The author is correct so far as it pertains to the ladders and scaffolding that basic science and research today contribute to potential benefits for tomorrow. I would argue, after 25 years in biopharmaceutical marketing & sales, that one could easily slash those budgets by 2/3 without touching the R & D budgets in each company. One need only look at the annual reports and compensation to see that. It would require far more heroism than anyone in Washington has been willing to demonstrate to turn down the dollars and resist the pressure from this industry, and it does set the precedent for "fettering" capitalism. But there is no other way to prevent the degree of profit-taking the industry enjoys now.
1
We're all in this together. It's bad enough the GOP health bill results in 22 million fewer people with health-care coverage in a decade. Probably more.
Keeping matters the way they are would result in none of these horrific losses.
With no humane subsidies, insurance policy deductibles sky rocket to perhaps $6,000 for a single individual. No way does the GOP bill improve healthcare:
Medicaid gets cut by 800 billion!! That affects us all.
People will struggle in rural areas---Trump Country. Does he give a darsh darn? Doesn't seem like he even understands the bill's consequences. Everyone suffers so millions go every year to the richest families this nation will be giving welfare to?
That tax cut money would fix Obamacare.
Let's not stoke higher drug prices. Hasn't the appearance of Martin Shkreli for trial--and memories of his smug price gouging--smacked us into reality?
Keeping matters the way they are would result in none of these horrific losses.
With no humane subsidies, insurance policy deductibles sky rocket to perhaps $6,000 for a single individual. No way does the GOP bill improve healthcare:
Medicaid gets cut by 800 billion!! That affects us all.
People will struggle in rural areas---Trump Country. Does he give a darsh darn? Doesn't seem like he even understands the bill's consequences. Everyone suffers so millions go every year to the richest families this nation will be giving welfare to?
That tax cut money would fix Obamacare.
Let's not stoke higher drug prices. Hasn't the appearance of Martin Shkreli for trial--and memories of his smug price gouging--smacked us into reality?
9
When I was employed to work on a major vaccine by a major drug company, I was ASTONISHED at the gifts, trips, massages, extravagant buffets (all you could eat lobster, shrimp, etc.) , roof top entertainment that included a trio band, a caricaturist, and a tarot card reader, among the walking trays of hors d'oevres and wines. Then the time boat trips offshore for mor riotous fun, including drinks gambling. And there at least 100 of us low-level nurses, vaccine techs, and assistants who,ere present along with the docs and company execs. The rooms we stayed in were fabulous: one bathroom was bigger than my living room -- all marble, jaczuui, separate room for a toilet with a telephone nearby, aeparate roon fro a loo, all off the main BR. Pure luxury!!! For Lowly Me. Take-away gift shop of glass candy bowls from Tiffany,.'s.
THAT'S. why your/our drugs cost so much. It was absolutely OBSCENE, and totally unnecessary..
THAT'S. why your/our drugs cost so much. It was absolutely OBSCENE, and totally unnecessary..
31
New Zealand and the United States are as far as I know are the only two countries that leagally alow pharmaceutical companies to advertise directly to the public. There is a reason for this ban that should be obvious to everyone.
19
Wow! Sounds like an industry white paper. Sure, some drug profits fund research. Some tax dollars do to, though Mitch and Paul are sure to not support that too much. But so much of the super high prices are just pure profit. I remember when zyrtec went generic and OTC; I think I found the brand at about $1.00 per pill, the Costco generic at about $.09. Albuterol in a plastic container for a nebulizer is dirt cheap; in a pressurized dispenser it costs maybe $60 for a short term supply; most of that is profit. Zyzal just went OTC and my drug store quoted $300 for a 3 month supply (nearly 3 times what Costco sells it for). Profiteering in this business takes place at multiple levels, of course. But my favorite is the epi pen; even with the fancy mechanism what does it really cost to make, $20 per pen maybe? Surely nowhere near $300 retail price per pen x 2. We need laws that prevent profiteering AND provide a steady stream of funding for research. And if taxpayers fund the research, a drug firm should not get rich over it.
17
Drug cost can be significantly reduced if the manufacturers cut down marketing cost by half, control their greed by limiting net margin to a reasonable level and preventing them from gouging the market by eliminating competition as we see today in the generic market. Paying off competitor not to manifacture should be illegal. They run the business like a cartel.
16
While pharma proclaims the aims the myth that high drug prices pay for drug research, just how much is research and how much more is profits, advertising, reformulating to justify new pricing? My guess is that research on new drugs (not how to reformulate to avoid patent limitations, etc, purely to retain high pricing) is a small part of the price.
We have all seen the massive amounts of ads on tv and the rapidly escalating prices on common drugs in recent years. Think Shrelki--he is not an exception--just more blatantly greedy and publicly boastful.
We have all seen the massive amounts of ads on tv and the rapidly escalating prices on common drugs in recent years. Think Shrelki--he is not an exception--just more blatantly greedy and publicly boastful.
11
I am all for saving Big Pharma huge sums of money by banning TV advertising (brainwashing?) of their products. Also most of the money pharma pays to "research" is for clinical trials which they primarily use as marketing tools. All discovery is now made by government-funded academic research.
15
Give me a break. It's the exorbitant markups that are the problem,
9
The open secret? The federal government funds most of the drug research. (If memory serves me, government-funded research accounts for two-thirds of the NMEs---new molecular entities---patented in the US.) The patents become the property of the drug companies whose lobbyists ensure that US patent laws favor the patent holder.
It's part of the corporate welfare system that makes our country "exceptional."
It's part of the corporate welfare system that makes our country "exceptional."
16
So U.S. citizens pay much higher drug prices to subsisize pharmaceutical research and the pharmaceutical companies pay little in U.S. taxes?
14
Of course research is good. But research funded by high drug prices may incentivize the wrong kind of research -- specifically, it's in the interest of pharmaceutical companies to find drugs that don't cure disease once and for all but rather manage disease so that people must purchase them on a regular basis indefinitely.
18
Having read many of the comments over the past week, I can´t help but conclude that, without data, Dr. SENDHIL MULLAINATHAN has done little to advance our understanding of the situation. Our commentators simply rehash the same positions we have seen before. So, Dr Mullainathan, please come back again, but this time with numbers. Two issues seem to bedevil us: (1) what share of the revenue from these high prices goes into research (including drug trials) and as opposed to advertising, share buybacks, etc.. (2) how much money the industry is collecting via price increases of old drugs, and what proportion if any helps research -- particularly when the entity jacking up the prices is a new owner of the drug who has no relationship to its original developer and has no research capabilities of his own. Apparently our audience demands facts, plus reasonable suggestions on how to improve the situations. What you are offering instead are soothing rationalizations which carry little weight without them, an no viable solutions.
20
In all of this discussion, it is never mentioned that the prices of drugs -in the US- are much higher than the same drugs in the rest of the developed world. I worked in pharmaceutical research: I understand that a profit must be made to fund research (my paycheck then, my pension now). But one wonders: are the margins in -every other- country such that drugs are sold on a "break-even and a little bit" basis? Can big pharma afford to sell at these prices? Or are the margins in the US so generous that they offset the low margins in other countries?
That last statement can be rephrased as: are American consumers bankrolling research that the rest of the world won't pay for? Are American consumers subsidizing Canada and the EU?
That last statement can be rephrased as: are American consumers bankrolling research that the rest of the world won't pay for? Are American consumers subsidizing Canada and the EU?
28
Steve
You're looking at the wrong bad guys. Canada and the EU are not the problem. Over-reaching drug manufacturers are the problem.
An example: our 'free-market' conservatives expressly forbid competition from foreign sources that would instantly and dramatically lower the cost of medication.
Why? Because the US does not have or want a free healthcare market, it has a multi-corporation monopoly. We are willing to pay virtually anything even knowing that no other nation on the planet has allowed this to happen.
Because its socialism for business, not socialism for people.
Actually, it wouldn't be socialism at all, but that's such a good way to scare great unwashed.
Its the companies, not the other countries. We should wise up. Quickly.
You're looking at the wrong bad guys. Canada and the EU are not the problem. Over-reaching drug manufacturers are the problem.
An example: our 'free-market' conservatives expressly forbid competition from foreign sources that would instantly and dramatically lower the cost of medication.
Why? Because the US does not have or want a free healthcare market, it has a multi-corporation monopoly. We are willing to pay virtually anything even knowing that no other nation on the planet has allowed this to happen.
Because its socialism for business, not socialism for people.
Actually, it wouldn't be socialism at all, but that's such a good way to scare great unwashed.
Its the companies, not the other countries. We should wise up. Quickly.
26
So my question is this: When government funds research that results in a blockbuster drug, are the drug prices MUCH lower because taxpayers paid for the research?
11
Appropriate regulation is not socialism. It is the necessary watchdog to prevent criminal price gouging. Increasing the price of a drug 100% or 1000% just because you think you can get away with it is no different than raising the price of food and gas because a hurricane is approaching. Both are, or should be, illegal. We are, after all, a society, and as such must eschew the dictatorship of the plutocracy as well as the dictatorship of the proletariat. Currently, we have lost all semblance of balance.
14
Make pharmaceutical research a national security priority and funding is magically not an issue since most research is government sponsored anyway.
2
In reading this article, along with readers' comments, it seems to me that health care is complicated.
Who knew?
Who knew?
6
the problem is our capitalist system of greed produces the advancements. the other systems don't. when you raise money to develop new technology, you are competing for investment with things like dot com companies that have way shorter paths to the market and lower development costs. if the product is successful, patent and regulatory laws give only a few years to get a return on the investment. other countries take a tougher stand on prices so a company has to make there money here. i suspect by allowing higher prices here, we are subsidizing prices in other countries. so we have the problem of high costs for drugs and medical devices. force prices down and investment will dry up
1
It is not the new drugs that are the problem but rather the 50 year old ones that suddenly jump in price. I have taken Synthroid for 30 years. It used to cost me $10.00 a month. Now it is over $30.00. I take it every day for the rest of my life. While the claim is that the generic is the same. It isn't. A small example.
17
And a gallon of gas used to cost $.29, it now costs $2.49. A pound of chuck steak used to cost $.99, it now costs $2.89.
Prices go up (and occasionally down). That is a fact of life which will never change.
Prices go up (and occasionally down). That is a fact of life which will never change.
4
Our healthcare financing system is to blame. Insurers are loathe to exclude breakthrough drugs from their formularies, especially those that Medicare pays for. That's because the insurers have to answer to their large corporate customers, who pay multiples more than Medicare. So, the costs just get pushed through the employers and employees with those on the drugs being subsidized by those who are not.
One of the problems is that the US system effectively pays for all the R and D premium while the non-US customers free ride, paying just for the margin on the manufacturing cost. The obvious solution is to put a tariff on exports of drugs and require the drug companies to use those tariffs to reduce the cost to the US system.
One of the problems is that the US system effectively pays for all the R and D premium while the non-US customers free ride, paying just for the margin on the manufacturing cost. The obvious solution is to put a tariff on exports of drugs and require the drug companies to use those tariffs to reduce the cost to the US system.
4
True, but we've handed the rest of the world that free ride on a silver platter - it's not something the ROW "did to us." The obvious solution is to join most of the rest of the developed world in having government help set reasonable prices (either federally or, if you prefer, state by state - people forget the Canadian system started one province at a time, and still consists of three separate systems). This would slow new drug development slightly but average health would improve a lot if the current drugs became available to all those who need them. It would also free up more R&D money by reducing the incentive for drug companies to waste massive amounts of money on marketing (by reducing the profits it brought; I'd also argue for making direct-to-consumer ads illegal again but doubt that's politically viable), freeing up some cash for drug development.
The Canadian healthcare system emerged from the "Social Credit" political philosophy (and former political party), which can be boiled down to saying that having lots of poor people with little to negative disposable income is a drag on the overall economy, so inequality should be addressed. That philosophy had its flaws, but I think the US is living some of the arguments for it right now.
The Canadian healthcare system emerged from the "Social Credit" political philosophy (and former political party), which can be boiled down to saying that having lots of poor people with little to negative disposable income is a drag on the overall economy, so inequality should be addressed. That philosophy had its flaws, but I think the US is living some of the arguments for it right now.
5
Are most of the drug companies U.S. Compamies? Where do they pay theor taxes?
1
This article promotes the false narrative that pharmaceutical profits are what fund basic research. They do not. All of that basic research is funded by tax dollars through NIH. Once a new class of drugs has been identified, the pharmaceutical companies then take the results of that publicly funded research and do their own R&D for the sole purpose of turning those results into patentable drugs. In other words, they invest their profits into making more profit. Period.
30
A solid point. Furthermore, the claim that high prices lead to more private research is undercut by author’s
1. strange failure to put dollars to the percentages of money put into raw research.
2. later admission that most of the profits do not go to research
3. blithe avoidance of the raising of prices for old drugs
4. ducking issue of higher drug prices in the US than elsewhere
5. all in all reading like pharma propaganda .
1. strange failure to put dollars to the percentages of money put into raw research.
2. later admission that most of the profits do not go to research
3. blithe avoidance of the raising of prices for old drugs
4. ducking issue of higher drug prices in the US than elsewhere
5. all in all reading like pharma propaganda .
17
How about auditing pharmaceutical companies' claims? Rather than let them claim that the cost of research requires sky-high prices, make them prove it --- verified by independent auditors.
And while we're at it, require them to publish all studies and include negative results in their marketing. As in expensive wonderdrug provides only a 5% improvement in outcomes for a 500% increase in cost.
And while we're at it, require them to publish all studies and include negative results in their marketing. As in expensive wonderdrug provides only a 5% improvement in outcomes for a 500% increase in cost.
12
It's a modern day Babel, with famines of their making, no end exists which tracks down whose research and costs can be numbered and claimed.
2
Pharma companies do a couple of things when they get huge cash flow from high-priced drugs. They buy back shares, increase dividends and pay their CEOs unconscionable sums.
Please look at the pace of R&D and investment in the US over the last number of years. Companies, and let's face it pharma is just another profit maximizer, are highly incentivized to disinvest while harming the company at the expense of its future.
Solution? Change the incentives for share buybacks and dividends. Start by taxing dividends like ordinary income. Reduce capital gains tax benefits proportionately to size of share buybacks.
Please look at the pace of R&D and investment in the US over the last number of years. Companies, and let's face it pharma is just another profit maximizer, are highly incentivized to disinvest while harming the company at the expense of its future.
Solution? Change the incentives for share buybacks and dividends. Start by taxing dividends like ordinary income. Reduce capital gains tax benefits proportionately to size of share buybacks.
5
The underlying problem here is that it's impossible to have a rational discussion about an irrational system.
4
This piece feels like an example of concern trolling. Let's not stop doing something bad because unintended consequences could result in something even worse, even though the author actually admits that the connection between the two somethings is not consistent, nor completely direct even when it could be applicable. If he's trying to solve a "foolish way of funding research", he should use his platform to tell us about a non-foolish way instead of implying that we have to accept the status quo in any form. I know the author agrees with me but his piece reads like one long series of qualifiers and disclaimers; I would prefer that he use his expertise to suggest a better model that's workable in the real world. I don't need to be a Harvard economics professor to know that drug research needs "increased funding, in some form."
10
So the American consumer funds research for the rest of the world? This could only be written by someone who has not directly paid for his or her medical insurance.
13
Let alone paid out of pocket for medications!
2
There's a big difference between legitimate profit in the pharmaceutical industry that supports research and much of what we have seen going on of late. How is it that prices must go up at double and triple digit rates on existing products? Seems that any product's initial price would be set to sufficiently cover profit, production costs and research. Tacking on huge increases years later and saying that's a necessity for research is a bit of a stretch.
Worse still are companies that have taken advantage of their position with mature products, often beyond their patent protection phase, and raised prices at unimaginable rates. There's no research involved there. Just plain old greed. I'm almost never in favor of government regulation of the market, but a few companies have taken terribly unfair advantage. They're practically begging to be regulated.
Worse still are companies that have taken advantage of their position with mature products, often beyond their patent protection phase, and raised prices at unimaginable rates. There's no research involved there. Just plain old greed. I'm almost never in favor of government regulation of the market, but a few companies have taken terribly unfair advantage. They're practically begging to be regulated.
13
The facts cited in this editorial support increased government funding of drug research, not higher drug prices. Nevertheless, the takers in our society will continue to use these facts as justification for their hostage-taking approach to pharmaceutical development, with current leaders eager to aid and abet.
Sadly, too many Americans don't really care - their only concern is their co-pay, and when that number is too high, they blame Obamacare and vote for politicians who will only make the situation worse. We see it playing out, in real time, before our eyes.
Sadly, too many Americans don't really care - their only concern is their co-pay, and when that number is too high, they blame Obamacare and vote for politicians who will only make the situation worse. We see it playing out, in real time, before our eyes.
18
I had Hepatitis C. I qualified for Medicaid. My treatment was $150K. Before I was connected with my current provider Fidelis I was approved by the state for treatment, they did it right away. One month into the process I joined Fidelis and they refused to approve my treatment however my doctors successfully convinced them that discontinuing my lifesaving treatment was not an option for them. I am now cured.
Why was my treatment, a few pills for a few months so expensive? Oh I suppose it took quite an investment to develop the cure and prove it really worked in addition to being safe. So here we have a mix of private and public money lavished on a crippling disease but why this one? The reason is that the private money could see a good return because here in the US and globally there is a large market. The reason the public money was approved for the treatment is luck for me; I live in NY which is a progressive state and believes that being a healthy productive citizen for the rest of my life (I'm 55) is a good economic investment even at a $150K to be contrasted with a slow, costly miserable death notwithstanding the effect that has on others who depend on me emotionally and physically. So I care a lot but I agree that too many Americans don't care and even when confronted with the type of situation I was fail to appreciate how important this private/public relationship is. Trump takes the failure to understand and care approach to the dramatic extreme. I got lucky.
Why was my treatment, a few pills for a few months so expensive? Oh I suppose it took quite an investment to develop the cure and prove it really worked in addition to being safe. So here we have a mix of private and public money lavished on a crippling disease but why this one? The reason is that the private money could see a good return because here in the US and globally there is a large market. The reason the public money was approved for the treatment is luck for me; I live in NY which is a progressive state and believes that being a healthy productive citizen for the rest of my life (I'm 55) is a good economic investment even at a $150K to be contrasted with a slow, costly miserable death notwithstanding the effect that has on others who depend on me emotionally and physically. So I care a lot but I agree that too many Americans don't care and even when confronted with the type of situation I was fail to appreciate how important this private/public relationship is. Trump takes the failure to understand and care approach to the dramatic extreme. I got lucky.
4
This MIGHT be a cogent argument if drug companies were in fact funding R&D, but the majority of the budget goes into marketing drugs, not developing newer or better ones.
I would still like someone to explain to me why I can get medications in Europe, same brand, amount and prescription strength, for pennies on the dollar of what I would pay in the US. One example: my asthma inhaler, $120 in the US, 2.87 euro (about three dollars) in Greece, without insurance.
I would still like someone to explain to me why I can get medications in Europe, same brand, amount and prescription strength, for pennies on the dollar of what I would pay in the US. One example: my asthma inhaler, $120 in the US, 2.87 euro (about three dollars) in Greece, without insurance.
27
I am an American living in London and can reinforce Laurette's point. My example: a private prescription for Protopic Ointment costs £36 in the UK. In the US? $940!! End US pharma consumer advertising and you can redirect more money to research and a reduction in pricing!
5
Prof. Mullainathan makes some good points. However, where I've looked drug marketing & sales expenses dwarf research costs. Maybe among his assertions it would be useful for the good Professor to include real data from several of the major pharmaceutical firms showing the real facts regarding where drug firm income goes. Among the majors I see few that spend more that 20% on R&D and about the same for manufacturing. But I'm no economics professor whose business is to gather and publish real facts-hard data. Please Professor, do your public a favor and publish the data!
20
Professor
Please explain why drug prices are outrageously in the United States but not Europe and Canada.
I am confused.
Please explain why drug prices are outrageously in the United States but not Europe and Canada.
I am confused.
9
Canada and European countries--and the V.A.--BARGAIN with pharmaceutical companies. They do not just accept whatever these companies would like to charge, for in this case obviously, the sky is the limit!
7
rhetorical question
1
Just as there is no evidence that high drug prices are actually necessary to fund drug development, there's no evidence that the free market actually produces the new drugs we actually need.
What is the marginal benefit from a new cholesterol-lowering medication, like the one featured in this piece, likely to be? Mortality from cardiovascular disease is already down significantly among patients who receive timely access to current therapies (including lifestyle management). How many deaths will this drug actually prevent, compared to current options?
On the other hand, we desperately need better antibiotics, but there's little profit in that, and few companies are even working on the problem (Frontline has covered this extensively).
When our system relies on profits to fund new products, we cannot expect new products to be chosen for anything other than profitability.
What is the marginal benefit from a new cholesterol-lowering medication, like the one featured in this piece, likely to be? Mortality from cardiovascular disease is already down significantly among patients who receive timely access to current therapies (including lifestyle management). How many deaths will this drug actually prevent, compared to current options?
On the other hand, we desperately need better antibiotics, but there's little profit in that, and few companies are even working on the problem (Frontline has covered this extensively).
When our system relies on profits to fund new products, we cannot expect new products to be chosen for anything other than profitability.
24
What would happen if research and development were separate from manufacturing? If R&D created a drug and then manufacturing would be left to the market forces where as all approved manufacturing could be done with fixed fees going back to the R&D.
In turn, R&D would be by contracted universities and independent researchers funded by a pool of those fees. Distribution awards would be done by combined professional organizations and governmental bodies. Testing and certification would be done by a separate branch in combination with FDA approval oversight.
What I'm trying to do with this is use competition for price and manufacturing innovations, but separate development to be socially and medically appropriate areas. Seems to me this division would be the way to do it.
In turn, R&D would be by contracted universities and independent researchers funded by a pool of those fees. Distribution awards would be done by combined professional organizations and governmental bodies. Testing and certification would be done by a separate branch in combination with FDA approval oversight.
What I'm trying to do with this is use competition for price and manufacturing innovations, but separate development to be socially and medically appropriate areas. Seems to me this division would be the way to do it.
4
How do you see this happening? To forbid private innovation is a non-starter. One wants to have research going on that is expected to advance treatment. Companies want to discover treatments that will be found effective, hence marketable. We have private enterprise. Hooray for what it does well!
Sometimes working on a particular problem is too long-range or uncertain of a payoff for private enterprise. This is where national research-- taxpayer -funded comes in. Both are needed. Tax money is not likely to be sufficient to do ALL research, nor need it be. There is, of course, a problem with the present administration's policy on funding research or any public health work.
Sometimes working on a particular problem is too long-range or uncertain of a payoff for private enterprise. This is where national research-- taxpayer -funded comes in. Both are needed. Tax money is not likely to be sufficient to do ALL research, nor need it be. There is, of course, a problem with the present administration's policy on funding research or any public health work.
Drug research and development requires the co-ordinated efforts of numerous senior scientists from a variety of different disciplines. This essential high level team approach could not possibly be carried out at a University for a variety of different reasons including the fact that each senior professor opperates his own separate fiefdom, rather than being a component part of a team. That anyone imagines that drug research and development could possibly be carried out successfully in a University setting is an indication that they are completely unfamiliar with what is required.
WA Spitzer, you're just wrong.
The entire foundation of the modern pharmaceutical industry is based upon drug research and development carried out at universities and government research facilities.
Pharmaceutical corporations took those developments for little or no cost, and invested in developing manufacturing processes and the research required to obtain patents and approvals.
Patents, by the way, which they abuse by renewing protection for non-essential changes like new tablet shapes and colors and dosages.
Your kidding yourself if you think this is all a gift from the free market.
The entire foundation of the modern pharmaceutical industry is based upon drug research and development carried out at universities and government research facilities.
Pharmaceutical corporations took those developments for little or no cost, and invested in developing manufacturing processes and the research required to obtain patents and approvals.
Patents, by the way, which they abuse by renewing protection for non-essential changes like new tablet shapes and colors and dosages.
Your kidding yourself if you think this is all a gift from the free market.
6
I agree that there is risk to cutting drug prices. My problem is that pharmas negotiate better prices with other countries and we are left in the US to foot the bill for the research. I'd like to see more equity across the global landscape.
2
We (Congress) have no authority to determine at what price pharmaceutical companies sell their goods outside the USA. Besides, these companies do sometimes sell drugs to underdeveloped countries that could not otherwise buy them. It is a good thing for world health. This may be represented as charity by the companies, but as long as they are selling for at least their marginal cost--it isn't costing them anything.
1
No one is talking about setting prices. We're talking about negotiating the best deal. Its what you call the free market in every other instance.
And the lower prices have little to do with "needy" countries, as every other nation on earth pays far less than we do. Its all an artifact of duplicitous dealings by "free market capitalists" on the conservative side of the legislature.
And the lower prices have little to do with "needy" countries, as every other nation on earth pays far less than we do. Its all an artifact of duplicitous dealings by "free market capitalists" on the conservative side of the legislature.
2
The VA negotiates with drug companies for the drugs they buy. So do all of the mostly single payer health care systems in all the developed countries. Medicare should be allowed to do the same and if/when we ever adopt single payer, so will that system.
Private enterprise is good at what it does: manufacturing and getting things to market efficiently. But they are uniquely able to set their own prices in this country--except for those who are getting their prescriptions from Canadian or Mexican pharmacies. Anyone who thinks they are plowing their profits into research hasn't been watching TV advertising--which, incidentally, no other country except New Zealand allows.
Private enterprise is good at what it does: manufacturing and getting things to market efficiently. But they are uniquely able to set their own prices in this country--except for those who are getting their prescriptions from Canadian or Mexican pharmacies. Anyone who thinks they are plowing their profits into research hasn't been watching TV advertising--which, incidentally, no other country except New Zealand allows.
2
This is the falsehood that the pharmaceutical companies peddle: that income from sales of drugs funds “important scientific work”, hence the necessity of high prices. This is incorrect for many reasons. Government funding still accounts for the largest portion of research funding, at university labs and the smaller biotech companies that actually do the research. NIH funding has increased steadily every year since 1970. Government supports drug research not only in terms of funding but also in terms of protecting monopolies by means of patents and acts like the orphan drugs act, which gives companies seven-year market exclusivity for every new indication of the same drug. Large pharmaceutical companies spend most of their revenues on marketing, not on research and development. To give one example, between 2006 and 2016 Johnson & Johnson—the largest pharmaceutical company by revenue—made $721.5 billion in total sales, of which it spent $86.2 billion on research and development, 12% of revenue, and $225.4 billion on selling, marketing and administrative expenses, 31% of revenue. In other words, for every dollar of revenue, J&J spent 12 cents on research and development and 31 cents on marketing; and for every dollar spent on research and development, J&J spent $2.6 on marketing. The same with other large pharmaceutical companies. Incidentally, most of R&D expenditure is on development, not on basic research, which means tweaking already existing drugs to extend patents.
19
The Government does not now, nor have they in the past supported drug research and development. What government has supported is the basic research that lays the foundation for research and development, but no one should imagine that basic research and applied research are the same thing or that in any way they can be substituted for one another. One is not inherently more important or more challanging than the other, but rather they compliment each other; both are essential
Let's assume you're correct, which you are not.
But in case you are, how do you explain the fact that pharmaceutical companies spend many more times in marketing and more times than that in lobbying than what they spend in research?
How do you even pretend health care is a viable market when corporations and Republicans have labored long and hard to create a closed market which forbids negotiations by the biggest consumer, refuses to allow competition from foreign suppliers, and will not under any circumstances permit price transparency so consumers have even the possibility of making informed choices?
Health care is a market only because Republicans tell us so. It is in reality a cash machine for pharmaceutical and device manufacturers, hospital "foundations", and most significantly investors. These people take no risks. They do not do any more research than they would under a more rational system, and they operate in utter disregard of their stated mission: to make people healthier.
As in so many other sectors, the free market in health care is a myth, perpetrated by flag waving self interested fools who can't see that everything in this country would be better if we kept free markets in their place, and recognized capitalism as a secondary feature of a functioning democracy.
But in case you are, how do you explain the fact that pharmaceutical companies spend many more times in marketing and more times than that in lobbying than what they spend in research?
How do you even pretend health care is a viable market when corporations and Republicans have labored long and hard to create a closed market which forbids negotiations by the biggest consumer, refuses to allow competition from foreign suppliers, and will not under any circumstances permit price transparency so consumers have even the possibility of making informed choices?
Health care is a market only because Republicans tell us so. It is in reality a cash machine for pharmaceutical and device manufacturers, hospital "foundations", and most significantly investors. These people take no risks. They do not do any more research than they would under a more rational system, and they operate in utter disregard of their stated mission: to make people healthier.
As in so many other sectors, the free market in health care is a myth, perpetrated by flag waving self interested fools who can't see that everything in this country would be better if we kept free markets in their place, and recognized capitalism as a secondary feature of a functioning democracy.
1
W. A. Spitzer, you are wrong. Government has always supported drug research and development, and to understand the extent of government support you have first to understand that government support goes beyond direct funding and includes tax breaks, subsidies, patent protection, etc. Second, the distinction between basic research and applied research has long been eroded, since medical and bio-scientists at entrepreneurial universities started forming biotechnology startups in the middle 1970s. When those scientist-entrepreneurs receive government support, including funding from NIH or NCI, for research in their labs that results in patents and leads to drug development, then government is supporting drug research. The myth that companies do it on their own is just that, a myth.
1
The arguments in the article may be valid as far as they regard recent innovative drugs. However, many overpriced drugs are not connected with any recent research. For example, there has been no research in decades that could be connected to the price of EpiPens and yet EpiPens cost many times more than they cost ten years ago.
4
This is also true of insulin and some drugs for asthma. There is no reason those essential (and not at all new) medications should be as expensive as they are.
4
High drug prices for novel, new cutting age drugs is one thing, but what most folks are concerned with are high prices for drugs that are routinely prescribed and that have been around for years. There's no realistic R & D argument there.
6
Sendhil: bait and switch. Start talking about high drug prices and your bizarre assertion that we should leave them where they are, then make your argument based upon "cutting prices for novel new drugs".
Let's start, though, with your number one reason for allowing drug prices to reach killing heights: that 58% of drug research is from private sources, up dramatically from just eight years ago.
What this statistic tells us is that corporate cartels controlling massive drug profits got where they are today largely on my tax dollars. They scarfed up university and agency research at very little cost, made billions and billions of dollars in profit. And all that profit is after the research expenses these corporations complain constantly about.
Now they want bigger and bigger profits.
But back to your argument. You can't start off talking about drug prices and then switch to research costs, because most of the big bucks profit producers are long in the tooth medications, and when their prices rise they rise arbitrarily for no other reason than to increase income.
To facilitate this process, drug companies invest their cash in perverting and destroying free markets. For example, forbidding the government to negotiate prices. Or getting laws passed to restrict, say, epinephrine used in schools to one particular brand which has increased prices 1500%.
Talk to us about that, and maybe we'll listen top your arguments about research.
Let's start, though, with your number one reason for allowing drug prices to reach killing heights: that 58% of drug research is from private sources, up dramatically from just eight years ago.
What this statistic tells us is that corporate cartels controlling massive drug profits got where they are today largely on my tax dollars. They scarfed up university and agency research at very little cost, made billions and billions of dollars in profit. And all that profit is after the research expenses these corporations complain constantly about.
Now they want bigger and bigger profits.
But back to your argument. You can't start off talking about drug prices and then switch to research costs, because most of the big bucks profit producers are long in the tooth medications, and when their prices rise they rise arbitrarily for no other reason than to increase income.
To facilitate this process, drug companies invest their cash in perverting and destroying free markets. For example, forbidding the government to negotiate prices. Or getting laws passed to restrict, say, epinephrine used in schools to one particular brand which has increased prices 1500%.
Talk to us about that, and maybe we'll listen top your arguments about research.
56
Most drug research is being done by small biotech start ups, not big pharmaceuticals. The model changed about 20 years ago. Reason is that it is way too expensive and risky for big pharma to do their own compounds from scratch. So, private investors along with small groups of scientists do the basic development and drug discovery. At some point they either partner or sellout to big pharma, and big pharma takes it from there. Getting a compound approved and to market costs over a billion dollars. There are currently 18,000 drug compounds that are in late stage development - the most ever. Do the math. How do we pay for all these drugs? Do we really want to slow the introduction of drugs to treat Alzheimer's, Parkinson's, etc? What would be the cost benefit of effectively curing Alzheimer's? By 2030 it is expected the 5.5 million people will need to be in long term memory care facilities. So, I ask what is the cost-benefit of a drug that would keep 5.5 million people annually out of long term memory care for Alzheimer's? What about drugs that would cure obesity or prevent type 2 diabetes from ever occurring? What is their cost benefit to society?
7
Turing Pharmaceuticals and the makers of Epi-pens have shown us how drugs are priced. It has nothing to do with research costs. Turing doesn't even do research.
Prices are set by taking the maximum amount the insurance companies can extract from their customers and backing out what they consider a fair (i.e. huge) profit margin for themselves. The rest goes to the drug's patent owner.
The higher the price, the more both the insurer and the manufacturer profit. The only limit is our collective ability to pay.
Prices are set by taking the maximum amount the insurance companies can extract from their customers and backing out what they consider a fair (i.e. huge) profit margin for themselves. The rest goes to the drug's patent owner.
The higher the price, the more both the insurer and the manufacturer profit. The only limit is our collective ability to pay.
13
Of course! We absolutely need to substantially increase research funding, that's as much of a 'no-brainer' as regulating drug prices are. That being said, I think another viable model for reining in the industry is imposing reasonable rate of return caps on prices, much like we do with power companies or other 'natural monopolies.' A drug company can charge enough across all of its products to ensure a reasonable rate of return - say 15%, on an annual basis. If a company chooses to spend massively on R&D, they can raise their prices accordingly and make some additional profit. While this model would eliminate the lottery-like opportunities as drug companies win big with a discovery or collapse into financial ruin as a result of a bad bet, it also has the upside of giving investors a stable return over time - utilities are certainly popular investments (for a very different type of investor).
3
We shelter drug companies from normal competitive pressures. We should get rid of protective import restrictions, encourage Medicaid to negotiate, encourage formulators to compete in generics, better scrutinize patent extensions & non-value adding patents that just extend price protections. Once we have taken these simple measures, we will have a healthier and more competitive markets for drugs - and a much lower bill for the consumer. We won't do these things of course because K street will keep funneling excess drug profits into campaign coffers - what a system........
2
The problem is not the money going into research, and reasonable profit-taking. The first line of offense is when pharmaceuticals, past their recouping of R & D expenses, is priced to earn excess profits. That is GREED!
https://thetruthoncommonsense.com
https://thetruthoncommonsense.com
2
To cry "greed" is a moral judgment which isn't wrong, but just doesn't get us anywhere. To permit large-scale purchasers like Medicare, to bargain is more to the point. Every other advanced country (all OECD members) do so--as does the VA.
I think we are ready for another era of trust-busting.
I think we are ready for another era of trust-busting.
1
Fascinating debate. It's awful that we are put into this situation given our current president. But it's hard to way the accessibility of drugs to those that really need it and can't afford it. Their lives matter as well. Without those drugs they may die.
You also fail to account for the exorbitant percentage of drug co budgets spent on marketing and the very large share of research that is funded by universities via gov grants. It's simplistic to state that big Pharma spends more on research, their own annual reports clearly state they are spending less, and propping up forecasts by simply buying smaller firms who may have a pipeline. There is nothing sustainable about high prices for consumers, govt has a legal role in research and that role MUST be returned in kind by reasonable prices for us consumers. If Pfizer CEO has to suffer with only $10m annual comp I can certainly live with that.
3
Unless these wonder drugs are available for everyone they should be available to no one.
The free market should not determine who suffers or dies based on profit.
We will never stop the decline of basic human rights until we get our priorities straight.
It may sound cruel to some but will you tell the family that their loved one will die because a wonder drug to some is not going to be affordable for you, it's happening now.
The free market should not determine who suffers or dies based on profit.
We will never stop the decline of basic human rights until we get our priorities straight.
It may sound cruel to some but will you tell the family that their loved one will die because a wonder drug to some is not going to be affordable for you, it's happening now.
4
Will you tell the family that the loved one will die needlessly because the necessary wonder drug has not been developed for lack of funding?
W.A. Spitzer
You realize your premise is hypothetical, I am talking about drugs that already exist that folks can't get for lack of funding.
I do understand but shift funding, raise taxes, do whats necessary to make that talk unnecessary.
You realize your premise is hypothetical, I am talking about drugs that already exist that folks can't get for lack of funding.
I do understand but shift funding, raise taxes, do whats necessary to make that talk unnecessary.
3
We are presently holding therapies based on ability to pay and have for decades. It is something that happens in every business everywhere.
That being said, many of these expensive drugs for advanced prostate cancer are being supplied FREE by the evil big PHARMA companies if your annual income meets a criteria which is quite high, even for NYT readers. Their assistance programs, particularly for the drug Xtandi, have revealed that a kind soul lurks within despite high cost and profit incentive. I applaud them.
That being said, many of these expensive drugs for advanced prostate cancer are being supplied FREE by the evil big PHARMA companies if your annual income meets a criteria which is quite high, even for NYT readers. Their assistance programs, particularly for the drug Xtandi, have revealed that a kind soul lurks within despite high cost and profit incentive. I applaud them.
1
That pubic investment in drug and medical research is shrinking is not the operation of a law of nature, but of deliberate policy choices being made by Paul Ryan and Scott McConnell and the Republican Congresses since 2010. These drug prices are also the result of Government action, of vesting these firms with monopoly pricing power with the full force of law, while at the same time not applying anti-trust rules to the marketing drugs and the merger of drug companies. We can change this sad situation by voting for politicians who don't revel in cruelty and greed.
1
I understand the problem raised in the author's example but suspect it is a rare exception among reasons for raising drug prices. A much more common one, I fear, is illustrated by an experience involving my late wife. She was prescribed Tarceva, a new drug at the time, but was too far advanced in her case of lung cancer for it to help. It was expensive, but fortunately the insurance provided by my former employer paid for it. A few months later I notice a news story reporting that the price had more than doubled. A spokesman for the pharmaceutical company, in a burst of uncommon candor, explained that the price rise was because the drug had been more effective than they had expected!
9
The reason why the same drugs are sold at a much lower price than here in Western Europe, Canada, Australia, etc. is because those countries place drugs on the fomularies covered by national health insurance only after price negotiations. The supplying companies supply only when and if they can make a decent profit from the sale.
Our GOP dominated Congress refuses to allow that type of negotation here, for example, with Medicare. Companies therefore, being rational, charge as much as the traffic will bear. They would be fools not to do so.
Our GOP dominated Congress refuses to allow that type of negotation here, for example, with Medicare. Companies therefore, being rational, charge as much as the traffic will bear. They would be fools not to do so.
62
Wrong. I have employer provided Blue Cross/Blue Shield health insurance that has a drug formulary that negotiates drug prices and what is covered under the formulary. On Medicare, Obama negotiated an 80 billion dollar drug reduction as part of the ACA and closing the donut hole on Medicare Part D with the pharmaceutical companies. Read the Obamacare Bill, it negotiated huge drug pricing reductions. Finally, drugs make up 9.6% of all healthcare spending in the U.S. even if drug companies gave away their drugs for free overall healthcare costs are rising 6.3% annually.
3
Sparky, you are aware that there is a law specifically forbidding the government from negotiating pharmaceutical and medical device prices, are you not?
The pharmaceutical giants kicked in almost $250 million to get the ban on negotiations passed by a Republican Congress.
Presidents of both parties have tried more or less seriously to revoke the ban, but no luck. Obamacare did not change that status quo.
"... there’s nothing in the health law that allows the government to push back. Prescription drugs are now the fastest growing category of medical costs" Norman & Karlinn-Smith, 2016.
The pharmaceutical giants kicked in almost $250 million to get the ban on negotiations passed by a Republican Congress.
Presidents of both parties have tried more or less seriously to revoke the ban, but no luck. Obamacare did not change that status quo.
"... there’s nothing in the health law that allows the government to push back. Prescription drugs are now the fastest growing category of medical costs" Norman & Karlinn-Smith, 2016.
All you guys don't like George Bush 43, but his "conservatism" brought us Medicare part D. It's expansion of socialized medicine will certainly last longer than anything President Obama attempted/accomplished in health care. Medicare part D has certainly improved access to many of these drugs and the formulary on these does attempt to lower cost. Whether giving more to Medicare patient's was a good idea? Discuss...
1
When one reads a column like this discussing drug prices in America, once again, it overlooks the largest of all "elephants in the room", the amount of money the pharmaceutical companies spend on advertising every year in America(over $5 BILLION dollars and in only one of the two countries in the world allowed to do so). This amount doesn't even include the hundreds of millions the industry spends every year lobbying in Washington. For some time now, all of these numbers have exceeded the amounts spent on R & D annually by the industry.
Instead of constantly complaining about why they can't cut drug prices, perhaps Mr. Mullainathan should spend more of his time questioning the industry as to why they don't divert even some of those advertising and lobbying dollars towards the reason why these companies exist in the first place?
Instead of constantly complaining about why they can't cut drug prices, perhaps Mr. Mullainathan should spend more of his time questioning the industry as to why they don't divert even some of those advertising and lobbying dollars towards the reason why these companies exist in the first place?
30
I noticed that when I was home in Virginia for Christmas last year; probably half of the TV ads were for pharmaceutical companies/prescription drugs. Over the past 10 years, I have lived in Greece, Belgium and Germany and traveled to London, Madrid, Rome, Paris, Amsterdam, Istanbul, Stockholm, Cairo, Hungary, and Copenhagen. I have never seen prescription drugs advertised on TV anyplace else.
1
Ask for a list of consultant clients before evaluating any article written by business faculty at any of the major business schools. This article is a great example of a specious argument at it's best.
33
I'm afraid Mr. Mullainathan has been conned by some of this pals at Harvard et al who are making a fortune from this industry.
The biomedical community is a disgrace. It isn't about science or curing diseases any more. Its about making money. Period end of report.
What makes it particularly odious is that TAX PAYERS funded the real pioneers like Andy Fire that make all this work possible. Yet many people can't even afford the most basic drugs - much less the latest high tech stuff most of which has marginal impact on health.
Scientists, pharma, and the medical establishment should all have their feet held to the fire. Health is not like some high tech gadget that's fun to have. Health is a human right. Shameful.
The biomedical community is a disgrace. It isn't about science or curing diseases any more. Its about making money. Period end of report.
What makes it particularly odious is that TAX PAYERS funded the real pioneers like Andy Fire that make all this work possible. Yet many people can't even afford the most basic drugs - much less the latest high tech stuff most of which has marginal impact on health.
Scientists, pharma, and the medical establishment should all have their feet held to the fire. Health is not like some high tech gadget that's fun to have. Health is a human right. Shameful.
18
In 2015, the pharmaceutical industry alone spent over $300 million on Washington lobbyists. America has been haggling about what to do with healthcare for over 60 yrs. with essentially liitle change and the healthcare industry wants to keep it that way.
5
"The biomedical community is a disgrace. It isn't about science or curing diseases anymoreit is about making money.".....And I suppose the automobile companies, the grocery stores, and building contractors are working out of the goodness of their heart? Beleive it or not scientists working in medical research have mortgages, car payments, and kids who want to go to college. The next thing you will tell me is you decline payment for the job you work at 50 weeks a year because unlike medical researchers you are a good person.
2
Wow. Now we are disparaging scientists who have often sacrificed so much of their personal lives to spend countless hours in the lab trying to discovery drug compounds to save peoples' lives. Tell me, how much should a scientist that developed the drug that cures Hepatitis C, and will save millions of lives worldwide make?
1
Let's dispense with this pretense that the USA is the center around which the world revolves. It is not! Of the world's largest and most influential pharmaceutical companies most are not headquartered in the US. Some are. Others are not. There is no rational or defensible reason why the same pharmaeutical products should be priced higher in the US than they are in Switzerland, Germany, France,the UK or Japan, where other of the world's leading pharmaceutical innovators are located and where innovation also takes place. There also is no rational or defensible reason why the same products, made by the same companies, should be priced much lower in Canada, Australia of New Zealand than they are in the US. That claim is pure poppycock!
69
Medical services are also a fraction of the cost, with great outcomes, even out of pocket.
Federal grants support much of the basic science and research by university people involved in drug development. In the case of epi-pens, the infamous daughter of the Senator from W. VA. bought the rights to a decades old drug delivery system and hiked prices from $50 to $600. The materials cost under five bucks. Check out the salaries of some of the pharmaceutical industry execs.
The big money is not in research and development. It's sales, marketing, and making it to the top. Ask any PHD working at a research university, teaching classes, running a lab, and not wealthy.
The big money is not in research and development. It's sales, marketing, and making it to the top. Ask any PHD working at a research university, teaching classes, running a lab, and not wealthy.
33
Science and research carried out by people at universities isn't remorely related to drug development. They carry out basic research which forms the critical base for drug discovery and development, but they are almost never directly involved in drug discovery and development themselves.
1
W.A. Spitzer,
You are wrong.Universities are great centers for developing many drugs that we enjoy today. But the big Drug Companies bring them to market because thats what they are set up to do.But the actual breakthrough/discovery and science of most value is from many Government or National Universities.
You are wrong.Universities are great centers for developing many drugs that we enjoy today. But the big Drug Companies bring them to market because thats what they are set up to do.But the actual breakthrough/discovery and science of most value is from many Government or National Universities.
1
Instead of cutting drug costs, how about some controls on oncologists, who when having near certainty that giving their dying cancer patients very expensive chemo drugs when it only gives them a slightly longer (and miserable) life. It will lower their incomes considerably, but will be better for the patient and for society.
And yes, unlike other kinds of doctors, oncologists profit from the sale of chemotherapy drugs. Look it up. It's perverse.
And yes, unlike other kinds of doctors, oncologists profit from the sale of chemotherapy drugs. Look it up. It's perverse.
7
It has already been done. The markup on chemotherapy has been cut from around 100% to around 4.3%. The result is that the vast majority of independent oncology groups have gone out of business. Ooncology practices are now hospital based, where insurance payments are higher and medications can be purchased in larger quantity for volume discounts. Further, as hospital employees, the oncologists no longer directly profit from the chemo (although the hospital certain can!). The NYT had a nice writeup about this a few years ago. https://www.nytimes.com/2014/11/24/health/private-oncologists-being-forc...
2
Sendhil needs to read An American Sickness to learn how pharma company game the 'more research in exchange for more profits via monopolies' rule. We need a congress that is serious about improving healthcare efficiency, not repealing laws To deny their predecessor a success
2
Its a shame that you chose a Harvard economist with ho experience in Health care to write this article. There are several there who can wirte a more informed piece as to the "link" between pricing and research. The author's premise is purely an emotional and unresearched premise. That there is a cause and effect relationship between National funding of research and pricing. The drug company prices drugs at whetever price will maximize profits, charging the highest amount it can before users decide they will pursue another alternative. The actual cost of developing a specific drug is irrelevant, and a Harvard economic professor should no the difference between pricing and cost of production.
6
This article is a classic nyt article
It misses a huge problem intentionally
Most of the profit from any drug goes to shareholders
And it has been increasing year after year faster than inflation
So your healthcare is supporting a well to do person like me.
We are heading back to feudalism
Most folks will exist to support the well being of the 5%
It misses a huge problem intentionally
Most of the profit from any drug goes to shareholders
And it has been increasing year after year faster than inflation
So your healthcare is supporting a well to do person like me.
We are heading back to feudalism
Most folks will exist to support the well being of the 5%
28
Yes, in "the real world we are living in" the knife definitely will slide in between your ribs if you don't hand over your wallet.
2
Bottom line here is that most is not all of our peer countries have much lower drugs costs to the consumer than we do.
Most of them have the same or higher scores on important factors like life expectancy, infant death rate etc.
I smell a fat rat here....super greedy drugs companies that put profits over the lives of Americans.
Most of them have the same or higher scores on important factors like life expectancy, infant death rate etc.
I smell a fat rat here....super greedy drugs companies that put profits over the lives of Americans.
5
The U.S Ranks last against 10 other OECD countries on health care and against most of the variables measured, including costs, coverage, outcomes, Equity, preventative and error deaths.
Google Commonwealth Fund Health Care Studies.
Google Commonwealth Fund Health Care Studies.
2
There is a major problem with this argument. Many of the world's leading pharmaceutical firms are based in Europe, for example,
AstraZeneca
Bayer
Eli Lilly
GlaxoSmithKline
Novartis
Roche
All of the European democracies have a form of universal health care, which includes limits on drug prices (just like in the US, some drugs are not covered by your insurance). So, if you need limitless exorbitant drug pricing to insure progress, how is it these firms continue to come up with cutting edge products through research? I mean, I suppose one could argue that they sell them to the US and patients in the US system underwrite all innovation, but that's a real stretch.
AstraZeneca
Bayer
Eli Lilly
GlaxoSmithKline
Novartis
Roche
All of the European democracies have a form of universal health care, which includes limits on drug prices (just like in the US, some drugs are not covered by your insurance). So, if you need limitless exorbitant drug pricing to insure progress, how is it these firms continue to come up with cutting edge products through research? I mean, I suppose one could argue that they sell them to the US and patients in the US system underwrite all innovation, but that's a real stretch.
4
The scientists working at Eli Lilly are going to be most surprised to learn that Indianapolis is in Europe.
3
Th author has it backwards. Companies don't charge more for their products so that they can do research. They do research so that they can create better products and charge more for these products. If they don't, they end up selling commodities and competitors will beat them on cost and they'll go out of business.
I agree with another commenter that the government must subsidize research for cures because it is not in Big Pharma's interest to cure people, just like it is not in the eye doctor's interest to teach people how to get their eye sight back.
I agree with another commenter that the government must subsidize research for cures because it is not in Big Pharma's interest to cure people, just like it is not in the eye doctor's interest to teach people how to get their eye sight back.
9
Bologna. Take a look at Harvoni. It has been a blockbuster drug for Gilead. Big Pharma would be happy to have a cure because it *is* in their best interest. They can only make money on a drug for a limited amount of time before the patent runs out, and they aren't likely to run out of business during that limited time period.
2
If Big Pharma were interested in cures it would not create medicine that lowers cholesterol but rather find out how cholesterol gets too high and how to lower it. We'd see Big Pharma advocate exercise and promoting having cooked oatmeal for breakfast, and their websites would excel in providing cholesterol-lowering recipes. They don't and they won't. They make money by telling people they can just as well take a pill. Every day for the rest of their lives. Big Money.
That's fine. But we need good advice on healthy living without pills. That's a role for the government.
That's fine. But we need good advice on healthy living without pills. That's a role for the government.
2
Is this why the lawyer ads follow the prescription drug ads on TV?
2
High (without limit) drug prices are justified because they fund new research is a "human shield" justification. Like family farms justify no estate taxes.
Where is the analysis showing how much is enough? If a new drug category has potential, where is the analysis justifying that the industry will be starved of capital unless they continue to increase prices without limit on old drugs?
Where is the analysis showing how much is enough? If a new drug category has potential, where is the analysis justifying that the industry will be starved of capital unless they continue to increase prices without limit on old drugs?
2
The single greatest impediment in drug development/cost has been Pharma lobbying which owns both Democrat and Republican lawmakers. Pharma does not do actual research- most of what they do is derivative and incremental. When there is a new drug it is generally from a newly bought startup company that in 99.99% promulgates products developed through NIH-funded research.
The moral: slash drug cost/prices to Canadian & German levels, institute institutional bargaining and increase the NIH budget.
The moral: slash drug cost/prices to Canadian & German levels, institute institutional bargaining and increase the NIH budget.
8
I don't buy the premise that if you cut into the obscene profits, that companies will stop doing research. What is the alternative? Don't do any drug development and eventually go out of business? No company would do that.
Perhaps if we pushed back a bit on prices, the companies would charge more to the rest of the world in order to maintain their profits and research instead of gouging Americans. We shouldn't be paying for drug companies to sell cheap drugs elsewhere.
Perhaps if we pushed back a bit on prices, the companies would charge more to the rest of the world in order to maintain their profits and research instead of gouging Americans. We shouldn't be paying for drug companies to sell cheap drugs elsewhere.
6
Reply to M. West:
So much wrong in your comments. First, drug companies spend more on advertising than research; the major breakthroughs are funded by the government and foundation dollars. Second, instead of doing any research, many simply purchase rights to old drugs with little competition due to narrow markets and raise the prices substantially (see the current Shkreli trial). Third, "the companies would charge more to the rest of the world"? No, in the rest of the world governments control drug prices, as we should do here. The drug companies in fact wind up charging much less in Canada and elsewhere because their legislatures are not "owned" by the pharmaceutical lobbyists so their Medicare equivalents can negotiate drug prices, which, of course, has been made illegal here.
So much wrong in your comments. First, drug companies spend more on advertising than research; the major breakthroughs are funded by the government and foundation dollars. Second, instead of doing any research, many simply purchase rights to old drugs with little competition due to narrow markets and raise the prices substantially (see the current Shkreli trial). Third, "the companies would charge more to the rest of the world"? No, in the rest of the world governments control drug prices, as we should do here. The drug companies in fact wind up charging much less in Canada and elsewhere because their legislatures are not "owned" by the pharmaceutical lobbyists so their Medicare equivalents can negotiate drug prices, which, of course, has been made illegal here.
5
I spent 30 years doing drug reaserach for a major pharmaceutical company. I can assure you that they do cut back on research when their profits decline. That said, every scientist I worked with wished that more money was spent on reaserch instead of advertising.
2
Can you supply a reference for the claim that drug companies spend more on advertisement than research? I think everyone can agree that they spend too much on advertisement, but I seriously doubt they spend more on advertising.
Conservative arguments in a nutshell: "Because we, conservatives, defund governmental programs, governmental programs do not work. Hence, the private market out only savior, so consumers should put up with price gouging and a rigged economy."
5
The unstated assumption seems to be that only US consumers should pay for drug research. I disagree with that.
People who live in rich European countries, and Japan, and Australia, should also pay. As long as our prices are higher than theirs, we pay a disproportionate share of research costs.
I'd like to see the US gov't decide that it won't pay more than the average (or 110% of the average) price paid by consumers in other rich countries.
People who live in rich European countries, and Japan, and Australia, should also pay. As long as our prices are higher than theirs, we pay a disproportionate share of research costs.
I'd like to see the US gov't decide that it won't pay more than the average (or 110% of the average) price paid by consumers in other rich countries.
5
Paul:
Read the above comment about the locations of many major drug companies, many are NOT all located in America. Also, America is one of only TWO countries in the world permitted to advertise and the $5 BILLION spent every year PLUS hundreds of millions spent lobbying exceeds the amount the industry spends
on R & D.
The reason why Americans, like yourself, pay so much for drugs? Take a look at the above numbers. What other countries pay are the LEAST of your problems.
Read the above comment about the locations of many major drug companies, many are NOT all located in America. Also, America is one of only TWO countries in the world permitted to advertise and the $5 BILLION spent every year PLUS hundreds of millions spent lobbying exceeds the amount the industry spends
on R & D.
The reason why Americans, like yourself, pay so much for drugs? Take a look at the above numbers. What other countries pay are the LEAST of your problems.
2
The NIH funds billions a year in research. Doesn't that entitle the American people to reasonable drug prices? This research leads to break throughs and drugs and pays the costs to educate our PhDs.
Should the American people benefit from our country's investment and commitment?
Should the American people benefit from our country's investment and commitment?
5
Deirdre is absolutely right. The National Institutes of Health does most of the basic research which has resulted in the most important drug breakthroughs.
Industry has been spending less and less of revenues on actual research and a sharply increasing portion on advertising which is only misleading consumers.
Industry has been spending less and less of revenues on actual research and a sharply increasing portion on advertising which is only misleading consumers.
3
What is not being mentioned here is that Americans are paying so much more for drugs than, say, Canadians that it is obscene. We do not need to lower prices on any particular drug. We just should not be paying more for them than Canadians are. It's a simple formula. We should demand to pay the same prices as Canadians. If this means drug companies need to charge Canadians more, let the drug companies work it out with them. America should not be in the business of financing new drugs for the rest of the world.
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Michael,
" America should not be in the business of financing new drugs for the rest of the world."
No America shouldn't, and it doesn't. America is in the business of allowing Pharma companies the ability to make Obscene profits so they can pay huge salaries to executives and fantastic returns to shareholders and owners like nobodies business!
Talk to your Politicians on why it is THEM that have made this so and allowed and helped them to be able to charge so much, even though it is to the detriment of most citizens.
" America should not be in the business of financing new drugs for the rest of the world."
No America shouldn't, and it doesn't. America is in the business of allowing Pharma companies the ability to make Obscene profits so they can pay huge salaries to executives and fantastic returns to shareholders and owners like nobodies business!
Talk to your Politicians on why it is THEM that have made this so and allowed and helped them to be able to charge so much, even though it is to the detriment of most citizens.
2
Michael:
Then have the drug companies cease the $5 BILLION expenditures on advertising every year PLUS the hundreds of millions spent lobbying and they can easily cut prices and still earn big profits. The propaganda fed to those like yourself that America conducts all the R & D and the rest of the world reaps the benefits is just that, "propaganda".
Then have the drug companies cease the $5 BILLION expenditures on advertising every year PLUS the hundreds of millions spent lobbying and they can easily cut prices and still earn big profits. The propaganda fed to those like yourself that America conducts all the R & D and the rest of the world reaps the benefits is just that, "propaganda".
An article that makes sense.
If you want to cut drug prices you need to look at the industry and why it is so expensive. You want to reduce prices, you need to make the process less expensive.
My ex was in big Pharma research and I was always blown away by the amount of dollars that was spent for zero return. It makes the oil business look tame. The last thing you need is government "cost control" . That will get you the equivalent of the militaries $600 toilet seat.
It is not going to be an easy thing to change. Demonizing the drug industry will achieve nothing. There needs to be fundamental review of where the costs are and what can be done to reduce them.
If you want to cut drug prices you need to look at the industry and why it is so expensive. You want to reduce prices, you need to make the process less expensive.
My ex was in big Pharma research and I was always blown away by the amount of dollars that was spent for zero return. It makes the oil business look tame. The last thing you need is government "cost control" . That will get you the equivalent of the militaries $600 toilet seat.
It is not going to be an easy thing to change. Demonizing the drug industry will achieve nothing. There needs to be fundamental review of where the costs are and what can be done to reduce them.
2
As someone who has spent considerable time working with pharmaceutical companies and clinical research organizations, I see many problems and opportunities not mentioned in this article. Yes, the government needs to do far more in funding basic research. A good point was made by another responder about using universities to conduct research and clinical trials. But there is much more that can be done.
Patent reform is good way to limit excess profits. In the U.S., once a patent has expired, competing firms may produce generic substitutes for drugs. The actual formulas are fairly easy to ascertain. In the U.S., a patent holder may pay another pharmaceutical company to withhold a generic drug, allowing for continuing monopoly profits. In the rest of the world, this practice is illegal. Patents should be in effect for much shorter periods.
The Medicare drug benefit explicitly barred the government from negotiating prices for drugs. Why should we pay substantially more for drugs manufactured in the U.S. than Canadians pay for those same drugs? If the government, by far the largest purchaser of healthcare, negotiated with pharmaceutical firms for lower prices, commercial insurance companies would be forced to follow suit.
More money should be devoted to prevention rather than treatment. Unfortunately, there is more money to be made for drugs that treat disease than for those that prevent it.
Patent reform is good way to limit excess profits. In the U.S., once a patent has expired, competing firms may produce generic substitutes for drugs. The actual formulas are fairly easy to ascertain. In the U.S., a patent holder may pay another pharmaceutical company to withhold a generic drug, allowing for continuing monopoly profits. In the rest of the world, this practice is illegal. Patents should be in effect for much shorter periods.
The Medicare drug benefit explicitly barred the government from negotiating prices for drugs. Why should we pay substantially more for drugs manufactured in the U.S. than Canadians pay for those same drugs? If the government, by far the largest purchaser of healthcare, negotiated with pharmaceutical firms for lower prices, commercial insurance companies would be forced to follow suit.
More money should be devoted to prevention rather than treatment. Unfortunately, there is more money to be made for drugs that treat disease than for those that prevent it.
4
Drugs account for 10% of total healthcare spending, and as my wife/ RN at a major hospital keeps telling me: the price gouging in hospital care is off the charts compared to drugs. The vast majority of drugs are not advertised and its pretty obvious that given the average 10 year/ multi billion dollar cost of development and FDA approval, very few new drugs will be invented if their is no return on investment. Healthcare is expensive but go back 25 years and it was medieval compared to today. Major surgeries are now performed without huge incisions and patients are home the same day. Chemo is delivered with afar less discomfort than even 10 years ago. Immuno therapies are curing cancer, knees are replaced, hearts repaired with small incisions in the thigh.
8
AS a Stage IV Prostate Cancer patient, it costs me over $9000 monthly for ZYTIGA. The profit margin of the pharmaceutical companies (Johnson and Johnson in this case) grow yearly. Their marketing costs alone exceed their research budgets. Why do we need pharmaceutical
marketing on television? It is a weird world!
marketing on television? It is a weird world!
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Pharmaceutical marketing is so you will ask your doctor for it instead of the alternatives. It cost billions to develop, be happy they had the profits to apply to your condition. Their profits are rising because they keep inventing new medications like Zytiga, without which you would unfortunately be dead.
My question - How much money does the pharmaceutical industry spend on research in total annually? My second question: How much money does the pharmaceutical industry spend on advertising in total annually?
The answers to those questions will tell us if the pharma industry is being run in an efficient manner to bring forward the greatest benefit to the most people possible.
The answers to those questions will tell us if the pharma industry is being run in an efficient manner to bring forward the greatest benefit to the most people possible.
16
Pharmaceutical company budgets are typically split into four equal parts:
1) Materials and production
2) Research and development
3) Marketing
4) Administration
1) Materials and production
2) Research and development
3) Marketing
4) Administration
For The Win.
Go back a few decaades and drug trials were done at Universities by Research Physicians with labor supplied by graduate students. The drug companies got cheap labor and the grad student got employment and essential training as they finished their PhD's and Post Docs.
The trend, starting in the 80's, was to move trials in-house and use professional staff at professional wages. This pushd the cost of clinical trials so high that drug compnies either cut back the trial size (number of subjects) or outsourced the trial to independnt contractors.
Today they will use one contractor to run the trial (collect the data), another company to design and load the data base, another company to analyze the data, a company to write the repot to FDA specification, etc. With so many hand-offs, there is risk of error, lack of accoutability, and an incentive to cut corners to be profitable.
The drug companies complain about the FDA approval process, but it is, to a large extent, the only "quality control" on the process of supplying new drugs.
The trend, starting in the 80's, was to move trials in-house and use professional staff at professional wages. This pushd the cost of clinical trials so high that drug compnies either cut back the trial size (number of subjects) or outsourced the trial to independnt contractors.
Today they will use one contractor to run the trial (collect the data), another company to design and load the data base, another company to analyze the data, a company to write the repot to FDA specification, etc. With so many hand-offs, there is risk of error, lack of accoutability, and an incentive to cut corners to be profitable.
The drug companies complain about the FDA approval process, but it is, to a large extent, the only "quality control" on the process of supplying new drugs.
7
Drug companies spend far more on on marketing than on research. [ www.washingtonpost.com/news/wonk/wp/2015/02/11/big-pharmaceutical-compan... ]. They also have some of the highest profit margins of any industrial sector [ https://www.fool.com/investing/value/2015/07/19/7-facts-you-probably-don... ]. Would cutting advertising expenses and lowering profit margins to the overall national average cut drug prices by 10-20?
48
Per this quote in his editorial, Mr. Mullainathan makes a strong case against the privatization of essential services. "Most of the additional profits from overly lucrative drugs go elsewhere, not to research."
What he doesn't mention is that the current system lets pharmaceutical companies choose which drugs get the funding. Heart drugs you take for a life time are funded, life saving drugs only taken occasionally such as antibiotics don't.
What he doesn't mention is that the current system lets pharmaceutical companies choose which drugs get the funding. Heart drugs you take for a life time are funded, life saving drugs only taken occasionally such as antibiotics don't.
42
The antibiotic question you mention is unique. If a new class of antibiotics were discovered tomorrow, doctors would correctly assign its use to emergency reserve only when nothing else works. In otherwords if you invent a new antibiotic there is a guarantee that it would not be widely used and you would therefore never recover the research and development costs. Now if you want to volunteer to raise say $800 million dollars maybe you could find someone who would be interested in doing the necessary research and development.
1
$800 million dollars? Thats chickenfeed compared to profits made on certain drugs.
Take EpiPen and then Congress letting them into schools and paying for it...that alone made them far ,far more than $800 Million profit!
Perhaps Congress could have asked for them to spend that amount to develop a new antibiotic for all the Billions it gave them by that bill?
Take EpiPen and then Congress letting them into schools and paying for it...that alone made them far ,far more than $800 Million profit!
Perhaps Congress could have asked for them to spend that amount to develop a new antibiotic for all the Billions it gave them by that bill?
1
"Because industry pays for a large share of research, high drug prices do not just generate profits; they also become a funding source for important scientific work."
An old theme, little supported. It's quite a spin to say cutting govt research is a good reason to support high drug prices.
An old theme, little supported. It's quite a spin to say cutting govt research is a good reason to support high drug prices.
17