Why we need price controls and anti-trust investigations of pharmaceutical industry.

[realibrad]

You always see the same people calling for price controls. If you look throughout history, you see price controls being involved in sectors and those sectors still being a problem. When you allow markets and regulate them to try and keep out abuse, you get better prices.

But, price controls feel so good.

 

[Sonikku]

What frustrates me is that ours is a free market only in the ways that it benefits the elite, while being government controlled in all the ways it sucks for the rest of us. Make it free market across the board or regulate across the board, but pick one.

 

[HumblePie]

The whole problem stems from the patent system.

We allow big pharma a complete monopoly on developed drugs for 50 years. Which was bad enough before, but with Disney screwing up that 50 year mark, right now patents don't have expirations for them. In places other than America which don't have patent laws, when one company innovates, everyone else re-engineers and copies. The problem is the company that did the innovation spent money developing the product in far excess usually than the other companies that just copied their work. So they have a need to recuperate their initial investment. That was why we have the patent system. Which is good in principle, but very BAD in execution.

I believe new laws and changes to the patent system are required at this point, as the current system is just fubar. Here is what I think should have been done, and my sentiments in this aren't my own.

First, any company submitted for a new patent in the health and medical field must show initial development costs and regular overhead costs for the development of the product. That that sum of developments, whatever it is and has to be audited at the companies' initial expense for which can be recuperated, and then use that as a baseline for how long a patent will last when factoring sales costs and profit margin. Also a cap on profit margin would have to be set for this to work for these product types only.

Here is a simplistic example. It takes a company 10 million dollars to develop a new medical product. That cost includes R&D, expenditures, overhead of maintaining facilities, and labor costs. That company ventures that operating costs to bring the product to market, logistics, and other overhead is going to be a 2 million dollar a year cost. The profit margin cap is set to 8% (which is generous IMHO). So whatever price the company sets their product at will factor in to how long the exclusivity of the patent lasts. Reports have to be made back yearly of revenues and losses for the product as well no different than a shareholders yearly report to the patent office. This way if adjustments are required they can be made.

I still say a hard limit of 50 years as the upper limit for a patent is fine, but if a company wants to charge 100,000 a pill and sells a million pills per year. The patent protection won't last them very long. It basically is meant to give a company some market protection and slight initial market edge once the patent goes away.

Currently, the system is setup for propping up monopolies that are allowed to freely fleece America because there is no fair and free market principles being applied. Which is fine when all companies are being fair and ethical themselves, but when the companies are existing now for pure greed the current system is shown to be horrible.

 

[Brainonska511]

The whole problem stems from the patent system.

We allow big pharma a complete monopoly on developed drugs for 50 years. Which was bad enough before, but with Disney screwing up that 50 year mark, right now patents don't have expirations for them. In places other than America which don't have patent laws, when one company innovates, everyone else re-engineers and copies. The problem is the company that did the innovation spent money developing the product in far excess usually than the other companies that just copied their work. So they have a need to recuperate their initial investment. That was why we have the patent system. Which is good in principle, but very BAD in execution.

I believe new laws and changes to the patent system are required at this point, as the current system is just fubar. Here is what I think should have been done, and my sentiments in this aren't my own.

First, any company submitted for a new patent in the health and medical field must show initial development costs and regular overhead costs for the development of the product. That that sum of developments, whatever it is and has to be audited at the companies' initial expense for which can be recuperated, and then use that as a baseline for how long a patent will last when factoring sales costs and profit margin. Also a cap on profit margin would have to be set for this to work for these product types only.

Here is a simplistic example. It takes a company 10 million dollars to develop a new medical product. That cost includes R&D, expenditures, overhead of maintaining facilities, and labor costs. That company ventures that operating costs to bring the product to market, logistics, and other overhead is going to be a 2 million dollar a year cost. The profit margin cap is set to 8% (which is generous IMHO). So whatever price the company sets their product at will factor in to how long the exclusivity of the patent lasts. Reports have to be made back yearly of revenues and losses for the product as well no different than a shareholders yearly report to the patent office. This way if adjustments are required they can be made.

I still say a hard limit of 50 years as the upper limit for a patent is fine, but if a company wants to charge 100,000 a pill and sells a million pills per year. The patent protection won't last them very long. It basically is meant to give a company some market protection and slight initial market edge once the patent goes away.

Currently, the system is setup for propping up monopolies that are allowed to freely fleece America because there is no fair and free market principles being applied. Which is fine when all companies are being fair and ethical themselves, but when the companies are existing now for pure greed the current system is shown to be horrible.

Patents do not last 50 years

 

[senseamp]

You always see the same people calling for price controls. If you look throughout history, you see price controls being involved in sectors and those sectors still being a problem. When you allow markets and regulate them to try and keep out abuse, you get better prices.

But, price controls feel so good.

These are government granted monopolies, through patents and FDA approvals. If they want to compete in a truly free market without those monopolies, that's fine. But if they want government protection, then the government is well within its rights to limit any abuses of this government granted market power.

 

[realibrad]

These are government granted monopolies, through patents and FDA approvals. If they want to compete in a truly free market without those monopolies, that's fine. But if they want government protection, then the government is well within its rights to limit any abuses of this government granted market power.

So, do you think price controls are going to be more effective than allowing competition?

 

[glenn1]

The whole problem stems from the patent system.

We allow big pharma a complete monopoly on developed drugs for 50 years. Which was bad enough before, but with Disney screwing up that 50 year mark, right now patents don't have expirations for them. In places other than America which don't have patent laws, when one company innovates, everyone else re-engineers and copies. The problem is the company that did the innovation spent money developing the product in far excess usually than the other companies that just copied their work. So they have a need to recuperate their initial investment. That was why we have the patent system. Which is good in principle, but very BAD in execution.

I believe new laws and changes to the patent system are required at this point, as the current system is just fubar. Here is what I think should have been done, and my sentiments in this aren't my own.

First, any company submitted for a new patent in the health and medical field must show initial development costs and regular overhead costs for the development of the product. That that sum of developments, whatever it is and has to be audited at the companies' initial expense for which can be recuperated, and then use that as a baseline for how long a patent will last when factoring sales costs and profit margin. Also a cap on profit margin would have to be set for this to work for these product types only.

Here is a simplistic example. It takes a company 10 million dollars to develop a new medical product. That cost includes R&D, expenditures, overhead of maintaining facilities, and labor costs. That company ventures that operating costs to bring the product to market, logistics, and other overhead is going to be a 2 million dollar a year cost. The profit margin cap is set to 8% (which is generous IMHO). So whatever price the company sets their product at will factor in to how long the exclusivity of the patent lasts. Reports have to be made back yearly of revenues and losses for the product as well no different than a shareholders yearly report to the patent office. This way if adjustments are required they can be made.

I still say a hard limit of 50 years as the upper limit for a patent is fine, but if a company wants to charge 100,000 a pill and sells a million pills per year. The patent protection won't last them very long. It basically is meant to give a company some market protection and slight initial market edge once the patent goes away.

Currently, the system is setup for propping up monopolies that are allowed to freely fleece America because there is no fair and free market principles being applied. Which is fine when all companies are being fair and ethical themselves, but when the companies are existing now for pure greed the current system is shown to be horrible.

Why such a ridiculous and cumbersome system? If the idea of providing a sales monopoly to drug innovators is so abhorrent to you then have the federal government buy the IP rights to the drug directly from the company. They can then do with it what they like, including license it for free to a manufacturer who will basically serve as a regulated utility for distribution (prices set at production costs + allowable profit margin).

So long as the innovator gets to monetize their IP, then I doubt they care what form that takes. Either way there ain't no free lunch; you can make the pills cost $1/bottle but someone is still paying for that R&D no matter what part of the product lifecycle you allocate that cost.

 

[senseamp]

Researching new drugs ain't free. You pretty much have 3 options: (A) recoup the costs in the price of the drug once developed, (B) have research directly subsidized by tax dollars, thus shifting the costs from point of sale to the tax withholding from your paycheck, or (C) go without new drugs and enjoy treating your exotic diseases with aspirin or Chinese folk remedies - powdered rhino horn anyone?

Building power plants isn't free either, yet somehow regulated utilities recoup their investments. Drugs should be an industry tightly regulated by the government, even more so than the public utilities. Prices should be set so that drug makers can recoup their investments (including R&D on drugs that don't work out, but not including marketing) and make a decent profit, but not gouge the consumers. This has a direct impact on people's health.

 

[BoberFett]

why do you hate capitalism?

It takes a "liberal" to blame capitalism for the problems caused by a government granted monopoly.

I suppose you think price increases for regulated utilities are a problem with capitalism too?

 

[BoberFett]

Simple deal, if you want patent protection and/or exclusivity for a drug granted by the government, you agree to price regulation by same government, like a public utility. If not, then enjoy the free markets, like those in India where the Hepatitis C drug selling for $1000 per pill here is already being sold for $4 and dropping rapidly because of 11 manufacturers competing with no patent protections.

That sounds reasonable. If you get government protection from competition, you need to live by government rules.

I see absolutely nothing wrong with that, though I'd prefer that no company get government protection. Eventually that relationship turns into something like we have with the military industrial complex.

 

[BoberFett]

What frustrates me is that ours is a free market only in the ways that it benefits the elite, while being government controlled in all the ways it sucks for the rest of us. Make it free market across the board or regulate across the board, but pick one.

Truth. We Americans seem to have figured out how to have the worst of both worlds.

 

[realibrad]

That sounds reasonable. If you get government protection from competition, you need to live by government rules.

I see absolutely nothing wrong with that, though I'd prefer that no company get government protection. Eventually that relationship turns into something like we have with the military industrial complex.

The only time I can see it, is when the company is multi-national. We may follow the rules of patents, but others wont. So a company has less incentive in research if you dont protect them a little. Its more complex than that, but I think you understand what I mean.

 

[glenn1]

Building power plants isn't free either, yet somehow regulated utilities recoup their investments. Drugs should be an industry tightly regulated by the government, even more so than the public utilities. Prices should be set so that drug makers can recoup their investments (including R&D on drugs that don't work out, but not including marketing) and make a decent profit, but not gouge the consumers. This has a direct impact on people's health.

Building power plants involves established and well-known technology, there are essentially zero R&D costs besides incremental improvements. As compared to tens of thousands of diseases which all require different development approaches and have no similarity. When it comes to power generation I can probably count the primary fuel sources for them on a couple hands (coal, oil, natural gas, hydro, nuclear, etc) and an innovation for one will probably apply to the others, whereas an innovation in cancer drugs probably makes no difference to the development of new drugs for diabetes.

Also with power plants, no matter what the fuel source there is only some minor degree of variability between the architecture, engineering, and construction of one power plant to another. I can probably tell you in advance how much it would cost to build a power plant within a +/- range of 5%, whereas with drugs I probably couldn't even begin to estimate beforehand. Also with drugs you not only have the near infinite variety of diseases, but also human biology factors come into play - you don't change the build of a power plant based on the particulars of each client. For drugs unlike electricity it matters if you're male or female, black or Asian, a senior citizen or a newborn.

 

[HumblePie]

Patents do not last 50 years

Eh, got the patent length time frames mixed up in my head. Medical patents last 20 years after I looked it up.

 

[HumblePie]

That sounds reasonable. If you get government protection from competition, you need to live by government rules.

I see absolutely nothing wrong with that, though I'd prefer that no company get government protection. Eventually that relationship turns into something like we have with the military industrial complex.

Without protection by the government for being able to make a profit for some time after creating a new product, no one would make new products. This is why the patent system was created in the first place. It is WHY America is one of the greatest invention countries the world as ever seen. But while the system that was developed centuries ago, it now longer works as intended in the current market like it used to.

As stated, if companies want government protected monopolies, then they need to abide by government rules of market prices for their products. If they don't want to agree to government market prices, then they can just go at it as they will in a market that is free to copy and resell their work if it can.

 

[senseamp]

So, do you think price controls are going to be more effective than allowing competition?

If these companies want government granted monopolies (patents and exclusive FDA approvals) they should have to agree to price controls. If they want to compete in the free market, without the benefit of a government monopoly, like the 11 companies in India making the Hep C drug are competing, that's fine. But then that drug will cost $4 (and falling) a pill instead of $1000. They can agree to cap the price at half what they are charging now, and still come out way ahead of "free market" price.

 

[uclaLabrat]

How much does it cost to get manufacturing up and running? Somehow Indian companies can get by selling the drug for fractions of fractions.

Depends on the drug. Is it small molecule or biologic? Something like daraprim I imagine you could get some chemists to make kilos of it for as little as $20M, maybe less in some place like India or China, where land, equipment and trained chemists are relatively cheap. Something like a biologic? Again, depends on complexity, but the average cost for a large-volume production facility that someone like Amgen or Genentech would build is right around $2B. Genentech's Vacaville site cost around that much or thereabouts, and then they shuttered it for about 5 years right before it was supposed to go operational. It sat on their books for a while and they are just now spooling up that manufacturing capacity.

Moreover, many facilities are product-specific, and aren't generally re-purposed for new drugs (unless you have drugs utilizing the same production platform, i.e. cell line, fermentation process, etc) Many companies are going into more of a flex-manufacturing capability, but it's still an on-going process.

 

[glenn1]

If these companies want government granted monopolies (patents and exclusive FDA approvals) they should have to agree to price controls. If they want to compete in the free market, without the benefit of a government monopoly, like the 11 companies in India making the Hep C drug are competing, that's fine. But then that drug will cost $4 (and falling) a pill instead of $1000. They can agree to cap the price at half what they are charging now, and still come out way ahead of "free market" price.

Why limit it to drug makers? Place price controls on all intellectual property since it's no fair that you selectively exclude some from patent protections (like pharma) yet include those that protect you or your company's own market value. Let's move to an "information is free" world where ideators work for free while the rest of us enjoy their work products for a lower price. Why should that pharmacologist get to have nice things like food when I could use the extra $5 my prescription cost to buy another beer?

 

[soulcougher73]

India straight up ignores pharmaceutical patent laws.

Really the best way to go. I would also

 

[uclaLabrat]

Building power plants isn't free either, yet somehow regulated utilities recoup their investments. Drugs should be an industry tightly regulated by the government, even more so than the public utilities. Prices should be set so that drug makers can recoup their investments (including R&D on drugs that don't work out, but not including marketing) and make a decent profit, but not gouge the consumers. This has a direct impact on people's health.

You guys are getting seriously bent out of shape over one example of abuse. The biotech industry as a whole isn't even profitable if you exclude two companies: Amgen and Genentech. Granted, those are two of the largest, but plenty of firms are around for 10-12 years (or even longer) before they ever even turn a profit, if they do at all.

Pretty much everyone in this thread that doesn't work in the industry doesn't have anything resembling a clue regarding how complex the industry is, how hard it is to develop a drug, how stringent the FDA requirements are for safety and efficacy, or even a rough order of magnitude of the costs involved.

 

[uclaLabrat]

Eh, got the patent length time frames mixed up in my head. Medical patents last 20 years after I looked it up.

In addition, the clock starts as soon as you figure out the drug has activity, because you patent that molecule (or process) in pre-clinical, which is before you've filed your IND and gone into humans. The clinical trials in humans take anywhere from 5-12 years, plus a year for registration, so even though you're patented for 20 years, you're not selling ANYTHING for more than 7-10 years. So you have 7-10 years (or less) to make back all the money you were spending to get the drug approved.

That patent system definitely needs to be tweaked, but people arguing for no patents whatsoever are demonstrably wrong. There are myriad reasons why the industry acts the way it does, some of them nefarious, but most of them not. I don't have the time to get into it now, but I will later if necessary.

 

[glenn1]

You guys are getting seriously bent out of shape over one example of abuse. The biotech industry as a whole isn't even profitable if you exclude two companies: Amgen and Genentech. Granted, those are two of the largest, but plenty of firms are around for 10-12 years (or even longer) before they ever even turn a profit, if they do at all.

Pretty much everyone in this thread that doesn't work in the industry doesn't have anything resembling a clue regarding how complex the industry is, how hard it is to develop a drug, how stringent the FDA requirements are for safety and efficacy, or even a rough order of magnitude of the costs involved.

They assume because they're smart in other subjects, that drug development must be easy. "Why should I pay a doctor $200 to see me for 5 minutes when I can diagnose myself using WebMD? If I can find it on Google it can't be that tough."

It's sorta like the movies where average Joe citizen can assume the office of President and do better than the politicians who have been doing it for decades. "How hard can it be to write legislation or balance a budget? It's just like my checkbook, only more zeros."

 

[senseamp]

You guys are getting seriously bent out of shape over one example of abuse. The biotech industry as a whole isn't even profitable if you exclude two companies: Amgen and Genentech. Granted, those are two of the largest, but plenty of firms are around for 10-12 years (or even longer) before they ever even turn a profit, if they do at all.

Pretty much everyone in this thread that doesn't work in the industry doesn't have anything resembling a clue regarding how complex the industry is, how hard it is to develop a drug, how stringent the FDA requirements are for safety and efficacy, or even a rough order of magnitude of the costs involved.

Only Amgen and Genentech are profitable? Are you smoking crack?

 

[senseamp]

They assume because they're smart in other subjects, that drug development must be easy. "Why should I pay a doctor $200 to see me for 5 minutes when I can diagnose myself using WebMD? If I can find it on Google it can't be that tough."

It's sorta like the movies where average Joe citizen can assume the office of President and do better than the politicians who have been doing it for decades. "How hard can it be to write legislation or balance a budget? It's just like my checkbook, only more zeros."

Why should only the US consumers pay for drug development at these mostly foreign corporations? They've been relocating to Europe to dodge US taxes, so there is no more reason why Americans should pay more (twice) for drugs than the Europeans.

 

[HumblePie]

They assume because they're smart in other subjects, that drug development must be easy. "Why should I pay a doctor $200 to see me for 5 minutes when I can diagnose myself using WebMD? If I can find it on Google it can't be that tough."

It's sorta like the movies where average Joe citizen can assume the office of President and do better than the politicians who have been doing it for decades. "How hard can it be to write legislation or balance a budget? It's just like my checkbook, only more zeros."

It isn't that hard in some ways. Every job that isn't grunt work is based on critical thinking, and eye to detail, memorization, and experience at trouble shooting when thinks don't seem to be going the way they usually do.

Those are the foundation of any job that takes more than a strong back to do. Most people are more than competent enough to do some other type of job, but they don't because they aren't interested in it and/or don't like the types of stresses that come from such a job. Lastly would be connections to achieve success in some jobs that some people don't have and can't make for whatever reason. This is because many jobs aren't about how good you are or what you know in comparison to others in the same career field, but about who you know. That's life.

Also, some career fields go to great lengths to purposefully make it hard for competition to enter the market through arbitrary barriers on purpose. Many of which increases various costs associated with those industries which in turn get passed over to the consumer. I can go into examples, but it really isn't that hard to figure out what I said if you think about it.

There are many, many, many reasons for the rising heathcare costs in this country, and most of them are from pure greed and stupidity. The reason we even have government is the people (ie the country) can't fix the problems on their own or are actively making the problem worse, then the government does need to step in to address the problem.