Comment by throwawaymaths
1 year ago
it's not a great argument since iirc half of pharmaceutical company spending is on marketing; far far outstripping r&d
1 year ago
it's not a great argument since iirc half of pharmaceutical company spending is on marketing; far far outstripping r&d
2024 numbers -- Selling, General & Admin vs. R&D
Roche (Pharma Division): 7533 MCHF vs. 11096 MCHF
Novartis: 12566 MUSD vs. 10022 MUSD
Pfizer: 14730 MUSD vs. 10822 MUSD
Eli Lilly: 8594 MUSD vs. 10991 MUSD
AstraZeneca: 19977 MUSD vs. 13583 MUSD
Johnson & Johnson: 22869 MUSD vs. 17232 MUSD
The left side here contains more than just marketing, and already "far far outstripping" seems like a mischaracterization.
For comparison, the average R&D spend between these firms is bigger than the 2024 NSF budget (~9bn) and bigger than 1/4 of the 2024 NIH budget (~37bn).
Also worth considering that this only includes internal R&D, not R&D acquired through acquisition of smaller biotech firms (known as in process R&D). VC investment in biotech startups is, at least in part, built around the assumption that acquisition by a larger pharmaceutical company is a viable exit strategy. To take the example of Eli Lilly, I think they spent an additional 10-20% of their R&D budget on IPR&D in 2024, though this obviously can fluctuate more year to year. They acquired Morphic, which produces a pharmaceutical that treats IBS, and Scorpion Therapeutics, which produces a precision oncology treatment, this year and I'm guessing neither spent much on consumer sales.
I think you meant to say NIH for the second budget number?
correct, edited, thanks
That's part of it, but pharma is also a portfolio business, like VC or music; the winners have to pay for the losers.
(I don't know how much that matters in this case, where a tiny company lucked into a blockbuster and then used every lever in the system to protect their exclusivity).
Yeah, nobody serious is really arguing the winners shouldn't pay for the losers. How many times over, though?
I sort of don't care, as long as investor value isn't being protected abusively, by anticompetitive schemes with the patent system and exclusivity. We pay lots of money for all sorts of things, most of which don't actually matter to our lives; pharmaceuticals matter a great deal, and I'm OK with the idea that advancements are incentivized by a time-limited lane for nosebleed pricing.
(Pharmaceutical costs, all in, across the board, are a relatively small component of total health spending in the US. They're not why your health insurance is so expensive.)
This is mostly a story about anticompetitive abuses, so that question isn't super relevant to the story. I'm just answering the claim that invisible marketing/SG&A costs are why drugs cost so much. They also cost a lot because most drugs fail, sometimes after billions invested.
well but the portfolio managers in this case could really do a much better job at picking hits. we wouldn't have 20 years of failing Alzheimer's drugs if pharma identified that the protein hypothesis was junk (which people were talking about in the aughts)
1 reply →
And a lot of pharma research is based on publicly-funded research in the first place.
Sure, but that's a bit of a red herring. The largest expense in bringing a new prescription drug to market is the phase 3 clinical trial, which now costs on the order of $1B each. Those often fail, so it's a huge gamble. There is very little public funding for type of research.
And a drug like Revlimid makes its manufacturer tens to hundreds of billions; the "legacy" portfolio in which BMS classes it pulled in a cool $5.6b just in Q1 '25, of which Revlimid itself was about a sixth, or just under a billion - down by almost half year on year. See https://www.bms.com/assets/bms/us/en-us/pdf/investor-info/do..., pp. 8-9.
It is as if VCs in the tech industry demanded the taxpayer guarantee them a healthy rate of profit, to a standard of health the VCs themselves are privileged to define. Indeed, as with Allred and the regional airlines, perhaps now we see whence Altman has cribbed his "innovation."
5 replies →
"How can we lower the cost of phase 3 clinical trials without allowing non-functional medication (scams) to proliferate" is very important. The point of a phase 3 trial is to prove that a medication treats what it claims to treat.
Phase 3 trials don’t cost $1B - they’re more on the order of $20M.
2 replies →
The NIH already creates grants for Phase 1 and Phase 2 trials. It's a bit insane that we don't also do phase 3 trials. Heck, even drug manufacturing is already done both by the DoD and the VA. It's crazy that we have a vision that private investment will somehow make things either cheaper, more affordable, or more available.
Big pharma is providing very little benefit and a lot of cost. We've seen their playbook with people like Martin Shkreli who'll buy up patents to existing drugs and jack up the price to make a quick buck. Do we really need that sort of "private investment"?
22 replies →
that number is not correct. you can get phase trials done in 100M ish. IIRC the 1B number is average cost, all three phases, including drug failures.
the argument might be, the more profits the pharma's make, the more available cash to buy out poltiicians or create SuperPAC's or whatever they have at hand..
America, the land of the dollar
>America, the land of the dollar
Correction: America, the land of the rent-seeking.