How expensive do prescription drugs need to be to fund research? • Hacker News Board

Re: How expensive do prescription drugs need to be to fund research?

#21

Post by astazangasta » Wed, Mar 27, 2019, 2:10 AM UTC

barry-cotter wrote: post #18

kingkawn wrote: post #2

Not at all if research is publicly funded for the public good

The research part of R&D is publicly funded, the development part isn’t, and it’s very, very expensive. On average about a billion dollars.

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.

Re: How expensive do prescription drugs need to be to fund research?

#22

Post by ikeboy » Wed, Mar 27, 2019, 2:10 AM UTC

barry-cotter wrote: post #14

djrobstep wrote: post #12

Earlier quoted context omitted.

The hypothetical situation you're describing has no connection to the reality of how drug research money gets allocated. We're not even ready to talk about how: - drug companies spend more money on marketing drugs than researching them - drug companies waste much of their research on copycat drugs rather than new treatments - IP law needlessly denies millions access to existing treatments by artificially inflating pr…

> 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 multip…

>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?

Re: How expensive do prescription drugs need to be to fund research?

#23

Post by barry-cotter » Wed, Mar 27, 2019, 2:12 AM UTC

jorblumesea wrote: post #11

Why is it expected that private industry the only funder of research? Isn't that something that governments should have a stake in and also fund basic scientific research in? That's like saying, how expensive does an iphone need to be to fund material science research?

No one expects private industry to fund all research and they don’t. Governments fund a lot of basic and applied research, in pharmaceuticals and many other domains. What they don’t really find is drug development, taking a drug from the “This looks good” stage through animal models, safety testing and efficacy testing.

Re: How expensive do prescription drugs need to be to fund research?

#24

Post by ineedasername » Wed, Mar 27, 2019, 2:12 AM UTC

rossdavidh wrote: post #4

The answer will always be, "more expensive than they are now". It's not like there will ever be a point at which more money, if available, could not in any way be used for some kind of drug research that might be useful. It's like saying "how much money do you need in order to keep from ever dying?" There will always be health problems, and there will always be some at least semi-plausible way in which we could spend…

I think you're using an ungenerous interpretation of the question here. The subtext is clearly "how much do they need to cost to support the current level of research"

Re: How expensive do prescription drugs need to be to fund research?

#25

Post by supertrope » Wed, Mar 27, 2019, 2:13 AM UTC

rossdavidh wrote: post #4

The answer will always be, "more expensive than they are now". It's not like there will ever be a point at which more money, if available, could not in any way be used for some kind of drug research that might be useful. It's like saying "how much money do you need in order to keep from ever dying?" There will always be health problems, and there will always be some at least semi-plausible way in which we could spend…

https://www.nytimes.com/2009/07/19/magazine/19healthcare-t.h...

"Why We Must Ration Health Care" by Peter Singer. New York Times Opinion Section.

Unfortunately this is a very difficult conversation to have between people and their physicians, between family members, and with ourselves. It ties into another very difficult discussion of facing death. In a democracy the lowest common denominator argument wins out with catchy slogans, in-group signaling, burying uncomfortable facts, avoiding short term sacrifice, and/or wielding anecdotes instead of rational analysis. Thus the rationing happens when it is least effective - during a crisis when significant human, monetary, and time resources are drained. And not much earlier when some planning and hard work could greatly ease the burden.

Re: How expensive do prescription drugs need to be to fund research?

#26

Post by maxerickson » Wed, Mar 27, 2019, 2:15 AM UTC

rossdavidh wrote: post #4

The answer will always be, "more expensive than they are now". It's not like there will ever be a point at which more money, if available, could not in any way be used for some kind of drug research that might be useful. It's like saying "how much money do you need in order to keep from ever dying?" There will always be health problems, and there will always be some at least semi-plausible way in which we could spend…

That doesn't really address the interesting question though, which is more about what level of spending is reasonable given the underlying basic science and currently available treatments.

Spending enormous sums on vague, incremental improvements is likely not an important use of funds.

Re: How expensive do prescription drugs need to be to fund research?

#27

Post by ineedasername » Wed, Mar 27, 2019, 2:15 AM UTC

ikeboy wrote: post #22

barry-cotter wrote: post #14

Earlier quoted context omitted.

> 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 multip…

>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?

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.

Re: How expensive do prescription drugs need to be to fund research?

#28

Post by barry-cotter » Wed, Mar 27, 2019, 2:19 AM UTC

astazangasta wrote: post #21

barry-cotter wrote: post #18

Earlier quoted context omitted.

The research part of R&D is publicly funded, the development part isn’t, and it’s very, very expensive. On average about a billion dollars.

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 privat…

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.

Re: How expensive do prescription drugs need to be to fund research?

#29

Post by barry-cotter » Wed, Mar 27, 2019, 2:28 AM UTC

ikeboy wrote: post #22

barry-cotter wrote: post #14

Earlier quoted context omitted.

> 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 multip…

>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?

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...

Re: How expensive do prescription drugs need to be to fund research?

#30

Post by djrobstep » Wed, Mar 27, 2019, 2:28 AM UTC

barry-cotter wrote: post #14

djrobstep wrote: post #12

Earlier quoted context omitted.

The hypothetical situation you're describing has no connection to the reality of how drug research money gets allocated. We're not even ready to talk about how: - drug companies spend more money on marketing drugs than researching them - drug companies waste much of their research on copycat drugs rather than new treatments - IP law needlessly denies millions access to existing treatments by artificially inflating pr…

> 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 multip…

> 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.