[Thriptic]

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

[sametmax]

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

[tripzilch]

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

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

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

[wpasc]

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

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

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

[dragonwriter]

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

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

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

[wpasc]

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

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

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

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

[menckenjr]

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

[Ericson2314]

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

[JKCalhoun]

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

[Thriptic]

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

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

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

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

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

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

[JKCalhoun]

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

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

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

Just spit balling here to be sure.

[ams6110]

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

[dnautics]

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

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

[nicoburns]

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

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

[toomuchtodo]

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

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

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

[BurningFrog]

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

[aaavl2821]

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

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

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

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

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

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

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

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

[Pharmakon]

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

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

[aaavl2821]

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

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

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

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

[pkaye]

> rejiggered stereochemistry to keep a patent

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

[Pharmakon]

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

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

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

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

[aaavl2821]

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

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

[coryrc]

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

[samfisher83]

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

[aaavl2821]

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

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

[dmitriid]

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

Please, do.

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

[PrimalDual]

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

[wpasc]

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

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

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

[m0zg]

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

[duxup]

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

[cgag]

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