Something to keep in mind is the population that typically has chronic Hep C requiring this drug. It's IV drug users who share needles. Think they have $84K? Nope. Think they have insurance? Nope. Guess who pays for it. Oh that's right, it's Medicaid! It's you, the taxpayers. Where is there a large concentration of people that have Hep C? Prisons. Guess who pays for it then? Still you! The prison systems are obligated to provide health care and treatments in accordance with community standards of care, which they do. They have treated many people already who meet the criteria of disease progression to qualify for it. Still think Gilead should be charging this much for it here and not elsewhere?
Actually a significant population in the US was infected by blood transfusion; the US didn't start properly/universally screening blood and taking precautions for hep C until 1992.
This is why there's a spike in infection rate among older people, and why hep C is considered a looming cost crisis for Medicare -- we don't yet know the full extent of the infectious disaster that was unscreened blood, but it's ticking away inside anyone who received a transfusion prior to 1992.
If person A ignores a problem, but person B comes up with an expensive solution to the problem, person B is the monster because he should have come up with a cheap solution. Person A is completely innocent.
Is there a way to take the taxpayer money being spent on medicine that's priced high to recoup the research investment, and shift it to directly funding the research in the first place?
Obviously you'd have to spend a while funding both R&D and Medicaid/etc, while the new drugs are in development and the old ones are still under patent, and I'm sure there's other details I've missed, but it seems like there should be some way to make the system make more sense.
I don't think you could get that to fly politically. While it is true that drugs require high prices to recoup research cost and that drug patents allow drug companies to charge those high prices, they don't just recoup prices. They charge as much as they can. From the point of view of trying to save as many people as possible for the money, that sucks, but from the point of view of encouraging investment in drug companies it is seen as a necessary evil.
I won't try to rehash all of the permutations of ways that might work (just search HN for any discussion of drug companies and patents and you will be able to enumerate them). I suspect that there are ways to improve the present system substantially, but I concede that the problem is much harder than I can solve. Hopefully someone will be able to do it some day.
How does it work in European countries where health care is (mostly) paid for by the government? Do these companies still charge the same prices as in the US?
> Do these companies still charge the same prices as in the US?
The majority of global R&D happens in the US market, even though the entire world benefits from it. So pharmaceutical companies have come to expect to recoup their R&D costs from the US market. Ultimately, this means that European markets benefit from the research without having to shoulder the bulk of the costs from it.
If they couldn't do that here, then yes, they might adjust their business models and try and charge more in Europe and India. But as mentioned above, India doesn't recognize patents, and since the R&D isn't taking place in Europe, there's less of a need to charge the same prices there. And because there isn't one single European market, its more complicated to price drugs there in such a way as to reliably turn a profit (after accounting for R&D) in each individual country than it is in the US, where insurance players are licensed by state but the pharmaceutical market is otherwise roughly uniform across all 50 states.
Companies charge as much as they can, they don't follow some altruistic "we love Europe" plan.
I understand your point though: Of course it's easier to bask in American exceptionalism than facing the truth that corporations rule the US and the only human value they are interested in is the amount of dollars extractable through any means imaginable.
Nobody said anything about altruism, or 'loving Europe'. I don't know where you're getting either of those ideas from.
> Of course it's easier to bask in American exceptionalism
This is hardly a claim of American exceptionalism. It's a non-normative observation about the existing structure of the markets. It is not a statement that this is how it always must be, or that this is how it should be. It is merely a description of what currently is.
Back in NZ, we have PHARMAC, which is basically a centralised drug buyer for the country. It works remarkably well at keeping drug prices low https://www.pharmac.govt.nz/ - though tends to miss some niche stuff.
The Australian Federal government has a Pharmaceutical Benefits Scheme, and U.S. pharmaceutical companies have been trying to undermine it for years.
Sadly for these companies, and fortunate for the vast majority of Australians, it is so popular and successful that any attempt to undermine it puts the government at risk of being turfed out in the next general election.
The Abbott government tried to force through a hair-brained GP co-payment and it was so unpopular that even when it was scrapped they eventually had to replace the Treasurer and Prime Minister for fear of being routed in the next general election.
The drug from the original company is expensive everywhere, what India has is generics, which in their turn might lower the price of the original drug because of the competition. It also lowers the incentive of selling the original drug there at all (and consequently allowing the government to press for agreements). I have some unpopular opinions regarding the subject...
Actually, India basically refuses to recognise patents for a wide variety of pharmaceutical products. For a long time they refused to recognise patents for drugs that combat AIDS and a thriving market for generics sprung up.
There was a lot of posturing and complaining by pharmaceutical companies in the U.S. and the U.S. Government tried to heavy the Indian Government, but to no
avail.
When it became apparent that the Indians weren't going to budge, and with a growing realisation that other nations would ether do the same thing or import their drugs from India, the companies agreed to drastically reduce their prices on "humanitarian" grounds. Now they still make massive profits, just they are less massive than they once were.
This is now happening with academic research.
Nobody will shed any tears because greedy multinationals make a lower profit to ensure less people die from disease. Nobody will weep over Elsevier's reduced earning if it frees up necessary information and research findings so science can progress for the benefit of all mankind.
The entrenched interests of rich, arrogant corporate executives and business owners in first world nations are finally being disrupted by poorer nations who don't care about this group of people. But that's what happens when you gain an attitude on I weaning entitlement - you eventually overreach so far you come undone, and nobody feels any sympathy when it happens.
While I tend to lean more to your side of the argument, the devil's advocate in me has to point out the fact that you leave out the massive costs of research, development, clinical trials / fda approval, etc. that go in to getting a drug to market.
This not to mention all the extra capital needed to fund research into all of the drugs that never make it to market before a company finds something that works.
This ignores the fact that the expensive, risky research is often funded by public money instead of by the pharmaceutical companies. So, the taxpayers pay for the research until it shows progress. Then it gets patented and sold to a large company which sells it back to the public for $1000/pill.
It's a pretty gross abuse of the original idea of patents.
The expensive, risky part of drug development is not the portion that is publically funded. Yay! You've found a compound that appears to shrink tumors when directly applied to them on glass slides.
Now, figure out what the correct dose is, how to get it into a mammal so that it's not metabolized into uselessness, how much you can safely give the mammal.
Now, start again with humans and hope you don't get to the final stage only to find out that it's not as effective as existing treatments or has side effects that will open you up to lawsuits.
Finally, once you've done all that, scale out the production of your compound such that you can prove that every dose meets FDA quality requirements.
To be fair the risky research side is relatively low cost. It's the development part - putting drugs through clinical trials that costs a hell of a lot. And its usually drug companies that pay for that.
Given that people would still die or become very sick from disease, I think that medicine would progress - whether at the same rate, I'm not sure but given Western nations other than the U.S. pretty much all don't have hangups about their government funded health systems, I suspect it wouldn't be all that bad.
If you're going to parrot Marcia Angell, at least get the substance right: They spend more on marketing and administration than they do on R&D. Where "administration" is stuff like IT, HR, etc.
I've never read her work, so I'm hardly parroting her. IIRC I've read about this in a few news articles about pharma finances, and in Ben Goldacre's "Bad Pharma". I don't know whether the marketing/sales figures include administration, but it does appear to be true, and I'd be inclined to think it's bad...
One of the problems with the patent system is that it pushes medical research in the direction of drugs because they are easier to market than alternatives such as knowledge of medical procedures.
There still needs to be incentive to lower the cost. For example, to lower costs of clinical trials, companies can invest more in computer simulations and find other ways to reduce those costs. Also this might also force big pharma companies to collaborate more with each other rather than re creating the wheel.
The future lies in "biologics", which unlike small-molecule compounds, cannot be (that) easily copied/manufactured. Initial and continuous capital costs prevent easy "piracy" and that is where the majority of large-pharam/biotech R&D is headed.
My father is currently under treatment (for around 50,000 EUR)
He's not an IV drug user, never was, most probably it was a dentist who infected him many years ago.
Don't oversimplify things like this, there are lots of situations you aren't thinking about..
He's not oversimplifying. He's not saying that all Hep C patients are IV drug users.
He's just staying that a lot of Hep C care is taxpayer funded, and that Gilead is therefore price gouging the American taxpayer. That your dad is also being price gouged, over in Europe, is just icing on the cake.
Certainly. And it should be just as fair to allow parallel imports of everything. Want to charge more than [retail price B + transport cost B->A + import tax A]? Guess what, the market is going to take care of this for you.
See the import tax that I included in the calculation? IMO this should be the way to solve this from a humanitarian standpoint. If a government wants to solve medical issues of poor countries, it can work together with drug corporations, dictate the price points (i.e. manufacturing+logistics without R&D) for offering these supplies and then protect the own market through import taxes on these products. But the point here is: It needs to be a transparent, i.e. democratic, process. The way it works now is just shady and anti free market.
It should be priced according to ability to pay based on income. The same is the reasoning why the drug is so cheap in other countries, their people can't possibly afford the prices. So it makes no sense for citizens of wealthy countries to have to pay huge markups if they don't have the money. It makes no sense from an economic perspective to force people to go into bankruptcy just because they got sick.
That's only fair if you believe that the seller has the moral right to maximize their earnings. I think that's questionable across the board, but certainly in the pharmaceutical industry.
As in: the idea behind capitalism (the reason we put up with it) is not that price-gouging is some fundamental right we should worship, but because capitalism works. What's that mean? It efficiently allocates resources. How does it efficiently allocate resources? By letting a fluid market with many competing buyers and sellers figure out an appropriate price.
Notably, patents of life-sustaining medicines utterly destroy that cornerstone of capitalism. People can and will pay almost anything to get that drug, so the seller can charge what it wants - that's not capitalism as it's supposed to work, that's a hostage scenario.
I don't know what the best alternative is, but I'm convinced that there are many trivially better solutions to allocating resources to medical research, efficacy testing and production than what we're doing now. Every social network, things like google's pagerank, scientific journal impact ratings - all represent alternative means to determine worth in a competitive fashion; and even competition isn't strictly necessary - for some scenarios plain old raw computation to solve for the optimal solution may be possible nowadays. We're not even trying to improve the status quo.
> Notably, patents of life-sustaining medicines utterly destroy that cornerstone of capitalism. People can and will pay almost anything to get that drug, so the seller can charge what it wants - that's not capitalism as it's supposed to work, that's a hostage scenario.
I don't think it is appropriate to compare a drug company that created a life-saving drug to a hostage taker. And in this scenario it is particularly inappropriate, because they are charging less for the drug than the previous best treatments cost!
Furthermore, there is an alternative here. The patent only covers this one cure. You are welcome to go out and spend $2-3 billion to try to create your own drug. (But that would be pretty risky, wouldn't it? And good luck raising the money if you plan on giving the drug away.)
Right, so in this case there was a tiny modicum of competition, and the smart company selling the drug priced their product appropriately.
However, that does not mean that they (or some other organization) couldn't have developed this drug for less.
The question isn't whether it's better that what came before, the question is whether it's efficient. If there were many buyers and sellers, you'd have some faith that is at least approximately efficient.
But with just one seller, they could recoup their costs many, many times over. That's terribly inefficient - those resources could be better used elsewhere.
And it's quite a bit worse than that - by being so inefficient, you're creating all kinds of perverse incentives. Instead of trying to find and create a worthwhile drug, the aim is to find those drugs with captive audiences. The Martin Shkreli saga illustrates that quite blatantly.
The appropriate benchmark is efficiency, not whether the drug at the offered price is better than nothing.
I think there's some middle ground that could be found here. For arguments sake, how about:
1. A drug company can charge whatever it wants for a drug until some predefined multiple of the cost of developing the drug is recovered.
2. After that point, the patent expires and its up to the free market to determine prices.
Set the multiple of R&D costs high enough that it allows for the low success rate of drug research, and you have a model that still encourages risk taking whilst preventing profiteering.
Also, this proposal means that while the patent is not expired, production is still monopolized.
And there is the issue of testing vs. research. There is an argument to be made that drug development isn't the hard part (or at least not always). The hard part is figuring out how to use the drug, and doing clinical trials to prove efficacy and safety.
E.g. we currently live in the wonky situation where there is little incentive to discover new uses for existing out-of-patent drugs. It's much more worthwhile to find a new drug that does the same thing.
I think patents-as-monopolies are a bad idea. A citation-based subsidy and/or fixed license fee, preferably on a decreasing schedule with a capped or only slowly growing integral would align motives with outcomes more clearly.
I mean, I don't see the problem if research becomes independently specialized from exploitation.
One aspect of the patent system is that the government or non profits or whatever could do drug development, get patents and then give away licensing.
Would doing that put an end to commercial drug development? Or would commercial drug makers continue to seek treatments where they saw opportunities to profit?
Sofosbuvir is a really great test of how we reason about this stuff. The price is high and easy to balk at, but it's cheaper and better than the previous treatment. Cheaper and better are clearly compatible with the profit motive. So we are left with our intuition that the price is unfairly high. I think part of the answer is to look at how medical payments are structured.
The best alternative is really quite simple: public funding for lifesaving medicines. This model also works for the provision of medical care and is used throughout the entire developed world, with one exception.
As far as I know, this is not true anywhere in the world. What drugs out there have had their development and trials fully (or majority) funded by governments, either in Europe or---apropos here---India?
Huge, huge amounts of drug discovery is funded by governments[0] around the world. Pharmaceutical companies step in to fund the trials after the promising results come out. A lot of the trials take place in India under ethically concerning conditions[1].
Capitalism uses a low value of human life for workers compensation and a high value when selling drugs. Perhaps we should force the maximum charge to be their lowest paid worker's income for the period of treatment ...
Capitalism allocates resources efficiently without external forces like patents. Patents are a fix to force capitalism to be more socially responsible with sharing of knowledge.
