[dnautics]

it's even crazier than that. Let's say that we institute some feel-good regulation that caps profits at 10% of cost. Presuming some sort of single payer system so that we don't have to feel guilty about screwing patients. What do I do as a pharmaceutical manufacturer? I'd overprovision FTEs on the production capability, encouraging them to spend "10%" time on other projects, ideation, but subtly encourage that 10% to be more. I'd create a QC system that is artificially stringent (make chromatography resins fail QC after single use) and recycle the QC-fail materials for pilot studies, etc...

There are always ways to sneakily increase costs. And I'm not going to lose sleep at night, since I am putting those funds back into "improving society".

[vkou]

I think the problem with pharma is not the profit margins, as much as the stupid amount of money that gets poured into marketing.

There is no indication that direct-to-consumer advertising of drugs improves health outcomes. It does, however, greatly increase the cost of medication. Since the marginal cost of producing more drugs is low, advertising, even at a positive RoI, leads to increased prices.

[refurb]

There is no indication that direct-to-consumer advertising of drugs improves health outcomes.

Do you have an citations to back that up? Because I do. And it's from the FDA.[1] I'll spare copying it all down and just leave these takeaways:

- FDA research, of patients who visited their doctors because of an ad they saw, and who asked about that prescription drug by brand name, 87 percent actually had the condition the drug treats. And in 6 percent of those DTC-generated visits, a previously undiagnosed condition was discovered.

- Only 7 percent of doctors said they felt "very pressured to prescribe" a particular advertised drug.

- According to the FDA study, a majority of doctors feel that DTC advertising increases patient awareness and involvement, improves compliance, and enhances the overall doctor-patient relationship.

[1]https://www.fda.gov/drugs/resourcesforyou/consumers/ucm14356...

[mjevans]

All that this tells me is that the current system for diagnosing patients is REALLY broken. Where's something like IBM Watson's doctor module to shortlist treatments for humans to undertake and evaluate?

[epmaybe]

It seems weird then, that the American medical association lobbies against DTC advertising.

[upvotinglurker]

The subset of doctors who expend probably significant time/effort getting on the governing board (or whatever it may be called) of the AMA, maybe have different opinions than doctors in general? (I've found this sometimes to be true of professional organizations/unions)

[epmaybe]

True, this is indeed possible. However, note that the FDA survey cited only asked 500 physicians. The survey was also done in 2004, which I believe is prior to the cracking down on gift giving and pharmaceutical companies giving kickbacks to physicians. If I remember correctly, DTC advertising spiked after this happened.

Here's some more recent data (also not super scientific, but probably a decent representation of most physician attitudes today): http://www.mmm-online.com/campaigns/what-doctors-have-to-say...

[Brakenshire]

Yes, I agree, I'm a big supporter of the pharmaceutical industry, it seems from random conversations that a significant proportion of people just think they are crooks, but clearly developing and testing drugs is expensive, that has to be paid for somehow, and private companies are completely indispensable to the process of drug development.

But, marketing is where my support starts to peter out. It seems crazy that marketing takes up such a large percentage of expenditure, it's not only wasteful but also introduces perverse incentives. I really think it would be great if trade deals could establish not just concessions like mandated strong intellectual property laws or restricted bulk negotiation, but also serious limitations on the other side of the coin, on something like pharma marketing.

If deep trade deals are justified by shaping the market to be at its most productive, I don't mind if that increases profits most of the time, but occasionally there will be measures that will improve the market but also reduce short term profit for some existing major players.

In practice, under the current situation the market is structured so that a profitable pharma company has to be good at generating demand, just as much as meeting a need. A company that can do the latter but not the former will go bust.

I think a world with more emphasis on judgements made by clinical research organizations (private or public) like NICE or the Cochrane Foundation rather than TV adverts, wine-ing and dining, and the nag factor on patients and overworked individual practitioners, would end up with a drastically more effective market for actually finding cures.

[refurb]

It seems crazy that marketing takes up such a large percentage of expenditure, it's not only wasteful but also introduces perverse incentives.

How much do drug companies spend on marketing? I've only ever seen article mention SG&A which is an accounting catch all for more than just marketing.

[rayiner]

I have my concerns about drug advertising, but pharma company SG&A isn't out of line with say tech company SG&A: For 2014-2015, the ratio between R&D spending and SG&A spending is 0.59 at Pfizer, 0.75 at Google, 0.56 at AstraZeneca, 0.43 at Apple, and 0.58 at Microsoft.

[Fomite]

Though in fairness, Apple isn't trying to get you to ask a licensed professional who has years of education about the new Apple Watch.

[spullara]

They might once it does glucose measurements... And I hope they do.

[barrkel]

How about prizes as a way of funding R&D? It's a different kind of profit motive, and it doesn't rely on monopolies and rent extraction to make things profitable. Once a drug is developed, it can be reproduced at close to cost.

https://en.wikipedia.org/wiki/Prizes_as_an_alternative_to_pa...

[JamesBarney]

The majority of advertising my pharmaceutical companies isn't direct to to consumer but to doctor's. And you're right it probably doesn't improve health outcomes, but I imagine most advertising doesn't improve consumer outcomes much.

[harryh]

That is an interesting point but doesn't really have any thing to do with rare disease drugs. There is no marketing for these drugs.

[maxerickson]

The sales rep calling up the doctor seems an awful lot like marketing.

Now a sales rep was on the other end of Owens’s phone from Alexion Pharmaceuticals Inc., the New Haven-based maker of Soliris—one of the world’s most expensive drugs, typically priced from $500,000 to $700,000 a year.

The rep was calling to argue with the treatment plan. She pressured Owens to continue Soliris treatments, ticking off detailed information about the mother’s organs that the doctor hadn’t shared with the drugmaker. “How did you know that?” Owens remembers thinking. She was monitoring the patient’s condition with seven hematologists and wasn’t swayed by the Alexion rep. “I was really taken aback by how bold and brash she was,” Owens says. “I’ve never had an experience like that—before or since.”

There was recently a discussion here about a new drug for ALS and when reading about it I took note of the line in the FAQ that mentions that anyone with a prescription can call the pharma company up and get a case manager to help explore their coverage and setup copay reimbursement ("Searchlight Support").

http://web.alsa.org/site/PageNavigator/alsa_radicava_faq.htm...

That's not exactly marketing, but it isn't really terrific that manufacturers are setting prices so high that they can spend significant resources helping people use their insurance.

[dmoy]

Idk how to break out their financial statement, but in 2016 it looks like they spent a billion dollars on "sales, general, and administration" (distinct from cost of sales (250m) and R&D (750m).

I would imagine something in that billion dollars is marketing...