Priced Out Of Your Medication? Must Be All That 'Expensive' Big Pharma R&D
from the actually,-it's-the-bullshit-that-costs-so-damn-much dept
A few months ago, the pharmaceutical industry was throwing around careless numbers to justify the exorbitant price of its products. The "industry standard" of $800 million to develop a new drug had inflated to $1.3 billion (presumably thanks to non-existent inflation), but some digging around in the very same dataset produced a completely different number: $35 million. Sure, that's not exactly "walking around" money, but it's a lot easier to recoup your investment if you don't overstate it by $1.26 billion.Some more damning numbers have emerged in a post at Rational Arguments, showing that even the drug companies' inflated R&D costs pale in comparison to what they really spend their money on. The first post pulls numbers from the Fortune 500 listing of top 10 pharmaceutical companies (by sales) and finds some (sadly) unsurprising results:
Those companies spent a whopping $41 billion on research and development. That's a lot of money. But it's significantly less than the $49 billion (18%) in profit they made. Just so you know, the average Fortune 500 company in 2008 made 0.9% of sales in profits. So in a recession, pharma did very, very well. [The] pharmaceutical companies spent $83 billion on marketing and administration. That's more than twice as much as they spent on research and development. That's an insane amount.
So it's a little disingenuous to claim that Americans must continue to spend so much to fund R&D when you could make cuts to either profits (which are big) or to marketing and administration (which is gargantuan). R&D just isn't that big a piece of the pie. There's plenty of fat to trim in there before research and development.
And why do pharmaceutical companies spend so much on marketing? It's simple, really. They're not creating new drugs. (Yes. That seems like a really moronic explanation, but read on...)
From 2000-2007, 667 new drugs were approved by the FDA. Of those, only 75 (11%) were new molecules that were much better than what we already had. In fact, over 80% of all drugs approved were no better than what we already had. Those are "me-too" drugs. Why do the pharmaceutical companies spend so much on marketing? Because you have to really promote drugs that really have no benefit over others that already exist. You have to convince people to buy those.
You know what needs no promotion? Awesome new drugs that save lives. When was the last time you saw a commercial for chemotherapy? For epinephrine? For steroids? Those drugs need no promotion - doctors just know to use them. But I bet all of you know about Nexium. Or Cialis.
Add to that the fact that drug companies are now helping themselves to medical records to help "guide" doctors' decisions and you've got a cyclical nightmare that increases costs while doing next to nothing for the health and well-being of their customers.
If you've managed to keep your incredulous rage (and whatever meal you last digested) suppressed, here's some more evidence dismissing pharma's everlasting claim to what's left in your wallet.
The Incidental Economist has a followup post by Aaron Carroll (who wrote the previous post at Rational Arguments), detailing even more evidence that the drug industry is blatantly lying when it claims its high prices are justified by its R&D investments. The twist here is that these companies, for the most part, aren't even doing their own R&D. (Click through for an informative and highly irritating graph. The colors are nice, though...)
The majority of research cited in patent applications was done in academic centers. Some more was done in other non-profit or government research centers. Only 15% of the research was done by industry. That's not a very compelling argument for the indispensable contribution of industry to research.
Carroll quotes another study, this one performed by Public Citizen in 2001, which showed that "U.S. taxpayer-funded researchers conducted 55 percent of the published research projects leading to the discovery and development of these drugs (and foreign academic institutions 30 percent)." In fact, drilling down even further into the data reveals that only one in seventeen papers come from the industry itself.
What we've got is an industry that uses the research (and money) of others to keep its profit margins right where it wants its. Even worse, it keeps going back to the government, fur-lined pimp hat in hand, looking for more funding, more patents, more patent extensions and more control over the medical community. Anyone looking to the pharmaceutical "community" for an answer to their health problems is in for a world of very literal hurt. The industry doesn't seem to mind if you're chronically ill. It just hates losing paying customers. To, like, death and stuff. And so it lowers its costs and raises its prices, trying to find the perfect balance between lifelong medical care and the local morgue.
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Drug companies next in line for obsolescence
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Re: Drug companies next in line for obsolescence
They are no better than PC techs other than they've has a thousand years of 'tradition' and advertising.
And before you yap about the smallpox cure, it is still out there,and that wasn't a cure, that was simply viral genocide.
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Re: Re: Drug companies next in line for obsolescence
And people around here claim that musicians think they're special. Yeesh. Get over yourself.
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Re: Drug companies next in line for obsolescence
Or if it gets developed in the U.S. it will be developed using taxpayer money and the patents will then be turned over to the private sector.
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Re: Drug companies next in line for obsolescence
Of course, don't forget that there will be technical glitches which accidentally deactivate the bots of anyone who votes against their legally purchased gov't officials, or protests against pharma etc., etc.
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Re: Re: Drug companies next in line for obsolescence
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Re: Re: Re: Drug companies next in line for obsolescence
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The drug companies have been in a slump for the past 5 years, and are desperately looking for ways to maximize their profits-by advertising drugs that have generic equivalents that do as well if not better than the brand.
It's also a little known fact that drug companies pay generic makers to keep their versions off the shelf.
It's legal, and it should not be-but it's big business.
The drug companies' R & D expenses are nothing when you consider that most of their research is done by public entities like universities and medical centers.
The public just doesn't understand that the drug companies are in it for the money-not the 'life-saving' or life extending products they promote.
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Re: further perfidy of big pharma...
should we make viagara blue or pink ? uh duh, blue...
there, i saved you 50 millions in 'research'...
2. as commented upon in the article and by you, big pharma manages to leverage their grant money to the research universities, etc, to control the parameters of research, squelch 'negative' results, and otherwise own the process and proceeds...
WE ALL provide the infrastructure, pay for the labs, pay the profs and grad students, and big pharma reaps the benefits of that system by paying pennies on the dollar for the value received...
3. judging by the number of big pharma drugs i see constantly advertised on the tee vee, i bet they spend more on tee vee ads alone than all their 'r&d' budgets...
art guerrilla
aka ann archy
artguerrilla at windstream.net
eof
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Good to see a little populist outrage /here/.
When I was a youth, we were so rich and influential that when I contracted measles, one of the leading physicians in the county dropped all else to rush to our home and give me a shot. Today there are probably fifty times as many "doctors" around, yet I doubt that even the richest ever get a house call -- I had to pause to recall the term, it's been so long since I heard it.
By the way, many doctors are invested in pharmaceutical businesses, besides all the other industry, they're not just unwitting pawns.
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Re: Good to see a little populist outrage /here/.
But that's socialism! If you prevent people from making many countless millions of dollars each year, what incentive will they have to screw people over?
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Re: Re: Good to see a little populist outrage /here/.
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Re: Re: Re: Good to see a little populist outrage /here/.
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Re: Re: Re: Re: Good to see a little populist outrage /here/.
However it is in the interests of the majority to make it work. The statistics of income distribution at ALL levels mean that your community of interest is always with those on lower incomes than yourself - never with the wealthier - yet so many people foolishly vote for parties that promote the interests of the better off at their expense. The reason why they do this is that most of the MSM are in the pockets of the wealthy. In the medium term ( perhaps the next 20 years) the internet will change that. At present only a relatively small proportion of the population (young/educated) are truly in the internet age - but that will change....
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Re: Re: Re: Re: Re: Good to see a little populist outrage /here/.
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Re: Re: Re: Good to see a little populist outrage /here/.
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Re: Re: Re: Re: Good to see a little populist outrage /here/.
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Re: Re: Re: Re: Good to see a little populist outrage /here/.
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Re: Re: Re: Good to see a little populist outrage /here/.
However, using underhanded tactics and leveraging the fact that some people need their medications to live is wrong. How many billions in profit is enough??
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Re: Re: Good to see a little populist outrage /here/.
The U.S. is already a corporate socialistic society. Free market capitalism? Hah, the government grants monopolies on practically everything around us. From taxi cab monopolies to cableco monopolies to broadcasting monopolies to mailbox delivery monopolies to electricity delivery monopolies to IP monopolies, the list goes on and on.
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Re: Re: Good to see a little populist outrage /here/.
Just end the existing subsidies (socialism).
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Re: Good to see a little populist outrage /here/.
Yea that worked out well in the past how can it fail...
How about set standard regs. for the industry and the government actually enforce the regs (honesty in advertising, in healthcare QC Controls, in healthcare Cures not treatment).. maybe a different path than the 2 we have seen tried again and again and failed for citizens every time...
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Re: Re: Good to see a little populist outrage /here/.
Yea that worked out well in the past how can it fail...
None of those people you quoted has actually tried it. What they did was to hijack the efforts of others for their own aggrandisement. They also all broke the golden rule of such an enterprise - which is that the ends do not justify the means.
If you want see how it CAN work look at the Mondragon Co-operatives and the John Lewis Partnership.
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Re: Re: Re: Good to see a little populist outrage /here/.
I will grant you Mondragon is a great idea for a company, but as a government it leaves much to be desired (as if i disagree with a company i can leave... a county not as easy)
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Re: Good to see a little populist outrage /here/.
Increasing the level of regulation, as you suggest above, would only increase the opportunity for corruption. Already, government power has led to massive, systemic corruption and the continued transfer of wealth from the general public to a few elite. Allowing income caps would complete the equation, allowing the government to seize ALL the income they want from individuals and transfer it to the few that they deem as "exceptions." As long as the government has power, that power will be corrupted. The downward spiral of pharmaceutical advancements is the direct result of the increasing power of the FDA. Competition and consumer choice is an EXTREMELY powerful control. The government has essentially eliminated that control, and taken it upon themselves to determine what medical advancements are allowed to be made. And how do they decide it? By the potential impact of the new drug? Nope. By user fees. In other words, "how much will you pay us."
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This is a poor metric to use. I'm not saying that they do all their own research, or even most, but industry (regardless of what industry) publishes at a MUCH lower rate than academia. For industry, it's usually the last thing they look at doing (and it is sometimes actively discouraged for competitive reasons) while it's the main metric used to judge performance of professors and is actively selected for.
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We let them do it, why are people not creating their own health centers and focusing money into research that could benefit all of us?
How can we make the money go to places that are truly necessary? how to make cheap drugs? how to create community health centers?
Those are the questions I'm most interested in.
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Regulation springs to mind
How to create community health centers? Eliminate the regulations that require doctors to prescribe medicine and perform tests.
Get rid of all the paperwork and tele-medicine could take off. I'd take a cheap doctor from anywhere in the world that I could talk to at home over visiting an overworked doctor at a clinic where I'm exposed to all manner of unknown diseases.
Yeah it's our own fault - start electing people who don't think government is the answer to anything but why things don't work.
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Today in the NYT
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Re:
http://www.iowh.org/
http://www.patchadams.org/
http://www.osdd.net/
http://nursingassi stantguides.com/2009/50-successful-open-source-projects-that-are-changing-medicine/
http://tropical disease.org/
http://linuxmednews.com/
http://www.plosmedicine.org/home.action
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http://www.dndi.org/
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A different solution
The answer is to eliminate artificial scarcity and stabilize the population.
Decentralizing manufacturing and open sourcing it addresses the first concern, given that american STILL throw away enough non-recycled Aluminum, Steel, and Glass to meet the auto industries needs every day and enough additional Aluminum to replace all domestic aircraft every 3 months
(Trash Trivia http://www.co.cass.in.us/ccswd/trivia.htm)
There are NO shortages of ANYthing that the marketing minds do not create as a perception i.e. "old is bad" etc...
Local level recycling would reduce the worldwide demand for raw materials by up to 90% for most manufactured materials
I'm working on an open source system to address these issues called CubeSpawn-> http://www.cubespawn.com and there is no reason to believe we could not have a society that did not need currency in 10 years if we devoted ourselves to building it - and health would become an entirely different pursuit in that kind of environment.
though idealistic and somewhat simplistic James Hogans "Voyage from Yesteryear" is probably the best fictional treatment of a post scarcity culture I have read... Read it! you might like it ;-)
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Re: A different solution
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Re: Re: A different solution
James
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Re: A different solution
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Re: A different solution
I clap to your effort and wish you the best, but until the economics are worked out it will be slow going (or some one starts researching better ways for the processes today).
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Re: Re: A different solution
http://en.wikipedia.org/wiki/Aluminium_recycling
http://www.epa.gov/osw/conserve/material s/alum.htm
And I know any furnace will accept anything aluminum to be throw in, that is why the factories I know collect cans and any aluminum scrap they can find to recycle because once it is there at 900 degrees Celsius any paint, water or other contents mostly become air pollution.
Steel is the same thing but the temperature inside the furnaces are even higher.
Also it cost less to recycle aluminum, to extract it from ore is expensive in energetic terms, which makes it costly to get the raw material to finish product.
So I need to ask, have you any study or studies corroborating your claims?
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Re: A different solution
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Good post, Tim
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They said: "Those companies spent a whopping $41 billion on research and development. That's a lot of money. But it's significantly less than the $49 billion (18%) in profit they made."
Yup, research and development is their only operating cost. No other costs at all. The lights stay on by themselves, the admin people work for free in an office provided by the state, they don't have to pay taxes, and they most certainly don't have any other expenses except R&D.
One read of the story and you can see it's a wild attempt to slam pharma with half truths and misleading information.
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Like the faux clinical trial that was designed to just improve sales of a drug?
Quote:
Yah one can see why people are slamming the drug industry and being unfair :)
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Maybe you should read the Article again, the $49 Billion was a net profit, not gross income. The article said they had other expenses like the $83 billion for marketing and administration. The $49 Billion was just Christmas bonuses for the people with offices on the top floor.
Pharma is making nearly 20 times more in profit than any other Fortune 500 company any yet they are still asking for handouts from us.
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One read of your comment and we can see it's a wild attempt to defend an industry you have a vested interest in. Care to declare that vested interest?
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I don't see anybody claiming that there aren't 'other'costs, only that comparing R&D expenditures ($41b) to their profit ($49b) shows that they make more than they spend on R&D.
To anyone normal common business sense, here's a very simple formula: Total Revenue (X) - Total Expenses (Y) = Profit (Z)
So lets do some math with the variables we know and don't know:
X is unknown,
we know a portion of Y ($41b R&D + $83b Marketing),
we know Z ($49B)
So X - (Y + 41b + 83b) = 49b, all we can reliably determine from this data is that Total Revenue was at least $173b, that profit exceeded total R&D expenses by $8b, and that total revenue exceeded total expenses by $49b.
So the companies that are complaining about how expensive R&D is and how the government need to 'save them', are spending more than twice as much on marketing as they are on R&D (how much of this is lobbying for new laws to 'protect' their industry that's dying due to excessive R&D costs), and are recording profits in excess of their R&D expenses....
This seems to indicate that R&D is not quite the 'boogeyman' to the Pharma industry that they claim it is... does this sound a little too much like the **AA's and 'piracy' to be a coincidence?
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Really? 90%? That a big claim. Got a source for that?
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Re: A Different Solution
Yard waste is 100% since I don't use herbicides or pesticides and do not have a lawn. I'm going for a "closed loop" lifestyle as much as possible on a personal level - with a long term goal of adequate fabrication resources to maintain a comfortable lifestyle with minimal additional inputs within 5 years. and no hair-shirt back-to-the-land self deprivation, either just a sensible alternative to relying in the constant purchasing of expendable junk...
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A fine example
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Re: A fine example
"until the FDA granted a license for one pharma corp to release a branded version of it and run off anyone selling non-branded versions"
What part of that statement is "free-market"?? That's the definition of corporatism.
If the FDA didn't have the power to so heavily regulate everything, the rich companies wouldn't be able to buy them off (because there would be nothing to buy...)
Some actual competition may then happen, and prices wouldn't be so out of control.
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Re: Re: A fine example
Free market capitalism is unstable - it tends to concentrate wealth (and hence power) in a few hands. Once that occurs a degeneration into corporatism is inevitable.
Ideally the government should regulate the system to keep the competition fair - but the risk of regulatory capture is ever present.
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Re: A fine example
When they are just starting out they may hail the virtues of free competition - but once they start to get somewhere they start trying to engineer a monopoly.
Free market capitalism. A system where companies compete to create a monopoly...
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you can't compete agains Big Pharma..
What, an individual compete against the establishment? The pharmaceutical companies OWN the FDA. Just look at Dr. Burzynski. The guy has patents on a *working* cure for multiple forms of cancer but BIG Pharma funded FDA repeatedly kept trying to shut him down until eventually they just stole his patents and helped other pharma companies instead. Incredible.
http://www.burzynskimovie.com/
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Re: you can't compete agains Big Pharma..
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Government Monopolies
Abolish patents.
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http://mises.org/daily/5359/The-Medical-Marketplace-Free-and-Unfree
"So who's to blame? The answer: a system that has been developed by government intervention to interfere with consumer sovereignty and make every individual pay for every other individual's medical expenses so that the individual consuming the care does not bear the full price at the point of utilization."
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I can tell that you come from a country that has never been engaged in a serious war that affected the civilian population.
(At least in living memory).
If you did you would realise that we all have to take some responsibilty for each other.
The vast majority cannot afford to pay the cost of modern healthcare at the point of utilisation and most cannot afford to pay for insurance if it is provided privately. That is at least in part because private insurance companies are too weak to deal with the difficult situations that arise when the insured gets sick and the drug companies ask for money.
Where the state provides the insurance it hold more bargaining chips to face down the drug companies.
Unfortunately the existence of the US healthcare system creates unaffordable drugs that cause problems for everyone else. You really need to sort you system out....
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I'm also unsure about what you're advocating. Are you calling for less government intervention via funding and more intervention via profit regulation?
And, yeah, I rely on several drugs that both extend and maintain a quality of life for me. So while you're stifling your vomit and expressing your rage, I'm thanking the pharma companies for the drugs they've brought to market.
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I make a decent income, have reasonably good group medical insurance, and the pharmaceutical co-pays in the aggregate are killing me financially. There are no annual caps on co-pays, and the PBMs hose you down mightily if it isn't a generic or in their formulary. And that's if they authorize the dispensing of the prescription, even if there are no alternatives available.
I have one prescription held up in the "authorization" process for ten days now, and nobody is perturbed about that. The doctor wrote a valid prescription, for a drugs specific to my condition, and for which there is currently no generic alternative, although I would happily pay less for generic if it were. The PBM has yet to issue the "authorization number" to my doctor, in the hopes it will be forgotten, obviously. I could name the company, but they all seem to do exactly the same thing and for the same reasons,
They drag their feet and stall in the hope that you'll simply give up and go away, or even better, die. They are a manifestly evil and amoral group of money grubbing thieves, and if you stand in the way of their profitability, then you need to die, and soon. Many people do just that, and it suits them fine. There are news stories aplenty about these situations, and even when it results in unnecessary patient death due to the fact that they need to maintain their profit margins, it bothers them not a whit.
So where can I get insurance like you have, at a cost I can afford? I'd certainly like to sign up for it.
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Will you also thank them for all the bogus studies they release?
Will you also thank them for all the bogus trials?
Will you also thank them for making so costly, that the future of your healthcare is in other countries that can do it cheaper? so you can travel there and still will be less expensive.
Will you also thank them for making things more expensive than they need to be?
I don't thank them for that, but if you want to, that is your option.
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US Health Care
The US need a new constitutional amendment: There shall be no law abridging a person's right to freely choose their own medical care.
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Re: US Health Care
Frankly we look over the "pond" at the US healthcare system and just can't believe it. Over here we have decided that we want free high quality care for all - and what is more we are prepared to pay the necessary taxes to get it.
There are arguments about how to keep the costs down but even the current Conservative PM (who is a man of independent wealth) realises the value of the NHS which cared for his disabled child over the years in a way that even he could not have afforded as an invdividual.
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RxRights is a national coalition of individuals and organizations dedicated to promoting and protecting American consumer access to sources of safe, affordable prescription drugs. The Coalition is encouraging consumers to take action now by sending letters to President Obama and Congress urging them to protect our right to safe, affordable medications. For more information or to voice your concern, visit www.RxRights.org.
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Marketing research, patent deal payments, etc.
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Corporatism
Regulatory capture is the main reason why the developed countries are in trouble and heading for another Depression. Not only are select corporations allowed exceptions from regulations, they are even legally allowed to do things which honest and informed people would see as plainly unlawful e.g. fraud and deception.
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