To ratchet Rayiner's argument forward to its next step: if the difference between Google and Pfizer is that Pfizer's work is more important, why would it make sense to de-incentivize it by capping its profits? Shouldn't we want drug development to be an attractive industry for entrants?
I wonder how important the R&D part actually is. The most benefit for society seems in a steady supply of many pharmaceuticals we already have.
Of course R&D into research for cancer, Alzheimer's, new antibiotics etc would be critically important - but one would need to know if pharma companies actually prioritize that at all.
Well, how is this unlike deregulating any other market that has an acute impact on people's lives? Why, for instance, are unregulated ICOs bad, but unregulated pharmaceutical profits not?
Keeping the pharmaceutical R&D market healthy does not necessarily depend on continued predatory pharmaceutical pricing. Let's take a closer look at one example, adalimumab (Humira). Adalimumab was developed initially by a research partnership between Cambridge Antibody Technology Group -- which was publicly funded -- and BASF Pharma, which at the time was a biotech section of a massive German chemical corporation. BASF commissioned Cambridge Antibody Technology to create a tumor necrosis factor-neutralizing agent using some new phage technology [1]. They succeeded, the long and expensive trial process was started, and eventually that section of BASF got picked up by Abbott Laboratories [2], which eventually became AbbVie, which now owns and markets Humira.
This brings us to the present day: Abbott paid $6.9 billion for Humira and all of BASF Pharma's other assets. Using the typical market value logic that's popular on HN, let's assume that this is approximately all of the costs associated with developing Humira and getting it to market.
AbbVie made approximately $16 billion off of Humira in 2016 alone. [3] AbbVie's pricing for Humira is massively asymmetrical depending on which country it's being sold in, and as the linked article suggests, appears to be "priced in the United States primarily on the basis of what the market will bear."
The most common defense of predatory pharmaceutical pricing in the United States by far is that we can't regulate these prices because it will hurt pharmaceutical development. So, my question to you, or rayiner, or anybody else exploring that position, is: at which point in that process did predatory United States pharmaceutical pricing help develop Humira?
Was it in the public funding of a UK research group? Or was it in the funds of a massive German chemical company? Or is it that doctors in the US wouldn't know to prescribe the drug without the massive marketing campaign AbbVie has waged, especially in the US, to urge patients to "ask your doctor about Humira"? Or, perhaps, is it in the development of patent "thickets" that AbbVie uses to protect its biggest revenue stream, or in the corrupt kickbacks it was paying out to drive sales? [4]
This is the part where this argument loses me. Whenever I look at the details, I don't see any evidence that pricing in the US has anywhere near a 1:1 correlation with drug development. The NY Times article for instance links to a Journal of the American Medical Association study which found:
"Per capita prescription drug spending in the United States exceeds that in all other countries, largely driven by brand-name drug prices that have been increasing in recent years at rates far beyond the consumer price index. ... Although prices are often justified by the high cost of drug development, there is no evidence of an association between research and development costs and prices; rather, prescription drugs are priced in the United States primarily on the basis of what the market will bear."
To answer your question directly: in this case study, I see no evidence that a reasonable amount of regulation on pharmaceutical pricing in the United States would have had any discouraging effect whatsoever on the development of this drug; it would however have made a huge difference to the health and well-being of many, many people.
> To answer your question directly: in this case study, I see no evidence that a reasonable amount of regulation on pharmaceutical pricing in the United States would have had any discouraging effect whatsoever on the development of this drug
With the benefit of hindsight? I suspect you are correct. But pharma portfolios operate on the lognormal success model of VCs. Without the blockbusters, you can’t fund “development” of the failures that could lead to another blockbuster. (Of course, much if large pharma R&D is by way of strategic partnership and acquisition.)
As to your pricing of the Humira acquisition: I personally would have included some consideration to the existing market exclusivity of the drug. The transaction price is unlikely to be just the “replacement cost”.
> But pharma portfolios operate on the lognormal success model of VCs. Without the blockbusters, you can’t fund “development” of the failures that could lead to another blockbuster.
That was the point of my whole Humira example though: high pharmaceutical prices did not fund its development.
This assertion that drugs have to be expensive or they can't be developed keeps getting repeated, but there's little evidence to support it and even less evidence that they need to be this expensive. This argument is further troubled by little details like drugs being 600% more expensive in the US than in other countries, indicative of more of a "how much money can we extract from vulnerable people" strategy than a "how much will it cost to develop the next great drug" strategy.
To put this into perhaps more familiar terms, AbbVie's behavior is far closer to Intellectual Ventures than to Y Combinator, and yet people here keep defending it.
Fine. Where did BASF get their money from? How much, in your esteemed opinion, should it cost to develop a therapeutic Ab from a drugable target? How should my industry pay for pipeline failures?
The rationale for regulating ICOs has nothing to do with capping profits or maximizing distribution of benefits from lawful enterprise; it's to stop bogus pump-and-dump investment scams. And pharma is intensively regulated, far more so than the finance industry is.
Bogus pump-and-dump scams suck because they hurt people. Pharma is regulated in some respects, but their profit margins aren't. This also hurts people.
