You should be glad. Pharma companies are well-known historically to have milked monopolies to their own financial favor at the cost of public health, well-being, and welfare. They are not traditionally seen nor acting in congruence with altruism. If a company has decided to do so, that is great. But I think seeing this as some sort of a slippery slope seems completely backwards to me. It's about time pharma companies cut a little of their profits for the benefit of people. The cost of research is far outweighed by their excessive profits that come after the fact.
I don't know how you can complain about "excessive profits" for entirely novel products that a drug company brings into existence, essentially, starting from nothingness. No amount of profit is excessive - the profit is the motivation for them to invest in further research and we should all hope it continues to be so. "Profit" directly represents how much value to society their drug produced. If someone cures cancer, are you going to whine about how much money they make from it? Are you going to claim that, because they produced something extremely valuable, society has the right to take it from them for less than it's worth?
This is not the same as, say, an ISP making excessive profits by manipulating the market and building themselves a quasi-monopoly, or a bank harvesting profits by taking huge risks with the understanding that the Federal Reserve will bail them out if everything blows up. The ISP isn't innovating, isn't creating anything, they're merely an engine for spending and allocating resources. The bank isn't creating anything either, they're just moving money around and playing social engineering games with society. Complaints about profits in these industries are totally reasonable, since these companies are basically just middlemen sucking money from the economy in order to maintain the plumbing.
But to complain about excessive profits in an industry whose entire purpose is to discover new things? That makes no sense to me. What alternative would you prefer?
> The bank isn't creating anything either, they're just moving money around and playing social engineering games with society
How would you react to a situation in which small companies discovered new drugs for ~$10 million, building on public research, and then were purchased by larger pharma companies for ~$300 million, and in which the large pharma companies aimed to earn ~$1-5 billion before the patents on the small company's invention expire?
I would say that there is a common misunderstanding of:
A) the viability initial drug discovery and subsequent development costs, and
B) The time value of money.
For A) success rates of 5000:1 are not uncommon. Discovery is at the very beginning of this process [1],which can take 12–15 years and cost in excess of $1 billion [2]
B) A 1 to 5 billion dollar return on a 300 million acquisition is likely a loosing proposition for most pharma companies due to risk and the time value of money. If you have a 300m acquisition, 700m additional dev costs, a 50% time discount, and a 50% chance of success, you are already up to 4 billion in revenue needed to break even. This article [3] provides a balanced overview of the finical aspect and is written by a scientist trying to give away a cure for his terminal wife.
I agree with your comment in general, but I would just underline that the discovery component of a drug is often not paid for by the eventual vendor of the drug, but is instead paid for by taxpayers, other granting agencies, and venture capitalists. Thus the eventual vendor of a drug won't necessarily have 5000:1 odds, but instead will be able to review and purchase the most promising candidate drugs based on data generated by other companies.
It's definitely true that companies also attempt to make new drugs in-house, but I can't readily recall a recent blockbuster drug made in this way.
The expensive part of bringing new drugs to market is testing in humans. Perhaps the US could bear some of these costs while, in exchange, shortening or eliminating patent protections.
>I agree with your comment in general, but I would just underline that the discovery component of a drug is often not paid for by the eventual vendor of the drug, but is instead paid for by taxpayers, other granting agencies, and venture capitalists.
In the case of the taxpayers and grants, i think it is important to keep in mind that these are explicitly given without strings attached or rights reserved because society decided that we want to encourage private research. It is fair to argue that perhaps we should change the model moving forward, but I find it fairly offensive when folk claim a retroactive ownership on this basis.
>Thus the eventual vendor of a drug won't necessarily have 5000:1 odds, but instead will be able to review and purchase the most promising candidate drugs based on data generated by other companies.
I wholeheartedly agree. the long >5000:1 is at discovery, i.e. the basic research that is often publicly funded. Once drugs have gone through enough screening to be used, the probability of approval is up to about 10:1 [1]. A lot of the bigger sales take place between phase 1 and 2, which probability of approval is up to perhaps 25%. Research institutions and early developers get paid based on the potential value and risk, and are not taken advantage of. The fact that companies often outsource early develop doesn't invalidate the their claim to their profits.
>The expensive part of bringing new drugs to market is testing in humans. Perhaps the US could bear some of these costs while, in exchange, shortening or eliminating patent protections.
This is an interesting idea. Two additional options that you may want to consider that wouldn't stifle development are expedited approval and government manufacture of generics. Due to the time value of money, faster approval increases the profitability of new drug development and without increasing prices to consumers. For generics, drug profits after loss of exclusivity are so far out that they don't significantly weigh in on the decision to develop a product or not.
