Yes Big Pharma does add incredible value to the world. That is indisputable, and the drugs we have today are incredible. There are a few big questions, about the net value they provide to civilization, however.
One is where are these immense sums going that they claim to spend on developing the drugs? I can understand that many prototypical drugs don't make it to market, most likely being found to be either unsafe or ineffective by FDA trials and other strictures that are the envy of and model of the rest of the world in terms of providing value to public health. I simply do not trust the accounting that makes up these amounts claimed spent on developing many of these medicines.
Scientists and engineers are not costing these companies millions each, yet its claimed that the current cost of bringing a drug to market is almost $3 billion. There simply must be synergies in drug development that are going unreported. Are development costs going to building research centers that will be used for later drugs? Further, what is being done to reduce the costs of developing these life-saving drugs (without allowing drug risk to rise) and is this even discussed or attempted by Big Pharma?
A second question regarding their net value is how they keep costs high and maximize their take by gaming the patent system in a number of ways to avoid losing sales to generics. AstraZeneca, in 2002 altered the molecule of an existing drug (prilosec) just enough to qualify for a new drug patent (Nexium). Another more recent example was how Allergan transferred their patent rights in Restasis to a New York indian tribe (St. Regis Mohawk) and licensed it back from them , all purely as a ploy. The tribe enjoys sovereign immunity and this will protect it in disputes against generic makers. These are just two simple examples of this type of abuse.
So, I'm less than sympathetic to Big Pharma's plight when the public's growing desperation for affordable medical care leads them to infringe on these patents.
> Yes Big Pharma does add incredible value to the world. That is indisputable, and the drugs we have today are incredible. There are a few big questions, about the net value they provide to civilization, however.
Agree, although I was specifically here arguing against the notion that they are comparable to academic journals. Academic journals are the absolute economic scum of the earth. Literally beneath contempt. I don't think pharmaceutical companies are comparable, though I agree there is an argument that their net value add might be close to zero, or negative. Academic journals don't even have to be netted for their social value to go to zero.
> Scientists and engineers are not costing these companies millions each, yet its claimed that the current cost of bringing a drug to market is almost $3 billion.
Well, they do employ quite a few people. However, a big chunk of their cost is navigating the approval process. This means conducting large scale clinical trials. These get extremely expensive, and take a long time.
The overall transition probability from Phase I to approval is 9.6% [1]. So that means to get one new drug approved, you have to get 10 to Phase I. Just getting a molecule to the point of Phase I trials is quite difficult, too. I don't know how to quantify that process, but I imagine it's akin to locating a needle in a haystack.
> A second question regarding their net value is how they keep costs high and maximize their take by gaming the patent system in a number of ways to avoid losing sales to generics. AstraZeneca, in 2002 altered the molecule of an existing drug (prilosec) just enough to qualify for a new drug patent (Nexium). Another more recent example was how Allergan transferred their patent rights in Restasis to a New York indian tribe (St. Regis Mohawk) and licensed it back from them , all purely as a ploy. The tribe enjoys sovereign immunity and this will protect it in disputes against generic makers. These are just two simple examples of this type of abuse.
Here's where you're approaching a more real issue, IMO. There's a very odd sort of anti-competitive thicket that's formed between regulators, pharmaceutical companies, and most importantly, doctors. The example of Nexium you cite, for instance. You're totally right that that pharmaceutical company did that. And in my view, there should be nothing wrong with them doing that. The question we ought to be asking is: why did anyone buy it? You have two drugs, prilosec and nexium that are nearly identical. Since Nexium is on-patent, it's going to be multiples more expensive, for efficacy improvements that are marginal at best. In a competitive market, this should not happen. The pharmaceutical company shouldn't even bother to get Nexium approved, because they should know that nobody would pay 10x the price for a drug that's only a little bit better.
But for some reason this does happen. Again and again. The reasons why, as best I can triangulate, are:
1. Heavy advertising to doctors, who are not paying for the drugs themselves, and therefore are not incentivized to compare on cost.
2. Side-effect smoothening, and extreme risk aversion on the part of the FDA, insurance companies, and doctors. I don't know much about Nexium, but if I had to guess, they probably purified a stereoisomer or made some other trivial tweak to the molecule that slightly improved its side-effect profile. What this means is that for a doctor to recommend Prilosec, they are essentially saying "Hey, patient, why don't you take on a bit more risk on this prior generation medicine so that you can save some money". The doctor doesn't save any money on that pill, but he does assume some malpractice liability for the side effects of his recommendations. Hence, he's strongly incentivized to choose the drugs that are the "safest" without considering whether going from .1% risk of headaches to .01% risk of headaches is worth $1,000/month to the patient.
And in fact, this is sort of the essence of the problem with pharma, right here. Because of this incentive thicket that we're stuck in, pharmaceutical companies are very strongly incentivized to innovate at the margins of what they already have, rather than develop bold new therapies. If going from Prilosec to Nexium gets you the same return as curing cancer, why bother with a cancer cure?
One is where are these immense sums going that they claim to spend on developing the drugs? I can understand that many prototypical drugs don't make it to market, most likely being found to be either unsafe or ineffective by FDA trials and other strictures that are the envy of and model of the rest of the world in terms of providing value to public health. I simply do not trust the accounting that makes up these amounts claimed spent on developing many of these medicines.
Scientists and engineers are not costing these companies millions each, yet its claimed that the current cost of bringing a drug to market is almost $3 billion. There simply must be synergies in drug development that are going unreported. Are development costs going to building research centers that will be used for later drugs? Further, what is being done to reduce the costs of developing these life-saving drugs (without allowing drug risk to rise) and is this even discussed or attempted by Big Pharma?
A second question regarding their net value is how they keep costs high and maximize their take by gaming the patent system in a number of ways to avoid losing sales to generics. AstraZeneca, in 2002 altered the molecule of an existing drug (prilosec) just enough to qualify for a new drug patent (Nexium). Another more recent example was how Allergan transferred their patent rights in Restasis to a New York indian tribe (St. Regis Mohawk) and licensed it back from them , all purely as a ploy. The tribe enjoys sovereign immunity and this will protect it in disputes against generic makers. These are just two simple examples of this type of abuse.
So, I'm less than sympathetic to Big Pharma's plight when the public's growing desperation for affordable medical care leads them to infringe on these patents.