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?
> Celgene said it spent $800 million to develop Revlimid and spent several hundred million more on additional trials to study the use of the drug in other cancers. Those combined figures represent about 2% to 3% of Revlimid sales through 2018.
These guys are making 300% ROI in annual revenue from their one-time investment into R&D. In order for that to be fair (in line with your 20% average ROI target), they would need to be testing 15 new drugs per year, and if all of the others had failed, then it would be fair to markup the one that succeeded by this amount. But according to the Wikipedia page, the company has investigated less than 10 drugs in their entire existence, much less 15 drugs per year.
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.
Are you thinking this through? It costs billions of dollars to bring a new drug to market --- before sales, admin, and marketing costs --- and most attempts to bring drugs to market fail. In the very best case for the public, the drugs are incredibly cheap to manufacture; that's an achievement for a pharma company. Do you see how the incentives work here?
> It costs billions of dollars to bring a new drug to market
Have you ever wondered why this is the case?
In the "Golden Age" of pharmaceutical development -- from roughly 1930 through 1962 -- it cost orders of magnitude less, adjusted for inflation, was much faster, and outcomes were no worse.
I'd argue that the new (post-1962) Phases II and III -- drug efficacy studies -- are wholly unnecessary and are indeed unethical.
First, because you can't even presume to gauge a drug's "efficacy" without huge and exorbitantly expensive trials -- and, even then, trials can be inconclusive.
Second, because the FDA selectively ignores efficacy data. See, e.g,. flibanserin and certain Alzheimer's drugs that have been approved recently. This was scandalous, but not nearly scandalous enough.
Third, the statistically sound way to find both rare harms and true-to-life benefits is to watch how a drug behaves in millions of real patients, not in a few thousand volunteers. Modern electronic-health-record feeds, claims databases, and wearable data streams let regulators run near-real-time Bayesian safety signals across populations that dwarf any Phase III cohort; the surveillance network that caught rofecoxib’s cardiovascular signal in 2004 had orders-of-magnitude more patient exposure than the approving trials, and today’s infrastructure is far denser.
It would literally be 10x faster, 100x cheaper, and 100x easier to grant conditional approval after Phase I and then run postmarketing surveillance. You'd better signal-to-noise on both efficacy and harm at a small fraction of the cost and time. It's downright perverse to outlaw early access to promising investigational drugs, forcing patients to wait 8-12 years, and then foot them with a multibillion-dollar bill for ritualized trials that are unnecessary -- for the same ends could have been attained in far better ways.
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?
> Celgene said it spent $800 million to develop Revlimid and spent several hundred million more on additional trials to study the use of the drug in other cancers. Those combined figures represent about 2% to 3% of Revlimid sales through 2018.
These guys are making 300% ROI in annual revenue from their one-time investment into R&D. In order for that to be fair (in line with your 20% average ROI target), they would need to be testing 15 new drugs per year, and if all of the others had failed, then it would be fair to markup the one that succeeded by this amount. But according to the Wikipedia page, the company has investigated less than 10 drugs in their entire existence, much less 15 drugs per year.
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.
Are you thinking this through? It costs billions of dollars to bring a new drug to market --- before sales, admin, and marketing costs --- and most attempts to bring drugs to market fail. In the very best case for the public, the drugs are incredibly cheap to manufacture; that's an achievement for a pharma company. Do you see how the incentives work here?
> It costs billions of dollars to bring a new drug to market
Have you ever wondered why this is the case?
In the "Golden Age" of pharmaceutical development -- from roughly 1930 through 1962 -- it cost orders of magnitude less, adjusted for inflation, was much faster, and outcomes were no worse.
I'd argue that the new (post-1962) Phases II and III -- drug efficacy studies -- are wholly unnecessary and are indeed unethical.
First, because you can't even presume to gauge a drug's "efficacy" without huge and exorbitantly expensive trials -- and, even then, trials can be inconclusive.
Second, because the FDA selectively ignores efficacy data. See, e.g,. flibanserin and certain Alzheimer's drugs that have been approved recently. This was scandalous, but not nearly scandalous enough.
Third, the statistically sound way to find both rare harms and true-to-life benefits is to watch how a drug behaves in millions of real patients, not in a few thousand volunteers. Modern electronic-health-record feeds, claims databases, and wearable data streams let regulators run near-real-time Bayesian safety signals across populations that dwarf any Phase III cohort; the surveillance network that caught rofecoxib’s cardiovascular signal in 2004 had orders-of-magnitude more patient exposure than the approving trials, and today’s infrastructure is far denser.
It would literally be 10x faster, 100x cheaper, and 100x easier to grant conditional approval after Phase I and then run postmarketing surveillance. You'd better signal-to-noise on both efficacy and harm at a small fraction of the cost and time. It's downright perverse to outlaw early access to promising investigational drugs, forcing patients to wait 8-12 years, and then foot them with a multibillion-dollar bill for ritualized trials that are unnecessary -- for the same ends could have been attained in far better ways.
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Are you arguing this can't be achieved by the public sector too? Or that pharma companies don't make obscene margins?
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