Big Pharma's profits are a result of taxpayer funded research via the NIH and others for drug discovery.
https://www.ineteconomics.org/perspectives/blog/us-tax-dolla...
Big Pharma has a very powerful lobbying arm that is against Medicare negotiating down prices.
"Spending billions on stockholders" is an odd way to frame giving profits to the owners (the shareholders). Does a small business owner spend money on herself when she makes a profit and moves money from the company account to her personal checking account?
Calling stockholders an expense misrepresents how businesses operate. "Spending" implies expense. Stock buybacks are a way of returning value to shareholders.
The point is that most of that profit comes from government incentives that are supposed to encourage R & D. i.e. we pay several times more on drugs than we would without paying those incentives to the businesses, but only a small proportion of that extra money goes into R & D. Its incredibly inefficient funding.
My take on that problem. There are others. https://pietersz.co.uk/2007/02/patents-inefficient
I made the same point nearly 10 years before that with regard to R & D vs marketing expenditure. Its not a new problem.
It seems like we want for-profit pharmaceutical corporations to act like non-profit institutions. Any idea why non-profit institutions haven't risen in the world of pharmaceuticals?
Or, we want for-profit pharmaceutical corporations to not take taxpayer dollars. You shouldn't be able to have it both ways, but at least in the US, you can.
I hear this a lot, and I think that there is a fundamental misunderstanding of what's going on.
People aren't upset by for-profit grocery stores taking tax dollars in the form of food stamps. They aren't upset by taxpayers giving money to for-profit hospitals to treat poor patients.
The government is paying a For profit company to do something that the government wants.
If the company would do it anyways, then of course I agree that the government shouldn't pay for it.
I think the difference is the extend of the profit. Big Pharma is incredibly profitable, while grocery stores are operating on very thin margins. Few people have a problem with a company doing business based on government expenditure, but specializing in maximizing profit from this reeks of profiteering.
Just as a point of reference, if you bought 100K in Pfizer stock 25 years ago, it would now be worth about 100K. Adjusted for inflation, you would have lost about 50% of it’s value.
Not what I would call ‘incredibly profitable’. And they are one of the biggest.
Does that include the value of dividends paid over the period?
with dividends, you might just about broke even on your 25 year investment.
If the goal is to go after 'extremely profitable' companies, maybe we should be looking at tech companies, that are in fact, 'extremely profitable', unlike most pharma companies.
and for the record, I have zero love for pharma companies, or how they operate - but they are not - in general - 'extremely profitable' companies. Far from it.
I agree with your position. There is a trend on HN and other platforms that anything with a profit motive is bad. Capitalism is bad, profits are bad... Yet it is all complaining on the problems without a actual real solution.
I thought HN was better, focus on the actual problems and not let every discussion turn into a profit/capitalism = bad debate.
The "actual real solution" with the regard to the topic in this thread is demonstrated well by a number of countries around the globe: force everyone in a country to be part of a public health insurance system, financed mostly by deductions on income and tightly regulate price setting for drugs and medical services administered under that system.
If that sounds too much like socialism for your taste, give rich people the option to buy additional services or restrict the public system to basic medical services and drugs and require private insurance on top for cutting-edge stuff.
Profit is a great thing, but it is not an end to itself. The point of liberal democratic societies is to guarantee basic rights for everyone, while constantly improving the welfare (which is not the same as wealth) of as many people as possible. Capitalism has made great contributions towards that goal, but it also contradicts it in several critical places and thus needs to be regulated where necessary.
Stock price and profits are not the same thing. The stock price are a bet on future developments, mostly on revenue/profit growth. Profits are actual money in the bank.
Pfizer's annual net income has been around $10 Billion continually since 2009: https://www.macrotrends.net/stocks/charts/PFE/pfizer/gross-p...
Annual revenues for that period were mostly between $45 and $60 Billion.
Not sure about you, but that is what I'd call "incredible profitable" on any day of the week.
People aren't upset by for-profit grocery stores taking tax dollars in the form of food stamps.
They might feel different if foodstamp-bought food was 10x as expensive as regular food, and those with foodstamps were forbidden from buying food for non-foodstamp prices.
I don’t like the percentage profit they take in the US, they can sell a drug outside the US for $50, but charge $300 here. Either we are subsidizing other countries, or they are fleecing us for what they can get, often on the back of research funded by tax dollars.
The latter, as these companies were perfectly profitable even if they wouldn't charge inflated prices in the US. Not quite as profitable as currently, but still not going bankrupt.
It takes very many million dollars to run a clinical trial, why the rhetorical question?
It's just funding. Not like non-profits are magically unable to have talent, or to achieve results.
No one's giving away billions on a pharma non-profit when they could invest. Even though the result is sometimes similar for the investor.
It wasn't a rhetorical question. I could imagine an entity like the Gates Foundation proving seed funding to bootstrap a non-profit pharmaceutical company. That company could fund R&D through sales of its newly developed medicines. No shareholders. No stock buybacks. But somehow this doesn't seem to happen, at least not on a scale that reduces medical costs for consumers.
Because those researchers could be shareholders of whichever biomedical startup they will create instead of a non-profit.
Because they make more money currently. Why would they choose to make less? Altruism??
It's just funding.
And to have funding, you have to attract investors. How to attract investors? By making it quite profitable to invest in the company, i.e. making it profitable for the shareholders.
With enough money, you can do anything big pharma is doing. But how to get that money consistently is another question that have an uncomfortable answer. Plenty of startup and small biotech companies go bankrupt every year. This isn't something you can do in a garage and turn it into a multibillion dollar business like software. Biopharma has too many regulations and rules to follow and it makes the entire field incredibly risky and less likely for a small and unattractive player to succeed, even if they are driven by passion.
I use to believe that. I then discover some private groups of people sharing a disease doing all kinds of trials. Nothing was to absurd. Almost brute forcing the problem. I thought a wiki written by mostly dead people was quite humbling.
There has to be some middle ground between the 2 branches of insanity?
CureDuchenne Ventures is a non-profit organization but functions like a VC firm. They provide funding for startup drug companies in exchange for equity, then return the profits back to the parent foundation rather than to LPs.
It's a spectrum, and the gap between non profit and this is quite wide
There are some examples of this like Novo Nordisk. They operate as a wholly owned subsidiary of a nonprofit foundation[1] whose purpose is to encourage medical research.
Financial incentives, obviously
I feel like it is very easy to claim a top down command economy would be more efficient. On paper it makes sense. You have no stakeholder profit and no marketing budget. You just tell scientists what to make and doctors just prescribe whatever comes out the other end.
However, it is hard to find real examples that bear this out. I think that this View overestimates the capability of institutions and underestimates the utility of price signals and an open market with competition.
Health systems in other (comparable) countries, where drug prices are centrally negotiated or outright set by government committees are vastly more efficient in terms of cost and generally produce better results in terms of health outcomes.
I.e. in my native Germany, health expenditure per capita is 2/3 of what it is in the U.S. if faced with a life-threatening illness, I would vastly prefer to be in Germany than in the U.S. (with the possible exception of being super-rich and being able to buy top-of-the-line health care).
This is still not a centralised system. There are still prices. Just the negjator is the public health system.
that's not really a contradiction to what I wrote above. The point of having one central negotiator is that this negotiator has a lot more leverage, because they control the demand of an entire market. If I tell a drug company, that they can sell me drug A for $X per dose or not sell any of drug A at all, you can except a lot more pressure on prices compared to negotiating only for one insurance plan among dozens.
"This is not centralised, there's just one single central entity that negotiates"
A lot of pharmaceuticals do however end up coming from what's essentially a non-profit system. It doesn't need to be a pure command economy.
The price signals are already broken. The people doing the research that is fundamental to pharmaceuticals are paid by grants which aren't connected to the price signals. There is a market failure here.
Fundamental research, like what a grant would pay for, is a fairly tiny part of what pharma companies do. The vast majority is the development. Modern drugs take ~$1.5 billion dollars to bring to market. In my experience, 99% of that cost comes after what looks like academic research.
We could take a portion of those r&d incentives and directly test and compare the cost & output of government pharma research vs private research in a mixed model.
It seems the prinicpal "R&D incentive" that the parent poster considered was IP/patent law. Im not sure how that baby could be split in an A/B test.
Pharma companies receive very little (relatively) in terms of grants or research funding.
R&D spending can be amortized as a business expense when calculating a tax bill, so I suppose that could be repealed, raising the effective tax rate.
Price signals are just that, signals and there are others for sure, like regulation.
You dont have to imagine a top down economy and fail to find examples, when simply regulation would do the trick and keep some enterprise freedom.
In very few cases are you talking about a system as inefficient as funding R & D.
It is not really an open market with competition: the government creates incentives, and only a faction of the increased cost to buyers goes into what the incentives are supposed to support.
Any useful information from price signals is lost too amid bad incentives: https://pietersz.co.uk/2007/01/pharmaceutical-incentives-dev...
https://en.wikipedia.org/wiki/Trappist_beer
The beer must be brewed within the walls of a Trappist monastery, either by the monks themselves or under their supervision.
The brewery must be of secondary importance within the monastery and it should witness to the business practices proper to a monastic way of life.
The brewery is not intended to be a profit-making venture. The income covers the living expenses of the monks and the maintenance of the buildings and grounds. Whatever remains is donated to charity for social work and to help persons in need.
It's funny to see above the suits and ties a layer of habits and scapulars[1]
https://www.koningshoeven.nl/media/127/compilatie-inkleding....
we pay several times more on drugs than we would without paying those incentives to the businesses
that really depends on your economic system doesn't it? In the more capitalist systems you pay what the market will bear and there is no consideration as to what the incentives are or aren't.
sometimes the market bears political incentives
Seems that the problem is with government incentives rather than with companies?
Plenty of companies do stock buybacks without also engaging in predatory pricing that customers are powerless to fight. The situation is even more problematic when you consider the lack of alternatives, and the often live-preserving nature of the product.
Stock buybacks are a way of returning value to shareholders.
This is also a problematic framing that ignores the broader situation. And that’s the tricky thing about framing things. It’s easy to manipulate the narrative and obscure the unreasonableness of the underlying reality if you sufficiently narrow the frame.
What is “predatory pricing”? It seems like “predatory” is just a word people attach to things they don’t like.
When pricing a good with inelastic or not very elastic demand (like, say, healthcare or medical products), the threshold for predatory is very low because people can't just choose most of their healthcare needs or replace them with alternatives (arguably some parts can be vastly diminished with better lifestyle choices over the long term, but that's not solving the current and very inelastic demand).
So, margins in the hundreds of percents is definitely predatory. I'd personally argue anything higher than 10-20% is morally bankrupt and I wouldn't be able to sleep at night if I were in the shoes of those responsible. If there is a hell, there's certainly a circle dedicated to people praying on the sick.
At 10-20% profit margin the pharmaceutical industry isn’t viable. The 1 winner in 10 needs to pay for the 9 losers.
And of course there are alternatives. A brand new drug is replacing something older (even if just supportive care).
Plenty of universal healthcare systems choose not to pay for new drugs because “they aren’t worth it”.
At 10-20% profit margin the pharmaceutical industry isn’t viable. The 1 winner in 10 needs to pay for the 9 losers
10-20% all included, of course, including R&D costs on failure.
Plenty of universal healthcare systems choose not to pay for new drugs because “they aren’t worth it”.
Source?
Spinraza—an incredibly expensive treatment for a deadly genetic condition in infants—was available to US patients for two and a half years before it was available to treat infants in the English NHS:
https://www.reuters.com/article/idUSKCN1SK2QM/
Many such cases!
There is a difference between something being available later (probably due to regulatory reasons, and with good reason, the FDA sucks at it's job - look at Oxycontin and sunscreens for two egregious examples on the two ends of the spectrum so of course other countries' regulators wouldn't just blindly trust them), and something not being available at all because it's too expensive as was the original claim.
So again, sources for medical devices or medicine not available in single payer healthcare systems because they're too expensive, but available in the US via an insurance?
To expand on this, the FAA also showed itself to be criminally incompetent to the point of sacrificing human lives in service of Boeing. European (and other countries if they wish to, but as a European they're the only ones I can directly advocate for) regulators should stop trusting American regulators, and only pay attention to them to get inspiration and see what to do/what not to do. European regulators are far from perfect, but they're doing a better job and more trustworthy than their underfunded, hated by 1/3 of the country, revolving door corrupt American counterparts.Its making the price higher because you know people are dependent on your product, well beyond a reasonable profit. I think 10x the price in other countries hints a bit to predatory pricing.
What is a "reasonable" profit? 10%? 50%? 100%?
What is a "reasonable" profit in an industry where it costs hundreds of millions to develop a product and 95% of the products fail?
I think this understates the power and options of the customers.
The typical alternative to receive what was state of the art care 10 years prior and off patent, and now 5% the price. The unfortunate part is the desire for such products is so low, that most of the time they are discontinued.
It is essentially a tragedy of the commons in the US. Because all the costs are shared, every individual is happy to pay 20X for a product that is 10% better.
Okay but stock buybacks should be illegal.
In favor of just dividends or what?
why?
Hopefully you'll never need cancer treatment, because it would probably change your opinion.
Hopefully I will never have to test it, but I imagine cancer patients are also glad they don't receive a 1900's standard of care.
Those that I do know who have had cancer were absolutely thankful that someone developed their treatments.
The moral dilemma is profiting from disease and the ill-health of a population.
The only argument against publicly funded drug production is that profit seeking is more efficient and the societal outcome is improved by not funding a public body to do this.
As other comments highlight, not only do societies publicly fund research (eg C19), they provide a legal system that protects monopoly profits, and won’t use single-payer bargaining on price…
So when pharmaceuticals then drop more cash on executives and shareholders it’s natural to question turning Covid19, cancer, or obesity etc into a profit centre for the wealthiest in society
Profiting from hunger, those pesky cooks. Profiting from people freezing, those deplorable tailors...
While that is true and how unregulated capitalism works, a society which enables capitalism (by laws, judges, ...) does not need to tolerate excessive profits on costs of its populations. Capitalism is not a law of nature. It is made by humans and can be adopted by the society. This is very common around the world.
They led with mentioning executives, which is spending on employee salaries and bonuses. At any rate, I think it’s the same point to say “makes billions more in profit than they spend on R&D”.
Okay, but they also spend more money on sales and marketing than they do on RnD. Surely that can be considered as “spending”.
"Oh no, would someone think of the poor shareholders"
They're parasites and freeloaders, contributing absolutely nothing, and consistently siphoning off value. Americans love to harp on socialism / communism and look down on "useless eaters", but there is no class more useless, more entitled, and more toxic than The Shareholder.
So... what is Congress actually going to do about it? Fix the broken patent system? Put a ceiling on pharma profits the same way health insurance profits are limited (80/20 rule)? Or just point fingers and continue taking campaign donation checks?
they will continue to beat the markets.
(not because they cheat, because they are our betters.)
Nancy Pelosi’s success at options trading at 83 years old is really quite remarkable.
Imagine having returns that dunk on even the best financial minds on Wall Street as an octogenarian congresswoman nailing calls on tech stocks. I guess the rest of us just have a “skill issue” as the kids say.
She's an amateur and is actually married to a hedgie, look up how much Mitch McConnell has made.
wonder what they talk about after work.
Imagine marrying a twenty year younger venture capitalist toy boy to manage her finances for her .. that's likely to be the remarkable secret sauce.
The rest of us aren’t married to a prominent VC from whom much of the wealth originates.
https://www.hhs.gov/about/news/2023/08/29/hhs-selects-the-fi... ("HHS Selects the First Drugs for Medicare Drug Price Negotiation")
https://finance.yahoo.com/news/pharmaceutical-groups-lawsuit... ("Pharmaceutical group's lawsuit over Medicare drug price program dismissed")
Jon Stewart says it best (because of course he does): https://youtu.be/NpBPm0b9deQ?t=1153
"The work of making this world resemble one that you would prefer to live in is a lunch pail [bleep] job, day in and day out, where thousands of committed, anonymous, smart, and dedicated people bang on closed doors and pick up those that are fallen and grind away on issues till they get a positive result."
You keep on grinding.
The Inflation Reduction Act requires the federal government to negotiate the price of certain high-spending drugs covered by Medicare Part D, Medicare’s outpatient prescription drug benefit program, and Medicare Part B, which covers physician and outpatient services, including drugs administered by physicians and other providers. Under the new Medicare Drug Price Negotiation Program, the number of drugs subject to price negotiation will be limited to 10 Part D drugs for 2026, another 15 Part D drugs for 2027, another 15 Part D and Part B drugs for 2028, and another 20 Part D and Part B drugs for 2029 and later years. The number of drugs with negotiated prices available will accumulate over time.
https://www.kff.org/medicare/issue-brief/a-small-number-of-d...
In case anyone is confused, the Part B “negotiation” is essentially price-fixing: If you reject the government’s final offer, your product is subject to a punitive federal excise (sales) tax no matter who you sell it to.
That’s in no sense what we typically think of as a “negotiation”.
Sorry, Part D, the drug benefit.
That's great, but private insurance and out of pocket accounts for almost 2x the annual drug spend that Medicare does [1]. So there's nothing stopping pharma companies from shifting the costs to maintain profits. In a way, this is a cost shifting exercise from Boomers to everyone else.
Without a Medicare-for-all system, Congress could still easily stop this by capping pharma company profits but I haven't even seen an attempt to do so.
[1] https://www.kff.org/medicare/issue-brief/how-does-prescripti...
Well, hopefully, we can start replacing people in Congress who won’t vote for Medicare for all.
France caps the prices the state is willing to pay, so the drugs are compensated through state owned health insurance if the company isn't selling much. Not all of them are 100% covered, but one can additionaly buy private insurance to cover everything.
The latter.
You can write this article about the vast majority of corporations.
You eat an elephant one bite at a time. If we’re gonna start anywhere, pharmaceutical companies are a fine place to compress margins. You know, because people need these products to survive, and corporate existence as well as profits aren’t guaranteed.
We can always come for additional sectors in the future, depending on objectives and resourcing.
Why don't the scientists actually doing the work of drug discovery just start a not-for-profit, since the executives and shareholders aren't actually adding any value to the customers here?
Do you mean the NSF and NIH? Certainly, fund them with what currently goes to pharma for executives, shareholders, lobbying, and marketing. Fund meaningful work, not gravy for corporate performance artists (Part D is funded by general revenues, beneficiary premiums, and state contributions).
Cut out the middleman.
"In 2021, Medicare Part D covered more than 3,500 prescription drug products, with total gross spending of $216 billion, not accounting for rebates paid by drug manufacturers to pharmacy benefit managers (PBMs)."
https://www.kff.org/medicare/issue-brief/a-small-number-of-d...
From this post:
Peter Maybarduk, the director of the Access to Medicines program at Public Citizen, a watchdog organization, who also testified at the hearing, hit back at the main pharmaceutical talking points along with Sanders. That included noting that the makers of the 10 drugs selected for the first round of Medicare price negotiation spent $10 billion more on self-enriching activities than R&D.
($200B/year buys a lot of manufacturing, distribution, admin, and whatever is left over for amortized and ongoing R&D)
Fund meaningful work, not gravy for corporate performance artists (Part D is funded by general revenues, beneficiary premiums, and state contributions).
The problem is that nobody actually knows or can predict what "meaningful work" is because drug discovery is a graveyard with a >90% death rate.
Because fundamentally most of science is a dead-end. Most of drug discovery is a further dead end with a 90% failure rate. Nobody wants to pay for it, and big-pharma uses a few blockbuster products to pay for all their other failures.
They did. They work for the US Government which does all the work of drug discovery which gets handed off, along with huge grants and other benefits, to private companies to productive and then sell at ridiculous profits that fuel massive executive pay packages and huge buybacks. The rich get richer while the taxpayers and most users of the ultimate product get screwed. It's really that simple.
not-for-profit companies are subject to a lot of bullshittery too.
Because drug discovery needs patient trials, and the massive cost of those trails drives scientists into the arms of investors and the for-profit sector.
corporate existence as well as profits aren’t guaranteed.
This sounds like a terrible business environment. Are you thinking through the long term consequences of this?
Every day.
You're speaking as if you were a movie villain or a communist dictator. Pure day dreaming.
Nah, just someone who has seen exceptional progress from the current WH admin over the last 4 years, and is confident in what future Congressional elections looks like due to electorate turnover (old people dying, young people aging into vote).
About 1.8M voters over the age of 55 die every year, we know how they vote. 4M young folks turn 18 every year, and we have a rough idea what their macro concerns are. Through the electorate death rate, progress is inevitable. This is not magic or miracles, simply systems thinking applied to demographics and political sciences.
Pharma is being challenged in this thread, the tax prep industry with the IRS developing their own tax filing system, FedNow challenging $100B credit card rails industry with cheap utility instant payments. Whose next? was my comment thesis. Important to not say things aren’t impossible when they’re being done. We’re just arguing trajectory and time horizon. Lots of paths to success.
That year, the company spent $17.8 billion on stock buybacks, dividends, and executive compensation, while the company spent just $14.6 billion on R&D, the report states. "In other words, the company spent $3.2 billion more enriching executives and stockholders than finding new cures," it concludes.
This is such a bizarre criticism. Note they include executive compensation, despite it being $26M out of the $14.6B (0.15%). And "spending" on dividends? You mean "returning money to shareholders".
How do they think businesses work?
And since I have a 401k invested in index funds, I'm a shareholder. So the criticism of "spending on shareholders" they actually mean "vast swaths of Americans whose retirement and pensions are invested in the stock market".
returning money to shareholders
There is nothing to return. Handing out is what it is.
And since I have a 401k invested in index funds, I'm a shareholder. So the criticism of "spending on shareholders" they actually mean "vast swaths of Americans whose retirement and pensions are invested in the stock market
This is a common repeated fallacy. Nice for you to profit but this is no whole gain for society.
Even better, the more ground level and more risky research is often funded publicly, only to be bought or go private, once a product could emerge. Big pharma is hawking over public research.
This is an oft-repeated sound bite by politicians looking to score cheap points, but it isn’t true.
https://www.science.org/content/blog-post/rep-ocasio-cortez-...
I dont buy it. Your linked blog post is about Derek Lowe gathering anecdotes, mostly.
His linked article (a better one)
https://www.science.org/content/blog-post/where-drugs-come-n...
is biased, because it only looks at approved drugs. He himself turns slightly to the R&D side and almost gets it.
And now to innovation - 118 of the drugs during this period were considered to have scientific novelty (46%), and of those:
44% were from pharmaceutical companies.
25% were from biotech companies, and
31% were from universities (transferred to either biotech or pharma).
The university-derived drugs clearly outperform in this category. What this also means is that 65% of the pharma-derived drugs get classed as "not innovative"
To be fair, i dont think you can convince me, that the pharma industry has no incentive to externalize risky or less profitable research and would never do it.
I have one anecdote for you too, hitting that exact spot: anti-biotics research. Because even though it has good prospect for profit, it is too risky research (kind of diminishing returns of R&D in that area).
Your logic doesn’t hold up.
You’re forgetting that this data is where the drugs come from not who developed them.
100% of approved drugs were developed by pharma.
And that’s the most expensive part. Spend $5M on early research is great, but all the academics out-license because the government isn’t going to bankroll the $100M-$500M cost of actually shepherding it through FDA approval.
Hence most of the financial risk is borne by the pharma companies. And you’re right, this doesn’t include the billions spent by pharma on failed projects.
It’s a great deal for society. Let private money fund development. Let them pay for the 90% failure rate.
And in exchange, they get ~10 year of patent protection, so the winners pay out a 10-100x return (to make it worth while investing at all).
Then after the patent runs out, the price falls 90%+ and society gets to pay pennies on the dollar for innovation.
This is false. All you have to do is look at the R&D spending of big pharma versus government.
It dwarfs the R&D spent by the NSF, NIH, etc.
The ‘whole gain’ for society is the medications that come out of investors putting money into these companies, instead of, say, Facebook. In 10-15 years, every new medication released today, will be off patent — and with insurance helping with payments taking into consideration — essentially free. Mind you, we are also talking about diseases for which no therapies exist today, and therefore the cost is effectively infinite in 2024.
Another point this story glosses over is that the $14.6B spent on R&D, represents nearly 1/3 of the entire National Institutes for Health $47B 2023 budget. And this is by a single company.
"returning money to shareholders"
unless you're just getting your money back, it's not "returning" money to shareholders; it's "paying out profits to shareholders"
since Pharma has exclusive control over products that citizens must have or they will get sick and/or die, they are not the same as your average company. so the question is -- what's more important, that shareholders get their dividends or that the money is either spent on 1) developing more drugs to combat more diseases (or improve the drugs we have, or 2) lowering the cost of drugs so people who are sick can actually get them without going bust.
remember that unlike almost any other industry, Pharma is allowed a __monopoly__ on drugs for a long time, and because we can't import drugs from outside the US (try buying from Canada), they control prices almost perpetually
People complain about Apple but all least you can get a Google phone if you want one. But if you need a drug that's monopolized by one company, they can set whatever price they want and you have no recourse (unless you do move to Canada).
As mentioned by several comments, while one can argue that Big Pharma should spend more on R&D, the title of the article is not so relevant.
From Apple financial statement for 2023 [1]:
- Spent on R&D: $29.9B
- Spent on stockholders (dividends + buybacks): $92.6B
[1] https://www.apple.com/newsroom/pdfs/fy2023-q4/FY23_Q4_Consol...
We aren’t spending public money on Apple.
Are you sure govts never bought an Iphone?
Governments buy iPhones to use. The US government gives bigpharma money and tax benefits as a way to encourage R&D.
Those are not the same
The iPhone doesn’t exist without mobile networks that telecommunications companies used government subsidies to build. (The same subsidies, by the way, that some like to complain weren’t spent on FTTH. Personally, I think mobile was the right call.)
Agreed. I'm sympathetic to the article's cause, but Pfizer/JNJ shareholders haven't done particularly well in the past couple decades.
Since 2000, the CAGR for (PFI, JNJ, SPY, IWM) was (1.56%, 7.68%, 7.79%, 7.63%) respectively.
(Per portfoliovisualizer.com. 2000 is the earliest date with data for IWM.)
Poor comparison.
- Apple doesn't make critical products that people must have or they will be sick or die.
- While Apple certainly benefits from some tax-payer funded basic scientific research done at universities (like all tech companies) that pales in comparison with the amount of NIH-funded research that Big Pharma relies on (to be clear, I don't have a problem with taxpayer funded research).
Big pharma is big pharma because they had success. It is like only looking at the most profitable tech companies and say "they spend more on profits than R&D". Many pharma companies never make a single dollar in profit. It is just like VC investing. You invest in 20 companies and 19 goes bankrupt but 1 is a massive success. It then becomes weird to only look at the 1 success and say "wow they spend so much on profit distributions" and ignoring all the losses the same investors made on the 19 other companies.
Is there any data to back this up? There is no way the startups even make a dent in total cashflow for the sector.
This is a logical fallacy in their arguments.
Compare the list of biggest pharma today versus 20 years ago. A bunch were acquired or merged because they couldn’t sustain profitability.
Take a look at the return of the industry as a whole. It’s not that great.
I'm late to the party on this one, but (as I've probably posted here before) the root cause of high drug prices in the US comes back to the US's broken political system.
Pharma companies charge more in the US because they can - because there are no strong reasons not to, and no mechanisms to prevent them doing so. And it's possible for big pharma to maintain this status quo because the political system in the US, with big money from lots of different companies and sectors funding politicians directly and indirectly, allows it.
Short of a conviction-driven leader (in the vein of Bernie Sanders, [or, surprisingly, Trump! - tough rhetoric on drug pricing was about the only thing I agreed with him on, although little was ultimately delivered]) or major changes to political funding (e.g. tight limits on funding of and spending by politicians, as exists in many other countries) nothing will change.
And yet without those high prices drug discovery and testing would progress at a far slower pace. The US does subsidize the bringing of new drugs to the market for the rest of the world, but as the richest nation that seems somewhat unsurprising.
I my mind the development of new drugs is one of the better uses for a nations capitol.
You're absolutely right; but I'd argue that that doesn't excuse the human cost of this situation within the US, or that it's an unfair situation that because the political system isn't actually working in the interests of most people in the US, the country is being taken advantage of in this manner.
Businesses will do what is most profitable for them. If we want pharma companies to spend more on R&D, we either need to make R&D more lucrative (which would likely require higher drug prices, higher approval rates from FDA, or higher consumption of drugs, all of which seem undesirable) or make “spending billions on executives and stockholders” less lucrative.
The problem is the stock market has become Monopoly money as a result of a decade of ZIRP and the huge amount of excess liquidity in the system. Furthermore, stock buybacks are incredibly efficient from a tax standpoint. And IIRC, there are tax incentives to paying executives in copious sums of shares. We shouldn’t blame companies for doing what’s financially best for them; we should change the rules to align what’s best for them with what’s best for the rest of us.
The patent system is what promotes R&D. Once your patents expire anyone can manufacture your drug without ever having done any of the initial work. Drug companies have a pipeline of new drugs going through the decade of studies and trials it takes to bring them to the market and the ongoing survival of the company depends on some of these being a success.
Would love to see some of the people here crying about obscene profits try their hand at investing in pharma companies. Its an easy way to lose a lot/all of your money.
This podcast provides some interesting color on the industry:
We shouldn’t blame companies for doing what’s financially best for them; we should change the rules to align what’s best for them with what’s best for the rest of us.
Why not both? Corporations that size are actively working to change, skirt and fight the rules in their favor. This idea that the elected make the rules in a vacuum and companies are just following them isn’t true in reality.
If we insist on having the market be responsible for drug development, it should work for us. We should be leveraging the benefits of market based capitalism in order to achieve a desirable outcome. Standing on the sidelines and hoping for side effects of profit-seeking to trickle down both dogmatic and defeatist. The best way to do markets is competition. And the best way to have competition is a lot of independent companies. A few mega-corps is more like institutions than markets. And the prices follow.
I grew up as an enthusiast of free market capitalism without regulation (probably because my country was just exiting communism when I was 7 and I've seen what good free market reforms can bring).
But over last 15 years I've moved significantly towards free market social welfare state. It's true that central planning doesn't work, and that communism doesn't work. It's painfully obvious to anybody who lived it. But capitalism leads to results just as bad if left unchecked for too long. It's just getting there slower than other systems. Even the rules we add don't stop it, they only slow down the gradual descent into oligarchy. At which point it doesn't matter what the rules are - because the oligarchs are choosing presidents, PMs and judges.
Now I think the perfect economic system would be free market capitalism for 50 years, then a total nationalisation of everything, reshuffle and restart. Rinse and repeat.
Capitalism is like a game of football that lasts forever. No matter what you do, if you're born into Real Madrid you'll win, because the score is already 1000000000-10. There's a reason we restart the scores after every game.
free market capitalism for 50 years, then a total nationalisation of everything, reshuffle and restart.
You could argue that's similar to the UK's recent history, if you can be flexible with the 50 year period. Minimal regulation and state ownership pre-war, mass nationalisation post-war, mass privatisation in the 1980s
This should actually happen on a rolling basis.
We should be nationalizing cellular networks, physical internet infrastructure and generic drug manufacturing because they are critical and don't really innovate besides following the slowly evolving, committee-defined standards.
I read somewhere that the amount of money that Pharma companies spend on research is the highest in healthcare but they get only about ~13% of the healthcare's revenue. There are other middle-man in healthcare that get a revenue share without putting in any work.
This is obviously not to say that Big Pharma cannot do better and there are no red flags.
In the US as far as I recall the system is somewhat convoluted. Insurance companies buy their drugs through brokers who act as middle men to negotiate bulk prices with drug companies. No insurance company actually ever pays the sticker price on most drugs.
This is only revenue though, not profit. Do other orgs maybe get a higher share of revenue but also have higher cost because their business scales differently because it's labor intensive like hospitals?
The article didn't focus too much on solutions, though a couple of things were mentioned: 1. Reducing patent protection 2. Price controls (?)
So let's assume we want these companies to reduce their profit margins (and instead lower drug prices or spend more on R&D.) What _are_ the best policy tools to incentivize this while minimizing market distortions, etc?
Wouldn't both reduced patent protections and price controls reduce incentive to invest in R&D and for private investors likewise reduce incentive to invest in pharma that invests in R&D?
I forget where I read this, but it was saying that the job of a leader was first and foremost to gain and hold power. Although I wish we lived in a better world, this actually makes sense, because constant power shifts and struggles seem far more costly. Isn't this the real reason that executive compensation (in general, not just pharma) is so high?
The framing is wrong. Pharma is (government-supported research) -> (pharma R&D + production + distribution) -> (government subsidized spending).
- Big pharma should be praised for making profits. They spend too much R&D to circumvent each other's patents. Zero-sum game for the society as a whole.
- The government should be faulted for not structuring the business-government interaction properly. Mandatory licensing with profit sharing for medical patents, for example.
Ask any healthcare economist, medicine and healthcare has every possible market failure you can think of. You can't arrange it using free markets and marketing. The business must structured better. The US can look to other countries for guidance.
I think a lot of laypeople have the idea that there are an infinite number of positive return projects waiting to be funded and pharma execs are just too fat and greedy.
There are very few pharma projects that aren't outright frauds and that actually have potential and that don't cost way more to get to market than they can ever possibly justify.
Very seldom do those project lack money.
Don't forget the money they spend on TV ads, mostly during the nightly news. Really helps to get those news people under your influence when you need to pass laws mandating the public take your drug.
I would take libertarians, filo-libertarians, the "small-government" gang, put them on a spaceX and just send them to Mars, a small trip for those men, a giant leap for mankind
I think everyone here knows how big pharma works (well, doesn’t ‘work’ as such) however this needs to get into the press a lot more for the public to see.
Now compare R&D and exec/shareholder pay to expenditure on "lobbying" (i.e. legalized bribery) and corporate capture of the "strong" and "independent" government regulatory agencies that were meant to keep these very same companies in line.
Comparing the prices in the US with those outside is wrong way to look at this, but it feeds the populist narrative. That discrepancy has nothing to do with Pharma but everything to do with the fact that in other countries the only payer is government and to be on the government formulary, Pharma companies have no choice but to accept those prices. If US did the same thing, many drugs would not be economically viable. In the most fundamental sense, for example Canadians aren't paying their fair share, and Americans are picking up the slack. I work in the industry and I am not blind to the issues the industry has but it always baffles me how simplistic the conversation becomes when the subject comes up.
This sounds bad when you first hear it. I do wonder though if this might counterintuitively lead to a better R&D outcome overall than if they individual company invested much more into R&D. This would render the industry uninteresting to private investors which would mean that we might end to in a scenario where it's all publicly funded. This would likely lead to the reduction in salaries also which addresses the other criticism from the article. We'd look at a much smaller pharmaceutical research industry that cannot afford to attract the best and the brightest.
It's also important for tech people to understand how different it looks to start a pharma startup. Funding requirements are orders of magnitude higher which also means the share of the company founders can retain is really tiny compared to tech and so are the gains from an exit that founders get.
Now one could argue that just making pharma a little bit less profitable would be a win, but even here I wonder. If I can get just 1% higher returns on my investment by cutting out pharma from my portfolio I'd do so immediately.
Amgen is basically a finance firm that does drug development as a hobby.
And lobbying:
Never forget the s€£t-show that was the Covid vaccine procurement by the EU.
It is true that pharma companies take advantage of publicly funded research, but from there to brining a new drug on the market it takes further 10/15 years and 100s million dollars of R&D. A large portion of the cost comes from the fact that most of these projects prove infeasible and are abandoned during development or later during trials.
The vast majority of this effort remains unpublished, so I am not sure that the article you cite supports your argument. Most of the research mentioned in that article talks about possible associations between target and disease, which is just the earliest step of drug development.
The thing is, pharma industry is clearly hugely profitable, so why doesn't the government invest in a wide shotgun approach to fund half (or more) of the entire industry and in return take half (or more) of the profits to either keep as revenue or reinvest in pharma or in other healthcare?
(Obviously theoretically ideal economically would be if the government could just have a socialised department discovering and developing all new drugs needed with no profit margins, but then you lose out on benefits of competition, profit motives etc. so a split model makes sense, where they're still private companies but the gov invests hugely in them - but in return for the fair share of profits, rather than so many current grants where the gov pays funding and it doesn't even get them a good discount on buying the overpriced final drug.
You could say that about any industry.
"The thing is, the S&P 500 is clearly hugely profitable, so why doesn't the government invest in a wide shotgun approach to fund half (or more) of the entire S&P 500 and in return take half (or more) of the profits to either keep as revenue or reinvest in the S&P 500 or in other stock indexes?"
Gov't investment in any industry just because it's profitable is a bad idea for obvious reasons.
Sure, except that investing in the S&P is just artificially inflating the economy as a whole, whereas my suggestion isn't intended to be "this is my advice for the most profitable use of a government $", it's a suggestion for boosting a small part of the economy to speed up the development / progress of new drugs as a societal benefit.
People who defend the huge profit amounts of pharma companies (which ultimately come from consumers needing healthcare, paying either directly or through insurance) say it's fair because of the huge amount they invest to create the drugs, if the government does most of the investing then they can take most of the profits to subsidise free pills for their population. Seems to me like a more direct benefit (in addition to potential economic benefits of boosting investment levels in a high-exporting industry too) than just the government buying S&P500 index funds.
Look what happens to University tuition when the government gets involved with funding. Not saying it would be the same model but I have doubts this could completely take over R&D funding.
define 'hugely profitable' - PFE is one of the biggest, their stock is at about the same price it was 25 years ago, so inflation already made you lose 50% of your money - with dividends maybe you broke even for a 25 year investment. I would not call that hugely profitable.
Why don't we go after the actual 'hugely profitable' companies if that is the goal.
I see Pharma more like energy utilities in that they provide an essential service that citizens cannot live without. Therefore maybe they should be regulated like utilities (which are private, or can be private, but their margins are capped and set by the government).
And yet the human race managed to survive for millennia with no pharmaceutical industry at all. The industry as we know it has only existed for about 100 years. While it has been helpful in extending lifespans and improving quality of life, it is nowhere as important as utilities like electricity and water.
The human race also survived without electricity for just as long…
Not ... sure that's the best reductio, since many governments do make broad-based equity investments, via Sovereign Wealth Funds, and it does bolster their long-term financial outlook.
To bring it back to the specifics of the original argument, and refine it a bit, the relevant point is, "If these are such easy profits from doing nothing, why doesn't the government get in on it?" Alternatively, why don't the universities themselves develop drugs to the point of FDA approval and mass marketing?
The unfortunate answer is: it's not actually easy profits. It's highly speculative and difficult work to turn a drug from "supported by university research" to "ready to market to the public". Sometimes universities do try to cover some of that ground though.
The same government that can't come up with sensible policies to regulate big pharma and gets played by all kinds of lobbyists suddenly is going to figure out how to develop drugs more efficiently than the industry does?
I'm suggesting the government take the role of investor, replacing (or rather, overshadowing) the financial firms & private owners who are the current investors, not taking over the way the companies work.
Could either give a body like the NIH a huge new budget to use for investing in pharma companies, or could pass a law that says any company that successfully raises X money with Y criteria (either in VC, or by IPO, or however) must automatically allow the government to buy x% at the same price (or a slight discount) as other buyers?
And sure, lobbyists, money in politics and quality of current US politicians are a problem to face with pretty much any aspect of improving the country, but I don't think that's a reason to never discuss ideas about how to do so. (Then again I'm not American so I don't have horse in this race, but I feel similarly about my UK.)
Pumping dumb money into a sector isn't likely to translate into profits. It will translate to a bubble and a lot of opportunists taking the money.
It isn't that it is impossible, but it would take a slow start, and sustained experimentation and organizational learning over many years, before the amount of money that could make a dent in the problem could reliably perform well.
All while VCs would be lobbying to end the incursion, and the easier money - therefore lower returns, it would inflict on their territory.
Hugely profitable is perhaps misleading. It’s hugely profitable in the sense that the aggregate profits are high, simply due to both the sheer number of products sold and their high prices. But in terms of profit to expense ratios the Pharma industry is actually at the low end of the spectrum. Most other industries, including tech, are far more profitable in this regard.
It is worth noting that a significant portion of the D in R&D is money spent on direct to consumer advertising. This only happens in the USA, as I believe that it is not legal elsewhere.
edit: I am now not 100% sure about this, please see comments down-thread.
are you sure? usually this is counted as marketing costs.
Thanks for checking me on this. It was just what I recalled from memory, but I believe that the following links confirm this.
[0] https://www.cbo.gov/publication/57126#_idTextAnchor003
[1] https://www.statista.com/statistics/686906/pharma-ad-spend-u...
[2] https://www.fiercepharma.com/special-reports/top-10-pharma-d...
In "clinical testing for safety-monitoring or marketing purposes", "marketing purposes" doesn't mean spending money on ads and stuff like that, it means doing clinical trials to see if a drug works for a certain disease or population, or to compare their drug against a competing drug, or whatever. This is the insanely expensive research that pharma companies do to see if drugs actually work, that everyone likes to ignore when talking about greedy pharma companies.
Results of clinical trials (if successful) can then be used in ads, but that would not be R&D expenditure.
Hmm, thanks. Now that I search more, I am not as sure of my original point.
However, could we agree that DTC pharma advertising has very controversial benefits for patient outcomes, at best?
I will agree with that, if we can also agree that pharma companies spend tons of money on clinical trials, and it's difficult to imagine where that money would come from if they didn't exist :)
Does it? What would those be?
In fact anything that pharma companies say about a drug must be information from a clinical trial. One of those little surprising but obvious in retrospect facts. Clinical trials must be designed not just to 1) find out whether the drug works, 2) find out whether it’s safe, 3) ideally avoid information that it’s not safe, but also 4) generate the numbers they can put on brochures to compare it against alternatives. Then all of those are balanced against the immense cost (to pharma) and complexity (to pharma, CROs, trial sites, and trial participants).
It’s a ludicrously complex business process.
Forest for the trees. The main point of the main article still holds true:
Big Pharma (and Big Everything, really) consistently spends more on executive compensation and shareholders than R&D. And to the commenters' point, maybe if they put more of that in R&D, we'd have more promising and successful targets
Dividends are not spending. It’s just the shareholders taking money they own.
There's a pretty nice article on this topic here. [1]
Shareholders do not own companies in any, way, shape or fashion, let alone owning the profits of a company. Shareholders own a right to vote on company matters and have certain privileges based around such, but increasingly often they don't even really own that in any meaningful way. Google, Facebook, and many other companies use tiered shares, where the executive owners of the company grant themselves shares with orders of magnitude greater voting power, generally enough for majority control. So the shares everybody else owns serve little purpose other than speculation.
In any case this is a [somewhat interesting] red herring. The issue is that big pharma profits are already very large (and in fact COVID sent a number of big pharma execs into the billionaires club) and so public funding serves little purpose other than to further increase their profit margins, which should not be the purpose of public funding - even though in practice it often is.
[1] - https://moneyweek.com/merryns-blog/shareholders-and-the-myth...
Money they own because the profits of the company far exceed the R&D costs.
It's way more than hundreds of millions, it's now well over a billion and most of it by a large margin goes into failed programs. Though it does seem to be getting better (or getting worse more slowly?) recently.
https://media.nature.com/lw1024/magazine-assets/d41573-020-0...
https://en.m.wikipedia.org/wiki/Eroom%27s_law
I think the point of the article is that R&D is not the actual source of the cost for developing new products.
There’s huge incentives to pad R&D spending numbers, so it’s important to consider the underlying reality here.
“In many cases, the estimated cost of capital can be substantial, representing almost half of total development costs in some recent estimates.” https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8855407/
Cost of capital makes sense in terms of ROI calculations, but it’s not going to show up as a line item on annual budgets. Similarly R&D at drug companies isn’t all drug development R&D.
A huge part of the expense of Pharma is compliance. A simple example of a PC connected some lab equipment. The PC and the equipment have to be validated which means that every step used to install the PC, equipment and software has be in an approved procedure that used to deploy them. Any deviation from that procedure will require a exception reports that will have their own approval process. Once in use every action is performed has a procedure. Any deviation from that procedure will result in an investigation that can be reportable to the FDA etc. Every task done on the system will have a log that has to be manually filled out by an analyst or an admin. There are regular system and user access reviews that are reviewed and approved. Once the system is no longer in use a formal decommissioning has to occur. Date may have to be kept for 25, 40 or even 100 years. Now picture a lab with 100s of systems.
And yet even with that, executive pays and dividends (meaning profits over development) are higher than R&D cost. plus the cost of compliance is still less than human cost in R&D.
Are there any public numbers available on how much of the drug companies expenses is compliance related? Is that bookkept with "cost-of-doing-business" or some other line item?
Current examples I have found:
[1] Eli Lilly, 2022 Annual Report: https://investor.lilly.com/static-files/2f9b7bb1-f955-448d-b...
Significant mentions of "compliance" (most are legal issues). However, a decent number of warning statements about how government compliance will require significant effort. No actual numbers I could find. Main Finanacial is pg 57.
[2] Merck, 2022 Annual Report: https://www.emdgroup.com/en/annualreport/2022/_assets/downlo...
200+ mentions of "compliance" (most are legal issues, it's a lot to check) Pg 148 has "number of self reported compliance violations. Most are fraud or "against company values". 79 reported with 28 confirmed. Main financials start pg 230. There was some about "compliance with audits", yet nothing I could find that was a line item for "government process compliance" or something similar.
[3] Johnson & Johnson, 2022 Annual Report: https://www.investor.jnj.com/files/doc_financials/2022/ar/20...
Significant mentions of "compliance" (most are legal issues, J&J has a "bunch" of lawsuits in Canada vs generics). Could not find a direct reference to cost of government compliance, although I did read a part that implied it seemed to be rolled into R&D somewhere. Financial Statement is at pg 54, although the $ numbers start quite a bit earlier.
[4] Bristol Myers Squibb, 2022 Annual Report: https://annual-report.bms.com/assets/bms-ar/documents/2022-b...
Notably, has a neat list of the main compounds currently under investigation with various groups, and "products in pipeline developments" (basically drug status updates). Only 2 mentions of compliance, both are officers. Financials are pg 40 in the pdf. Also, there is something wrong with their PDF format, because search is very obviously broken (at least on Firefox). So there might be something hiding in there that's just not being searched correctly.
Anyway, best effort for a half hour of avoiding working on anything, and did not find a number source.
Yeah still though, if we're going to be funding basic research (a necessary though not sufficient step in drug development) then drugs should be affordable, and the government should be able to negotiate on prices.
It's a really odd system at first blush. People pay taxes. Taxes fund research. Research is then developed by private corporations into products that are sold back to the people.
It does solve a few key problems though. If universities and other research institutions were encouraged to bring products to market, they'd change what they work on and how. Basic curiosity driven research would give way to commercially oriented research. Moon-shots that might take multiple decades to develop would be replaced with things that can be brought to trials in just a few years. Brilliant researchers that might have made multiple earth-shaking discoveries over the course of their careers might get bogged down bringing one product to market. There's a lot to be said for insulating academia from quarterly reports.
However, things go awry when corporations that turn government funded research into private profits start lobbying too much and regulatory capture occurs. Even if it takes a decade to turn novel research into something you can buy at a pharmacy, the debt pharma companies owe to taxpayers should not be lost sight of. There should be stringent regulations on how drugs based on public research are priced. Yes, pharma company investments, market size, projected sales, and all that should be factored in, but drugs based on public research should be made available to the public at reasonable prices. That's not happening in the U.S..
Bottom line, public money must come with strings attached that serve the public interest. Pharmaceutical companies should be under heightened scrutiny and regulation because of where they get their IP.
I love how circular neoliberals argue, lobbying and regulatory capture are a real problem with big pharma, to fix it the government really should put them under heightened scrutiny and regulation. These politicians are really corrupt, they should really stop being corrupt.
Here is a wild idea: Perhaps the core of the problem just simply IS for-profit health care itself. Perhaps if someone has cancer, nobody should profit?
Does that mean the doctors and nurses and others should all work for free to? If individual people can 'profit' by providing care, i.e. a doctor, why can't a collection of people providing the same service, but as a company be allowed to profit as well?
"not profit from" != "work for free"
The healthcare system in Europe doesn't gauge its sick citizens the way the U.S. healthcare system does, and yet, last I checked, doctors in Europe, while certainly earning less than in the U.S., do not "work for free" or are unable to provide for themselves and their families.
Why aren’t the Europeans cranking out new medications at cost then?
No one is saying that drugs have to be provided "at cost" (that's very similar to the fallacy of the "do you expect us to work for free?" argument).
Is not the definition of profit the excess charge after removing costs? By definition “no one should profit” does mean “at cost”.
maybe if someone is hungry, farmers and supermarkets shouldn't profit? maybe if someone needs a place to live, builders and realtors shouldn't profit? maybe if my gas tank is empty, oil companies shouldn't profit.
Where do you draw the line?
You draw the line when the basic requirements for a free market aren’t available: transparent pricing, customers that have a choice between different providers, customer that actually have the time to shop around.
The vast majority of prescriptions are for treating chronic conditions. Those patients have time to shop around and consult with their physicians to decide on a course of treatment. There are multiple drugs available for most conditions, often including genetics. Statins are some of the most heavily prescribed drugs and there are at least seven on the market now.
Hardly, often drugs treating same condition have different side effects, or different effect on patients. Physicians usually search for the drug that works best on a specific patient. Once you find a drug with the desired effect, it’s usually not a good idea to switch to another with different side effects.
So your idea is, rather than address known issues in the system, replace the system with one that is known not to work?
Do you have proof that non-profit health care does not work? I’d say there are plenty country that show proof that nonprofit health care works better for the majority of people then for profit health care.
There are no countries with non-profit healthcare systems which develop as many new drugs as the USA on a per capita basis. Non-profit or socialized systems can work reasonably well for care delivery but no one has figured out how to productively develop new drugs under such systems. The profit motive is highly effective.
Maybe we don’t need all those new drugs? Are they helping patients, or are they just slightly changed existing drugs that allow the industry to ask for more money?
You use cancer as an example, but what about other meds? Is it ok to profit off ED meds or ADHD meds? Note, just cherry picking a few that are arguably not life saving for most.
Drugs go off patent, and generics don’t have to undergo clinical trials. Sounds like the public benefits quite a bit. After a relatively short period of time (usually 10 years post FDA approval) a generic comes in the market for a fraction of the price.
The problem is, once a drug gets approved everyone thinks they are entitled to it. It is fundamentally a selfish problem; “I deserve XYZ” as opposed to “everyone will benefit after it’s paid for”.
1. Drug companies do a complex song and dance to avoid/delay the release of equivalent generics. For many drugs, they continually release modified preparations that keep generic competitors locked out decades past when they should have been available.
2. Drug prices in Canada or other nations versus the U.S. should be paid attention to. I'm Canadian, and there's absolutely no way I'd go to a pharmacy when cross border shopping. Americans are being gouged to a massive degree, in large part because of the idiotic American medical insurance system. Drug prices in the U.S. are a complex issue and it's not solely the fault of drug companies, but they are taking every advantage of the situation.
I particularly liked how all the Congresspeople involved in writing that the government couldn't negotiate drug prices into Medicare Part D immediately retired and went to work for the drug industry.
What’s even funnier is this apparently powerful lobbying arm didn’t stop Congress from passing a law..that allows Medicare to negotiate drug prices.
https://www.cms.gov/inflation-reduction-act-and-medicare/med...
If it took two decades from the creation of part D and a worldwide pandemic/financial disaster just to allow for price negotiation, I see that more as evidence of power rather than weakness. Good that it finally changed though. Democrats also put price caps on insulin which seems nice for diabetics.
Well the kicker is that Medicare never paid the list price anyways. There are a ton of mandatory discounts the government gets.
With Part B, Medicare pays average selling price, which is the average price private insurers pays. Then add on top 340B discounts which many hospitals get, which knocks another 23.1% off plus penalties for price increases above inflation (Google "340B penny pricing", many hospitals only pay $0.01 per unit of drug).
With Part D, the government doesn't pay for drug anyways. Private insurers do the negotiating on behalf of he government.
Then look can look up VA pricing (24% off at a minimum). Medicaid gets "best price" which is the lowest price the drug sells for anywhere.
So the government has "negotiated" (by fiat) plenty of discounts. But saying "Medicare doesn't negotiate drug prices" makes plenty of political hay, and while technically true, doesn't really explain the prices the government gets.
I'm guessing you mean anywhere in the US. Apparently Florida is currently pushing to import drugs from Canada.
https://www.reuters.com/business/healthcare-pharmaceuticals/...
Yes anywhere in the US. Private insurers often get discounts of 50%+, which then Medicaid gets.
And sure Florida can try to import Canadian drugs. They tried that 20 years ago.
The companies capped sales to Canada at no more than 10% of last years sales. Canada then put export restrictions in place to put prevent shortages.
The US government has talked about price referencing Europe. Which would actually be great. Companies would be forced to increase European prices and lower US prices.
I often find myself saying the US should do things like they do in Europe, but I'm told it's impossible for one reason or another (American Exceptionalism in some form or other no doubt), so that does have an appeal to me at least. I wonder though, given that these companies are generally (all?) for-profit entities, what stops them from raising prices in Europe now? It's always seemed a bit grim mixing market economics with human morbidity and mortality, but I would think the upshot is that you can really squeeze people for lots of money when their life is on the line.
Most European countries impose some form of price fixing on pharmaceuticals. The details vary by country but this is often done based on an economic value calculation, such as the number of quality-adjusted life years (QALYs) that the drug would add for a typical patient. It's not impossible to do this in the USA, at least in the sense that it wouldn't violate the Constitution. But if would somewhat slow down the pace of new drugs. The US pharmaceutical industry launches far more new drugs every year than all of Europe, largely due to the outsize profit potential in the US domestic market. With price fixing we would lose out on some percentage of those new drugs.
I have approximately zero interest in new drugs, but better drugs would be great. Is that the case? My impression is that the latest two blockbuster drugs that I’m aware of - mRNA vaccines and GLP1 agonists, had substantial European development, such that Novo-Nordisk is substantially impacting the GDP of Norway today.
Wow that is wild. Could you share a source for this? I would love to look further into this.
That's a pretty standard practice in tobacco, banks, drug companies... Search for revolving doors <industry name> and you will find books and documentaries and articles ...
And let's not forget communication companies and the FTC.
When faced with a regulatory issue in the USA, I often look at EU regs for reference. Here is their inquiry on the "revolving door" issue:
https://www.ombudsman.europa.eu/en/decision/en/155953
Weird how it’s framed as an issue of reputational damage. Ctrl+f “corruption”, 0 results.
This is a problematic position, you can say that big tech profits are also funded by the taxpayers since they employ people trained through public resources(most people don't study %100 private).
Yes this is the classic Obama’s ‘You didn’t build that’ argument.
Yes this is the classic Obama’s ‘You didn’t build that’ argument.
The same can be said about any BigTech company, actually.
Not just taxpayer, but also charity funded!