the way I'd look at is what's the return-on-capital for pharmaceuticals as a whole.
Generally I think (this is highly subjective and irrational, of course) that I'd be comfortable with a 10%-20% return-on-capital overall. Lower than that and I'd think that risky drugs couldn't get funding; higher and I'd think there's too much rent-seeking.
Perhaps some economists have studied what an optimal ROC might be for pharmaceuticals.
In any case, the gross margin per-pill doesn't really tell you anything about ROC. 99.875% is astounding, but what was invested to get to that point - including the drugs that never made it to market?
Which is why there should be no patents in healthcare. Most research is already publicly-funded, production and distribution should be too. We could drown in cheap medicine, instead we artificially increase the prices by 5000% to fatten the pockets of already super-wealthy parasites.
My wife’s company developed a multiple myeloma immunotherapy that is for people that have had previous treatments of other drugs but then go into remission.
It works so well that their efficacy reports have caveats like “not enough patients that were treated have died yet” to provide meaningful statistics.
The drug was initially developed in china. They presented results at a conference in the USA but no one believed them other than a skeptical Pfizer who sent a big team to china to confirm the data. Pfizer soon invested billions into the company and drug to bring it to market.
The drug’s sales are on track to be $1 billion this year but the stock is heavily depressed because of the china connection.
What kind of focus do biopharma companies put on their stock prices? If a company like the one you described had a great treatment option that could genuinely help people and was raking in money by the boatload, is that “enough” for them as a “winning” business strategy regardless of how outside investors might perceive it?
Biotech companies raise money by selling shares. That's they go public so early compared to any other sector. The more suppressed your share price is, the harder it is to raise the money you need to do research and clinical trials.
Selling $1B of drugs might no necessarily mean they have sufficient free cash flow to do the things they want to do.
It leaves them vulnerable to takeover, for one. They have over $1B cash right now to pay for clinical trials in other markets as well as new indications but their valuation is about 5x that. Someone could leverage the $1B as part of a hostile takeover.
> "Today, the DeSantis administration received U.S. Food and Drug Administration (FDA) approval of its Canadian Prescription Drug Importation Program. The Agency for Health Care Administration (AHCA) submitted this first-of-its-kind plan to safely import cheaper drugs from Canada to the FDA nearly 37 months ago, and after filing a lawsuit against the FDA due to delays, has finally received approval. This approval will save Florida up to $180 million in the first year."
Talk about irony! Ron hates trump, but is afraid to open his mouth too much. Now trump's tariffs might (who knows for sure, he can't seem to make up his mind.) make their cheaper drugs not so cheap.
Crazy how they managed to restrict the competing researchers from obtaining the drug.
How did they do that?
Why is the sale of a super expensive drug used exclusively to treat a super specific type of cancer even controlled in the first place? What is even the argument?
I couldn't think of any argument before. After reading, I can only think of "to restrict competition".
The argument in essence is that only permitting pharmaceutical companies these outrageous profits will induce them to continue investing the likewise outrageous costs of new drug development now that all the low-hanging fruit like antibiotics, and sildenafil and other antihypertensives, has been picked. This extends (usually by implication) to trivial variations in molecular chemistry which have no functional effect on a medication but which are used to extend patent protections solely on the basis of a structural change - a practice also visible in the history of one family of drugs I have mentioned, and one which without some sort of justification might be taken for an example of a law's letter being abused to violate that same law's intent.
Look, I didn't say I buy it. But you asked for the basic argument advocates make in support of such practices, and here it is.
> This extends (usually by implication) to trivial variations in molecular chemistry which have no functional effect on a medication but which are used to extend patent protections solely on the basis of a structural change
How does that work? Does it extend patent protection on the original molecule? Or if not, what stops generic copies of the original version?
Bayh-Dole legislation in the 1990s allowed universities to exclusively license researcher inventions to private parties. Hence:
> "Celgene had acquired the rights to thalidomide patents held by researchers at Rockefeller University in 1992."
Change Bayh-Dole law to non-exclusive licensing, but with some level of royalties paid to institution that originated the patent, and other corporations could have made the drug - and it would be a competitive market, so costs would drop due to lack of a monopoly on the drug.
This one simple change to Bayh-Dole - 'non-exclusive' - would upset the academic-corporate apple cart well beyond pharmaceuticals. Eg the PageRank algorithm created at Stanford could not have been exclusive licensed to Google - any American corporation or person could have applied for a license to the invention, entirely erasing the benefits of a monopolistic patent to the corporation.
One great benefit of this change is that corporations who wanted exclusive patents would have to finance their own private R & D divisions, instead of just capturing the output of taxpayer-financed researchers.
There is some light at the end of the tunnel. I suppose the patent runs out early next year, as the drug was released in 2005 and the generic which is already available but volume limited also has that volume limitation until January 31, 2026. The press release formulates this as if Celgene did this out of graciousness but I suppose it's just that the government granted monopoly ends.
> Celgene has agreed to provide Alvogen with a license to Celgene’s patents required to manufacture and sell an unlimited quantity of generic lenalidomide in the United States beginning no earlier than January 31, 2026.
> But Revlimid is also, I soon learned, extraordinarily expensive, costing nearly $1,000 for each daily pill. (Although, I later discovered, a capsule costs just 25 cents to make.)
That daily pill is 25mg. You can buy 5g of Revlimid's active ingredient for $352.
If you want to get adventurous, you can probably buy 1kg from China or India for $900. Find a university or commercial lab with HPLC and LC/MS and run your own QC for a few hundred bucks. Store the powder in a vacuum-sealed container in a refrigerator. You're set for life.
I've done this sort of thing before, and a lot of people are doing it for GLP agonist drugs. (To say nothing of sports doping, nootropics, etc.)
Sometimes you've gotta take matters into your own hands.
We agree that, while it's nice this is an OPTION, it's a crazy state of affairs, right? I'm tired of the phrase "free market" since it isn't really either of those words.
No one would take the drug for this condition unless the company spent years and a billion dollars proving to the FDA that it was sufficiently safe and effective. It's hard for me to get my mind around the controversy here.
It makes me wonder, is there a way to get this drug from a Chinese or Indian lab? I'm sure there are severe legal repercussions, but purely theoretically. It reminds me of the film The Dallas Buyers' Club
Yes, it's readily available to buy online from India for <$1/pill.
In practice there aren't legal repercussions. If you import scheduled drugs (adderall, opioids, etc.) and get caught that's obviously going to be a big issue. But with most prescription medications, the worst case scenario is that Customs will just toss your package. And the likelihood of that is low; the majority of the time it makes it through undetected.
I've done this in the past with another drug. In the US it was $30/month but from India I got 1000 pills for $30 + $40 expedited shipping. For me the big factor wasn't cost, but rather the convenience of not needing to go through the process of getting a prescription.
> But Revlimid is also, I soon learned, extraordinarily expensive, costing nearly $1,000 for each daily pill.
Thanks to the bargaining power of my nationalised healthcare, my government pays around 1/5th of that, and I'll pay nothing myself.
Revlamid is listed under it's generic name Lenalidomide, price is in pence: https://www.drugtariff.nhsbsa.nhs.uk/#/00791628-DD/DD0079145...
Even that is still an obscene amount if money for something that cost 20p per pill.
The manufacturing cost of a 20p pill has literally nothing to do with its price.
3 replies →
So $200/pill for something that costs them $0.25 to make. That's still obscene.
the way I'd look at is what's the return-on-capital for pharmaceuticals as a whole.
Generally I think (this is highly subjective and irrational, of course) that I'd be comfortable with a 10%-20% return-on-capital overall. Lower than that and I'd think that risky drugs couldn't get funding; higher and I'd think there's too much rent-seeking.
Perhaps some economists have studied what an optimal ROC might be for pharmaceuticals.
In any case, the gross margin per-pill doesn't really tell you anything about ROC. 99.875% is astounding, but what was invested to get to that point - including the drugs that never made it to market?
1 reply →
Which is why there should be no patents in healthcare. Most research is already publicly-funded, production and distribution should be too. We could drown in cheap medicine, instead we artificially increase the prices by 5000% to fatten the pockets of already super-wealthy parasites.
17 replies →
My wife’s company developed a multiple myeloma immunotherapy that is for people that have had previous treatments of other drugs but then go into remission.
It works so well that their efficacy reports have caveats like “not enough patients that were treated have died yet” to provide meaningful statistics.
The drug was initially developed in china. They presented results at a conference in the USA but no one believed them other than a skeptical Pfizer who sent a big team to china to confirm the data. Pfizer soon invested billions into the company and drug to bring it to market.
The drug’s sales are on track to be $1 billion this year but the stock is heavily depressed because of the china connection.
What kind of focus do biopharma companies put on their stock prices? If a company like the one you described had a great treatment option that could genuinely help people and was raking in money by the boatload, is that “enough” for them as a “winning” business strategy regardless of how outside investors might perceive it?
Biotech companies raise money by selling shares. That's they go public so early compared to any other sector. The more suppressed your share price is, the harder it is to raise the money you need to do research and clinical trials.
Selling $1B of drugs might no necessarily mean they have sufficient free cash flow to do the things they want to do.
It leaves them vulnerable to takeover, for one. They have over $1B cash right now to pay for clinical trials in other markets as well as new indications but their valuation is about 5x that. Someone could leverage the $1B as part of a hostile takeover.
Any chance you could share what therapy this is or at least a hint?
Remember the time that Florida fought the federal government for access to socialized medicine?
https://www.flgov.com/eog/news/press/2024/florida-becomes-fi...
> "Today, the DeSantis administration received U.S. Food and Drug Administration (FDA) approval of its Canadian Prescription Drug Importation Program. The Agency for Health Care Administration (AHCA) submitted this first-of-its-kind plan to safely import cheaper drugs from Canada to the FDA nearly 37 months ago, and after filing a lawsuit against the FDA due to delays, has finally received approval. This approval will save Florida up to $180 million in the first year."
Talk about irony! Ron hates trump, but is afraid to open his mouth too much. Now trump's tariffs might (who knows for sure, he can't seem to make up his mind.) make their cheaper drugs not so cheap.
Crazy how they managed to restrict the competing researchers from obtaining the drug.
How did they do that?
Why is the sale of a super expensive drug used exclusively to treat a super specific type of cancer even controlled in the first place? What is even the argument?
I couldn't think of any argument before. After reading, I can only think of "to restrict competition".
The argument in essence is that only permitting pharmaceutical companies these outrageous profits will induce them to continue investing the likewise outrageous costs of new drug development now that all the low-hanging fruit like antibiotics, and sildenafil and other antihypertensives, has been picked. This extends (usually by implication) to trivial variations in molecular chemistry which have no functional effect on a medication but which are used to extend patent protections solely on the basis of a structural change - a practice also visible in the history of one family of drugs I have mentioned, and one which without some sort of justification might be taken for an example of a law's letter being abused to violate that same law's intent.
Look, I didn't say I buy it. But you asked for the basic argument advocates make in support of such practices, and here it is.
> This extends (usually by implication) to trivial variations in molecular chemistry which have no functional effect on a medication but which are used to extend patent protections solely on the basis of a structural change
How does that work? Does it extend patent protection on the original molecule? Or if not, what stops generic copies of the original version?
2 replies →
it's not a great argument since iirc half of pharmaceutical company spending is on marketing; far far outstripping r&d
49 replies →
This is trickle down economics for healthcare. It is stupid. No, it is worse than that, it is evil.
Bayh-Dole legislation in the 1990s allowed universities to exclusively license researcher inventions to private parties. Hence:
> "Celgene had acquired the rights to thalidomide patents held by researchers at Rockefeller University in 1992."
Change Bayh-Dole law to non-exclusive licensing, but with some level of royalties paid to institution that originated the patent, and other corporations could have made the drug - and it would be a competitive market, so costs would drop due to lack of a monopoly on the drug.
This one simple change to Bayh-Dole - 'non-exclusive' - would upset the academic-corporate apple cart well beyond pharmaceuticals. Eg the PageRank algorithm created at Stanford could not have been exclusive licensed to Google - any American corporation or person could have applied for a license to the invention, entirely erasing the benefits of a monopolistic patent to the corporation.
One great benefit of this change is that corporations who wanted exclusive patents would have to finance their own private R & D divisions, instead of just capturing the output of taxpayer-financed researchers.
There is some light at the end of the tunnel. I suppose the patent runs out early next year, as the drug was released in 2005 and the generic which is already available but volume limited also has that volume limitation until January 31, 2026. The press release formulates this as if Celgene did this out of graciousness but I suppose it's just that the government granted monopoly ends.
https://web.archive.org/web/20220811173542/https://ir.celgen...
> Celgene has agreed to provide Alvogen with a license to Celgene’s patents required to manufacture and sell an unlimited quantity of generic lenalidomide in the United States beginning no earlier than January 31, 2026.
> But Revlimid is also, I soon learned, extraordinarily expensive, costing nearly $1,000 for each daily pill. (Although, I later discovered, a capsule costs just 25 cents to make.)
That daily pill is 25mg. You can buy 5g of Revlimid's active ingredient for $352.
> https://www.sigmaaldrich.com/US/en/product/aldrich/901558
200 doses at less than $2/ea.
If you want to get adventurous, you can probably buy 1kg from China or India for $900. Find a university or commercial lab with HPLC and LC/MS and run your own QC for a few hundred bucks. Store the powder in a vacuum-sealed container in a refrigerator. You're set for life.
I've done this sort of thing before, and a lot of people are doing it for GLP agonist drugs. (To say nothing of sports doping, nootropics, etc.)
Sometimes you've gotta take matters into your own hands.
We agree that, while it's nice this is an OPTION, it's a crazy state of affairs, right? I'm tired of the phrase "free market" since it isn't really either of those words.
No one would take the drug for this condition unless the company spent years and a billion dollars proving to the FDA that it was sufficiently safe and effective. It's hard for me to get my mind around the controversy here.
It makes me wonder, is there a way to get this drug from a Chinese or Indian lab? I'm sure there are severe legal repercussions, but purely theoretically. It reminds me of the film The Dallas Buyers' Club
Yes, it's readily available to buy online from India for <$1/pill.
In practice there aren't legal repercussions. If you import scheduled drugs (adderall, opioids, etc.) and get caught that's obviously going to be a big issue. But with most prescription medications, the worst case scenario is that Customs will just toss your package. And the likelihood of that is low; the majority of the time it makes it through undetected.
I've done this in the past with another drug. In the US it was $30/month but from India I got 1000 pills for $30 + $40 expedited shipping. For me the big factor wasn't cost, but rather the convenience of not needing to go through the process of getting a prescription.
How do you know you're actually getting what you bought?
1 reply →