fairer price, and I've no idea if it's possible for anyone outside the companies to work out - even if you ignore the fact that what's fair is so subjective.
There is marginal cost, the cost to produce one more product independent of development cost, and fully amortised cost, which amortises the development (and, holistically, finances future development). Saying we should abolish innovator drug patents ignores the latter.
If we take the assumption that a life tomorrow is worth about a life today cutting pharma's revenues 97% means the development model is unsustainable. The government would have to develop drugs (or promise to refund all or most of the cost of developing a drug that gets FDA approved).
On the other hand we know that, since most people will pay whatever they able to for healthcare, drug companies have too much leverage. The market doesn't function well un-aided.
The problem here is the way this decision has been implemented throws up a lot of regulatory uncertainty. Having an objective framework for how innovator drug companies can be subject to need-based forced licencing (and under what boilerplate terms) would allow pharma companies to plan how to allocate development dollars.
"we" don't know that. In fact, we know that it's wrong.
When people are spending their own resources, they plan their non-emergency spending.
For example, I'll bet that you don't take the vitamins that you should. You probably also don't exercise as you should. It's money and time that you could easily afford, yet ....
And then there are Flex spending plans. Folks put money into those plans so they can pay for health care with pre-tax money, giving them lower out of pocket costs for healthcare.
Look at how people handle their deductibles and co-pays - again, they try to minimize their costs.
New drugs are often about squeezing out those last few years of life-expectancy, and even if they're not, they're a marginal increase over today's drugs. Meanwhile today's drugs fail to save many many lives because they are unaffordable in order to pay for R&D on new drugs (which will also be unaffordable).
See, the system is very broken on both sides.
But the choice to me seems very clear:
- on the one hand you have +developing new future drugs. except those drugs will only be affordable to a tiny fraction of the world population. additionally this lines the pockets of big pharma and the bureaucracy that keeps the system broken as it currently is ("Bayer was disappointed")
- on the other hand developing new drugs will be slowed down for some time, but all people will be able to afford the many current ones that could be saving lives today, big pharma + your FDA bureaucracy will fail and maybe that opens room for a new and better system to emerge so that R&D on drugs may start once more but in a more efficient manner. All the while lives are being saved and quality of live is being improved because today's drugs are affordable to everyone.
Lives are being saved and quality of life improving...for everyone who doesn't have a disease we haven't yet cured or which hasn't become treatment resistant (biology is adamantly lassez-faire).
The industry needs regulatory upheaval and new ways of financing itself. But if the response is to throw away the ability to recoup the initial investment profitably, medical research will just start devoting funds to making treatments exclusive, e.g. only invest in custom/on-site medicine.
If I were to say anything negative about this it would be that this sets a bad precedent for any new drugs coming to India -- knowing that the government can effectively void out drug patents after certain number of years, the big pharmas probably would not want to set up shop in the country altogether. Does that sound familiar?
This town is no longer friendly for business.
Under the new forced licensing terms, Bayer will still be making money. In fact, it might end up making pretty much the same as before, since volume will increase dramatically thanks to the 97% price cut.
That's why drug companies don't do differential pricing, because they can't stop the cannibalization of their wealthier markets.
Suppose that big pharma stops selling drugs in India. That wouldn't make much difference because the generic drug manufacturers would still make cheap copies of the drugs. The only downside would be that new drugs will take time to be introduced because of the time needed to reverse engineer the formulae and set up manufacturing capabilities.
I disagree here. Pure laissez faire capitalism works no better than pure communism or socialism. You need a mix of both to have a functioning economy and IMO it should be pretty clear at this point that health care works best (cheapest and most effective) on the socialism side. American has the most expensive health care in the world, but not the best service.
I agree that the more socialsist systems work better atm but this does not include development of new medication and equipment. Would you want that in gov hands too?
Agreed. Which is why health care shouldn't be a business. It leads to perverse profit incentives and it's an inelastic market in any case (you can't "opt out" of care for a heart attack).
>Would you want that in gov hands too?
Not in US government hands, no. But more competent governments could certainly handle this via grants (in fact, I think even the US does this to some degree), etc.
Relevant citation please.
You have to consider both the seen and the unseen: consider the case where a drug is not developed in the first place because the return on investment is (expected to be) forcefully lowered below where it is profitable. Or even more abstract: research is slowed down due to more risk adverse behaviour, delaying a major breakthrough.
Investing in drug development is very expensive and very risky. Very risky investments command a large return on their success.
It's easy to focus on the large sums of money being made on specific drugs, but pharma as an industry isn't inherently more profitable that other industries as a result. The cost of lower prices on successful drugs is going to come from somewhere.
(1) the FDA regulating access, pricing, and financing to the pharmaceutical industry, effectively nationalizing it, and,
(2) the US effectively bankrolling pharma for the rest of the world (it does this to a large extent already, but this would throw the scales all the way).
It would also have little effect on what innovator (or generic, for that matter) drug companies could charge outside the US.
Then when the whole system is ineffective, corrupt, counter-productive, and an enormous wastes our tax dollars (see the current FDA, PTO, DOE, etc.), what will happen? Well, at best, nothing. At worst, the Statists will use the lack of success as an excuse to take over even more of the system. Maybe the FDA would then want to hire the researchers to design and test the drugs in the first place. They would need a bigger budget for that.
Also "6% royalty on net sales every quarter to Bayer" that isnt all unfair
So no, it isn't fair.
On the question of fairness: Is it fair for people to die because they can't afford a life-saving drug? I'm sure that's what it boiled down to for the Indian government.
According to my math if Bayer priced the drug over here the same way they did in India relative to average per-capita income the drug would cost around $1.5 million per year. Would that change your perspective?
And on the flip side of intellectual property, the US is able to extradite a kid over piracy of TV shows? (http://news.ycombinator.com/item?id=3699325)
Neither seems right to me. Maybe they aren't the same thing, but if ThePirateBay was sending the MPAA checks for 6% of what they made on the site, and saying "This should make it right, you weren't cheap enough so we distributed it ourselves" then the US would be trying to seize and detain people involved.
Hasn't India signed some intellectual property treaty with... well pretty much the rest of the world? How in the world can they do this?
And totally on the flip side- props to India for sticking it to the man. Kinda...
In order to get a drug approved in India, you need to run clinical trial on Indians. You also need to go to through the regulatory process, which isn't cheap.
If drug companies fear that the millions they spend on getting a drug approved in India won't be recouped because the gov't issues a compulsory license, then they simply won't do it.
I mean think about it... if introducing your product to a new market resulted in a net loss, would you do it?
Or, they could have offered the drug at 25% of the original cost and the gov't could have told them to shove it.
The cost is overwhelmingly in R&D -- finding the chemicals, proving it doesn't kill people, and proving it actually does something useful.
R&D stays in private sector. All successful drugs are bought by the government at the cost of R&D and a sizable profit. The government, then, distributes it. Government can control the distribution and Pvt. markets can control the invention.
Government can then tie up with other govts. and allow sales of the said medicine in those countries.
It's not an ideal solution, but it has best of both capitalist and socialist ideologies.
Sounds like a nonstarter to me.
We could really screw up an industry that has been phenomenally successful at producing drugs that everyone agrees have provided incomparable and vital life-saving solutions.
We should be extremely sober and careful about messing with it and mindful of our ability to destroy the benefits that we already get today. I've seen too many comments in this thread along the lines of "They make too much money" or "The Government should take over the industry" or "Something radical needs to be done right away because 'lives are at stake'".
Statements and positions like those set off my warning alarms.
Again, I'm inclined to agree with your criticism of that particular proposal. And I'll agree that there are things that are worse than the current state. But the current state is pretty bad, and imperfection is not a disqualifier for "better".
- They use Drug trials in lightly regulated developing countries to get FDA approvals for medicines. There was a famous case in India last year I think where 10-12 children died due to an experimental vaccine. The company involved was one of the biggest vaccine manufacturers in US. That case got hushed up quick.
- Drugs that get banned in US/Europe get dumped in Developing countries where the science/regulation may not have caught up yet. So even when the deadly consequences are known, these companies push dangerous medicines.
- Medical Reps employed by these companies routinely pressure doctors to over-prescribe expensive medicines. for a uneducated public this ends up costing them more for the same effects.
Against the backdrop of these practices an occasional such judgement is indeed good news against these companies.
One of the more recent ones was from a serial entrepreneur in the medial space.
He said the reason that drugs take so long to produce is the FDA process. Now the FDA is housed by smart people but you have to look at it from their prespective.
They can accept or reject drugs. If they reject a drug then there is no serious problem that can come back and bite them.
If they accept a drug, there is no real upside to them.
They get no bonus for accepting the drug, however if the drug turns out to actually harm people then they are squarely in the cross hairs.
This leads to the question of why would the FDA accept any drug without being 100% sure, and with medicine there is no such thing as 100% sure.
however because of such decisions companies will find it risky to invest in life saving drug research. I think government should also take some steps to win their confidence.
I disagree. That mentality is precisely the reason that they are overpricing now (and always have done so) as much as they can. People will always need life saving drugs, and ordinary drugs as well. Terminal and cronical patients will always try both traditional and new drugs (or the state will provide it to them in case there is health care). There is absolutely no need to overprice because any price will eventually give a fair ROI for them.
What they do instead is maximize profit at the cost of human life.
On a different light, a lot of research is funded by government entities worldwide, and even if pharmaceutical companies do their own research, they certainly reference other research that is also publicly funded. Thankfully some states do care a lot about their people and will challenge them. India is doing so now, Brazil has also broken HIV drug patents (they cover the full cost of treatment through Health Care) and I hope to hear more of it from different places.
This is false.
When patents expire the drug is also made by generic drug making companies for cheap. So upper bound of getting a ROI is the lifetime of a patent (30 years for drugs iirc, 10 years longer because it takes about 10 years to develop, so still effectively 20 years).
For every drug that is successful, they pour tons of money into drugs that are eventually considered useless. So the R&D isn't solely for the one successful drug, but also for the losses.
A competitor might come in 5 years with a drug for the same problem, that works better. Now the timespan for any ROI has been cut short to 5 years.
Looking at the profits of pharmaceutical companies: sure, most medicine is probably overpriced. But saying that they can get a good ROI at any price is false. They will need to recoup the billions spent on R&D.
Claiming that the cost of clinical trials is the major reason that the drugs need to be priced that high is true, as far as it goes. The issue is that the pharmacuetical companies lobby for more regulation to keep out other treatments not backed by themselves. In addition, they focus on drugs that can cure lifestyle choices (obesity, for example) as rich people can afford them and these will provide a good ROI. Malaria, a disease which is eminently treatable is not focused on as it is a disease which effects poor people.
Another major issue is that the companies suppress negative research and studies which show defects in their products. Its an extremely broken system.
What I would propose is the following:
1) new development of drugs should be carried out by private companies and universities.
2) Patents arising from this research should be under a compulsory licensing scheme, based on the outcome of clinical trials.
3) Clinical trials should be paid for directly by healthcare systems, to avoid duplication of research and to prevent the suppression of negative research.
4) Manufacturing should be completely separate companies who can tool up and down plants. Currently, plants get built in anticipation of approval and then shut down if problems arise, which is extremely wasteful.
This would allow the private sector to retain development and manufacturing (but in different companies) and the governments would have much more incentive to conduct good clinical trials, and the results would be public so others could re-analyse the data and find better links with conditions, drugs and outcomes.
The thing is, when a company chooses to manufacture pharmaceuticals, it shouldn't just be 'business as usual' for them. They must realize that they have a social responsability to undertake besides making a profit, and that is even without a proper regulamentory agency or something of the sort.
Most countries have some kind of social welfare, so maybe these companies could have differentiated deals with those programs and still price whatever for those can afford it. It would both cover a market they wouldn't otherwise reach and not jeopardize those that imperatively need treatment and can't afford it otherwise.
Ultimately, matters of social responsibility ought to be governed by the government, using taxation to spread the burden equally among everyone who can pay.
Couldn't you turn this on it's head?
What if the companies could expense the cost of getting the approval. I.e. the tax payers pay for drugtesting and approval process.
Wouldn't this make sense? Since it's in the publics interest to get safe medicin, shouldn't they/we pay for that part.
The prices of the drug includes the cost of development. So if you remove that cost you would decrease the price.
It would force the governments to develop better and cheaper systems themselves to make sure that they can test for cheap.
Surely the current scenario isn't working is it?
Are not drug companies finding drugs that people desire a great deal for their life saving and other efficacious properties?
I'm guessing that you don't like that newer drugs are too expensive. What would be your definition of "too expensive" and what would be your proof that such a situation exists?
The current scenario isn't working IMO if the majority of the cost comes from the approval process.
Drugs for me er fairly cheap as I come from Denmark.
With regards to proof. The article we are debating here is proof that since the production of a drug is extremely cheap the development of it is extremely expensive.
Surely that cost can be cut.
> It would force the governments to develop better and cheaper systems themselves to make sure that they can test for cheap.
I doute they cool do that.
> Surely the current scenario isn't working is it?
Well like most things it kind of works but is not very effective.
I agree its not very good right know but I don't know how to change it.
>I doubt they could do that.
While I disagree with the OP's point in general, this is probably true in a way the OP didn't intend. When testing, each unit of thoroughness you add costs the same amount but catches fewer and fewer mistakes. You generally want to stop adding more tests when the cost of new tests (in drugs that are too expensive to develop) exceeds the cost of letting bad drugs through. The research I've seen shows that not only is the FDA well into the point of diminishing returns, its also probably into the realm of negative net returns on drug testing. Probably because there's a huge public outcry when a drug they approve ends up killing people, but no outcry when I drug that could save lives isn't developed due to too much testing. If anybody has more research on the topic, however, I'd be happy to see it.
As far as I know there are some pretty standard procedures you have to go through. Surely it must be possible to somehow validate and verify whether someone is trying to take advantage.
You can't hinder some taking advantage of it, but you don't have to IMO.
>I doute they cool do that.
Of course they can, just like then can improve many other areas in public service.
>I agree its not very good right know but I don't know how to change it.
Well I for one think its more fair to accept some fraud to make it cheaper for everyone else if possible of course.
Bayer's current market cap is a fairly significant EUR45.93bn. So even with the "patent cliff" that JunkDNA discusses, it seems people still expect big pharma to be profitable.
Government wants to buy it and distribute through government and aided hospitals, that is the principal reason behind it.
According to statistics there about 200 Indians using it, even if can save a additional thousand lives it is worth passing this compulsory licensing
When they lower the price of the drug in India, a gray market arises that resells the drugs to other countries. The presence of the gray market creates yet more opportunities for scam artists to sell fake versions of the drug, creating yet more victims.
My point is that this isn't as cut and dry of an issue as you imply.
Imagine if you had eliminated Bayer's incentive for even creating this cancer-saving drug in the first place. How many lives would you have ended prematurely? Imagine all the new drug research that depends upon Bayer's initial research that will save yet more lives.
Like I said, it's not so cut and dry. The pharmaceutical industry has had quantifiable and demostrable success at a level that is almost unparalleled in history. But your claim is that it's backwards.
I think your statement is inherently backwards. The "reality" is that the pharmaceutical industry produces something that society has found to be extraordinarily valuable. The people I see warping models that don't reflect reality are the ones that disregard the cost of keeping the pharmaceutical rate of discovery going.
I'd love to see improvements to the industry, but "human lives are at stake! It's all backwards!" along with the "senior management should be held accountable" just don't seem to be statements that head is a direction of improvement.
It's distressing that people think that the only possible motivation for inventing life-saving drugs is money.
Lots of people want this and lots of people want to put in the work. Our governments are supposed to be representing us, right? In fact, they are already one of the main contributors to cancer research (http://kcl.academia.edu/RichardSullivan/Papers/263427/Trends...). So why are we leaving it to profit hungry organisations to literally save our lives? If governments do all the research instead then they can all collaborate and share each others' knowledge. That way everyone gets access to everything just by doing their part. It's the open source, creative commons approach to the problem. People can pay a company to do research just so that company can turn around and charge them a fortune or they can pay the equivalent amount in taxes and get cheap product with guaranteed access.
Business is useful for a lot of things but definitely not the basics. They need to be kept simple, cheap and reliable. Only way to achieve that effect is through collaboration, not competition.
>The pharmaceutical industry has had quantifiable and demostrable success
Then I guess our definitions of success differ. To me, success is not in how big their turnover is but what kind of an impact they make on the world and how fairly they treat it. I don't blame anyone for these kinds of actions, their monkey spheres (http://www.cracked.com/article_14990_what-monkeysphere.html) are full and they can't empathise with the people they affect. They're just reacting to the rules of the game. And that's what's backwards - the game, but we can choose to play a different one.
Yes human lives are at stake (but then they always are), yes our models should follow reality as closely as we can if they are to give any useful predictions.
But what do you mean the business is backwards? Surely they are trying to make money.
I would argue that our models do not follow reality closely enough given that there are people who cannot afford to have their lives saved. If our model yields such results then it ought to be rebuilt or refactored.
>But what do you mean the business is backwards? Surely they are trying to make money.
As in peoples' business, what they do. To rephrase, the business of how we handle healthcare research is backwards. The part of society responsible for that should not be in the mindset of making money but that of saving lives.
This is little different that Greece having passed laws allowing them to retroactively change bond agreements and then implement said changes they claimed were now legal under their laws.
Now if India decided to pay a reasonable fee to Bayer for the ability to have a national drug company manufacture them then I would see little issue here.
Instead they are simply passing the costs to other countries. As in, let those "rich" countries pay for the development of medicines and countries like India will simply steal what they want with impunity. How different is that from what the Chinese do to manufacturers of cars, electronics, and other technology not developed at home.
The cost is simply borne by people they don't have to see or care about. Yes I know the drugs are expensive but development of new medicines is not a cheap endeavor. To have government arbitrarily decide who can charge what and when will simply trade a few lives today for a potentially larger number in the future, that larger number arises because potential treatments may be deemed to risky to research under the threat of confiscation.
Do they think cancer is just going to stop happening so their profit will dry up?
Kudos to India for doing the right thing, I think the 6% royalty is a nice offering.
Down-vote me if you like, but I get sick to my stomach when I read sentences like this. If someone is able to deliver and sell the anti-cancer drug by 97% cheaper than you, then in my eyes you have no right to interfere. I am starting to dislike the whole concept of intellectual property and patents and copyright. These are tools of greedy people and bring nothing to the table for the wider audience. No one creates anything just by himself. You are always building on the work of others and merely deriving, combining, changing and mutating it. Whether you do it consciously or unconsciously. It is the principle of cultural evolution and it is why we are where we are. If intellectual property was always practiced the way it is today, I fear we would still be in the Middle Ages.
Get rid of drug patents, bye bye new drugs without direct g'vmt funding. Drugs are trivial to reverse engineer, incredibly expensive to invent.
There is also a massive amount of drugs that go nowhere, often even failing at major trail stage, so the successes pay for the failures.
Our government is fundamentally broken and the source of a good portion of the problems in the health care industry... so let's sprinkle some more government in there!
Seriously, the government has plenty that it can do by providing more transparency in the industry, streamlining and correcting problems in the Patent office and at the FDA, stopping collusion and price fixing, and examining the length of patent-granting-monopolies to ensure that profiteering isn't too far out of whack.
... Provided that that "someone" also bears their fair share of the cost of discovery and clinical trials. THAT is the issue here.
The mindset of these companies of treating the poor people as Guinea pigs is also disgusting
671 reported deaths http://www.business-standard.com/india/news/human-rights-pan...
There is no count of no of people who get disabilities but don't die due to trials failing. Who will pay for these? These pharma companies are steered by greed
But if poor Indian patients are going to test these drugs, the GP can certainly argue that poor Indian patients should be able to afford them.
India is one of the biggest hub for most of the pharma's clinical trials due to huge poor population. The rules are lax and they take advantage of it. Lot of people die and many turn paralyzed or disabled permanently due to drug's unknown side-effect.
These corrupt pharma companies want to use India as it's test-bed but want to sell the drugs tested here at an abysmal high price such that it is even out of my reach (even though I am well off).
Anyway the point is moot because R&D costs will probably be paid in the US and other richer markets, India could simply take a free ride. If everyone wanted to do this then you would need to find a way to compensate R&D investments.
Better to just negotiate cleanly with the company for the drug you want, and sell it all on your own market like the NHS does.
Well that's what I meant negotiate a "fair" price that would encourage further investment but you don't overpay - the problem is that unless you have competition/substitutes you can't have market pricing so you need to have a good estimate of "fair" price, eg. say a company comes up with 100% effective HIV cure tomorrow - no competition, nothing comes close, a lot of people would pay gold for that but well over investment/production cost and profit is in many multiples of going rate. You would say "fine" obviously there's a high demand - but the reality is that the demand is inelastic and supply is artificially restricted by a government granted monopoly - reverse engineering costs + production cost would allow a lot lower prices, so you aren't benefiting the consumers (the discovery has already been made) or optimally allocating resources (you have recovered investment/production costs, earned standard profit rate and then some) the thing you earn on top of that is deadweight loss from rent seeking so you need to come up with some metrics to avoid that and also set expectations for investors.
All I'm saying is that if we accept that there is a market failure where you can't recover your investment because you don't have enough advantages on the market (without IP) we should consider compensating the innovator in a way that would stimulate further investment in the area, and when that is the objective you can measure/model what is the minimum profit incentive you need to provide to guarantee acceptable levels of R&D investment.