This is an impressive article and an impressive couple. From the site's about page: My name is Eric Vallabh Minikel and I’m on a lifelong quest to develop a treatment or cure for human prion diseases. I originally trained as a city planner at M.I.T. and was working as a software engineer and data analyst in the transportation sector when, in December 2011, I got some bad news. My wife and the love of my life, Sonia V…
How pharmaceutical industry financial modelers think about rare diseases
61–70 of 159 posts
Re: How pharmaceutical industry financial modelers think about rare diseases
#62I met a PHD chemist who spent 30 years developing drugs. Over that period he developed 20,000 APIs. 4 were approved. 1 made it to the market.
I wonder how many times over tests were done by competing companies, duplication, and how much waste/inefficiency there was because of data not being shared - and how much further duplication may continue to happen.
Probably lots. Its a huge issue thats driving the reproducibility crisis in science and academia, so I imagine it would also be a problem for industry.
Re: How pharmaceutical industry financial modelers think about rare diseases
#63Having been through the early phases of this (both as bench scientist and management, up through Phase II) I can say that this author's analysis is right on. There is a macro wrinkle he doesn't mention and that makes things worse: as we increasingly succeed on stopping the big killers (e.g. lung cancer, CIs, various accidents that constituted most of the causes of death into the 1990s) the histogram of death starts t…
> This "problem" has been well understood for decades. The current model doesn't really work as this process continues, but nobody really knows yet what would be a reasonable replacement.
Instead of targeting individual conditions, we'll probably see increased emphasis on common factors that can exacerbate many conditions, but aren't really considered "diseases" per se. The accumulation of changes due to aging would be a plausible candidate.
Re: How pharmaceutical industry financial modelers think about rare diseases
#64Earlier quoted context omitted.
I agree completely, most people overlook the "opportunity cost" of investments. If an investment makes %3 per year but you could invest in something else that makes %4 per year, while you did make profit, you actually lost money, because you missed an opportunity to make an extra revenue equals to %1 of your money (or %33 more profit).
You see people do this a lot with housing. They make $100k after 5 years and pat themselves on the back. They ignore that if they had put their down payment in the market, they would have made $110k.
You also see this kind of argument against housing a lot, which also ignores that housing is one of the few highly leveraged investments an individual can/will make, and that even if you don't buy a house you will have to pay for housing, all of which goes to someone else's pocket.
Re: How pharmaceutical industry financial modelers think about rare diseases
#65I would assume that somewhere on the bottom line there is an analysis of what the drug itself is doing. For instance, does the drug cure something or does it treat the symptoms of something? I imagine most of former are thrown out right off the bat. What we need is a system for testing, developing and selling medications that is less effected by the human condition. Perhaps, we should close the private sector and han…
> I imagine most of former are thrown out right off the bat.
Why? You don't think cures have monetary value?
Re: How pharmaceutical industry financial modelers think about rare diseases
#66Earlier quoted context omitted.
Companies don't spend $X on promotion unless they gets $X+ back. Otherwise why bother? So overall, promotion is a net positive to revenues.
The criticism is more that instead of increasing sales by developing more drugs, they focus their resources on marketing instead. This makes more money for them but is bad for society.
I still don't understand why it's bad for society? It seems like this is a common point that implies something, but I can't figure out what that thing is.
Re: How pharmaceutical industry financial modelers think about rare diseases
#67This is a well researched, informative and infuriating article. Within the system I cannot think of a better or more determined approach to this problem, but as this is HN I need to lay out a few points.
As we mint more billionaires they are going to do an end-run around the FDA. If I were a billionaire there is no way in hell I'd wait for a standard drug trial to progress on an FDA timeline.
Eventually one or more of the ultra wealthy is going to survive a disease that government sanctioned healthcare says is incurable. This will make its way through the network of the wealthy, and with some luck the whole process of how a drug was developed outside of the system will come out.
The bloat and overhead of the current process is intolerable. We've managed to elevate caution to a crippling set of shackles and at the same time put control of the process into the hands of people who only care about the calculus the OP so carefully describes. We pay unending lipservice to process and safety but drug companies are only act in proportion to potential liability.
Re: How pharmaceutical industry financial modelers think about rare diseases
#68The author ignores two obvious, extremely high leverage changes that would solve the problems in his model.
First, on the revenue side, extend patents on pharmaceuticals as long as possible. His model assumes a very narrow window of payback; quadrupling or quintupling that window would make many more drugs feasible to investigate.
Second, to use the author’s word, “de-risk” all trials. The best way to do this would be to end the FDA. But an intermediate step would be to eliminate the requirement to show efficacy, only retaining the requirement to show safety. Safety is orders of magnitude cheaper to prove.
Trials could be conducted much more cost effectively with these two changes. There would be more time to form patient and investigator networks, the structure of trials would be less complex, many more drugs could be tested, and many more drugs would be profitable.
Re: How pharmaceutical industry financial modelers think about rare diseases
#69Earlier quoted context omitted.
Companies don't spend $X on promotion unless they gets $X+ back. Otherwise why bother? So overall, promotion is a net positive to revenues.
The criticism is more that instead of increasing sales by developing more drugs, they focus their resources on marketing instead. This makes more money for them but is bad for society.
> The criticism is more that instead of increasing sales by developing more drugs, they focus their resources on marketing instead. This makes more money for them but is bad for society.
The original point was that advertising increases their resources by more than its cost. If they spend $X to get $X+ then the "+" is additional resources that both increase the incentive to do R&D and provide more resources to do it with.
Moreover, the only way advertising makes them money is by more people using the drug. Presumably the additional people taking the drug derive some value from it (or why take it?), so that isn't inherently a loss to society. If the value of taking the drug is worth more than what they're paying then it's a benefit.
The biggest problem here is probably when you have insurance paying most of the price of something, so then the patient sees an ad for a drug which is 2% better and costs 2000% more, but the fact that the benefit isn't worth the money is removed from the patient's calculation when the insurance is paying for it, and then that causes everyone's premiums/taxes to go up. But the problem in that case isn't the advertising -- that's just the mechanism -- the problem is the misalignment of incentives caused by widespread low deductible insurance.
Re: How pharmaceutical industry financial modelers think about rare diseases
#70Earlier quoted context omitted.
Companies don't spend $X on promotion unless they gets $X+ back. Otherwise why bother? So overall, promotion is a net positive to revenues.
The criticism is more that instead of increasing sales by developing more drugs, they focus their resources on marketing instead. This makes more money for them but is bad for society.
To play devil's advocate, imagine a drug that costs $1b to develop and would only break even in costs - obviously drug companies wouldn't pursue the drug. But suppose spending $1b to develop and then $2b to market the drug does better than break even - possibly way better, with the right advertising agency. Then the drug company would pursue the drug. So advertising can lead to more drugs being developed overall, since it can do so much to improve the cash flows that accrue to any given drug.