The Median Cost of Bringing a Drug to Market is...

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Sep 29, 2011
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#21
You kinda forget my original point. Investors have to get a reasonable return or guess what, they don’t invest. But you’re gonna make a decision on some idea of gross margin or what the GAO says. Guess what, the GAO might be the last place I’d look for data to base on which to base an investment.


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You framed this as an investment, not me. My point was that the high cost of drugs is not because of increasing R&D costs overall as they aren't really increasing.


Ok, bear with me a sec. Let's pretend that you thought that man-made climate change was a real threat.
And, let's say that China did restrict the cost of a Tesla to $30000 USD which means that Telsa is essentially break-even there and cannot gain money for battery development.

Someone proposes that in the US if your car gets totaled, if you replace it with a Tesla, your insurance company will pay Tesla a price high enough for a model 3 so that Tesla can continue to develop batteries to "save the planet" Tesla and the insurance company's contract negotiation company settle on a price around $200000 for a model 3 with a 10% deductible so the consumer pays $20000 directly and insurance rates adjust to cover this deal.
Good idea so that there is a reasonable rate of return on investment in Tesla?

Because, essentially, that is in a nutshell what is being defended here. Drug prices elsewhere are restricted. We have a convoluted system where a third-party through a middle-man negotiates the prices here and at levels that allow R&D to continue (along with a rate of return) instead of what the consumer actually thinks the product is worth. This isn't really capitalism.
Good god, what you don’t understand is astounding.

You somehow think current R&D costs have anything to do with current drug prices, they don’t.
For some reason you think the industry is somehow obligated to spend more today than they did yesterday on R&D in order to support the prices they charge. That’s absurd.
As I’ve said, it’s clear you don’t understand the financial reporting or the economics of the pharma industry.

As I said, I think the price of drugs is probably too high, but simply basing that on gross margin or a GAO report is ludicrous.


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Oct 30, 2007
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#22
You framed this as an investment, not me. My point was that the high cost of drugs is not because of increasing R&D costs overall as they aren't really increasing.

Ok, bear with me a sec. Let's pretend that you thought that man-made climate change was a real threat.
And, let's say that China did restrict the cost of a Tesla to $30000 USD which means that Telsa is essentially break-even there and cannot gain money for battery development.

Someone proposes that in the US if your car gets totaled, if you replace it with a Tesla, your insurance company will pay Tesla a price high enough for a model 3 so that Tesla can continue to develop batteries to "save the planet" Tesla and the insurance company's contract negotiation company settle on a price around $200000 for a model 3 with a 10% deductible so the consumer pays $20000 directly and insurance rates adjust to cover this deal.
Good idea so that there is a reasonable rate of return on investment in Tesla?

Because, essentially, that is in a nutshell what is being defended here. Drug prices elsewhere are restricted. We have a convoluted system where a third-party through a middle-man negotiates the prices here and at levels that allow R&D to continue (along with a rate of return) instead of what the consumer actually thinks the product is worth. This isn't really capitalism.
Under this scenario, Tesla would give the middle finger to China and refuse to sell their vehicles there. Their R&D would have to be funded by the profit they made from countries where their prices weren't restricted. The Chinese people simply wouldn't have access to Tesla vehicles.

Maybe we would be better off if drug companies took a harsher stance with countries that restrict drug prices. We shouldn't be forced to subsidize the cost of R&D for the rest of the world.
 

steross

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#23
Under this scenario, Tesla would give the middle finger to China and refuse to sell their vehicles there. Their R&D would have to be funded by the profit they made from countries where their prices weren't restricted. The Chinese people simply wouldn't have access to Tesla vehicles.

Maybe we would be better off if drug companies took a harsher stance with countries that restrict drug prices. We shouldn't be forced to subsidize the cost of R&D for the rest of the world.
Why would an electric car maker do that while pharmaceutical companies do not?
 

steross

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#24
Good god, what you don’t understand is astounding.

You somehow think current R&D costs have anything to do with current drug prices, they don’t.
For some reason you think the industry is somehow obligated to spend more today than they did yesterday on R&D in order to support the prices they charge. That’s absurd.
As I’ve said, it’s clear you don’t understand the financial reporting or the economics of the pharma industry.

As I said, I think the price of drugs is probably too high, but simply basing that on gross margin or a GAO report is ludicrous.


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Please show me where exactly I said anything about current R&D costs are due to current drug prices? Where did I list any obligation to spend anything? The hypothetical post was already four paragraphs long did you expect me to detail out long range modeling of the financial operations of the hypothetical company?

That is your MO as I mentioned before. You don't have an answer to the actual thing being said? Why, ignore it, claim superior knowledge, toss out a strawman or two, and claim the other person is ignorant when you have absolutely no knowledge of what the other person knows other than the false assumptions that you made up because you can't answer what was written.
 

NotOnTV

BRB -- Taking an okie leak
Sep 14, 2010
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#25
Maybe we would be better off if drug companies took a harsher stance with countries that restrict drug prices. We shouldn't be forced to subsidize the cost of R&D for the rest of the world.
Yeah whatever happened to, if you can't pay the price, you don't getta the drugs?
 
Sep 29, 2011
982
199
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Breckenridge, CO
#26
Good god, what you don’t understand is astounding.

You somehow think current R&D costs have anything to do with current drug prices, they don’t.
For some reason you think the industry is somehow obligated to spend more today than they did yesterday on R&D in order to support the prices they charge. That’s absurd.
As I’ve said, it’s clear you don’t understand the financial reporting or the economics of the pharma industry.

As I said, I think the price of drugs is probably too high, but simply basing that on gross margin or a GAO report is ludicrous.


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Please show me where exactly I said anything about current R&D costs are due to current drug prices? Where did I list any obligation to spend anything? The hypothetical post was already four paragraphs long did you expect me to detail out long range modeling of the financial operations of the hypothetical company?

That is your MO as I mentioned before. You don't have an answer to the actual thing being said? Why, ignore it, claim superior knowledge, toss out a strawman or two, and claim the other person is ignorant when you have absolutely no knowledge of what the other person knows other than the false assumptions that you made up because you can't answer what was written.
You said: “You framed this as an investment, not me. My point was that the high cost of drugs is not because of increasing R&D costs overall as they aren't really increasing.”

Dude, the cost of a drug is largely based on the R&D costs expended BEFORE the drug is even available. Current R&D costs are largely for drugs that have yet to hit the market. So when you say “the high cost of drugs is not because of increasing R&D costs overall as they aren't really increasing”, you’re tacitly suggesting the current cost of drugs should be tied to current R&D expenditures. You’re are wildly mistaken.

I’m sorry you can’t understand the simplest example of the economics of developing one drug. Clearly you’re not a candidate for higher (economic or financial) education.


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Oct 30, 2007
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#27
Why would an electric car maker do that while pharmaceutical companies do not?
I don't really know that much about the pharmaceutical industry and how they operate abroad. You could probably answer that question a lot better than me. Do you think that drug companies should change the way they deal with countries that restrict prices so that the U.S. doesn't have to bear the burden of the cost of new drug development?
 
Sep 29, 2011
982
199
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60
Breckenridge, CO
#28
Why would an electric car maker do that while pharmaceutical companies do not?
I don't really know that much about the pharmaceutical industry and how they operate abroad. You could probably answer that question a lot better than me. Do you think that drug companies should change the way they deal with countries that restrict prices so that the U.S. doesn't have to bear the burden of the cost of new drug development?
Individual Pharma companies negotiate with foreign governments (that have government run medical industries) for the price of a drug. If they can’t reach a deal, that drug is not available in that country. The result is lower drug costs in countries that can reach a deal with the company. In essence, unregulated US drug prices subsidize regulated foreign drug prices. If the US starts regulating drug prices (meaning they’ll regulate investment returns), foreign drug prices will, without question, either go up or become unavailable.


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steross

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#29
You said: “You framed this as an investment, not me. My point was that the high cost of drugs is not because of increasing R&D costs overall as they aren't really increasing.”

Dude, the cost of a drug is largely based on the R&D costs expended BEFORE the drug is even available. Current R&D costs are largely for drugs that have yet to hit the market. So when you say “the high cost of drugs is not because of increasing R&D costs overall as they aren't really increasing”, you’re tacitly suggesting the current cost of drugs should be tied to current R&D expenditures. You’re are wildly mistaken.

I’m sorry you can’t understand the simplest example of the economics of developing one drug. Clearly you’re not a candidate for higher (economic or financial) education.


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LOL. Still attempting to insult my economic intelligence while not understanding the difference between the microeconomics of a single drug company and the macroeconomics of the industry that is actually being discussed. Sure, buddy, sure.


BTW, oh brilliant one, I took your advice and bought the companies you were pushing last month as a lot of upside. Now, I'm down 18% on one and 21% on the other. I guess I really am financially stupid. What do I do now?

Don't' worry, I may be stupid, but I am not so stupid as to take message board financial advice from some arrogant random on the internet who is high on himself and pumping his own industry that is as far as possible from smart money right now. I was 70% cash after selling A LOT on 2/21. There will be a time for pipelines, but obviously not early Feb this year. You can keep your attempts at belittling me, I'll just keep my money, thanks.
 
Oct 30, 2007
3,829
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#30
Individual Pharma companies negotiate with foreign governments (that have government run medical industries) for the price of a drug. If they can’t reach a deal, that drug is not available in that country. The result is lower drug costs in countries that can reach a deal with the company. In essence, unregulated US drug prices subsidize regulated foreign drug prices. If the US starts regulating drug prices (meaning they’ll regulate investment returns), foreign drug prices will, without question, either go up or become unavailable.
You would have to think that innovation would be stifled as well if the U.S. started regulating drug prices. Companies would be less likely to take on the risk of developing new drugs if the potential ROI was lower.

It seems that everything surrounding healthcare is a convoluted mess. Everyone agrees that reform is necessary, but it's far from clear what the right changes would be to fix it.
 
Sep 29, 2011
982
199
593
60
Breckenridge, CO
#31
You said: “You framed this as an investment, not me. My point was that the high cost of drugs is not because of increasing R&D costs overall as they aren't really increasing.”

Dude, the cost of a drug is largely based on the R&D costs expended BEFORE the drug is even available. Current R&D costs are largely for drugs that have yet to hit the market. So when you say “the high cost of drugs is not because of increasing R&D costs overall as they aren't really increasing”, you’re tacitly suggesting the current cost of drugs should be tied to current R&D expenditures. You’re are wildly mistaken.

I’m sorry you can’t understand the simplest example of the economics of developing one drug. Clearly you’re not a candidate for higher (economic or financial) education.


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LOL. Still attempting to insult my economic intelligence while not understanding the difference between the microeconomics of a single drug company and the macroeconomics of the industry that is actually being discussed. Sure, buddy, sure.


BTW, oh brilliant one, I took your advice and bought the companies you were pushing last month as a lot of upside. Now, I'm down 18% on one and 21% on the other. I guess I really am financially stupid. What do I do now?

Don't' worry, I may be stupid, but I am not so stupid as to take message board financial advice from some arrogant random on the internet who is high on himself and pumping his own industry that is as far as possible from smart money right now. I was 70% cash after selling A LOT on 2/21. There will be a time for pipelines, but obviously not early Feb this year. You can keep your attempts at belittling me, I'll just keep my money, thanks.
Complaints about drug prices are not so much about macro drug prices, but individual drug prices that are very expensive. Thus the individual drug price example which is instructive of the entire industry. But you know that because you’re an economic whiz.

BTW You’re getting a +9% yield. Do you need your investment back? If not, why not wait on your distributions? Did you realize those were energy stocks, impacted by the price of crude? Most energy stocks are down by similar amounts. Most all stocks are down +10%.


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Sep 29, 2011
982
199
593
60
Breckenridge, CO
#32
Individual Pharma companies negotiate with foreign governments (that have government run medical industries) for the price of a drug. If they can’t reach a deal, that drug is not available in that country. The result is lower drug costs in countries that can reach a deal with the company. In essence, unregulated US drug prices subsidize regulated foreign drug prices. If the US starts regulating drug prices (meaning they’ll regulate investment returns), foreign drug prices will, without question, either go up or become unavailable.
You would have to think that innovation would be stifled as well if the U.S. started regulating drug prices. Companies would be less likely to take on the risk of developing new drugs if the potential ROI was lower.

It seems that everything surrounding healthcare is a convoluted mess. Everyone agrees that reform is necessary, but it's far from clear what the right changes would be to fix it.
Absolutely correct. Why spend $1b to develop a new drug with no clear path to an economically acceptable return?

Just wait until we get (hopefully never) universal/single payer healthcare and the government determines how much your doctors make. The quality and availability of our healthcare will suffer dramatically.


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steross

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#33
I don't really know that much about the pharmaceutical industry and how they operate abroad. You could probably answer that question a lot better than me. Do you think that drug companies should change the way they deal with countries that restrict prices so that the U.S. doesn't have to bear the burden of the cost of new drug development?
I know that pharmaceutical companies will at the drop of a hat quit making medications in the US market if they are not profitable. We have had significant shortages of many really good generic drugs in recent years. There are many factors and I'm not saying that I necessarily blame the companies. But, it is there.
Now, on the other hand, they are producing drugs for foreign countries. While obviously not as profitable as what they do here, they clearly get enough to make it worth doing.

I guess the answer to your question would be like saying that a car dealership has 5 customers that bargain and one guy that just comes in and pays sticker price. Should the car dealerships change the way they deal with the 5 bargaining customers so that the one guy doesn't bear the burden?
 

kaboy42

Territorial Marshal
May 2, 2007
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#34
Absolutely correct. Why spend $1b to develop a new drug with no clear path to an economically acceptable return?
There have been MANY drug companies take on and develop drugs to cure or treat people suffering from extremely rare diseases. We are talking so rare that only tens of thousands of people worldwide are afflicted.

We've worked on a project that was for an extremely rare infant disease. The treatment didn't cure the infant, didn't really even treat the disease... the drug was literally being developed just to possibly lengthen the life span of these infants (we are talking months to possibly years) in hopes something else would come along to truly treat their disorder.

The drug companies never recoup the costs for this type R&D and clinical trials to get drugs like this to market. Sometimes the drug they develop can be used on other indications, but most of the time that's not the case.
 
Sep 29, 2011
982
199
593
60
Breckenridge, CO
#35
I don't really know that much about the pharmaceutical industry and how they operate abroad. You could probably answer that question a lot better than me. Do you think that drug companies should change the way they deal with countries that restrict prices so that the U.S. doesn't have to bear the burden of the cost of new drug development?
I know that pharmaceutical companies will at the drop of a hat quit making medications in the US market if they are not profitable. We have had significant shortages of many really good generic drugs in recent years. There are many factors and I'm not saying that I necessarily blame the companies. But, it is there.
Now, on the other hand, they are producing drugs for foreign countries. While obviously not as profitable as what they do here, they clearly get enough to make it worth doing.

I guess the answer to your question would be like saying that a car dealership has 5 customers that bargain and one guy that just comes in and pays sticker price. Should the car dealerships change the way they deal with the 5 bargaining customers so that the one guy doesn't bear the burden?
You’re missing a key element in all your look-a-like examples in this thread. The Pharma’s are producing patented products with a limited life span and only available from the developer. Car dealers are selling products that can be had down the street from multiple suppliers. That’s an apple seed vs an orange grove.


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Sep 29, 2011
982
199
593
60
Breckenridge, CO
#36
Absolutely correct. Why spend $1b to develop a new drug with no clear path to an economically acceptable return?
There have been MANY drug companies take on and develop drugs to cure or treat people suffering from extremely rare diseases. We are talking so rare that only tens of thousands of people worldwide are afflicted.

We've worked on a project that was for an extremely rare infant disease. The treatment didn't cure the infant, didn't really even treat the disease... the drug was literally being developed just to possibly lengthen the life span of these infants (we are talking months to possibly years) in hopes something else would come along to truly treat their disorder.

The drug companies never recoup the costs for this type R&D and clinical trials to get drugs like this to market. Sometimes the drug they develop can be used on other indications, but most of the time that's not the case.
Quite correct.


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Jul 25, 2018
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Boulder, CO
#37
There have been MANY drug companies take on and develop drugs to cure or treat people suffering from extremely rare diseases. We are talking so rare that only tens of thousands of people worldwide are afflicted.

We've worked on a project that was for an extremely rare infant disease. The treatment didn't cure the infant, didn't really even treat the disease... the drug was literally being developed just to possibly lengthen the life span of these infants (we are talking months to possibly years) in hopes something else would come along to truly treat their disorder.

The drug companies never recoup the costs for this type R&D and clinical trials to get drugs like this to market. Sometimes the drug they develop can be used on other indications, but most of the time that's not the case.
So how exactly did Skreli pull of the insulin scam?
 

ksupoke

We don't need no, thot kuntrol
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#38
Now all these companies need to do is detail out all the various gvt subsidies they receive via tax breaks, grants, insurance overcharges etc... and we can determine what the actual costs are.
 

ksupoke

We don't need no, thot kuntrol
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#39
Fun fact
Pharma spends more on marketing than r&d
If you buy the poor pharma ploy take a look at the history of taxol

and big pharma isn’t remotely a capitalist endeavor, insurance is its target and our healthcare payment vehicle means gvt guaranteed profits for insurance.
Great investment though
 
Sep 29, 2011
982
199
593
60
Breckenridge, CO
#40
Fun fact
Pharma spends more on marketing than r&d
If you buy the poor pharma ploy take a look at the history of taxol

and big pharma isn’t remotely a capitalist endeavor, insurance is its target and our healthcare payment vehicle means gvt guaranteed profits for insurance.
Great investment though
Here’s another fun fact, Pharma doesn’t spend more on marketing than R&D. Studies that claim that mis-categorize SG&A costs while also assigning the cost of give-away drugs as marketing costs instead of production costs.

It always helps when study preparers spend the time to actually read and comprehend financial statements and SEC disclosures.


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