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Author Topic: Why are drugs so expensive?  (Read 1935 times)

Offline thedoc

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Why are drugs so expensive?
« on: 27/05/2014 19:30:01 »
How do developing countries gain access to treatments? And why do drugs cost so much in the first place?
Read a transcript of the interview by clicking here
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« Last Edit: 27/05/2014 19:30:01 by _system »


 

Offline CliffordK

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Re: Why are drugs so expensive?
« Reply #1 on: 27/05/2014 22:15:23 »
As far as market economics.  Say for any disease condition, you compare the #1 (patent) vs #2 (generic) treatments.

It certainly is complicated, considering the value of "years", cost of "side-effects", etc.

Marketing plays a huge part. 

Personally I'll take a few vitamins, and the occasional aspirin (sometimes Bayer, sometimes generic).  I don't see the need for newer NSAIDS.  The side-effects of opiates is great enough to discourage their use. 

For heart medicine, one might wish for the latest beta blocker, but an older one may be just fine.

Some diseases such as AIDS can not be treated by a single class of drugs, even though some of the drugs should now be available as generics.  Of course, one may choose some of the oldest drugs in each class.  There may, in fact, be a benefit to society to limit the spread both of HIV, as well as multi-drug resistant HIV whether it is in the USA, Europe, or around the world including Africa.

Perhaps one alternative would be for governments to become involved in HIV treatment and eradication.  So, as new HIV treatment drugs (or the first of a class) hit the market, there would be a way for the government to essentially buy the rights to the drugs.  How much of the current drug development is done at government institutions, or using government grants?
 

Offline alancalverd

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Re: Why are drugs so expensive?
« Reply #2 on: 27/05/2014 23:26:55 »
Drugs are for the most part developed by private companies using money invested by shareholders. It can take 10 to 15 years to get a new molecule from the bench to production through the required stages of safety testing, efficacy testing, and full clinical trial. Maybe one in 20 promising products gets from lab test to production, and it's anyone's guess how many never get out of the laboratory.

Now whether you borrow money from a bank or raise it as share capital, you need to show between 5% and 20% return per annum on that money if your company is going to survive and prosper.   So by the time you get to market, a 1 million shareholding has to be worth about 5 million just to ensure that you can raise capital to develop the next product, and the shares that are now worth 5 million have to yield 5 - 10% revenue each year from profits on sales. And you also have to recoup the costs of the other 19 starters that never made it to the finish line. Your patent only lasts 15 years from the date it was granted, giving you a probable commercial life of maybe 10 years for the product. The actual cost of production is negligible compared with the overheads of getting there. People often talk about "the cost of R&D" as though it was only "R", and imagine a couple of guys with a test tube and a cage of rats. Fact is that D costs thousands of times more than R in this business, and a few million pounds won't get you to market even if you discover that the fluff under the bed can cure every known disease (it can, but don't tell anyone!).

I can't give you a definitive answer on how much drug development is government-sponsored, but after 10 years of sitting on a research ethics committee vetting clinical trial proposals, the answer appears to be "none". 
 

Offline CliffordK

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Re: Why are drugs so expensive?
« Reply #3 on: 28/05/2014 02:45:45 »
As far as economics...

I have no doubt that drugs beyond patent protection such as Bayer Aspirin, or Tylenol Acetaminophen still make their original manufacturers millions of dollars, as well as giving brand recognition.

As I understand it, the patent period begins as much as 5 years before the drug hits the market.  If the drug is the best thing since sliced bread, then within 5 years after the new drug hits the market, there will also be a half dozen similar drugs (different enough to be a new drug) on the market. 

Is the drug used for acute treatment such as an antibiotic for a disease, perhaps used for a week?  Or, is it used for a chronic condition such as a blood pressure medication, or HIV treatment? 

Consider 300 million people in the USA.  If 1 in 300 people use the new wonder drug, then it is marketed to 1 million people, and profits add up quickly (plus international sales).  On the other hand, if it is one in a million people using it, then the entire cost of R&D, as well as production must be carried by 300 people.

There has been a lot of criticism about the development of new treatments for diseases that largely only affect 3rd world countries (and perhaps tourists).
 

Offline alancalverd

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Re: Why are drugs so expensive?
« Reply #4 on: 28/05/2014 07:04:48 »
Slightly different story over here: supermarket generics of aspirin and acetaminophen generally outsell any original brand, but it's true that a few pharmaceuticals are actually useful and cheap to market (no prescription needed) beyond patent life.

Me-toos raise a problem: whilst you can save on the original research, even simply recompounding doesn't absolve you from clinical trials and production quality assurance so the latecomer still has to take a significant risk in order to enter a market where his entry may halve the price. And why offer a lower price anyway, if your clinical trial shows that B is at least as good as A? The possible entry of a me-too means that the manufacturer of A has even less time to recoup his investment so he may be looking at a commercial life of 5 years rather than 10....In other words, simple economics is wrong: competition doesn't necessarily drive down prices: it merely increases choice. 

Third world pharmaceuticals is a big risk for potentially huge rewards. The additional commerical risk is twofold: no protection against counterfeit, and reputational damage if the counterfeit is useless or harmful. Unless you control the entire delivery chain, you are staring into an abyss of corruption, and if you do control it, be sure that some mullah or revolutionary leader will call it colonialism and declare juju, fatwah or open season on your expensively trained staff. Saving lives comes fairly low on the agenda in the real world.
 

Offline CliffordK

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Re: Why are drugs so expensive?
« Reply #5 on: 28/05/2014 07:25:14 »
Of course, the copycat drugs aren't without risk.

About the time the 2nd generation Cox-2 inhibitor drugs were hitting the market, the market was already collapsing (although apparently not completely over) with a flurry of lawsuits.
 

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Re: Why are drugs so expensive?
« Reply #5 on: 28/05/2014 07:25:14 »

 

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