[thisrod]

I wonder how much this will cost? A drug you take 2 times a year could be much cheaper than one you take 365 times a year, and that's a big deal.

The existing daily pill is really expensive. Australia knew that PrEP would practically eliminate HIV transmission. Even so, the decision to pay for it took years and was fiercely contested. That was before COVID, and people are more willing to pay for public health today. But cheap PReP would make a big difference in the poor countries where HIV prevention really matters.

[argonaut]

The shot will likely be exorbitant in the USA. Gilead charged almost $2k/month for Truvada (list price, of course) and Descovy is the same. Generic Truvada is like $30/month now, so the price was never about the cost to manufacture. Obviously Gilead is developing these new drugs/shots for when Descovy's patent expires.

They rely on the government mandating that health insurance companies cover the shots. This drives up the price.

[ortusdux]

The price is rarely ever about the manufacturing cost.

"A new study in 2020 estimated that the median cost of getting a new drug into the market was $985 million, and the average cost was $1.3 billion, which was much lower compared to previous studies, which have placed the average cost of drug development as $2.8 billion.[4]"

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

[pfdietz]

It should be pointed out that looking at the average cost of developing a drug is misleading, since one has to include the cost of all the drugs that failed to make it to market. One also has to include the money spent by small companies that failed and were not bought out, not just the money the big companies spend buying the successful ones.

[Nifty3929]

This is critical, and exactly the sort of thing someone will gloss over, intentionally or not. The numerator is the total cost of developing ALL the drugs, even (especially) the failed ones, but the denominator is only those drugs that are successful.

[FireBeyond]

On the contrary, often pharma proponents will gloss over the fact that most “failures” are discovered and canned at a small fraction of the investment of getting a drug to market (when it’s obvious it won’t do what you need or has other challenges).

Actually not in the contrary - you are right. It’s just that the failures often cost a small fraction. They don’t get to 95% testing and approval before “nope, not even close”.

[pfdietz]

I understand 60% of drug candidates fail in phase 3, the last and most expensive phase of testing.

There are of course lots of chemicals ruled out early, but that's before you have something you'd call a drug.

[tbrownaw]

> One also has to include the money spent by small companies that failed and were not bought out, not just the money the big companies spend buying the successful ones.

If you're looking at the total amount spent by "the economy" (drug development costs X% of GDP), sure. If you're looking at "why are drug prices so high", it probably doesn't make sense to to include costs funded from other places (which in this example I assume would be research grants ie taxes, and venture capital funds).

[mlyle]

For the private parts of development, the costs are absolutely priced in. A large drug company needs to amortize the cost of all development attempts, not just the successful ones. Private investments into smaller firms price in a very large chance of failure, so the cost of capital is quite high.

[pfdietz]

That's not quite right. A drug company with a new product will charge whatever the market will bear. What the costs do is control the scope of the industry: if profits are high, the industry expands to try more kinds of drugs, stopping when the attempts on the margin are just profitable enough (on average). If profits are not expected to be adequate, the industry contracts.

[JoelEinbinder]

I'm not going to invest a drug company with a 90% chance of failure unless I can expect to get a 10x return if it succeeds.

[FireBeyond]

The problem with this argument is it assumes the cost of a failure is the same as the cost of success, which it cannot be: the successful drug has to go through more rounds of testing and approvals than a failure.

In reality many failures are early or first round failures. Not free but a small fraction of the price of getting to market.

So to you example a 90% failure rate may only require a 2x or 3x return on your successes to “break even”.

[chimeracoder]

> "A new study in 2020 estimated that the median cost of getting a new drug into the market was $985 million, and the average cost was $1.3 billion, which was much lower compared to previous studies, which have placed the average cost of drug development as $2.8 billion.[4]"

PrEP repurposed Truvada, an existing blockbuster drug that had already reaped immense profit for Gilead for use in HIV treatment by the time the trials for PrEP began. The trials for PrEP were funded by the government, not Gilead. Gilead, however, got to retain all profits earned from PrEP.

[HideousKojima]

Did Gilead fund the R&D? There's a lot more to developing a new drug than just trials (though I think Gilead should have foot the bill for the trials too).

[roughly]

I don’t know if it’s the case here, but very, very, very often in biotech you’ve got the primary foundational research happening at university labs funded by grants, and it’s the productionization of the research (and then clinical trials, etc) that are what the biotech companies are doing. I’m not sure where that shifts the “who deserves what” conversation, but without university research labs, there’s no pharma industry.

[pfdietz]

If the university owned the IP, then its value should have been reflected in what was bid for it.

If the knowledge was not restricted by IP law, then any drug company could use it, and compete for new drugs based on it. As such, it would not provide any of them with a competitive advantage, and so would not be reflected in what they could charge.

What universities typically produce is not a chemical that can serve as an actual drug, but is only a starting point for a long and expensive process of producing such a chemical. And then, it's often found that the target of the class of potential drugs isn't actually a good one. One can't determine that until drug candidates are available to test on real patients.

[Nifty3929]

"without university research labs, there’s no pharma industry." - I think you have it exactly backwards: Without the pharma industry, there's no medicine. Good research goes nowhere if you can't bring it to market.

The pharma industry COULD do their own foundational research, but the university system cannot bring a drug to market.

[wdwvt1]

The direct role that university research plays in drug development is overstated. The majority of cost and difficulty in pharma is _drug development_ not _drug discovery_. Pharma can do the discovery and the development, academics can only do the development. Absent academia, we'd have less drugs. Absent pharma we'd have no drugs.

Academics focus on drug discovery because it's better aligned with academic incentives and timelines (see this commentary for a brief description [0]). Drug development costs (including clinical trials, extensive and repeated med chem, etc) are borne mostly by drug companies.

Fair data on this is hard to come by because the two main sources have clear conflicts of interest (academics and pharma industry publications). One study Derek covered before (data from 1995-2007) shows only 24% of drug scaffolds were first found at a university and transferred to a biotech or pharma for development [1]. You can break this down further to highlight any story you want to support ('university ID'd drugs more innovative' vs. 'pharma ID'd drugs help more people') but they key point is that combining all the US research leads to only 24% of drug scaffolds that make it to market.

I think everyone acknowledges that outside of finding the scaffolds and the basic biology, pharma is paying the vast majority of clinical trial costs. [2] gives a figure of total NIH funding of clinical trials at 10% of overall (e.g. pharma covers 90%).

I think an argument could be made that the NIH training grants (which pay grad students in the biomedical sciences) subsidize the work force substantially, and might have a higher impact than direct research grants. I couldn't find quantitative data on this with a quick search, but I think this is often overlooked in the discussion.

Finally, a less quantitative pieces make me think the impact of the NIH/government funding is overstated even given the above numbers. In my own field (microbiome), academic research has been almost inimical to the production of quality drugs. For every disease there exists a paper suggesting that a certain gut microbe changes the likelihood/severity/X about that disease. Academic labs have incentives to publish significant results fast, and in the microbiome this has led to a) abysmal signal to noise ratio with very high likelihood of failure to replicate, and b) an epistemic closure about what types of microbiome data matter and how they should be pursued as drugs that is totally divorced from the reality of how drugs are developed. Much of the knowledge base is polluted by low-quality research that has been done for the purpose of publishing. While the NIH spends ~40 billion a year on external research grants [3], I think you have to heavily discount this for the amount of just pure "grad student needs to graduate gotta publish" material that gets produced.

[0] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10812233/ [1] https://www.science.org/content/blog-post/where-drugs-come-n... [2] https://www.fiercebiotech.com/research/report-industry-not-n... [3] https://www.nih.gov/about-nih/what-we-do/budget

[a-dub]

i've always viewed big pharma as like pre-internet record labels. they pick up talent (that often comes from bohemia aka government funded research), vet it, run the trials and put up the money, do the engineering to deliver it at scale and then market it.

[Symmetry]

The usual story is that academia finds an interesting mechanism to produce the desired effect. Though occasionally this is done by industry instead.

Then industry turns that into a specific molecule that can enter the human body in a standard way and doesn't produce too many side effects.

Then industry figures out how to produce that molecule at scale reliably in a sufficiently pure form.

And at the same time industry is shepherding the drug through clinical trials.

[ortusdux]

A significant portion of the cost is the drug trials. Excedrin Extra Strength and Excedrin Migraine have identical formulations, but IIRC Bayer spent $300m on FDA approval for migraine treatment, which is why the migraine variant continues to be more expensive.

[chimeracoder]

> A significant portion of the cost is the drug trials. Excedrin Extra Strength and Excedrin Migraine have identical formulations, but IIRC Bayer spent $300m on FDA approval for migraine treatment, which is why the migraine variant continues to be more expensive.

Your analogy would only be relevant if the US government paid $300M for the FDA approval and Bayer got to pocket 100% of the markup.

[rishav_sharan]

Talking of studies, from the same wiki

   A 2022 study invalidated the common argument as is for high medication costs that research and development investments are reflected in and necessitate the treatment costs, finding no correlation for investments in drugs (for cases where transparency was sufficient) and their costs.[20][21]

[mortehu]

The Wikipedia editor was a bit naive to think such a basic study could invalidate that whole claim. They measured the correlation between the list price, adjusted for use amount, and development cost. As far as I can tell they didn't take into account number of customers each drug would have, how long the drug would stay on the market before profits are cannibalized by competitors (see e.g. Wegovy), and definitely not the cost of failed drug development.

[gomox]

These original $3B numbers are highly misleading, to the extent that I deem them to be bordering on a straight up lie.

See: https://news.ycombinator.com/item?id=18693177

[hanniabu]

Also the government, aka the public, subsidizes a lot of those costs

[renewiltord]

Same with software. I saw IntelliJ costs $250/year but it costs almost nothing to send that file (it's like maybe 1 GB max, cents). You can get it from generics manufacturer on TPB but updates are not as frequent.

[consteval]

The difference here is that:

1. Pharmaceuticals actually don't do all their own research. Universities find the drugs and what they can treat, pharmaceuticals research the product viability. They make medicinal products, they're not research labs

2. The research is often majority funded by the government, i.e. your taxpayer dollars. So the costs are often socialized, but of course the revenue is not.

IntelliJ actually develops they're stuff, they don't just take existing code, test it a bit, and then make a product. And IntelliJ is a truly private company, pharmaceuticals are not because they get huge sums of money from the gov.

[Cthulhu_]

Are you insinuating that the only expense the company behind intellij has is the data transfer?

[namdnay]

It was clearly sarcastic

[Analemma_]

I'm no fan of pharma industry but there's an unfounded and troubling assumption embedded in this comment: that any drug price over cost-to-manufacture can only be extortion. How do people recoup R&D costs (which are the vast majority of costs in getting a new drug onto the market)?

[asveikau]

Doesn't the government also fund a lot of pharma R&D?

Here's a 2019 article that came up in a Google search: Taxpayers funded this HIV research. The government patented it. Now a company profits https://www.latimes.com/business/la-fi-gilead-sciences-truva...

[pfisherman]

The government funds a lot of early stage preclinical research. These are the inexpensive stages of the pipeline.

As soon as you move into humans you can add another 2 or 3 zeros to your burn rate.

It is not politically feasible for the public sector to fund later stages. The numbers are just too big. Just think of the campaign ads that would run around $200M late stage failure funded by the government.

The reason why mega giant pharma companies exist is because they make enough money and are capitalized enough to withstand multiple $100M failures without going belly up.

[tptacek]

Taxpayers fund all sorts of stuff that is ultimately commercialized!

[asveikau]

So that's an argument that the government and the public should get a return on that investment, or profits should be constrained.

Or an argument against exclusive rights being in private hands.

[ToValueFunfetti]

The public gets access to a life-saving drug that otherwise would not exist, which is exactly what the government is paying for. You can reasonably argue they they should get more, but arguing that they should get some ROI is moot; they're already getting a tremendous ROI

[sroussey]

Universities certainly do. IP transfer is big business.

Subsidies for oil, not so much.

[kiba]

The outcome for taxpayer ROI should be about the benefit to the public at large regardless of who commercialized it. Commercialization should eventually lead to better and cheaper version of the technology, which increases benefit to the public.

Of course, the people who worked to commercialize it deserve pay for their work, so the question is exactly how much.

[smt88]

I think it's perfectly fine to assume that it's a form of extortion to profit from life-saving products, which is why some people agree that pharmaceuticals shouldn't be a for-profit industry at all.

[WalterSear]

> the vast majority of costs in getting a new drug onto the market

Debatable.

> according to these firms' annual reports, 16 percent of revenues was taken as profit, and • 31 percent went for marketing and administration. That's nearly three times as much as their R&D spending.

https://www.bu.edu/sph/files/2015/05/Pharmaceutical-Marketin...

[Auracle]

Marketing gets them more money, which then increases the amount they can put into R&D. They aren’t spending on marketing without expecting a return.

[sethammons]

They shouldn't make tv ads; they should be in a white paper that doctors read.

[Auracle]

Maybe, but even people with chronic conditions might not go to doctors often. They see an ad for a new medicine for their disease, they go to the doctor, it works better, and hooray.

Maybe doctors should be able to send out email blasts to people, but I'm guessing that's not HIPAA friendly. Also, I've had online ads aimed at oncologists served to me for different medications.

I think the fact that there are both TV ads for cancer medications and online ads aimed at oncologists says a lot about the fact that a ton of doctor's aren't keeping up with what's new, even in something as critical and limited in scope as specific cancers are.

[WalterSear]

R&D is still not where the vast majority of their money is spent.

[chimeracoder]

Gilead's R&D costs for Truvada as PrEP were literally almost zero. They paid none of the costs for actually conducting the trials.

Their only contribution was that they donated the actual pills used in the trials - in other words, the unit price of 30 pills per person for the duration of the trial.

PrEP has been pure, risk-free profit for Gilead.

[jayshua]

Gilead claims that is false and that they spent 1.1 billion on developing Truvada. https://www.gilead.com/news-and-press/company-statements/gil...

[chimeracoder]

> Gilead claims that is false and that they spent 1.1 billion on developing Truvada. https://www.gilead.com/news-and-press/company-statements/gil...

You are quoting a corporate press release that was written in response to an editorial criticizing Gilead, which was based on my colleagues' work.

This is a great example of how easy it is to fall for propaganda, because not a single thing in your link refutes what I said! They spent money developing Truvada as a treatment for HIV, then made that money back in record profits for nearly a decade. Only then did clinical trials for PrEP begin, and for those, Gilead donated only the production costs of Truvada (which are minimal). They did not spend any money in actually conducting the trials - which, as pharmaceutical companies are generally very quick to point out - is where most of the costs of bringing a drug to market are.

Gilead is claiming that, when it spent half a billion dollars to acquire a biotech company that went bankrupt, 100% of the money in that transaction should as "R&D related to Truvada". This is preposterous. Neither the SEC nor the IRS would endorse that accounting, which is why you're seeing it in a press release and not their 10-K.

That's a ridiculous claim even when you're talking about the development of Truvada, but that's not even the question at hand. The actual topic is how much was paid for the development of PrEP, which came nearly a decade later, and for which Gilead paid nothing but the per-unit costs of production.

[comex]

The $1.1 billion figure is for Truvada total, not for PrEP specifically. It’s perhaps notable that Gilead chose not to break that down, given that the original claim they were responding to was about PrEP specifically.

[chimeracoder]

> The $1.1 billion figure is for Truvada total, not for PrEP specifically. It’s perhaps notable that Gilead chose not to break that down, given that the original claim they were responding to was about PrEP specifically.

And even then it's a dishonest claim. Half of that $1.1 billion is the amount of money they paid to acquire another biotech company in a firesale. It's beyond disingenuous for them to claim all of that towards the amount they spent developing Truvada, since they received way more assets in that sale than just the patent for one drug.

[yieldcrv]

Although this is a discussion about costs

I just want to point out that the government has assumed the role of telling everyone how to take risks for its economy, and literally all you have to do is do that, successfully, and it will privilege your rewards by reducing risk on profits or reducing taxes

This is not controversial when you look at the state’s role in these outcomes

[mock-possum]

It’s life-saving medication. It should be freely available to everyone, period.

If we’re not willing to question the degree to which big pharma ought to profit off of controlling access to scientific miracles, the least we could do is use taxes to subsidize the cost - “I can’t afford it” should not be a reason to not be on PrEP.

Anyone should be able to walk into a CVS and walk out with 2-1-1 dose, as easily as they’d pick up the morning after pill, or a bottle of aspirin.

[scotty79]

To find the correct pricing you just check how much shareholders make. If they get unreasonably high return on their investment that means the company is overcharging.

Tax shareholders on their gains and rebate customers if the company doesn't adjust the price.

[modeless]

The patent system literally grants monopolies, on purpose. I don't know why people are surprised when patented things are priced like there's a monopoly exploiting their customers, because that's exactly what's happening and everyone knows it. But somehow people never seem to come to the conclusion that granting monopolies is not the ideal way to incentivize things.

[vasco]

Maybe it is if the alternative is those things you granted monopoly on wouldn't exist. With drugs especially it's a difficult proposition to spend time researching if the day after you make your pill and sell the first one the next guy can just sell it too. So we need a larger change than just modifying the patent system for medicines, we'd also need to change the way we fund pharma research and after having thought about it a lot I don't have a solution. I agree with the problem you mention, but the solution isn't simple.

[amrocha]

There’s no reason pharma research should be for profit. The researchers aren’t doing it for profit, they would do it either way, the only thing private pharma brings to the table is price gouging.

[vasco]

Citation needed on "the researchers aren't doing it for profit". All drug companies have a bunch of them, more than wall street types running around. Most of them enrich themselves with biotech stock bets, insider trading, regulatory capture of national agencies etc. Why do you think somehow people that go into pharma research are different from people in any other industry?

Look, random example https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10370755/ - explain why if they are not motivated by profit, how is it possible that the outcome of this paper happens?

If you speak to anyone in the field, their goal to get to a point where you having a patent or two giving you a passive income stream. You can't do it if you just public domain your work.

[amrocha]

Maybe my understanding is wrong, you’re telling me researchers keep the rights to patents they develop under the employment of pharmaceutical companies, and profit off of licensing? If that’s the case I was wrong.

But as for your other point, yes, researchers are different from people in other industries because of the high barrier of entry into the field through years of schooling, and the uncertainty of the work. Anyone that’s motivated primarily by money wouldn’t go into pharma research, they’d go into CS or finance straight off university.

Of course, that doesn’t mean they don’t want money. If you can do a job you love and get rich off it that’s the dream. And there’s no reason the public sector can’t pay enough to motivate researchers.

[tirant]

I don’t know of any researcher not working for profit, none. Not only that, I would always want them to earn as much as possible, if they deserve it.

[amrocha]

Researchers aren’t the ones profiting off of price gouging.

Of course they’re working for money, they live in society.

[modeless]

See, blaming private companies for the consequences of government-granted monopolies is exactly the kind of thing I don't understand. The government is handing out permission to price gouge. On purpose!

[amrocha]

How did governments create pharmaceutical monopolies? And, if they did, why does that make the companies killing people by charging exorbitant amounts for drugs free of guilt?

[bobthepanda]

There is a two-month shot now (Apretude) and I was quoted $4K a shot when I asked about it.

Health insurances in the US mostly only cover Truvada. Some cover Descovy but not many.

[paulmist]

In the Netherlands until recently you could get it for ~$10/mo (now ~$20). We have a whole website naming prices in different pharmacies around the country.

https://prepnu.nl/users/price-list/

[reducesuffering]

Like the other commenters allude to, how would you like software mandated to cost just 10% margin over COGS? Do you think selling cloud services for 10% more than the cost of server parts is going to be a business when there's thousands of software engineers in R&D needed?

[LeifCarrotson]

I would love that, as long as the cost includes that R&D and those engineers, the actual bits might be immaterial but the engineer salaries are part of the cost of the goods.

The problem is that we're being told that the cost of insulin is $270 per vial, or that Daraprim used to estimate its cost per dose at 90% of $13.50 and then Shkreli decided to raise it to $750.

[vasco]

The Shkreli case has nothing to do with the rest. He was playing the insurance companies and there isn't a single person that went without the medicine due to the cost. Almost nobody takes this medicine.

In fact, it still costs $750 today.

[malfist]

No one is suggesting it should be billed at only the cost of manufacturing. Recouping expenses incurred during R&D are perfectly reasonable.

If you poked at the data a bit, you might find it interesting to learn that drug companies spend more money on advertising than R&D

[pdntspa]

That would be amazing! More businesses need a costs-plus gun held to their head.

[renewiltord]

It's true. Harvard education costs $300k, so that engineer's lifetime earnings can be $300k plus some small margin so that he does not price gouge. Community college engineer can be paid $2k+small margin.

[pdntspa]

Businesses are not people (despite what the law tries to make you think), and people should not be bound by the same limits as businesses.

[renewiltord]

I see. So all software engineers can charge what they want until the moment they join another software engineer. The moment the two of them work together on a shared enterprise, their margin must be capped.

As an employer, hiring single-person LLCs provides such a strong advantage in this universe over hiring employees. The former can't charge you more than a small percentage. The latter can charge as much as they want. I suppose we would all be like Uber drivers.

[refurb]

Would you be willing to work for a cost-plus salary?

Figure out what a middle-class lifestyle costs and pay you 10% more?

[amrocha]

You’re saying this ironically but yes, I would. If there was an accepted living standard and every job paid according to that that would be amazing.

[refurb]

That seems very anti-worker.

[barfingclouds]

Well we have a hiv prep shot already that’s every two months. I forgot the name, but yeah I think it’s very expensive

[isoprophlex]

Crony capitalism at its best.

[barryrandall]

If it's like every other IP-encumbered drug, the price will be approximately "the value the recipient places on HIV resistance," which is probably close to what's being charged now.

[refurb]

> A drug you take 2 times a year could be much cheaper than one you take 365 times a year, and that's a big deal.

Dosing doesn't impact price. Pharmaceuticals aren't based on "cost-plus" pricing.

[hadlock]

Why would they give up the profit? What's your rationale here?

Cure = $X

If the treatment is daily then it's $X/365 if it's monthly the price is $X/12 if it's twice a year it's $X/2

Imagine being an exec at that company and being like "let's give up 50/52 of our profit because it's more convenient for the patient"? How many hours would it take between giving that speech and getting fired, do you think?

[michaelcampbell]

> I wonder how much this will cost?

If history is any guide, as much as it possibly can. Probably more.