Indian Government uses special powers to slash cancer drug price by 97%

http://timesofindia.indiatimes.com/india/Govt-uses-special-powers-to-slash-cancer-drug-price-by-97/articleshow/12240143.cms

by Garbage • 14 years ago

241 215 14 years ago

timesofindia.indiatimes.com

jensnockert• 14 years ago

It would be interesting to see how much money was lost or gained by Bayer based on this. I assume that usage might go up by at least a factor 20 in India (and their production costs go down) so those 6% might actually be a fair deal in the long run.

rmc• 14 years ago

remember that Bayer won't have to manufactor it, someone else does. They get a cut (6%) without having to do any work

getsat• 14 years ago

They already did the overwhelming majority of the work. Developing that kind of stuff is expensive. I've seen estimates of ~100MM USD quoted for the discovery of a new drug.

Tuna-Fish• 14 years ago

As others put it, the manufacture of simple chemicals in the quantities involved in pharmaceuticals is effectively free. As in, give me 100k and I'll be able to make enough of the drug for the whole world for the next hundred years. The packaging of most pharmaceuticals is more expensive than the manufacture of their contents.

The cost is overwhelmingly in R&D -- finding the chemicals, proving it doesn't kill people, and proving it actually does something useful.

JumpCrisscross5• 14 years ago

Fewer than 200 Indians used the drug in 2011; impact on sales should be minimal [1]. Bayer's concern is probably the export of these generics (illegally) to other places where it sources more sales from.

[1] http://www.nytimes.com/2012/03/13/business/global/india-over...

piyushranjan• 14 years ago

Only 200 people bought it because the price of the drugs is ridiculously high. Even people who are dying would not have been able to afford it.

arkitaip• 14 years ago

Bayer shareholders should hold the senior management accountable for not caring enough to bring the drug to more than 2% of the Indian market.

crusso9• 14 years ago

And if they lower the price drastically in India and then are accused of gouging their customers in other countries?

When they lower the price of the drug in India, a gray market arises that resells the drugs to other countries. The presence of the gray market creates yet more opportunities for scam artists to sell fake versions of the drug, creating yet more victims.

My point is that this isn't as cut and dry of an issue as you imply.

Produce12• 14 years ago

Human lives are at stake, there's nothing more cut and dry than that. We need to stop trying to make our reality fit our models and start adapting our models to fit reality. This whole business is backwards.

MengYuanLong• 14 years ago

Surely this was market was considered but more likely than not abandoned due to fears of arbitrage?

corin_• 14 years ago

I think few people would argue that drug companies' prices are reasonable, and when it comes to life vs. death I no longer care much about the "they're a business, they're allowed to make a profit" line - of course it's still true, and of course they are, but there's a (subjective) line between "making a good profit" and killing people through greed.

That said, what pricing would be fair? When people claim that these pills cost bugger all to make, the answer is (perfectly validly) that the second pill costs bugger all, the first one costs $$$$ in R&D. So I don't know how cheap they would have to be to be considered a fairer price, and I've no idea if it's possible for anyone outside the companies to work out - even if you ignore the fact that what's fair is so subjective.

JumpCrisscross5• 14 years ago

This is a difficult decision to rule on, without resorting to petty emotions, without access to the underlying data. One must balance the incentive for drug companies to develop drugs (and get that development financed) with the price inelasticity of the healthcare market.

There is marginal cost, the cost to produce one more product independent of development cost, and fully amortised cost, which amortises the development (and, holistically, finances future development). Saying we should abolish innovator drug patents ignores the latter.

If we take the assumption that a life tomorrow is worth about a life today cutting pharma's revenues 97% means the development model is unsustainable. The government would have to develop drugs (or promise to refund all or most of the cost of developing a drug that gets FDA approved).

On the other hand we know that, since most people will pay whatever they able to for healthcare, drug companies have too much leverage. The market doesn't function well un-aided.

The problem here is the way this decision has been implemented throws up a lot of regulatory uncertainty. Having an objective framework for how innovator drug companies can be subject to need-based forced licencing (and under what boilerplate terms) would allow pharma companies to plan how to allocate development dollars.

tripzilch2• 14 years ago

While assuming that a life tomorrow is worth about a life today might be reasonable, we're talking about research costs for drugs, and the comparison does not hold to assume that a new drug tomorrow is worth about an already existing drug today.

New drugs are often about squeezing out those last few years of life-expectancy, and even if they're not, they're a marginal increase over today's drugs. Meanwhile today's drugs fail to save many many lives because they are unaffordable in order to pay for R&D on new drugs (which will also be unaffordable).

See, the system is very broken on both sides.

But the choice to me seems very clear:

- on the one hand you have +developing new future drugs. except those drugs will only be affordable to a tiny fraction of the world population. additionally this lines the pockets of big pharma and the bureaucracy that keeps the system broken as it currently is ("Bayer was disappointed")

- on the other hand developing new drugs will be slowed down for some time, but all people will be able to afford the many current ones that could be saving lives today, big pharma + your FDA bureaucracy will fail and maybe that opens room for a new and better system to emerge so that R&D on drugs may start once more but in a more efficient manner. All the while lives are being saved and quality of live is being improved because today's drugs are affordable to everyone.

anamax2• 14 years ago

> On the other hand we know that, since most people will pay whatever they able to for healthcare

"we" don't know that. In fact, we know that it's wrong.

When people are spending their own resources, they plan their non-emergency spending.

For example, I'll bet that you don't take the vitamins that you should. You probably also don't exercise as you should. It's money and time that you could easily afford, yet ....

danssig3• 14 years ago

> I no longer care much about the "they're a business, they're allowed to make a profit" line - of course it's still true, and of course they are,

I disagree here. Pure laissez faire capitalism works no better than pure communism or socialism. You need a mix of both to have a functioning economy and IMO it should be pretty clear at this point that health care works best (cheapest and most effective) on the socialism side. American has the most expensive health care in the world, but not the best service.

DanBC2• 14 years ago

See also the unethical marketing of anti-cancer medication to cancer patients; skirting strict laws in the UK by funding "patient groups" who campaign to have those meds made available on the National Health Service when the meds have been shown to be ineffective.

nickik3• 14 years ago

So if the businesses make no more money how will the invest in R&D for new medication? Im not advocating pure capitalism but businesses have to make some profit.

I agree that the more socialsist systems work better atm but this does not include development of new medication and equipment. Would you want that in gov hands too?

tomjen34• 14 years ago

>I disagree here. Pure laissez faire capitalism works no better than pure communism or socialism.

Relevant citation please.

leonth4• 14 years ago

Truth is, clinical trials are mind-bogglingly expensive and takes years for turnover. Also some newer drugs (I'm not sure about Nexavar) are rightfully expensive to manufacture due to requirements in equipment, sterile conditions, etc.

If I were to say anything negative about this it would be that this sets a bad precedent for any new drugs coming to India -- knowing that the government can effectively void out drug patents after certain number of years, the big pharmas probably would not want to set up shop in the country altogether. Does that sound familiar?

This town is no longer friendly for business.

Indyan• 14 years ago

On principle, you are right. However, Rs 2.8 lakh for 1 month of pills is inordinately expensive. It's something that no one but aristocrats will be able to afford. By the standards of the Indian society, I fall in the upper middle class category, and that amount is almost half of my annual salary (more than half after tax deductions). To get an idea about how expensive it is, just think whether you could afford to buy a new car (even a cheap one) every month. Another point worth noting is that most Indians don't have medical insurance, since typical healthcare is quite cheap in India.

Under the new forced licensing terms, Bayer will still be making money. In fact, it might end up making pretty much the same as before, since volume will increase dramatically thanks to the 97% price cut.

shalinmangar• 14 years ago

In case of Nexavar, another company is able to manufacture far more cheaply and that says something about Bayer. Either they are unable to manufacture cheaply or they are unwilling to price it cheaper.

Suppose that big pharma stops selling drugs in India. That wouldn't make much difference because the generic drug manufacturers would still make cheap copies of the drugs. The only downside would be that new drugs will take time to be introduced because of the time needed to reverse engineer the formulae and set up manufacturing capabilities.

vamsee• 14 years ago

That's alright, as an Indian I support this action, and am ready to face the consequences. After all, we have 'socialist' in the constitutional definition of the republic. It's about time we invoked it for a good cause once in a while.

wisty• 14 years ago

Perhaps the FDA should bankroll clinical trials, subject to a pre-agreed price and a reasonable case that the trial will work out. Monopoly sellers and monopoly buyers is fairer than a monopoly seller.

JumpCrisscross5• 14 years ago

This would result in:

(1) the FDA regulating access, pricing, and financing to the pharmaceutical industry, effectively nationalizing it, and,

(2) the US effectively bankrolling pharma for the rest of the world (it does this to a large extent already, but this would throw the scales all the way).

It would also have little effect on what innovator (or generic, for that matter) drug companies could charge outside the US.

Symmetry5• 14 years ago

In this situation who decides what drugs go into clinical trials? The drug companies are in a much better position to know which drugs are worthwhile, but if they don't pay the price they have to reason not to throw everything at the wall to see what sticks.

crusso9• 14 years ago

So instead of private companies employing the top researchers who are jockeying for success in an open market that decides the winners and losers through doctors' and consumers' choices, you end up with winners and losers being picked by politicians, bureaucrats, and lobbyists.

Then when the whole system is ineffective, corrupt, counter-productive, and an enormous wastes our tax dollars (see the current FDA, PTO, DOE, etc.), what will happen? Well, at best, nothing. At worst, the Statists will use the lack of success as an excuse to take over even more of the system. Maybe the FDA would then want to hire the researchers to design and test the drugs in the first place. They would need a bigger budget for that.

mseebach• 14 years ago

> I no longer care much about the "they're a business, they're allowed to make a profit" line

You have to consider both the seen and the unseen: consider the case where a drug is not developed in the first place because the return on investment is (expected to be) forcefully lowered below where it is profitable. Or even more abstract: research is slowed down due to more risk adverse behaviour, delaying a major breakthrough.

Investing in drug development is very expensive and very risky. Very risky investments command a large return on their success.

It's easy to focus on the large sums of money being made on specific drugs, but pharma as an industry isn't inherently more profitable that other industries as a result. The cost of lower prices on successful drugs is going to come from somewhere.

vineetdhanawat2• 14 years ago

"The Bayer price of Rs 34,11,898 per year ($69,000) is more than 41 times the projected average per capita income for India in 2012, shattering any measure of affordability." This is good enough for any govt to act so and rightly done as well!

Also "6% royalty on net sales every quarter to Bayer" that isnt all unfair

tomjen34• 14 years ago

Bayer is in it to make money, so presumably the reason the Indian government forced this deal is that Bayer would lose money under it.

So no, it isn't fair.

Yeroc2• 14 years ago

Keep in mind that the government did NOT force Bayer to manufacture the drug, only to license it. I don't believe Bayer had any interest in pursuing the Indian market whatsoever since it was priced well beyond what the average person could afford.

On the question of fairness: Is it fair for people to die because they can't afford a life-saving drug? I'm sure that's what it boiled down to for the Indian government.

According to my math if Bayer priced the drug over here the same way they did in India relative to average per-capita income the drug would cost around $1.5 million per year. Would that change your perspective?

MaggieL• 14 years ago

Why not just do what the Greeks did? Pay for all the drugs with government bonds that are worth nothing. That'll work just as well.

digamber_kamat• 14 years ago

Government was forced to make such decision because Bayer sold these drugs at a price unaffordable to most Indians. This to me seems like a very stupid decision from Bayer's management. The shareholders must act against the board now.

however because of such decisions companies will find it risky to invest in life saving drug research. I think government should also take some steps to win their confidence.

ttt_2• 14 years ago

>> however because of such decisions companies will find it risky to invest in life saving drug research.

I disagree. That mentality is precisely the reason that they are overpricing now (and always have done so) as much as they can. People will always need life saving drugs, and ordinary drugs as well. Terminal and cronical patients will always try both traditional and new drugs (or the state will provide it to them in case there is health care). There is absolutely no need to overprice because any price will eventually give a fair ROI for them.

What they do instead is maximize profit at the cost of human life.

On a different light, a lot of research is funded by government entities worldwide, and even if pharmaceutical companies do their own research, they certainly reference other research that is also publicly funded. Thankfully some states do care a lot about their people and will challenge them. India is doing so now, Brazil has also broken HIV drug patents (they cover the full cost of treatment through Health Care) and I hope to hear more of it from different places.

relix• 14 years ago

You're talking about an infinite timeline where they are the sole seller of a drug that is used indefinitely.

This is false.

When patents expire the drug is also made by generic drug making companies for cheap. So upper bound of getting a ROI is the lifetime of a patent (30 years for drugs iirc, 10 years longer because it takes about 10 years to develop, so still effectively 20 years).

For every drug that is successful, they pour tons of money into drugs that are eventually considered useless. So the R&D isn't solely for the one successful drug, but also for the losses.

A competitor might come in 5 years with a drug for the same problem, that works better. Now the timespan for any ROI has been cut short to 5 years.

Looking at the profits of pharmaceutical companies: sure, most medicine is probably overpriced. But saying that they can get a good ROI at any price is false. They will need to recoup the billions spent on R&D.

urza• 14 years ago

Bayer said it was "disappointed" and would "evaluate options to defend intellectual property rights" in the country.

Down-vote me if you like, but I get sick to my stomach when I read sentences like this. If someone is able to deliver and sell the anti-cancer drug by 97% cheaper than you, then in my eyes you have no right to interfere. I am starting to dislike the whole concept of intellectual property and patents and copyright. These are tools of greedy people and bring nothing to the table for the wider audience. No one creates anything just by himself. You are always building on the work of others and merely deriving, combining, changing and mutating it. Whether you do it consciously or unconsciously. It is the principle of cultural evolution and it is why we are where we are. If intellectual property was always practiced the way it is today, I fear we would still be in the Middle Ages.

gaius3• 14 years ago

If someone is able to deliver and sell the anti-cancer drug by 97% cheaper than you, then in my eyes you have no right to interfere

... Provided that that "someone" also bears their fair share of the cost of discovery and clinical trials. THAT is the issue here.

man1sh3• 14 years ago

also don't forget that for these companies the poor people in India are the subjects of clinial trials.

The mindset of these companies of treating the poor people as Guinea pigs is also disgusting

671 reported deaths http://www.business-standard.com/india/news/human-rights-pan...

There is no count of no of people who get disabilities but don't die due to trials failing. Who will pay for these? These pharma companies are steered by greed

moonchrome4• 14 years ago

Those costs could be covered by the government in this case and they should increase the investment to match all money lost on dead end R&D and add standard going rate profits on top - on the grounds that it is a market failure of public good - R&D. Also the costs will be covered in the richer markets. I'm no fan of government interventions but the fact that we are having a debate around intellectual property shows how dire things are.

melling• 14 years ago

Yes, it would be great if the Indian govt financed research into new medicines. India already makes a lot of the world's generic drugs. They could move up market and actually create new drugs. A win-win for [just about] everyone. Perhaps fund one of the IIT's and have it work with industry.

mattmanser• 14 years ago

You seem very poorly informed about the subject. While I don't agree with the vast amount of lobbying a lot of pharma companies do, which in itself increases costs, the costs of R&D and the process of approval are huge.

Get rid of drug patents, bye bye new drugs without direct g'vmt funding. Drugs are trivial to reverse engineer, incredibly expensive to invent.

There is also a massive amount of drugs that go nowhere, often even failing at major trail stage, so the successes pay for the failures.

noble• 14 years ago

The problem is that the govt is providing an artificial barrier to entry by other companies which protects the profits of the big pharma. Because of it the pharma companies have no incentive to reduce prices . They would rather spend the money on lobbying

ThomPete6• 14 years ago

The reason why it's expensive to develop drugs is in large parts because of the process involved to get the approval.

Couldn't you turn this on it's head?

What if the companies could expense the cost of getting the approval. I.e. the tax payers pay for drugtesting and approval process.

Wouldn't this make sense? Since it's in the publics interest to get safe medicin, shouldn't they/we pay for that part.

nickik3• 14 years ago

You risk everybody threwing some shit into the pipeline. Now they have to think about if the really want to trie to get it threw.

ThomPete6• 14 years ago

I am not sure I follow?

It would force the governments to develop better and cheaper systems themselves to make sure that they can test for cheap.

Surely the current scenario isn't working is it?

ThomPete6• 14 years ago

Did I say something that was factually wrong?

nikcub3• 14 years ago

because drugs are a hit based business. a large number don't get through the approval process. your proposal would socialize and subsidize the downsides of an already very profitable drug industry while privatizing the upside

ThomPete6• 14 years ago

But the downsides are largely due to government demands of safe drugs no?

The prices of the drug includes the cost of development. So if you remove that cost you would decrease the price.

yaix• 14 years ago

My guess is that this is not so much about saving patients from cancer than it is about saving polititians during the next elections.

JunkDNA4• 14 years ago

I worked in the drug R&D business for over 8 years. I still follow the industry closely. Some things always get lost in these discussions. First, manufacturing an existing drug is absurdly cheap. Modern industrial chemistry ensures this for all small molecule drugs (note that this is not the same case for the "biologics" which are often fiendishly difficult to make). Almost all the cost in a drug is the manufacturer recouping R&D costs. These costs have been spiraling out of control for 10 years. They are astronomical. A recent Forbes analysis pegs the cost of a new drug with failures of drugs in development folded in anywhere from $3 billion to $12 billion depending on the manufacturer (excellent context and discussion here: http://pipeline.corante.com/archives/2012/02/10/the_terrifyi...).

You don't need to be an industry expert to grok that those numbers are wildly unsustainable. It is not possible to keep spending the amount companies spend to make new drugs. In the past, companies would inflate the price in the USA to make up for reduced prices elsewhere. But with all the recent healthcare reform in the USA, that strategy is ending.

To add insult to injury, the vast majority of the most commonly used drugs will lose patent protection in the next couple of years. In the industry they call this the patent cliff. There will not be enough new drugs to offset all the ones that go generic.

This move by India is a symptom of the wider drug industry problems. There will be more of these kinds of moves in the future. The industry has been searching for ways to more effectively make drugs and have it not be so expensive. But so far they have been striking out for 10 years running. The current strategy is to lay off most of their r&d workforce and offshore and outsource this part of the business.

Somewhere out there, a business model is waiting to be found. Whoever cracks that nut and becomes the Southwest of the drug industry is going to make a fortune.

Retric• 14 years ago

There are a finite number of useful small molecules you can use as drugs. If it's costing 3-12 billion to find new ones and even then we are failing we may be at a point where it's time to 'give up' on our existing approach. As an upside we can remove a significant slice of our spiraling healthcare costs. We can also remove a lot of drug related advertizing that has dubious healthcare benefits. Unfortunately, that also means antibiotics are going to become infective in the not to distance future.

On the net I don't think this is a good thing, but it should free up a lot of vary intelligent people to work on other lines of research. Hopefully, we may eventual start to develop the tools to build direct DNA specific medicines on the fly by using the fruits of those other lines of research.

onemoreact• 14 years ago

Why the down votes? Diminishing returns is a real issue and randomly testing chemicals until one happens to work for something is hardly the most effective approach possible.

nknight3• 14 years ago

> You don't need to be an industry expert to grok that those numbers are wildly unsustainable.

Tell you what. When these companies stop being the most profitable in America, or even just when their EPS starts declining, I'll believe you.

w1ntermute5• 14 years ago

I don't think there's an unbreakable bond between profitability and sustainability. To use a tech industry analogy, despite making insane profits off of Windows as it is (and has been for 20 years), Microsoft has realized that we've entered a post-PC world, and modified Windows to run on new form factors, such as the tablet.

jerf3• 14 years ago

Take a closer look at the post, and you'll see that what JunkDNA just said is that is going to happen, and hard. Right now they run about a 17% profit margin [1]. If they lose their cash cows en masse, that's going to go negative, fast. That's not that great a profit margin from that point of view.

What are they going to do then? The only thing they really can, slash costs. It seems unlikely the all the slashing is going to come out of everything except R&D.

We're ultimately going to have to deal with the fact that as a society we've chosen to make it extremely expensive to bring new drugs to market. Basically, our extremely high standards are/were sustainable only because we also gave them patent protection. It is going to be economically infeasible to have both extremely high standards for new drugs, then refuse to protect them for long enough to recoup their costs. There is no law of economics that says a thing must be produced; raise the cost above what can be recovered and what happens is that it won't be produced.

[1] http://biz.yahoo.com/p/sum_qpmd.html

JunkDNA4• 14 years ago

The reason the EPS hasn't taken a hit is because these companies aren't stupid. If they can't bring in more money by selling new products, they cut costs instead. Pharmas have been laying off huge numbers of research scientists and slashing their sales forces in record numbers. If you follow the industry, it seems like a major Pharma site is closing completely every few months. In the short-term, this props up the numbers, but the day of reckoning is still going to come.

snowwrestler• 14 years ago

Most profitable? Citation needed. Profit margins are higher in the tech industry--companies like Microsoft, Apple, and Google all have higher margins than pharma. In terms of nominal profits, pharma does not come close to the oil and gas industry.

ekianjo4• 14 years ago

The reason why the cost of R&D is inflating so much is due to relentless addition of new regulations, new requirements, new safety-related trials demanded by the authorities. Add to that that almost every other country has specific requirements that do not fit with what was developed and proven before, and that's just another 2-3 years clinical trial you need to put up with. This is really getting insane and there is science to back all those regulatory differences, some driven by pure ideology.

As you mentioned the patent cliff is looming for a number of big pharma actors, and what this is going to result in is less innovation and more strategic moves to other "easier" markets such as generics or OTC drugs. This is just plain bad for everyone in the end.

lysol• 14 years ago

Got any examples? The trial process for new medications isn't perfect, but without citing specific failures in the process it becomes to easy to discount the parts of the process that do work.

jbooth4• 14 years ago

Yeah, there are a lot of safety-related things because we keep getting a vioxx every so often that's killing people.

I'm not willing to increase my chance of getting killed by medicine on behalf of someone else's profit margin. They have a big, powerful lobby, they should suggest process improvements. And make some on their end, as well, nobody's charging them billions in fees, they spend that money on the typical big-company waste in the process of complying with those regs.

antihero• 14 years ago

Why has the cost gone up so much, and what can be done to reduce it?

leonth4• 14 years ago

It does not go down. The more drugs we know, the harder it is to prove that the new drug you propose is better than current therapy. A proposed molecule that does not have significant advantage compared to the current gold standard will never sell. To put it in another way: all the low-hanging fruits are already taken.

Add to the fact that science progresses; we now know more about the human body and generally everything compared to 20 years ago, so more stringent rules and testing are required.

Classic example: before thalidomide, nobody cares about how drugs work in pregnant women. Now all drugs have pregnancy category (how safe it is to be used by pregnant women) approved by FDA, and figuring out this pregnancy category comes with a cost.

tripzilch2• 14 years ago

But most of those R&D costs are for getting "FDA" approval. I don't see why India (or anyone, really) should pay for lining the pockets of the USA's inefficient and corrupt bureaucratic machinery.

Or I could be wrong and those $12B really goes into equipment and lab workers wages, but you won't blame me for finding it real hard to believe until I see at least a rough breakdown of how those costs are summed up.

From the article: "Bayer tried to justify its high price by making claims of high R&D costs, but refused to provide any details".

That either means they don't know themselves, or it means that the larger part of the budget got "lost" in requesting approval forms paper pushing greasing cogs and lobbying politicians.

leonth4• 14 years ago

I am not terribly familiar with the process, but I assure you it includes: early computational simulations of the prospective molecules; testing on lab animals; testing on healthy people; testing on small (a few hundred) number of patients; large scale (a few thousand) multi-centre trials across the whole world (if you want to sell it to the whole world, that is). This process takes quite a number of years.

Now imagine how many labs, hospitals, scientists, doctors, statisticians, patients (oh they do get compensation), and auxiliary clerical workers need to be paid for the whole process.

betterth6• 14 years ago

The majority of the money goes into Phase III clinical trials. Don't bash the FDA - they're the most evidence based, scientifically minded regulatory body in our government.

Preclinical and Phase I - II trials aren't too expensive, in the order of millions of dollars.

But also remember, for every ~10,000 candidates that enter preclinical trials, about 1-2 will actually pass FDA approval.

The billion number isn't just for one drug, it's also for the 10,000 failures that you had to weed through to find that one drug.

Phase I is safety trials in healthy humans (young males generally). Phase II starts using it in the target population (the sick) and begins looking at dosing requirements and preliminary efficacy data.

But the big one, Phase III, that's the big group, expensive, efficacy trial. This is the trial that has to prove, beyond a shadow of a doubt scientifically, that the drug does what they say it does. A good Phase III trial can cost in the hundreds of millions of dollars easy. I've heard of $250,000,000 Phase III trials before.

If "the most rigorous evidence requirement in the world" is your example of "inefficient and corrupt", than I guess we'll just disagree.

But the FDA is the most strict drug regulatory body in the world, and the amount of evidence for efficacy that they require from the industry is truly impressive and truly does warrant the billions price tag.

SystemOut• 14 years ago

Don't you think that the drug companies would have found cheaper ways to develop drugs since they've realized that people will still pay them? That would lead to even higher profits.

It's insanely difficult to bring a new drug to market. Imagine all of the crazy combinations of people that take them and if you miss one small group that has an adverse reaction you could be talking 1000s of people that are lining up to sue you out of existence or if you're in another company the regulatory body doing it for them. People around the world benefit immensely from our "inefficient and corrupt bureaucratic machinery" because they get safe drugs.

Also, from the article, "Bayer tried to justify its high price by making claims of high R&D costs, but refused to provide any details". This is just plain rhetoric plain and simple. You see politicians do this everyday because there is no real way to refute it.

Duff• 14 years ago

At this point, isn't the pharmaceutical industry playing games with supply by limiting the production of many medicines?

Even a common OTC drug like guaifenesin that has been around since the 50's is difficult to find by itself, except in the newly patented time-release formulation (ie. Mucinex). (Although it is an ingredient in many cold medicines.)

Judson• 14 years ago

Maybe I'm not talking about guaifenesin by itself, but there seems to always be a drug store generic of Mucinex beside it on the shelves.

refurb7• 14 years ago

The margins on generic drugs are razor thin. Most of the recent drug shortages are due to a lack of starting materials or manufacturing problems. Both of these can be traced back to the fact that there is very little money to be made in generic drugs. They are basically commodities.

vannevar5• 14 years ago

Somewhere out there, a business model is waiting to be found.

I hope so, because the current one isn't working for consumers. Even with the billions spent on R&D, it turns out that many of the drugs Big Pharma turns out are no better than placebos. It's not hard to see why: a big company spends X amount on each failure and needs a 10X hit to offset the costs. If one doesn't materialize, it's not hard to rig the statistics to show some marginal benefit for a chosen winner, and a big marketing budget and the placebo effect takes care of the rest. Thanks to this model, we've finally conquered the scourges of restless leg syndrome, overactive bladder, and general anxiety disorder.

roadnottaken• 14 years ago

Actually it's almost impossible to rig the statistics. And every drug on the market has shown efficacy compared to placebo in large tests calle phase 3 clinical trials.

smalltalk2• 14 years ago

Do you not believe these are actually problems for people?

Alex39173• 14 years ago

>Almost all the cost in a drug is the manufacturer recouping R&D costs.

Actually that's not true. Big pharma spends twice as much on advertising as they do on R&D:

http://www.sciencedaily.com/releases/2008/01/080105140107.ht...

They also spend a significant amount of money on government fines due to corrupt practices (i.e. killing people). They are now the single most corrupt industry, paying significantly more fines per year than the entire military industrial complex:

http://www.citizen.org/hrg1924

mjallday• 14 years ago

Is paying fines corrupt? I would say that dodging fines would be considerably more corrupt.

makmanalp• 14 years ago

I'll play devil's advocate: Marijuana users pay fines too, are they also corrupt and immoral? How about drivers who drive at 80km/h on a highway that is 95% 80km/h and 5% 50km/h which was obviously set up to trap people into paying fees? How do you know the fees that big pharma pays are not because of similar over-oppressive laws designed to make the government money?

Edit: Well, I'm a moron for talking before reading. Scratch that.

JunkDNA4• 14 years ago

If you took the time to look at the link I posted that talks about the Forbes piece, you'd see that they specifically excluded the cost of marketing from the analysis of how much it costs to put out a new drug. When companies do marketing, they expect it to more than pay for itself, clearly it is, or they wouldn't be spending so much on it. I know people don't like to hear it, but marketing products does lead to more sales.

Trust me, having worked in an R&D organization, there was no want for more funding. There was an incredible level of funding. If the problem in the drug industry is simply that not enough is being spent on R&D, that is easily correctable. Unfortunately for all of us, that's not the problem.

InclinedPlane• 14 years ago

Keep in mind that the majority of the cost that gets put under the "advertising" label is actually free samples. Those effectively lower the cost of care for patients, it's not just money spent on madison avenue.

pullo• 14 years ago

May be the real solution is a combination of tiered pricing and cut of all sales revenues by generics. The cost of this decision for Bayer is yet to be seen. Considering the number of users is only a few hundred at the current price point, Bayer should be ok. But, it will be interesting to see a breakdown of r&d costs of bayer in total. Considering India is one of the most popular destinations for clinical trials by drug firms, I cant shrug off a karma play here. http://www.scidev.net/en/health/clinical-ethics/news/fines-e...

malandrew5• 14 years ago

Where does all the R&D money go? Somehow I get the impression that developing a new drug involves way too many people and processes and that disintermediation and automation along the R&D chain could greatly simplify and cheapen the process.

First of all, you need the brains to develop the drug. I can't imagine that this involves a team much larger than a pre-series A startup.

Does the development process for creating a new drug promote failing fast?

Does keeping the entire R&D process in house help or hinder?

How far can a team get before it needs to try a drug on humans and how much does it cost to get that far?

Are there any startups that just manage a portfolio of patients with symptoms/diseases/disorders and automatically pair those patients with drugs that might benefit them?

Should the process allow the patient to "price" his or her own life/health, whereby patients can opt in to Phase 1 trials for a lot more money than Phase 2 for example and name their own price in the process?

How much of the money spent is actually (time*wages) for a lot of people for an unnecessarily long process? Is burn rate a consideration when creating a new drug? How long does it take to get a drug to market? Can price be reduced by half by reducing the time it takes by half? Do a lot of people in the process spend their time waiting?

Is drug development in the US far more expensive than elsewhere because the entire healthcare system here is more expensive (vicious cost cycle / positive feedback loop)

Anyways, just tossing some ideas out there because I get the suspicion that pharma R&D is ridiculously archaic.

wtvanhest• 14 years ago

I don't have exact numbers on this, but it seems like a lot of the early stage research happens in very small teams at universities and biotech companies.

Then large companies like Bayer acquire the research and spend millions on getting it through FDA process.

I know advancements are being made in automation for various research activities and I'm sure there will continue being a lot of advancements there. (The need for automation is fully recognized at the industry level)

cma• 14 years ago

Most private research dollars go into patent work-around drugs--drugs that have the same basic function as another, but successfully work around its patent (and get their own patent in the process). E.g. duplicated effort with occasional serendipity leading to something new.

refurb7• 14 years ago

This is patently false.

Most research dollars go into new therapies with completely new mechanisms of action.

Companies are often working in similar areas, that's true. The best example of this is the statins. Lipitor was the 5th statin to hit the market. Was it a me-too drug? I guess, but it was also superior to the other 4 that came out first (less incidence of muscle damage, more efficacious). Did Pfizer say "Gee, let's copy that other statin?" Obviously not since getting a new drug to market takes 10 years and they came out only a few years later.

tuxguy2• 14 years ago

@JunkDNA, you seem to know Pharma R&D & patents.

An excellent read on another case coming up before the Indian Supreme Court, regarding Swiss drug co. Novartis's blockbuster anti-cancer drug Gleevec.

http://www.nytimes.com/2012/03/07/business/global/indias-sup...

I think that judgement might be more important, as the NYT article points out how the US govt is trying to influence the outcome. http://keionline.org/sites/default/files/tpp-10feb2011-us-te...

What are your thoughts on Gleevec ?

robmcm• 14 years ago

Perhaps making drug companies non proffit to ensure all money went back into developing new drugs and perhaps less proffitable drugs (i.e. Drugs targeted at the developing world).

Shivetya• 14 years ago

Special powers? They mean by force or arms. There is nothing special about theft except when a government does it they are pretty much immune to counter actions.

This is little different that Greece having passed laws allowing them to retroactively change bond agreements and then implement said changes they claimed were now legal under their laws.

Now if India decided to pay a reasonable fee to Bayer for the ability to have a national drug company manufacture them then I would see little issue here.

Instead they are simply passing the costs to other countries. As in, let those "rich" countries pay for the development of medicines and countries like India will simply steal what they want with impunity. How different is that from what the Chinese do to manufacturers of cars, electronics, and other technology not developed at home.

The cost is simply borne by people they don't have to see or care about. Yes I know the drugs are expensive but development of new medicines is not a cheap endeavor. To have government arbitrarily decide who can charge what and when will simply trade a few lives today for a potentially larger number in the future, that larger number arises because potential treatments may be deemed to risky to research under the threat of confiscation.

x3c• 14 years ago

I propose the following solution.

R&D stays in private sector. All successful drugs are bought by the government at the cost of R&D and a sizable profit. The government, then, distributes it. Government can control the distribution and Pvt. markets can control the invention.

Government can then tie up with other govts. and allow sales of the said medicine in those countries.

It's not an ideal solution, but it has best of both capitalist and socialist ideologies.

crusso9• 14 years ago

So the government then picks "successful drugs" and hands out massive amounts of money to those companies based on the definition of success as determined by politicians, bureaucrats, and lobbyists.

Sounds like a nonstarter to me.

jbooth4• 14 years ago

I'm not advocating for the proposal necessarily, but it's worth pointing out that a solution could be all kinds of bad yet still better than the mess we have today.

RexRollman• 14 years ago

That's funny, because I was thinking it should be the opposite: R&D by government scientists so that discoveries can be made available to the public as cheaply as possible.

w1ntermute5• 14 years ago

Does anyone else find it appalling that the American government and American companies have the gall to complain about intellectual property violations in developing countries like China and India? Until the late 1800s, American IP law explicitly excluded foreigners from IP rights. That's right, forget about lax enforcement (like you often see in developing nations nowadays) - you could violate foreign IP rights in public view and not a thing would be done about it.

And that's exactly what Americans and American companies did - they went to Europe, took the latest IP, brought it back to America, and copied it. Charles Dickens went on a tour of America to try to get people to buy legitimate copies of his books, which no Americans were doing at that point. By the end of his tour, he realized this was a pointless venture, referring to America as a "nation of pirates". Doesn't sound that different from what contemporary American industry trade groups call China and India, does it?

And it wasn't just international - domestic IP rights violations were endemic as well. The reason the movie industry developed in California was because the movie studios (the same people that are now crying foul about copyright violations) were trying to escape Thomas Edison and his patents on moving picture technology. Not only was Edison's lab in New Jersey, distancing them geographically, but the Ninth Circuit Court of Appeals (which covers California) took a more "relaxed" view of IP rights.

nikcub3• 14 years ago

It isn't just with IP protection, but also CO2 emissions, restricting nuclear technology, military powers.

A big case of 'do as I say not as I do' designed to retain the status quo in the order of the world.

Produce12• 14 years ago

All of what you described falls under the "history is written by the victors" sentiment.

ars4• 14 years ago

No one else finds it appalling that things in the 1800s are not the same as in the 2000s.

It is a bit appalling that you expect nothing to change in 200 years though.

w1ntermute5• 14 years ago

Read my comment here: http://hackerne.ws/item?id=3699868

It has nothing to do with the year, it has to do with the position of the US (as developing or developed) changing its viewpoint vis-à-vis IP rights.

ck2• 14 years ago

$5500 a month per person? Bayer are scumbags, serious, serious scumbags.

Do they think cancer is just going to stop happening so their profit will dry up?

Kudos to India for doing the right thing, I think the 6% royalty is a nice offering.

GuyCall• 14 years ago

I have no idea when it was first public knowledge that the Indian Govt were considering this option and when it was finalised. But since Bayer AG's share price in part the markets sentiment of their potential future earnings, and their share price has done reasonable well over recent years, I suspect the market doesn't see this as a major issue.

Bayer's current market cap is a fairly significant EUR45.93bn. So even with the "patent cliff" that JunkDNA discusses, it seems people still expect big pharma to be profitable.

chollida1• 14 years ago

Stanford has a set of awesome podcasts called Entrepreneurial thought leaders (http://ecorner.stanford.edu/podcasts.html).

One of the more recent ones was from a serial entrepreneur in the medial space.

He said the reason that drugs take so long to produce is the FDA process. Now the FDA is housed by smart people but you have to look at it from their prespective.

They can accept or reject drugs. If they reject a drug then there is no serious problem that can come back and bite them.

If they accept a drug, there is no real upside to them.

They get no bonus for accepting the drug, however if the drug turns out to actually harm people then they are squarely in the cross hairs.

This leads to the question of why would the FDA accept any drug without being 100% sure, and with medicine there is no such thing as 100% sure.

sanderoak• 14 years ago

finally atleast 1 government has the common sense i was waiting for!

suprgeek• 14 years ago

Excuse me for not being cut up about how the BigPharma companies will be pulling in a few less dollars. Thinking about some of the corrupt and downright unethical practices employed by these companies - this would almost seem like just payback.

- They use Drug trials in lightly regulated developing countries to get FDA approvals for medicines. There was a famous case in India last year I think where 10-12 children died due to an experimental vaccine. The company involved was one of the biggest vaccine manufacturers in US. That case got hushed up quick.

- Drugs that get banned in US/Europe get dumped in Developing countries where the science/regulation may not have caught up yet. So even when the deadly consequences are known, these companies push dangerous medicines.

- Medical Reps employed by these companies routinely pressure doctors to over-prescribe expensive medicines. for a uneducated public this ends up costing them more for the same effects.

Against the backdrop of these practices an occasional such judgement is indeed good news against these companies.

refurb7• 14 years ago

This may end up hurting India not helping.

In order to get a drug approved in India, you need to run clinical trial on Indians. You also need to go to through the regulatory process, which isn't cheap.

If drug companies fear that the millions they spend on getting a drug approved in India won't be recouped because the gov't issues a compulsory license, then they simply won't do it.

I mean think about it... if introducing your product to a new market resulted in a net loss, would you do it?

Yeroc2• 14 years ago

The really simple argument is that at the previous price very, very few people in India could afford it. So in the end it is more than likely that the revenue that is gained is higher than it would have been at the very high price.

refurb7• 14 years ago

No, I can't argue that's not true. We don't really know what Bayer's strategy was here. For all we know they could have told the Indian gov't to shove it. In that case, they gambled and lost.

Or, they could have offered the drug at 25% of the original cost and the gov't could have told them to shove it.

bradharper2• 14 years ago

That "special power" is commonly referred to as theft.

bradharper2• 14 years ago

Would love for any down-voters to tell me how I'm wrong...

tibbon• 14 years ago

So wait- am I reading this right? Essentially Bayer didn't sell the drug cheap enough, so the Indian Gov't gives an Indian company the 'right' to copy the drug and send Bayer checks for 6% of the proceeds?

And on the flip side of intellectual property, the US is able to extradite a kid over piracy of TV shows? (http://news.ycombinator.com/item?id=3699325)

Neither seems right to me. Maybe they aren't the same thing, but if ThePirateBay was sending the MPAA checks for 6% of what they made on the site, and saying "This should make it right, you weren't cheap enough so we distributed it ourselves" then the US would be trying to seize and detain people involved.

Hasn't India signed some intellectual property treaty with... well pretty much the rest of the world? How in the world can they do this?

And totally on the flip side- props to India for sticking it to the man. Kinda...

senthilnayagam• 14 years ago

This is a late stage cancer drug, delays death by 6 months to 5 years for liver and kidney cancer patient. Even after 97% reduction most Indian households may not be able to afford it .

Government wants to buy it and distribute through government and aided hospitals, that is the principal reason behind it.

According to statistics there about 200 Indians using it, even if can save a additional thousand lives it is worth passing this compulsory licensing

tuxguy2• 14 years ago

Related NYT article with some more facts & insights

http://www.nytimes.com/2012/03/13/business/global/india-over...

Indian Government uses special powers to slash cancer drug price by 97%

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