Corante

About this Author
DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

Chemistry and Drug Data: Drugbank
Emolecules
ChemSpider
Chempedia Lab
Synthetic Pages
Organic Chemistry Portal
PubChem
Not Voodoo
DailyMed
Druglib
Clinicaltrials.gov

Chemistry and Pharma Blogs:
Org Prep Daily
The Haystack
Kilomentor
A New Merck, Reviewed
Liberal Arts Chemistry
Electron Pusher
All Things Metathesis
C&E News Blogs
Chemiotics II
Chemical Space
Noel O'Blog
In Vivo Blog
Terra Sigilatta
BBSRC/Douglas Kell
ChemBark
Realizations in Biostatistics
Chemjobber
Pharmalot
ChemSpider Blog
Pharmagossip
Med-Chemist
Organic Chem - Education & Industry
Pharma Strategy Blog
No Name No Slogan
Practical Fragments
SimBioSys
The Curious Wavefunction
Natural Product Man
Fragment Literature
Chemistry World Blog
Synthetic Nature
Chemistry Blog
Synthesizing Ideas
Business|Bytes|Genes|Molecules
Eye on FDA
Chemical Forums
Depth-First
Symyx Blog
Sceptical Chymist
Lamentations on Chemistry
Computational Organic Chemistry
Mining Drugs
Henry Rzepa


Science Blogs and News:
Bad Science
The Loom
Uncertain Principles
Fierce Biotech
Blogs for Industry
Omics! Omics!
Young Female Scientist
Notional Slurry
Nobel Intent
SciTech Daily
Science Blog
FuturePundit
Aetiology
Gene Expression (I)
Gene Expression (II)
Sciencebase
Pharyngula
Adventures in Ethics and Science
Transterrestrial Musings
Slashdot Science
Cosmic Variance
Biology News Net


Medical Blogs
DB's Medical Rants
Science-Based Medicine
GruntDoc
Respectful Insolence
Diabetes Mine


Economics and Business
Marginal Revolution
The Volokh Conspiracy
Knowledge Problem


Politics / Current Events
Virginia Postrel
Instapundit
Belmont Club
Mickey Kaus


Belles Lettres
Uncouth Reflections
Arts and Letters Daily
In the Pipeline: Don't miss Derek Lowe's excellent commentary on drug discovery and the pharma industry in general at In the Pipeline

In the Pipeline

« Merrimack Wins One | Main | Can Anything Stop Pfizer-AstraZeneca From Going Through? »

May 1, 2014

Another Whack at the Cost of Drugs Issue

Email This Entry

Posted by Derek

I wanted to highlight this post by Wavefunction on drug pricing. He's addressing the peole who want to know how come a drug with $X of ingredients in it can sell for some multiple of that price, and I'm glad he's making the effort. That's a tough crowd to convince (I've taken several swings at the same topic myself). He emphasizes the difference between the cost of manufacturing something versus the cost of discovering it, which is exactly right, but the people arguing about this issue will usually dispute any realistic estimate of those discovery costs as well. But it's a point that has to be made. It's not that there's no way that a drug could ever be priced too high. It's just that they can also be priced too low.

Comments (17) + TrackBacks (0) | Category: Drug Prices


COMMENTS

1. Anonymous on May 1, 2014 9:54 AM writes...

Ash is certainly right about the high R&D costs However, even if discovering Sovaldi cost $1, Gilead can, and should, charge what the market will bear for it. That's capitalism.

Permalink to Comment

2. annon on May 1, 2014 10:23 AM writes...

Gillead is being a bit too greedy on this one. There's more to the legal drug trade than just making money, and helping human health at a reasonable cost is one obligation if you are going to be in this space.

Permalink to Comment

3. Chemjobber on May 1, 2014 10:41 AM writes...

#2 has a point. I'm surprised that there hasn't been a concomitant "of course, we'll lower the price for indigent clients" PR flogging by Gilead.

Permalink to Comment

4. Biotechtranslated on May 1, 2014 10:49 AM writes...

@#3,

Gilead does have a patient assistance program that will offer Sovaldi at no cost to patients with no insurance.

Permalink to Comment

5. David Borhani on May 1, 2014 11:01 AM writes...

@3: What about Gilead's already-stated pricing of $84,000/treatment-course in the US vs. $900 in Egypt?

Recall that Gilead paid the unheard of price of ~$11 billion to acquire Pharmasset/Sovadi. http://www.businessweek.com/ap/financialnews/D9R58SUO2.htm Seemed absolutely nuts...until one factored in the current cost of HCV care, and how much Solvadi, even priced as it is, lowers the total cost of care (by ~50%), with much better outcomes as well.

Now, I strongly suspect that nowhere near $11B was spent on all the research that never turned into marketed drugs by either Gilead or Pharmasset. Rather, @1, I think Gilead did a very careful calculation of how much they might sell Solvadi for, over how many patients, compared to how much they would have to pay (an 89% premium --- an audacious bid unlikely to be matched) to ensure that Gilead, and not some other company, would be the one to acquire Pharmasset.

Note that I'm not trying to be a shill for Gilead. Rather, I don't think I'm saying anything profound or new here; just reiterating the facts.

Permalink to Comment

6. Chemjobber on May 1, 2014 11:16 AM writes...

@4: Of course, and I'm not surprised. (And thanks for telling me!)

But this is the first I've heard of it, and that every single article on Sovaldi and every single public utterance by Gilead doesn't have that fact attached to it is a failure of PR on Gilead's part, I feel.

Permalink to Comment

7. biotechtoreador on May 1, 2014 11:42 AM writes...

" helping human health at a reasonable cost is one obligation if you are going to be in this space"

Sorry, but it's just not. Drug companies have a legal responsibility to maximize value for shareholders. Note, this does not give companies license to do so illegally. If making a profit helps people, great, but GILD is under no more legal obligation to improve the lot of humanity than is MO.

Permalink to Comment

8. Anonymous on May 1, 2014 1:00 PM writes...

In 1909 the anti-syphilis Compound 606 emerged from the laboratory of Paul Ehrlich at the Hoechst Dye Works, the result of several years of investigation into the anti-spirochete activity of organoarsenic compounds. After much technology development and a clinical trial, reports of the drug's efficacy in treating syphilis became headline news in the world press. The long-wished-for cure to this dreaded disease was now at hand.

The drug was called salvarsan, and those suffering from syphilis tried every possible trick to secure ampoules of this miracle drug. Pilfering by factory workers was such a problem that the plant manager had no alternative but to personally count each vial at the end of the day and lock them in his steel safe until they could be distributed by doctors to the sick, many of whom impatiently waited at the plant gates for their chance to get this wonder drug. Letters from kings, popes, the rich and the powerful begged the company for access to this new drug on behalf of this or that patient.

Within a couple of years, reports appeared claiming that salvarsan was not really that effective, that it was far more poisonous than had been stated, and the price of 10 marks per ampoule was much too high. In 1912 a Swiss professor criticized the price of salvarsan. He had totaled up the costs for a kilo of arsenious acid and a kilo of benzene as if the two substances were simply thrown together and salvarsan had been distilled from a Hoechst retort. No mention was made of R&D costs, the tricky nature of salvarsan's industrial-scale preparation or manufacturing costs.

Thus began the long-running love-hate relationship between the general public and the pharmaceutical industry which continues to this day.

Permalink to Comment

9. Am I Lloyd peptide on May 1, 2014 1:29 PM writes...

#2, #7: Why can't it be both? I am sure the people who founded Merck or Vertex or Gilead had both goals in mind: to generate profits and to aid human health at an affordable cost. I get a little impatient with the argument that it has to be one or the other, although I can see why today's Big Pharma makes it much easier for people to make that argument.

Permalink to Comment

10. DCRogers on May 1, 2014 3:05 PM writes...

Check out this list of drugs in the pipeline for HCV (http://www.hepmag.com/drug_list_hepatitisc.shtml) - it's no wonder Gilead wants to price high up front, because within 12 months, competition will be driving what they can charge down, fast.

It will take about 200,000 patients to pay off the $11B acquisition tab alone... save your pity for the later arrivals, which may have trouble paying off their R&D costs if the price falls too fast.

Permalink to Comment

11. petros on May 2, 2014 8:59 AM writes...

This article and especially the graphic provide a good counterpoint

http://www.bloomberg.com/news/2014-04-30/drug-prices-defy-gravity-doubling-for-dozens-of-products.html

PS there are still site problems with viewing comments

Permalink to Comment

12. ab on May 2, 2014 10:08 AM writes...

@11, yes that article provides a counterpoint in the form of a huge pile of bs anecdotes. One of the funniest is the accusation that American spending on drugs has increased 11% since 2007! OMG, that's outrageous! Of course, read back a few paragraphs, and cleverly hidden within the drivel is the fact that the CPI has risen 12% within the same time period.

Permalink to Comment

13. Fraser Glickman on May 2, 2014 11:46 AM writes...

There is an ethical dilemma here. Business practice sets prices at whatever demand dictates. The vendor tries to get as much from the buyer as the market will allow. However, for a life-saving treatment, this practice can be "cruel". Offering someones life back, in exchange for all of their property and perhaps future security. Perhaps a more ethical deal, other than to have the government step in, would be to set the price as a percentage of documented family income/wealth.

Permalink to Comment

14. Fraser Glickman on May 2, 2014 11:47 AM writes...

There is an ethical dilemma here. Business practice sets prices at whatever demand dictates. The vendor tries to get as much from the buyer as the market will allow. However, for a life-saving treatment, this practice can be "cruel". Offering someones life back, in exchange for all of their property and perhaps future security. Perhaps a more ethical deal, other than to have the government step in, would be to set the price as a percentage of documented family income/wealth.

Permalink to Comment

15. Proteus on May 2, 2014 6:57 PM writes...

The $1000 pill is reasonable economics, but it's easier for me to swallow when the company puts much of the earnings back into real R&D (not life cycle management. That is not always the case.

Permalink to Comment

16. aa3 on May 4, 2014 12:01 AM writes...

Patented drugs are only 10% of US medical spending.. and it seems to me delivering much more than 10% of the benefit in the system.

Permalink to Comment

17. Orv on May 14, 2014 6:03 PM writes...

It's a tricky issue because there are a lot of external costs the market doesn't capture. The death or disability of a patient who can't afford a drug has a cost to the economy as a whole, but not to the company's bottom line.

Permalink to Comment

POST A COMMENT




Remember Me?



EMAIL THIS ENTRY TO A FRIEND

Email this entry to:

Your email address:

Message (optional):




RELATED ENTRIES
Messed-Up Clinical Studies: A First-Hand Report
Pharma and Ebola
Lilly Steps In for AstraZeneca's Secretase Inhibitor
Update on Alnylam (And the Direction of Things to Come)
There Must Have Been Multiple Chances to Catch This
Weirdly, Tramadol Is Not a Natural Product After All
Thiola, Retrophin, Martin Shkrell, Reddit, and More
The Most Unconscionable Drug Price Hike I Have Yet Seen