Big Pharma claims lower prices means giving up miracle medications. Ignore them

https://www.vox.com/future-perfect/368538/medicare-drug-prices-pharma-negotiations-innovation

by rntn • 2 years ago

142 117 2 years ago

AlbertCory8• 2 years ago

Drug for discussion:

Bimzelx (for psoriasis). This costs six figures or more per year, from what I can glean. Watching baseball a lot, I see this advertised multiple times per game, and God only knows what else they spend on marketing.

  (I don't have psoriasis or know anyone with it, if that matters)

Looking at UCB's financials (helpfully broken out by drug), they took in $242 million on that drug alone in fiscal 2024. So that's how they can afford all those ads. It's also probably something patients would demand, and maybe even be happy to pay for out of pocket.

they will help the Medicare program cap what individual patients spend out of pocket on their prescriptions in a year at $2,000.

So if you want clear skin, you probably have to pay big bucks. But maybe these immensely profitable drugs subsidize the life-saving ones.

bryanlarsen• 2 years ago

(I don't have psoriasis or know anyone with it, if that matters)

Psoriasis is very common, especially the mild forms. You probably know people who have it.

__MatrixMan__• 2 years ago

C6552 H10132 N1750 O2029 S42, 147229.87 g·mol, what a monster. Probably not making that one in your garage.

exyi• 2 years ago

It's apparently a monoclonal antibody (https://en.wikipedia.org/wiki/Bimekizumab). That's just a protein, so it might actually be easier to make in your garage than your average small molecule ;) ... not that either would be practically possible, but it might be available in countries where they don't care too much about patents and such

zdragnar4• 2 years ago

Clear skin is the least of the problems with psoriasis. From their website:

    Bimzelx, alone or in combination with methotrexate, is indicated for the treatment of active psoriatic arthritis in adults who have had an inadequate response or who have been intolerant to one or more disease-modifying antirheumatic drugs (DMARDs).

In other words, it's for people with bad cases who don't respond well to other drugs. Keep in mind, other drugs often come with serious complications- constant use of topical steroids will thin your skin, and give you glaucoma if you develop it and use them near your eyes. Many biologics have even worse potential side effects.

On top of that, psoriatic arthritis is degenerative, if you're unlucky enough to get that too, so not treating it means not only constant pain, constant threat of skin infections from scabbing, but permanent joint damage.

I ended up on Taltz, another very expensive biologic, but the eli lily foundation covered almost all of the cost since my insurance wouldn't. Before then, I looked like an alcoholic, because my nose was constantly red and inflamed, and I didn't have anything safe to put on it- glaucoma runs in my family, and I wasn't brave enough to risk anything strong enough.

If that was the only problem, I might not have even gone the route of Taltz, but I was also developing it all over my body, and there wasn't much that was helping.

AlbertCory8• 2 years ago

Thanks.

I finally realized I was seeing this ad constantly and decided to look into it.

vostok• 2 years ago

Assuming this is post-Obamacare, do you know why your insurance didn't cover it? I had this simplified model that insurance covers everything once you hit maximum out of pocket and I'd love to learn how that model breaks down in practice.

Neil44• 2 years ago

Obviously you need to subtract costs from that, not just production costs for this year but development costs, and the development costs of other drugs that didn't even make it to production.

AlbertCory8• 2 years ago

Obviously

Yes, it is. I didn't say it was all profit.

fgonzag• 2 years ago

My feet have had open wounds for the past year due to psoriasis (and I've gone to every dermatologist I can). It's not just clear skin, it gets very bad with quite painful wounds from the scratching. Especially in hot humid conditions, and I play tennis a lot. 3 people I train with have bad cases, as in having to stop playing for a while

BenFranklin1003• 2 years ago

You seem to be implying the advertising costs are a significant driver of the price for drugs. They are not. The significant driver of the cost in drug is the development costs, including the cost of the many failures along the way. Also, in general and not specific to this case, the prices need to targeted high enough to encourage investors to invest in the first place. If prices are not set at a sufficient premium to offset the volatility and risk, in the future investors will realize biomedical research is a poor investment and put their money in less socially beneficial investments like Facebook.

AlbertCory8• 2 years ago

You seem to be implying the advertising costs are a significant driver

No, I'm not. That's in your mind.

The advertising costs can be justified by their return. Business 101.

istultus2• 2 years ago

Like many a disease with an old name, Psoriasis refers to a localized cutaneous autoimmune disease usually treated by dermatologists, and a severe family of Rheumatic (autoimmune) diseases, part of the Spondyloarthropathy family, that happens to have a cutaneous element which is the same (and often is the first symptom). This treats the latter, debilitating and possibly life-threatening variety.

a_puppy4• 2 years ago

But presumably the advertising department pays for itself, right? So if they cut the advertising department, wouldn't they have less total money in the end? The advertising supports the R&D, not competes with it.

(The one exception is when two pharma companies have competing drugs that are basically equivalent. So they get trapped in a "Red Queen's race" where they both spend money on advertising to try to gain market share. In the end they've both spent a bunch of money on ads and ended up back where they started. For those cases, I think government regulation would be valuable.)

AlbertCory8• 2 years ago

You seem to have supplied your own conclusion here. I didn't say UCB should do anything in particular: cut it, increase it, or keep it the same.

Physkal• 2 years ago

To counter a Red Queens race is to spend twice as much in advertisements?

sudosysgen7• 2 years ago

If there wasn't a competing drug there would be no need for ads, the only drug would get prescribed anyways.

slashdave3• 2 years ago

So if you want clear skin, you probably have to pay big bucks.

The price is determined by what the market will bear. So, yes.

nemo44x2• 2 years ago

What needs to happen is more and more money has to go to pharma from tax payers for novel medicine research. Today there is some, yes. But the vast majority of money comes from the markets. And anyone that has invested across the bio sector knows it’s capital intensive and almost everything fails. Money is just burned through so quickly.

So yes with lower returns investors will look elsewhere. Especially since overall pharma doesn’t really outperform. There’s no alpha across the sector.

So the money has to come from somewhere. If not then yes, innovation will slow down.

riffraff• 2 years ago

There's a problem with this line of thinking: the rest of the world already pays the same medicines less.

nemo44x2• 2 years ago

You’re not serious, are you? The USA consumer subsidizes everyone else in many cases. Similarly to how the USA taxpayer subsidizes the protection of trade, supply lines, and logistics through her mighty military.

Just compare the small and mid cap bio market of the USA to the rest of the world. These are the companies that get acquired by the large caps once they’ve gone through a P1 or P2 successfully. But most die before acquisition. This is where the real work happens in most cases.

istultus2• 2 years ago

The rest of the world has governments that negotiate directly the Pharma companies and strike up deals that subsidize the first X doses per year per Y number of people. Once the limit is passed it's the same for everyone - pay the price or find an alternative. NB that this doesn't happen only with US companies, e.g. Roche is very profitable selling Million-dollar-per-course cancer treatments. But in general, the fact that Pharma companies can sell at "full price" in the US subsidizes the drugs for the rest of the world.

LorenPechtel4• 2 years ago

The problem here is the idea that medicines have a particular price.

In reality you have a very big bill for developing it. A substantial bill for tooling up to actually be able to produce it. And typically a small bill for each unit you produce.

Now, I would like to see the developed world all pay the same price. But it wouldn't end up being the UHC-negotiated rates. I actually consider negotiation (or this dictate pretending to be negotiation) a bad thing. Instead:

You must sell to the US market at a rate no greater than you sell to any developed country. This is measured as net $ vs doses. No playing games with rebates, no playing games with giving them some for free. Reciprocity is encouraged, make the playing field level.

The US would benefit, the rest of the developed world would be screaming bloody murder.

BenFranklin1003• 2 years ago

To add to your point about expensive failures, this weekend it was announced that Tome Biosciences is going belly up. This is only a few years after being founded on some very promising research out of MIT. That’s $213M in investor money gone.

https://www.statnews.com/2024/08/22/tome-biosciences-gene-ed...

lvl1553• 2 years ago

US pharma already benefits from academic research which is paid for by tax money. This is a classic example of socializing the costs and privatizing the profits. Often times, you’re looking at 10-100x the cost for “statistically significant” uplift in efficacy. What happened to value-based medicine?

gruez4• 2 years ago

Nobody is forcing you to buy the more expensive drug. You can always use the older generic version.

mesk2• 2 years ago

Well, 'somebody' might be forcing you, the illness itself, because the generic drug might not be good enough in your case.

murphyslab• 2 years ago

You cannot always obtain a generic version; sometimes not even the original version.

Drug manufacturers regularly take approved medicines, which are off-patent and non-exclusive, due to safety reasons (side-effects, risks to patients) or due to commercial reasons: high cost of production, low demand, or possibly to increase demand for an exclusive alternative.

The FDA maintains a list of "List of Off-Patent, Off-Exclusivity Drugs without an Approved Generic": https://www.fda.gov/drugs/abbreviated-new-drug-application-a...

There are also perverse incentives at play and it often isn't easy to get a generic approved, especially if the original drug was already removed from market, under biosimilar regulations:

https://prospect.org/health/2024-03-14-novo-nordisk-disconti...

varispeed• 2 years ago

"privatising profits" is a bit vague term. May suggest that simply everyone but government benefits.

I think it's better to say that it is socialising losses and making the rich richer.

someNameIG3• 2 years ago

The vast majority of the costs aren't in the early stages that happen at academic institutions.

lvl1553• 2 years ago

No. 99% of the costs are put on patients who take these drugs that are often ineffective. Heck, they give dying patients placebos. Yes, patients are willing to give up everything to live (and sometimes merely for weeks/months), and pharma is using them for experiments. Do you want to put a price on that? What a cynical thing to say. This isn’t some AB testing for a new web app feature.

consteval2• 2 years ago

I think they could be, because I think you're looking for that 1/1000. Doing 1000 things and throwing away 999 is expensive. So sure, when you look at that 1/1000 you might say "oh the 1 isn't expensive". But you're also paying for the 999, and you have to in order to get that 1.

slashdave3• 2 years ago

Most of the costs of drug development involve clinical trials. Basically none of that is supported by academic research because it is so expensive.

lvl1553• 2 years ago

That’s such a cynical thing to say. I guess in your mind, drug companies carry out these trials in a complete vacuum. Patients take on all the risks.

sudosysgen7• 2 years ago

We spend more money on the NIH alone than on drug trials. This is completely false.

The trick here is that you exclude fundamental research by definition when you talk about "drug development". But the fundamental research is necessary for drug development, and it's just as if not more expensive.

jimmar• 2 years ago

Why not make these same arguments for cars, food, or anything else that we buy? Just have the government negotiate maximum prices that manufacturers can charge. Maybe AI will help make cars cheaper in the future.

cerved• 2 years ago

Is the US government not already negotiating the prices for cars and food it buys?

doctorpangloss4• 2 years ago

I'm not sure why you are being downvoted. Import bans on food and vehicle tariffs suggest the US has to deal with a lot of complexity regarding cars and food prices. Drugs are no exception. If only there were any easy answer.

twoodfin3• 2 years ago

If the Secret Service doesn’t like what GM charges for a few dozen black Escalades, they can’t take a haircut on GM’s revenue for every one it sells to the general public.

But that’s how the IRA works.

Also, the way Medicare Part D was set up, the government doesn’t buy the drugs in the first place. Private insurers negotiate their rates and then are reimbursed. They already have significant market incentive and power to negotiate lower prices.

AnthonyMouse3• 2 years ago

The US government typically puts out purchases for bidding. They need so many SUVs of a particular size so they receive bids from Ford and GM and whoever else and pick the lowest bid that satisfies the contract. They aren't setting the price, the sellers are, by bidding on the contract. The government just picks the lowest one.

The issue with drugs under patent is that the alternatives are often not as good. If the FBI needs a vehicle, it doesn't really matter if it's a Ford or a Chevy, but sometimes a drug under patent is quite a lot better than the available generic and then the seller can command a much higher price than the competition. Which is whole point of the patent system. In exchange for funding the research/trials you get a temporary monopoly on the drug and get to charge the monopoly price until the patent expires.

They're now proposing a different system where instead of taking bids, the government dictates the price and can blacklist the entire drug company if they don't accept the government's price for every individual drug. That's price controls and the result is consistently under-production. For commodities that means shortages, for R&D it means fewer new drugs.

mesk2• 2 years ago

Car, food manufacturers etc... operate in mostly free market - pharma, insurance, hospitals operate in highly regulated markes and 'somehow' for all of them is better if the price goes up, because 1% of 10mio is more than 1% of 1mio. And what is maybe also important, when buying car you pay for it directly, and know the price in advance and there is no urge to buy it just to stay alive...

saulrh• 2 years ago

If funding pharmaceutical research is a common public interest, then it should be funded the way all common public interests should be: taxes. Taxes pay for the weather predictions that make modern agriculture possible. Taxes pay for the basic physics research that keeps Moore's Law on track. Taxes pay for the transportation and logistics infrastructure that make the modern economy possible. Taxes pay for the fire engines that might keep your house from burning down some day. Taxes can and should pay for the pharmaceutical research that makes modern medicine effective. This kind of generalized "everybody needs it but no single person can pay for it and trying to do it through capitalism distorts everything" benefit is precisely what taxes are designed for.

gruez4• 2 years ago

Right, but what sort of taxes? If the answer is "just an overall tax on everything", then that's basically the status quo, with all the accompanying "socializing the costs and privatizing the profits" (eg. [1]). If it's tax on the industry in question specifically, then that's something that's not usually done. For instance, you mention "Taxes pay for the basic physics research that keeps Moore's Law on track", but to my knowledge there's no semiconductor tax to attempt to recoup the cost of that research. The same goes for agriculture. You might have a point for roads since they're financed via a fuel excise tax, but it doesn't generalize to ocean/air freight.

[1] https://news.ycombinator.com/item?id=41351872

spondylosaurus• 2 years ago

Half-joking, half-serious counter: why not socialize the costs and socialize the profits, too? Think big!

firesteelrain3• 2 years ago

Taxes do pay for pharmaceutical research though private funding makes up the majority of the funding. For example, NIH, DoD and CDC all provide funding.

NIH has an annual budget of $45 billion - all taxes.

[1] https://www.nih.gov/grants-funding [2] https://jamanetwork.com/journals/jama/fullarticle/2775400

lotsofpulp3• 2 years ago

Then why do legislators not finish funding the "minority" of the funding? The clinical trials are the most expensive and risky part. There is a reason the US government (and other governments) step away at that point.

BurningFrog2• 2 years ago

Pharmaceutical research is a common global interest.

But there is no way to levy any global taxes to pay for it. That makes this idea practically impossible.

Noumenon72• 2 years ago

Am I summarizing this article right?

* The US premium paid is 150% of R&D costs, therefore cutting it will only cut spending on the costs that aren't R&D

* M&A did not drop in the first year of the program, which covered 10 drugs, therefore the program will have no effect once phased in

* We think AI might develop new drugs for us someday, so it's safe to throw away the existing system today

Not very solid reasons to go after the golden goose!

twoodfin3• 2 years ago

You forgot putting “price controls” in scare quotes while describing the program matter-of-factly as “negotiation”.

If you dive into the details of the law, it’s a “negotiation” only in the sense that drugmakers can choose to sell anything to Medicare or nothing at all if they don’t like the proposed price on any one drug. The penalties for “walking away” from that price are not limited to failing to make sales to Part D insurers. (Remember: Medicare doesn’t have its own formulary, that’s the Part D insurers’ role.)

Also you don’t have to know much about the history of this law to know the non-partisan Congressional Budget Office thinks we’re going to fail to achieve a dozen or so blockbuster drugs over the next decade due to this “negotiation”:

https://www.hks.harvard.edu/publications/biopharma-venture-c...

LorenPechtel4• 2 years ago

Note that the track record of government dictating what they'll pay for drugs is shortages. You drive prices as low as the drug companies can afford and the result is the drug companies don't make enough to pay for ensuring regular supplies even when things go wrong.

One plant has a problem and a whole bunch of patients don't get what they need. The government has caused chronic supply problems this way before and I do not trust them not to do so again.

mschuster912• 2 years ago

First, one thing to keep in mind: "Big Pharma" is the medical equivalent of "venture capital" in technology. They buy up a lot of patents and very early stage startups in the hope that 1 or 2 of 100 investments actually strike it big, and that explains a part of why new medical innovations cost so much - all the loss has to be distributed.

It is a harrowing proposition: that in trying to control drug prices for 67 million Medicare patients now, we might inadvertently prevent the development of future drugs that could save lives. Implied, if not stated outright, is that we’re putting a cure for cancer or Alzheimer’s or some other intractable disease in jeopardy.

Well... given that a lot of the fundamental research in pharmaceuticals happens at universities and/or on taxpayer grants, what exactly is preventing the US government from taking over the later stages of development and the associated risk itself, and only use external providers for manufacturing at scale?

Of course, it's a rhetorical question. The answer is two-fold here - primarily the obvious: large parts of the US (and most Western nations facing similar questions) prefer a "small state", preferably as small as possible. But there's also a second answer... the US' very dark history in government-run medicine. The Tuskeegee syphilis study, the consistent discrimination against PoC and women in medical research, MKULTRA or the US just about permanently burning all of its trust across the world by using "vaccination drives" as a pretext to verify Bin Laden's presence in that compound in Pakistan [1] - antivaxxers, Covid deniers and their ilk didn't sprout up from nothing, they have very fertile soil.

[1] https://www.npr.org/2021/09/06/1034631928/the-cias-hunt-for-...

iris700• 2 years ago

The main expense is the testing needed to bring the drug to market, the cost of initial research is peanuts compared to that

mschuster912• 2 years ago

Yep and that should be taken on by the government.

Kye• 2 years ago

What good is a miracle if the only people who can afford it don't need it because they can afford to maintain their health?

pg_bot2• 2 years ago

Would you rather live in the world where we don't have a solution or the world where the solution is expensive now but will eventually become cheap?

passwordoops2• 2 years ago

Under our current system, the trend is for drug prices to increase

https://www.aarp.org/politics-society/advocacy/info-2024/rx-...

BurningFrog2• 2 years ago

That would be an odd epidemiological profile...

Even at worst, when the patents expire after 17 years the miracle becomes affordable for all.

LorenPechtel4• 2 years ago

If you can buy it. My mother had chronic nutritional issues because of rationing stuff to those who needed it the most. Cheap generic, just without enough production capacity because the price was forced too low.

RcouF1uZ4gsC• 2 years ago

Most other wealthy countries, like Australia and the UK, use the government’s central role in their health care system to negotiate lower prices while also fostering their own medical innovation sectors.

These wealthy countries are relying on the US to subsidize their medical innovation. The US drug market is the one where the profits are and which determines how much investment is worth it.

doctorpangloss4• 2 years ago

How would this be disproven? What would you observe?

This should hint to you why, despite sounding reasonable, what you said isn't a common-sense, no-evidence-needed or even wholly-formed idea.

a_puppy4• 2 years ago

I don't think this article's analysis makes sense.

If pharma companies lose revenue, they have to cut something. Presumably the intention is to force them to cut profits. I found this analysis of global pharma industry profitability: https://www.ispor.org/docs/default-source/euro2023/poster-is... They found that the average profit margin across the pharma industry was around 20%. So even if pharma companies cut their profits to zero, prices would only drop 20%, right?

And even the idea of cutting profits to zero isn't realistic. Pharma investment is similar to venture capital; investors make risky bets in the hopes that a few of them will pay off big. Why would investors agree to take that risk if they get zero profit in return?

Some people propose things like "the government should fund drug development". OK, that's a fine proposal; it has pros and cons. But that's a very different proposal than "the government should institute price caps on privately-developed drugs". Don't try to justify the latter proposal by conflating it with the former.

AnthonyMouse3• 2 years ago

Some people propose things like "the government should fund drug development". OK, that's a fine proposal; it has pros and cons.

Not only that, it's complementary to private investment. Did public investment produce a valuable new drug? Great! Make sure the law doesn't allow anyone to patent drugs developed entirely with public funding so it immediately becomes a cheap generic.

But if a different drug is developed with private financing under the assumption that they'll get returns during the patent term to justify the cost and risk, well, that's why they're doing it. And paying a higher price for that drug is better than not having it all, or else why is anybody willing to pay the higher price for it?

rileymat2• 2 years ago

But doesn’t the high price come, largely from government blessed IP creating an artificial monopoly? Controlling prices in the context of a created monopoly makes some sense to me.

But yes, balancing incentives is critical.

complaintdept2• 2 years ago

Pharma spends more on marketing drugs than developing them. If marketing drugs is prohibited, especially through dubious kickback schemes with doctors and hospitals, there'd be a lot more room for lowering prices.

The profit motive really doesn't deliver great outcomes in medicine, between the enormous information asymmetry between patient and doctor (and even other doctors), doctors with perverse financial incentives, and believing (whether it's true or not) that your life or wellbeing are on the line if you're wrong, it's ideal for all sorts of chicanery. (/rant)

Loughla• 2 years ago

I hear that a lot, but have never seen numbers. Googling it doesn't help me either. Would you know of any resources?

sudosysgen7• 2 years ago

This is especially true since marketing drugs is essentially a negative sum game, it's banned in most developed countries with no discernible drawback.

a_puppy4• 2 years ago

Hmmm, the marketing question is complicated and I'm not sure what to think.

From a profit point of view, presumably the advertising department pays for itself; in other words, the advertising department generates money for the R&D department, rather than taking money from the R&D department.

But, the advertising presumably increases the number of people taking the drug. If it's teaching patients/doctors about a valuable new drug that will make peoples' lives better, then it's a social good. But if it's persuading patients/doctors to buy the drug unnecessarily, then it's a waste.

(Also, sometimes two pharma companies have competing drugs that are basically equivalent. So they get trapped in a "Red Queen's race" where they both spend money on advertising to try to gain market share. In the end they've both spent a bunch of money on ads and ended up back where they started. For those cases, banning marketing would be a clear win.)

Edit: Also, keep in mind that "ban/regulate pharma advertising" is a different proposal than "medicare negotiation".

LorenPechtel4• 2 years ago

I do agree there would be a benefit from removing the marketing. But the benefit would be little more than what is spent on said marketing.

It comes back to the same thing--where is the money going to come from? Few medicines actually have a high per-unit production cost. The cost is usually mostly amortizing R&D and the production equipment. (And looking at R&D overall--you have to count the spending on the failures as well as on the successes.) Sell fewer pills and you don't cut that R&D cost, you just distribute it across fewer pills.

lathiat• 2 years ago

In Australia, prescription drugs generally cannot be advertised to consumers. Additionally, prescriptions for all drugs are written in the generic drug name form and not the branded form.

That said, where this currently seems to fall apart is the pharamacies.. most only stock a single "brand" and pricepoint for many drugs, two at most. Most pharamcies aren't online so you can't easily compare prices. In practice, I have frequently observed over many different prescriptions a price different of 1-2x between pharamcies in the same area for the exact same thing and dosage. Additionally, the way we fill scripts here you don't even get the price until you go to pay and theyve already labelled your box with your script, etc.

There's also largely no pricing on the shelves, even if you can see the behind the counter ones.

The only thing that saves us, is that "many" but not all drugs are subsidised by our public health care and the government negotiates the price. But for any non-subsidised drug it's open season and also much of the pricing is "per dispense" and not at all related to the drug quantity.

e.g. 4x10mg or 28x5mg of the same drug has the same price.

Also recently the much-publicised Ozempic which is used for weightloss and diabetes which is $150/dose here, because the price is fixed by that government negotiated price for diabetic patients but off-label prescribers get the same price even when not subsised by the government and they actually have to pay the full $150. They launched the literal exact same drug for weight loss as "Wegovy" but they vary the recommended dosages a little so that in practice you can't cross-fulfill the prescription. The exact same 1mg is $150 when sold as Ozempic and $250 when sold as Wegovy :) And for some straight reason the weight loss dose is "2.8mg" but the diabetic doses are 1mg and 3mg.

schneems• 2 years ago

Profit is revenue minus costs. How many of those “costs” are things like private planes for executives? How much for reps that visit doctors and give out free samples and swag and tickets to Cancun?

Famously some major tech companies aim to have zero profit as they want to reinvest everything back in the company. It doesn’t mean they don’t have any wiggle room to drop prices.

Big Pharma claims lower prices means giving up miracle medications. Ignore them

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