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Separate Pharma R&D from Manufacturing

Under anti-trust
  (+11, -1)(+11, -1)
(+11, -1)
  [vote for,

Let me start by saying that no one who has seen more than one [tc] idea or annotation is likely to be confused about where I stand on business versus regulation.

But pharma pricing is a truly intractable problem that challenges typical market solutions for the following (well known) reasons:

1. It takes tons of money to develop a drug, for both development and regulatory reasons.

2. It takes tons of money to market a drug, because apparently men need to be convinced that they want erections

3. It takes tons of money for the US consumer to subsidize the rest of the planet.

4. When I'm sick and I can extend my life, I'm willing to pay what they ask.

No doubt there are many others.

Now, there is no good way to solve this (or anything) through price regulation. At best, you will slow down the pace of innovation. At worst, you'll cause prices to go up -- which is what keeps happening. Don't tell me about countries that do it -- it's all doable ONLY because the US is paying for all of it by paying more.

An intractable problem. And yet, we need food even more than we need medicine. The cost doesn't go through the roof, because there's competition.

The argument goes that you cannot have price competition in pharma because of patent protection. So unless multiple companies come up with competing drugs at the same time, there's no downward pressure at all until the generics come on much later.

So what is really happening is that every drug, particularly a life saving drug, is a natural vertical monopoly, at least until the patent expires.

The answer then is actually relatively simple -- you can't own both the oil well and the gas station, exactly along the lines of the original anti-trust reform.

In this scenario, R&D companies can focus on solving the problem. They would then license to multiple manufacturers under patent. These manufacturers do not need to be price regulated beyond the usual "price-fixing" regulations. Let them compete on a commodity basis.

[tc], isn't this price regulation under a different scheme? Sure, all anti-trust regulation is meant to limit the leverage the monopoly has over the consumer. But this uses a proven market driven approach that still lets price discovery occur, as opposed to a regulator that tries to figure out what a drug should cost this year or next year.

I should end by saying that long term, the business plan of manufacturing arms of these companies are challenged in any case -- a material analyzer & 3D printer that can reformulate a pill is something we're likely to see within 10 to 20 years.

theircompetitor, Feb 04 2016

Big Pharma R&D vs Marketing https://www.washing...ting-than-research/
[bs0u0155, Feb 04 2016]


       I wonder what Martin Shkreli would (decline to) say...
normzone, Feb 04 2016

       Assuming the Martin Shkreli case got you thinking about this as it did with me.   

       My libertarian side is somewhat at odds with the side that wants to lock that Sckreli brat in stocks in the town square and raid his castle with pitchforks and torches. Intellectual property needs to be protected but I'd propose using laws against profiteering during a natural disaster. People ending up dying because of a massive jacking up of a price of a drug can't be allowed to happen. Neither can the finances of the public agencies that are called on to pay for these drugs be raided by scumbags like this.   

       I think this is one of those ugly situations where a little bit of common sense needs to reign rather than dogmatic ideology. I'm a libertarian but this Sckreli brat needs to be tarred and feathered.   

       Not sure about the solution but bun for looking into possibilities.
doctorremulac3, Feb 04 2016

       It takes years and millions of dollars to R&D a drug. Why would company A do that if company B can just copy the drug the moment it hits market? There are a lot of fair reasons against patents, but drugs are not one of them.   

       [tc], I like this idea and I wonder how much it's already being done through universities.
the porpoise, Feb 04 2016

       [the porpoise] -- and biotech as well. In truth, much of R&D is already done by venture backed companies whose only plan to monetize is to sell to a big pharma company.   

       But the whole system is skewed by the the end-pricing.   

       [Ian] -- yes, generally speaking all that stuff is going to change drastically within a generation. But a fair amount of time to improve things before that.
theircompetitor, Feb 04 2016

       [Ian] if* robots become creative enough to invent, they deserve personhood, be it limited, special, or even full.   

the porpoise, Feb 04 2016

       My question about this idea is how do you keep the licensing fees charged by the patent holder in check?   

       A lot of people point to this whole Shkreli thing as a failure of Capitalism and say this is why we need more regulation. They fail to see that this is CAUSED by people taking advantage of the poorly thought out regulations already in place. Daraprim was already out of patent, but it was the only FDA-approved version. Because of the expense of getting FDA approval and the small demand, no one created a generic. It just wasn't cost effective. So Daraprim was selling for $13 a pill. Now we find out that Imprimis (a compounding pharmacy) can profitably produce and sell these pills for $1 each once they found the loophole that allowed them to get around the FDA regulation. In some ways we're lucky that Shkreli jacked the prices through the roof because it revealed that they had already been overcharging for years.   

       I would say that patented drugs are NOT the problem. There are non-patented treatments for most illnesses. When someone creates a better treatment they deserve to charge whatever anyone is willing to pay for the improved outcome. If it is lifesaving compared to other treatments then they deserve to get rich for a few years.   

       Now there may be some benefit in reforming the patent system. It might make sense to decrease the length of time that a patent is valid, since industry moves a lot faster now than it did when the patent laws were written.   

       But to combat issues like Daraprim (and I mean fix it so they can't charge $13 for a $1 pill, let alone hundreds of dollars), we need to revamp (gut) the FDA regulations. When Daraprim was under patent, it should have gone through the FDA approval process. Once out of patent, that FDA approval should automatically get applied to anyone who can produce the drug with a similar process, significantly reducing the barrier to entry. The intention of the patent system is to reward inventors by giving them a monopoly for a fixed time in exchange for them giving up all the information needed for anyone to produce the invention once the patent has expired. Therefore if someone claims that new producers need to go through FDA certification again because they might not be able to produce the drug correctly, that is a failure to include enough information in the patent, so maybe that needs to be fixed as well. Maybe in addition to the patent, the FDA should catalog the exact recipe and make that available once the patent expires. In that case, they could not have sold Daraprim for $13 per pill without some other company stepping in and undercutting the prices. With a limited demand for that product they might have still been able to "overcharge" at $5 a pill or something without any competition stepping in, but that would probably be a better deal for society than the cost of running the bureaucracy needed to regulate the price.
scad mientist, Feb 04 2016

       But we have the ability to think laterally and recognize fortunate accidents. Post-it notes, vulcanization, plastic, etc.   

       I rather like this. The NASA of drug invention.
RayfordSteele, Feb 04 2016

       //The process of invention isn’t anything magical or divine.   

       I wasn't arguing that inventing is divine. Rather, personhood should apply to any entity capable of creative thought (or something). It is entirely possible that machines will eventually become more intelligent and creative than humans.   

       Robot inventors are not an argument for "information should be free". At least I don't see how that follows. Rather, they're an argument for robot personhood, and therefore patent (and other property) ownership by robots.   

       It's often forgotten that patents primarily result in the public disclosure of technology. The side-effect, which happens about half the time, is the grant of a time-limited monopoly. Most granted patents are never commercially exploited, so the public reaps the larger benefit (knowledge++ vs. a small proportion of commercial limited monopoly). Modern patents were designed to break guild secrecy (a form of indefinite monopoly) which was rightfully thought to be an impediment to the progress of science and tech. Do you see many guilds around?   

       Imagine a robot guild where robots invent in secret and choose not to teach us stupid humans their inventions.
the porpoise, Feb 04 2016

       //R&D companies can focus on solving the problem. They would then license to multiple manufacturers under patent.//   

       Licensing deals tend to be exclusive - I'm not sure many manufacturers would go for a non-exclusive licence. And in any case, the R&D companies will just set the licence fee high.   

       I think you're mistaken in assuming that current Pharma is basically half R&D and half manufacturing/selling. Big pharma is 98% R&D - manufacturing [most] drugs is very cheap, and marketing isn't such a huge part of the budget either. Big pharma doesn't really care who manufactures their product, nor who advertises it, as long as they get their money back and then some. Going through a manufacturer/distributor is not going to change the landscape.   

       People want cheaper drugs. They also want better drugs, and they also want new drugs, and they want them faster. The only way to get all of those things is to make it much, much cheaper and easier to get new drugs approved.   

       The current regulatory process costs needless billions, and kills truly vast numbers of people through delay, in order to avoid the culpability of small numbers of deaths through speedier clinical trials.   

       //decrease the length of time that a patent is valid, since industry moves a lot faster now than it did when the patent laws were written.// Actually, the opposite is true. It takes longer now than ever to bring a drug to market, leaving less and less time to earn money from it. Again, much faster clinical trials would alleviate the problem, but nobody is prepared to balance the lives saved by cheaper, faster, better drugs against the risk of lives lost through faster trials.
MaxwellBuchanan, Feb 04 2016

       //Big pharma is 98% R&D//   

       Nope, hasn't been that way for a long time, if ever. It make pretty depressing reading, <link> but it turns out that putting a shiny box around a packet of old school painkiller and some flavouring is way safer bet than trying to solve real problems.
bs0u0155, Feb 04 2016

       // Actually, the opposite is true. It takes longer now than ever to bring a drug to market, leaving less and less time to earn money from it. //   

       You're right. I guess what I meant to say was that if the approval process wasn't so insane, it could be faster to bring things to market. Another option might be to somehow integrate the patent and regulatory approval process so that the patent expiration starts when it is approved, but then doesn't last as long. Well maybe that's not exactly right either since that could lead to abuse when a company fails to work hard enough at getting the medicine approved.
scad mientist, Feb 04 2016

       //putting a shiny box around a packet of old school painkiller //   

       Yes, but that is exactly the kind of thing we're not discussing here - i.e. manufacture and selling of off- patent drugs like aspirin. I was talking about patented drugs.
MaxwellBuchanan, Feb 04 2016

       The link says: "drug companies spent more than $3 billion a year marketing to consumers in the U.S. in 2012, but an estimated $24 billion marketing directly to health care professionals". I wonder what percentage of the money spent marketing to health care professionals is in the form of free samples? If it's high (like 80% or more), then I'd say the issue is not nearly as bad as the article makes it sound. Even if that's true, it does seem like we should try to find better ways to communicate advances in medicine more efficiently.
scad mientist, Feb 04 2016

       Quite so, but how would separating R&D from manufacture help?
MaxwellBuchanan, Feb 04 2016

       /They would then license to multiple manufacturers under patent/   

       I am drug R&D house. I strike out often. When I get a winner I need it to pay. I license my winner to multiple manufacturers. I require them to pay me my price per unit manufactured. My price is high.   

       Exactly this is done now except instead of multiple manufacturers there are multiple pharmacies: they pay the drug company what is required and then mark the drugs up as much more as they think the market will bear. Getting the companies out of the manufacturing business does not solve the problem.
bungston, Feb 04 2016

       // Quite so, but how would separating R&D from manufacture help? //   

       Was that addressed to me?   

       I don't think it would, and I wasn't intentionally arguing in favor of this idea. I was intending most of my statements to be pointing out areas of the system that DO need to be reformed, and I think I am in agreement with most of your points [Max].
scad mientist, Feb 04 2016

       Seeing it in perspective, all this sounds as if the drugs for healing ourselves come from an evil alien civilization that wants to ruin us.
piluso, Feb 04 2016

       //Was that addressed to me? // No, it was more addressed to [their]. Perhaps I should have said "and" rather than "but".   

       At the end of the day, bringing new drugs to market is phenomenally (and unnecessarily) expensive, and has to be paid for somehow.
MaxwellBuchanan, Feb 04 2016

       // vulcanization //   

       "Spock me and buy one" ... ?
8th of 7, Feb 04 2016

       Isn't [tc] a recreational drug?
blissmiss, Feb 05 2016

       //all this sounds as if the drugs for healing ourselves come from an evil alien civilization that wants to ruin us.//   

       Might as well be.
Any corporate entity is completely alien to humanity and should be treated as such... and yet they flourish, and dominate.
When observed from an outside perspective they lack any conscience deemed unnecessary by their spin-doctors.

       Up to, and including, creating their own markets would be my bet.   

       // Isn't [tc] a recreational drug? — blissmiss// more of a lifetime addiction :)   

       [bungston], I take your points, but I do think that the vertical monopoly analogy has merit, and breaking it up would shift the dynamic.   

       [mb] -- as mentioned at the top of the idea, I'm very, very reluctant to seek a govt. remedy to this kind of problem, But even if costs stayed the same but shifted around such that they were more transparent, we would be better off.   

       [2 fries]. It would be interesting in the age of AI, when corporations can actually get real personas. Hard to see what's so alien about them now -- they are simply a convenient target, particularly for those on the left.
theircompetitor, Feb 05 2016

       Well [tc] I guess what I'm saying is that a corporate entity has no soul unless the men and women who started it are still alive. Once a company becomes entirely beholden to shareholders then the almighty Bottom-Line becomes its God at the expense of everything else. In other words companies themselves become con-men. Incorporeal, unaccountable, self-serving con-men...   

       Ethics go out the window in favor of profits, and when it comes to pharmaceutical companies this means protecting their patents and research even at the cost of withholding any and all information from the medical community which might compete with their little monopolies.   

       The con, (again from an outside perspective), would seem to be suckering tax payers into funding their own poisoning so as to dispose of waste while boosting pharmaceutical industry profits treating the increased rates of chronic illnesses they cause.   

       Pretty slick really. Just a modern adaptation of the oldest con in the book.
The Snake-oil Slaesman.
Make someone sick... and they'll pay you anything for the cure.

       /withholding any and all information from the medical community/   

       There is a lot of bruiting about this, but for any drug that goes to the FDA for application all of the associated info goes with. The FDA could make this available in all or in part, stripped of identifiers or what have you. A lot is available but not in easily digested databases like the SEER.
bungston, Feb 05 2016

       Maybe the robots can get to work on the approval process. I'm sure there's some bits of it that should be rather standard operating procedure.
RayfordSteele, Feb 05 2016


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