Topic Actions

Topic Search

Who is online

Users browsing this forum: No registered users and 1 guest

US Pharmaceutical Pricing

The Management is not responsible for the contents of this forum. Enter at your own risk.
US Pharmaceutical Pricing
Post by biochem   » Mon Sep 11, 2017 10:15 pm

biochem
Rear Admiral

Posts: 1220
Joined: Thu Aug 19, 2010 8:06 pm
Location: USA

Well there was another sneaky way by a less than ethical "pharma" company to beat the system on generic drug pricing. This makes four loopholes that I know of one of which is solved.

Allergan's patent is being challenged by companies which produce generics, so Allergan transferred the patent to a Native American tribe, which then contracted with Allergan to produce the drug and they split the profits. This works because through a loophole in patent law, tribes are immune to some types of patent challenges.

The other 3:

1) Martin Shkreli/Turning

They bought a very old generic drug which was used for rare life-threatening conditions and then raised the price 5000x. The drug was from a single generic manufacturer because not enough of it was sold to support >1 company's production. People had to buy the drug to live and thus had to pay the high price. This took advantage of how the FDA regulates drug production. Drug manufacturers have to set up dedicated equipment and processes, which are then inspected by the FDA. This takes at least a year. The competitor will also have the costs from the equipment and the FDA requirements that they will need to pay off. Once they were on the market, Turning could undercut their price since they didn't have those costs. Potential competitors knew this and so weren't willing to make the investment.

This was solved by the compounding manufacturers. They make specialty individualized drug formulations for people with special needs such as allergies etc. They make these drugs in batches rather than one by one, which results in a cost savings for customers with allergies etc. However, they don't use dedicated equipment, they make Drug X one week and Drug Y the next week, using the same equipment. So the FDA regulates them differently. The facility is inspected for sterility etc but the FDA doesn't regulate the individual processes for all of the drugs they formulate. They were able to counter Turning by making their drug in a new formulation. This solves this particular loophole since they could easily do the same for any other "pharma" company which tries this stunt.

2. Mylan Pharma/epipen/Sen Joe Manchin

This one is good old fashioned political cronyism/corruption. Epipen is regulated under the medical device rules not the drug rules. The CEO of this company is the daughter of Sen Manchin and she used her father's political connections to influence the FDA to delay approval of Epipen competitors using a variety of different pretexts (a different excuse for each one). She is smarter than Shkreli in that she slowly increased the price rather than produce a sudden jump, so it wasn't as noticed for a while. But then she got greedy and raided the price too high (600x) and triggered a firestorm.

The firestorm did result in competitors being approved but nothing but vigilance will stop good old fashioned corruption.

3. Marathon Pharma

These guys took an old generic drug for a rare indication (approved in Europe but not the USA), did some pharmacokinetic clinical trials to get the drug approved in the USA and for bringing a "new" drug for an orphan disease they got 7 year market exclusivity for that medication (i.e. they can charge whatever they want just like a pharmaceutical company which invents a new drug can) and for it being a pediatric rare disease they also get a priority review voucher for use with a future drug product. The voucher can be sold on the open market, it's worth 100-300 million dollars.

The thing is there is a genuine problem with these old generic medicines and new indications. Doctors may or may not have enough information from trial and error or pilot trials by academics to prescribe the drug in a safe and effective manner for the new use. Some of these drugs are so old, there isn't clinical trial information period. Plus most drug companies won't investigate them for new indications, since that would cost millions (or hundreds of millions) of dollars but not be profitable since the drug is a generic. So there really does need to be a process which allows these old generic medicines to be investigated more broadly but at the same time prevents dive through the loophole scams like this one.

For example. An industry-academic-NIH working group subdivide the old medicines with potential new uses (or which further information is needed for current uses) into categories.

Category 1 – low hanging fruit i.e. the cpds for which a simple study or two can answer the efficacy and/or safety issues -> dealt with by academia or the NIH or perhaps by direct government payment to a clinical trial CRO in a pay for service model (the example above would fall under this category)

Category 2 – more complex challenges requiring multiple clinical trials and/or long expensive clinical trials -> send to industry with a limited reward i.e. only marketing exclusivity not eligibility for anything else i.e. not eligible for a priority review voucher for bringing a rare pediatric disease drug to the market or any other type of similar award (academia and the NIH aren't set up to do intensive drug development of this type and they are really bad at it when they try)

Category 3 – major work required essentially redoing the entire clinical program including expensive phase III trials, which often cost hundreds of millions for many indications -> for something like this they would be eligible for marketing exclusivity (I’d even be willing to make the marketing exclusivity longer than 7 years!) plus any priority review vouchers that apply. (this would be rare)
Top
Re: US Pharmaceutical Pricing
Post by Imaginos1892   » Tue Sep 12, 2017 1:05 am

Imaginos1892
Commodore

Posts: 767
Joined: Sat Mar 24, 2012 3:24 pm
Location: San Diego, California, USA

I agree there are abuses, but do you have any idea what it takes to develop one drug and get the FDA to approve it? Billions of dollars AT LEAST, sometimes over ten billion, and five to thirty years. And for every drug that gets approved, dozens fail. Some fail late in the process, after billions and decades have been spent on them.

If the drug companies don't spend those billions, there will be no new drugs. They won't spend those billions if they don't think they'll make more than they spent. Imposing price controls, allowing other companies to copy the drugs and sell them for peanuts, such measures reduce the amount of money drug companies can afford to spend developing new drugs.

"But the peepul'sa dyin' cause dey can't afford those expensive drugs!"

If you keep the drug companies from making money, there won't be any drugs, affordable or not. Lots more will die.
———————————
If a business tries something and it doesn't work, they have to either stop doing it or they will go broke. If the government tries something that doesn't work, they will keep shoveling our tax money into it forever.
Top
Re: US Pharmaceutical Pricing
Post by biochem   » Tue Sep 12, 2017 9:50 am

biochem
Rear Admiral

Posts: 1220
Joined: Thu Aug 19, 2010 8:06 pm
Location: USA

Imaginos1892 wrote:I agree there are abuses, but do you have any idea what it takes to develop one drug and get the FDA to approve it? Billions of dollars AT LEAST, sometimes over ten billion, and five to thirty years. And for every drug that gets approved, dozens fail. Some fail late in the process, after billions and decades have been spent on them.

If the drug companies don't spend those billions, there will be no new drugs. They won't spend those billions if they don't think they'll make more than they spent. Imposing price controls, allowing other companies to copy the drugs and sell them for peanuts, such measures reduce the amount of money drug companies can afford to spend developing new drugs.

"But the peepul'sa dyin' cause dey can't afford those expensive drugs!"

If you keep the drug companies from making money, there won't be any drugs, affordable or not. Lots more will die.
———————————
If a business tries something and it doesn't work, they have to either stop doing it or they will go broke. If the government tries something that doesn't work, they will keep shoveling our tax money into it forever.



I'm in the industry, so I do know. And that is why I've repeatedly defended the pricing of innovator products in multiple previous postings. These are dealing with generic products and are likely to damage the industry as a whole. The average citizen doesn't differentiate from these abuses and the legitimate high prices pharma companies need to charge to recover the 2-3 billion dollars it takes to develop a new product.

And it doesn't help that the single payer countries pricing dictates mean that they don't pay their fair share of the development costs.
Top
Re: US Pharmaceutical Pricing
Post by Joat42   » Tue Sep 12, 2017 12:05 pm

Joat42
Commodore

Posts: 776
Joined: Tue Apr 16, 2013 7:01 am
Location: Sweden

biochem wrote:..snip..
And it doesn't help that the single payer countries pricing dictates mean that they don't pay their fair share of the development costs.

That statement doesn't make sense. Are you really saying that pharmaceutical companies are forced to sell drugs at a loss in single payer countries?

Or are you saying that they hike the price in other countries that doesn't have single payer systems?

Either way, how does that equate to single payer countries doesn't pay their fair share???

---
Jack of all trades and destructive tinkerer.
Top
Re: US Pharmaceutical Pricing
Post by biochem   » Tue Sep 12, 2017 1:17 pm

biochem
Rear Admiral

Posts: 1220
Joined: Thu Aug 19, 2010 8:06 pm
Location: USA

Joat42 wrote:
biochem wrote:..snip..
And it doesn't help that the single payer countries pricing dictates mean that they don't pay their fair share of the development costs.

That statement doesn't make sense. Are you really saying that pharmaceutical companies are forced to sell drugs at a loss in single payer countries?

Or are you saying that they hike the price in other countries that doesn't have single payer systems?

Either way, how does that equate to single payer countries doesn't pay their fair share???


That depends on how you define profit. For most new drugs manufacturing, packaging and distribution costs are small (biologics are an exception). What generally happens is something like this: drug x costs $0.25 to make and gets sold in the USA for $2.50 per pill, a 90% "profit" BUT that is without the 2-3 billion in R&D costs, which at $2.25 per pill will takes sales of roughly 900 million pills to pay off. In the single payer countries, there is some back and forth negotiation but at the end of the day, they decide what they are going to pay and it is usually a lot less, say $0.75 per pill which would take sales of 4 billion pills to pay off the R&D. Most new drugs don't have the level of sales which would allow them to pay off the R&D costs if sold exclusively in single payer markets.
Top
Re: US Pharmaceutical Pricing
Post by Imaginos1892   » Tue Sep 12, 2017 1:47 pm

Imaginos1892
Commodore

Posts: 767
Joined: Sat Mar 24, 2012 3:24 pm
Location: San Diego, California, USA

Those 'generic drugs' are copies of 'brand-name' drugs that cost billions to develop. Without the original, expensive drug there wouldn't be any generics.
———————————
“What’s your secret for living to a hundred?”
100-year-old man: “Don’t die.”
Top
Re: US Pharmaceutical Pricing
Post by gcomeau   » Tue Sep 12, 2017 2:45 pm

gcomeau
Commodore

Posts: 986
Joined: Tue Dec 02, 2014 5:24 pm

Of course considering that most of those countries have serious ethical objections to direct to consumer marketing of prescription drugs rather than leaving those decisions to medical professionals with the training to make informed decisions... and 9 out of 10 of the big pharma companies spend more on marketing than R&D... perhaps those countries have reasons to be less than sympathetic to pharma's claims that they "need" the prices they ask for in order to cover their R&D costs...

https://heximer.net/wp-content/uploads/ ... akdown.png
Top
Re: US Pharmaceutical Pricing
Post by Fireflair   » Wed Sep 13, 2017 12:27 am

Fireflair
Captain of the List

Posts: 401
Joined: Wed Sep 05, 2012 6:23 pm

Something else to consider when looking at R&D costs (And this applies across the board, not just to pharma) is how much of their funding comes from government sources.

The government subsidizes about a third of all the R&D costs, if it pays out or not.

Another item of note is the frequency of government 100% funded research which is turned over to the private sector for usage. In one case, the federal government spent $484 million developing the cancer drug Taxol — derived from the bark of Pacific yew trees — and it was marketed under an agreement with Bristol-Myers Squibb starting in 1993. The medical community called it a promising new drug in the fight against ovarian and breast cancer.

Since then, Bristol-Myers Squibb has sold $9 billion worth of Taxol worldwide, according a General Accounting Office report which was released.

The National Institutes of Health have received just $35 million in royalties from Bristol-Myers, however.

Further I think it is worth noting that often times pharma research and development is more focused on minor tweaks and incremental improvements of an existing drug which results mostly in higher pricing and not a real improvement in the drug's general usage.
Top
Re: US Pharmaceutical Pricing
Post by Joat42   » Wed Sep 13, 2017 6:13 am

Joat42
Commodore

Posts: 776
Joined: Tue Apr 16, 2013 7:01 am
Location: Sweden

biochem wrote:..snip..
And it doesn't help that the single payer countries pricing dictates mean that they don't pay their fair share of the development costs.
Joat42 wrote:That statement doesn't make sense. Are you really saying that pharmaceutical companies are forced to sell drugs at a loss in single payer countries?

Or are you saying that they hike the price in other countries that doesn't have single payer systems?

Either way, how does that equate to single payer countries doesn't pay their fair share???
biochem wrote:That depends on how you define profit. For most new drugs manufacturing, packaging and distribution costs are small (biologics are an exception). What generally happens is something like this: drug x costs $0.25 to make and gets sold in the USA for $2.50 per pill, a 90% "profit" BUT that is without the 2-3 billion in R&D costs, which at $2.25 per pill will takes sales of roughly 900 million pills to pay off. In the single payer countries, there is some back and forth negotiation but at the end of the day, they decide what they are going to pay and it is usually a lot less, say $0.75 per pill which would take sales of 4 billion pills to pay off the R&D. Most new drugs don't have the level of sales which would allow them to pay off the R&D costs if sold exclusively in single payer markets.

That still doesn't make sense.

Why would someone not leverage their buying power to get better prices? And it is still the company that sets the prices they can get away with. That doesn't at all equate to single payer countries not paying their fair share.

And the point is, the companies WILL charge what they can get away with in each market - and if you think that the markets that pay less is not paying their fair share you are also saying that the companies investing in R&D are entitled to recoup their costs.

Newsflash: they are not, all R&D is a gamble and if they can't get the economics of a product to work it's not the buyers responsibility to make it work, no matter how you "define profit". Although, in the end the cost will be transferred to the customers in one way or another.

---
Jack of all trades and destructive tinkerer.
Top
Re: US Pharmaceutical Pricing
Post by Daryl   » Wed Sep 13, 2017 7:02 am

Daryl
Admiral

Posts: 2202
Joined: Sat Apr 24, 2010 1:57 am
Location: Queensland Australia

To some extent I'm conflicted here.
On one side companies are entitled to make a profit over time, and R&D is expensive.
On the other side when a company executive knows that setting the price of treatment at a millionaire's level will cause a great many people to die, I'm not sure how they sleep at night.

I'm also somewhat bigoted or biased by my experience in the workplace. Now retired, I was my country's representative in many contract and supply negotiations with the US Military/Industrial complex. My US equivalents were the most unethical and unscrupulous people that you could imagine. I won't give too many details, but a single example was a simple but essential aircraft component that was quoted at $800, we countered by having a copy made for about $5, their counter was "Sure, but it doesn't have an airworthyness certificate, so if you use it and a aircraft goes down we'll make sure that you all personally go down with it". We found the original supplier who agreed to provide it for $80 with the airworthyness certificate. The original company then offered to match that, we said go elsewhere and fornicate, and it just so happened as a totally unrelated result our next two fleets were sourced from Europe.
So, if a senior US executive tells me the sky is blue, I'll go out and check.
Top

Return to Politics