[barry-cotter]

> drug companies spend more money on marketing drugs than researching them

Free samples to doctors are counted as a marketing expense at retail prices, not at marginal prices

> drug companies waste much of their research on copycat drugs rather than new treatments

Marginal improvements are actually a huge deal and make for a lot of improvement. Because of our astonishing ignorance doctors will often go through multiple drugs looking for one with good efficacy and side effects profile with different patients.

> IP law needlessly denies millions access to existing treatments by artificially inflating prices.

It’s not needless. Someone needs to pay for pharmaceutical R&D for the global market. Right now that someone is US consumers (mostly in the form of high insurance premia). If they don’t pay then either the pace of drug R&D will fall or some other mechanism will need to be found to pay for it.

As to pharmaceutical company profits, their return on capital is nothing special, not like academic publishing rent seekers like Elsevier.

[ikeboy]

>Free samples to doctors are counted as a marketing expense at retail prices, not at marginal prices

That doesn't sound like GAAP - is this proper accounting?

[barry-cotter]

I don’t know if it’s proper accounting but there’s no way the marginal cost of producing drugs is high enough to cost as much in marketing costs as they do.

> Between 1996 and 2000, they accounted for slightly more than half of the total promotional dollars spent by industry [22]. Although there is controversy about how best to tally the amount of money the pharmaceutical industry spends on free samples, a recent analysis of 2004 figures sets the retail value of samples at approximately 16 billion US dollars [23]. The retail value of free samples has risen steadily, doubling between 1999 and 2003 [24] (Figure 1).

Chimonas S, Kassirer JP (2009) No More Free Drug Samples? PLoS Med 6(5): e1000074. doi:10.1371/journal.pmed.1000074

https://journals.plos.org/plosmedicine/article?id=10.1371/jo...

[ikeboy]

https://www.pewtrusts.org/en/research-and-analysis/fact-shee... puts recent spending around $5 billion on samples. Seems reasonable for actual cost, not retail.

[ineedasername]

Yeah, I'm not a pharmaceutical, but I have a side hustle of sorts. When I give something away, I'm only allowed to deduct the marginal cost.

[cosmie]

But marginal cost for whom? The entity manufacturing the drug, the entity that holds the inventory, the entity that owns the IP, or the entity that the pharmaceutical rep works for?

Any sufficiently large corporation is more likely than not to be an amalgamation of interconnected subsidiaries, for a wide variety of purposes. Once you're at that stage, there's a lot of room to get creative with how you structure intra-company charges to form whatever optics you want. It's entirely plausible that one internal entity may charge the marketing entity full retail price for samples, if they feel it's beneficial and have enough justification to satisfy accounting and auditors that it's a fair market value for the product (which list price would generally satisfy that requirement).

[ineedasername]

Good points, they can just shuffle the money from one balance sheet to another, but then get to deduct the whole thing anyway.

[ikeboy]

That's not how accounting works.

[refurb]

The other major cost with pharmaceutical marketing is just personnel. When you have 200,000 prescribers (for example) in the US, you're going to need thousands of sale reps. Otherwise how else do you communicate with your customers?

[djrobstep]

> Marginal improvements are actually a huge deal and make for a lot of improvement.

The problem is that these decisions are made on a marketability basis (hence, a plethora of impotence treatments for rich old men) rather than a public health basis.

> If they don’t pay then either the pace of drug R&D will fall or some other mechanism will need to be found to pay for it.

When you hear about it, the concept of public funding is gonna blow your mind.

[barry-cotter]

Racism and ageism aside I agree with you, but I have serious concerns about any but incremental changes to the system we have, since it works. There’s lots and lots of drug development and we get new and better treatments every year.

My preferred system of public funding would be one where the government buys out a patent and places it in the public domain or a prize system. The government would estimate the value to it (or to its citizens) of curing or alleviating some disease, with some objectively verifiable success criteria and then offer a prize of, say 0.7 that amount.

You get the good parts of private enterprise, like experimentation, knowledge elicitation and market coordination. You also avoid the bad parts of government provision, like endless bureaucracy, form filling and the legendary efficiency of Lockheed Martin. If government pharmaceutical research worked well we'd know. The Soviets developed a different psychiatric pharmacopeia and phages and the Chinese found artemisin but it’s not a great record compared to the West.

Fundamentally someone has to pay for this. Right now its the US consumer. If you want to put that cost onto the budget good luck in politics, whether you’re talking about the US budget, the German one or the Chinese.

[djrobstep]

> Racism

?????

> bad parts of government... Lockheed Martin

????

What you say is absolute FUD. The US already has publicly funded biomedical research, which works fine (the NIH). Just needs to do it all that way and put all the research into the public domain.

> If you want to put that cost onto the budget good luck in politics, whether you’re talking about the US budget, the German one or the Chinese.

Weak argument. The US consumer is already being ripped off by drug and insurance companies, and would save money from a public system.