[astazangasta]

The idea that development is not publicly funded is a myth. Regulators define every step, put in a good deal of the money, and do a lot of the organizing. A lot of the rest is done in coordination with researchers at hospitals and universities that are often publicly funded. As with most large industry involved research efforts, the government and academia are heavily involved in the effort. Only the profit is privatized. It has always been thus.

[barry-cotter]

If your model of the pharmaceutical industry were true they would have very, very high profit margins. They don’t. Privatised profit and socialised losses is a great way of making an individual profit but the pharmaceutical industry is not politically connected enough to do that.

https://www.forbes.com/sites/johnlamattina/2018/01/23/about-...

> The average return on equity for key industries from 2014 – 2016 shows that biopharma’s profits stand at 16.2%, significantly lower than Computer Sciences (31.6%), Beverages (27.4%), Aerospace/Defense (23.0%), and Trucking (19.1%) while modestly higher than Software System/Applications (15.2%) and Healthcare Support Services (14.4%).

> Another measure, Internal Rate of Return (IRR) is even more telling. IRR calculates the sales/cash flows resulting from R&D investments, ties R&D and the returns it generates together, and is a more appropriate metric for biopharma productivity. Deloitte reports that the IRR for biopharma R&D has been steadily falling from 10.1% in 2010 to 3.2% in 2017. Even Wall Street hasn’t bought into the “pharma soaring profits” view. Since February 1, 2014, while the Dow has risen 63%, the stock prices of a number of major pharma companies have been muted with Pfizer and Bristol-Myers each growing by about 15%, and Merck and AstraZeneca by roughly 6.5%. Even Lilly’s growth of 43% still lags the Dow.

[astazangasta]

This is an industry that has had 15-20% returns for decades. I'm not sure what "computer sciences" is as an industry separate from the rest of software, but saying there are some sectors more profitable than pharma says not much. Pharma is huge as a fraction of GDP and consistently profitable because its profit is based on rents. If it is flagging in recent years it is because public sector spending on research is flagging and hasn't yielded as many cash cows as usual.

[refurb]

Yeah, no.

Regulators put no money into it other than what it costs to fund it's own regulatory process. And, under PDUFA, drug manufactures pay >$1M to fund the review of their drug. It's paid for by industry.

Yes, clinical trials are often run by hospitals and universities, but manufacturers pay for everything. Drugs, people, etc.

And you forgot to mention that failures are privatized too. Spend $500M on a trial that fails? That's not the public's money, that's investors money.

[astazangasta]

It's the public's money, since the only reason that the investors have that money is they are given patent monopolies that allow them to take in 1.5% of GDP in rents every year.

[credit_guy]

And my house is a public good, since the only reason it's not being vandalized/robbed/burnt down is that the public spends x.y% of the GDP on law enforcement

[astazangasta]

Your house, if it is like mine, is a lot more reasonably a public good than it is "private property". I didnt build this thing, will "own" it for probably 5% of its existence and do little to maintain it myself. Yeah, you are right. We owe a lot more to the "public" than we usually acknowledge.

[greeneggs]

> Only the profit is privatized. It has always been thus.

This is false. Just the other day we had a discussion on another Alzheimer's drug failure [1]. From the linked article, "Biogen and Eisai will discontinue two late-stage trials designed to evaluate the efficacy and safety of the drug, aducanumab, which has cost the partners more than $830 million over the past three years." This comes after Eli Lilly spent $3 billion on another Alzheimer's drug, that failed in 2016, and other failures from Merck and Johnson & Johnson. There's a fortune being spent on the last steps of getting a drug to market, or not.

One might argue that there has been some regulatory capture, that the pharmaceutical giants have happily acquiesced with the FDA in making drug trials more and more expensive. Now only the giants can afford trials, and small companies have to go through them. But the trials are absolutely extremely expensive.

[1] https://news.ycombinator.com/item?id=19468987