[Ip-health] NY Times editorial: No Justification for High Drug Prices

joan joan at vyhcontexto.org
Tue Dec 22 11:58:22 PST 2015

I can't stop wondering why a business where the costs associated with all failed attempts to bring a product to the market can be recovered in the successful one(s) is labeled as high-risk investment. To me it sounds quite conservative, in fact. This is why capital costs, at least for big companies, should be much lower - similar or close to the public debt rate of the company home country, for instance. This will significantly lower drug costs estimates.

Joan Tallada
Barcelona, Spain.

-----Mensaje original-----
De: Ip-health [mailto:ip-health-bounces at lists.keionline.org] En nombre de Dimasi, Joseph A.
Enviado el: martes, 22 de diciembre de 2015 18:33
Para: Kapczynski, Amy; Ruth Lopert
CC: ip-health
Asunto: Re: [Ip-health] NY Times editorial: No Justification for High Drug Prices

Yes, that's true for markets in general, and also for drug markets in particular.  Even under the current system, drug manufacturers do not generally appropriate all of the social value of their drugs.  See the work of Philipson and Jena that estimated that manufacturers obtained only about 5% of the social surplus created by HIV/AIDS medicines, and, in later work, that for a set of more than 200 health care technologies analyzed (with pharmaceuticals being a substantial share of the total) manufacturers appropriated about 15% of the social surplus created by the median technology.

-----Original Message-----
From: Ip-health [mailto:ip-health-bounces at lists.keionline.org] On Behalf Of Kapczynski, Amy
Sent: Tuesday, December 22, 2015 11:44 AM
To: Ruth Lopert
Cc: ip-health
Subject: Re: [Ip-health] NY Times editorial: No Justification for High Drug Prices

Yes, agree - that’s why I’d also insist on the proviso about “assuming the drug’s social benefits are sufficient to justify the R&D expenditures.”

Needs to be sufficiently socially valuable to justify paying for it.  But that doesn’t mean we need to pay for all of the social value of the drug.  (We don’t generally pay people for all of the social value they create in markets — see Lemley and Frischmann on Spillovers on this.)

On Dec 22, 2015, at 11:25 AM, Ruth Lopert <ruth.lopert at gmail.com<mailto:ruth.lopert at gmail.com>> wrote:

Pricing based on risk adjusted R&D expenses wouldnt preclude paying a lot for things of questionable value

On Tue, Dec 22, 2015 at 10:45 AM, Kapczynski, Amy <amy.kapczynski at yale.edu<mailto:amy.kapczynski at yale.edu>> wrote:

sure, that’s a good discussion to have.  prices should be adequate for companies to cover the risk-adjusted cost of R&D, w/ a reasonable profit.  )(if - and in some cases this is a big if - the drug’s social benefits are sufficient to justify the R&D expenditures.)

we’ve talked for a long time about compensation for social value, as an alternative to monopoly pricing.  in many cases that has great advantages over the existing model.  but you can see some of the difficulties of that approach w/ a drug like sovaldi - you can end up w/ massive rent seeking and waste where the science makes a big leap (based on publicly funded rsch, unsurprisingly).  we could treat massively more people, and save enormous sums, w the risk-adjusted R&D approach in this context, as opposed to a “pay for DALYs” approach.  (for those interested, I have a paper coming out soon that makes this case in much more detail, and uses 28 USC 1498 as a mechanism to get us closer to the risk-adjusted R&D compensation model.).

there are a few cases where that approach will still lead to very high prices, but prices of many drugs would be far lower.

there are others coming to this view as well — see sachs on this, for example:


> On Dec 20, 2015, at 12:24 PM, Peter Pitts <ppitts at cmpi.org<mailto:ppitts at cmpi.org>> wrote:
> Perhaps a good debate would be what "high" means -- and relative to what?  What is the "right" price and how does that impact development?
> On Dec 20, 2015, at 11:37 AM, Herper, Matthew wrote:
>> But see this recent Bloomberg article:
>> https://urldefense.proofpoint.com/v2/url?u=http-3A__www.bloomberg.com
>> _graphics_2015-2Ddrug-2Dprices_&d=AwICAg&c=-dg2m7zWuuDZ0MUcV7Sdqw&r=-
>> ddH8Zceq1hAY-PYLwkNHeKcPT9OK3Kb_YdJ7DDd_Uo&m=YaiUSWbhK0ahtfnyerOT0XK3
>> VgtcJMqivApsdvz3jXE&s=F8UnBc9hxepmvLV5qPcqF2OwLEpG6UdhI9FdKLdwqPk&e=
>> The "real" prices are not as high as you'd think based on list price, but they are still high.
>> ----------------------------------------------------
>> Matthew Herper
>> Senior Editor, Pharma & Healthcare
>> Forbes
>> office: 212-367-4879
>> ________________________________________
>> From: Ip-health
>> [ip-health-bounces at lists.keionline.org<mailto:ip-health-bounces at lists
>> .keionline.org>] On Behalf Of Peter Pitts 
>> [ppitts at cmpi.org<mailto:ppitts at cmpi.org>]
>> Sent: Sunday, December 20, 2015 10:55 AM
>> To: ip-health
>> Subject: Re: [Ip-health] NY Times editorial: No Justification for High Drug     Prices
>> The editorial "No Justification for High Drug Prices" (NYT, 12/20/15) quotes the "list" price for innovative medicines from Eli Lilly (Portazza for lung cancer)) and Pfizer (Ibrance for advanced breast cancer). The prices mentioned are true, but the context is inaccurate. Most every innovative new medicine offers significant discounts to private insurance payers (generally between 35-50%) in addition to double digit rebates for Medicare and Medicaid. There are very few patient paying "list price" and for those without insurance both of these companies (and mostly all innovative pharmaceutical developers) offer programs that provide their products at low or no cost. Context matter and accuracy counts.
>> Peter J. Pitts, a former FDA Associate Commissioner, is President of 
>> the Center for Medicine in the Public Interest On Dec 20, 2015, at 9:36 AM, Peter Maybarduk wrote:
>>> https://urldefense.proofpoint.com/v2/url?u=http-3A__www.nytimes.com_
>>> 2015_12_20_opinion_sunday_no-2Djustification-2Dfor-2Dhigh-2Ddrug-2Dp
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>>> vApsdvz3jXE&s=_XsjGL0mNWtsFKKyYdkro5C2xbzvKBSMFQE_dISJEHI&e=
>>> <https://urldefense.proofpoint.com/v2/url?u=http-3A__www.nytimes.com
>>> _2015_12_20_opinion_sunday_no-2Djustification-2Dfor-2Dhigh-2Ddrug-2D
>>> prices.html-3Faction-3Dclick-26pgtype-3DHomepage-26clickSource-3Dsto
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>>> ivApsdvz3jXE&s=_XsjGL0mNWtsFKKyYdkro5C2xbzvKBSMFQE_dISJEHI&e= >
>>> By the Editorial Board / Dec. 19
>>> There is ample evidence that drug prices have been pushed to astronomical heights for no reason other than the desire of drug makers to maximize profits. Prices in many cases far exceed what's needed to cover the costs of research and clinical trials, and some companies have found ways to rake in profits even without shouldering the cost of drug development.
>>> The two worst offenders are bottom feeders that simply buy companies they believe have underpriced their drugs and then quickly raise prices to astronomical levels.
>>> In August, Turing Pharmaceuticals acquired the American marketing 
>>> rights to a 62-year-old drug to treat a devastating parasitic infection andraised the cost of one pill to $750 from $13.50. That brought the cost of a course of treatment for some patients to hundreds of thousands of dollars. (Turing's founder, Martin Shkreli, was indicted on Thursday on charges of securities fraud involving a hedge fund and another biotechnology firm he started.) Valeant Pharmaceuticals greatly increased the prices of several drugs it acquired, including two used by hospitals to treat heart conditions. It also protected its high-priced dermatology drugs by urging doctors to send prescriptions to a mail-order pharmacy that would make sure no cheaper alternative was substituted.
>>> The Pharmaceutical Research and Manufacturers of America, a trade group, described Turing and Valeant as essentially investment vehicles "masquerading as pharmaceutical companies."
>>> Yet even some mainstream companies have set high prices that seem hard to justify. Eli Lilly said its new lung cancer drug, Portrazza, would cost about $11,430 a month in the United States, six times the $1,870 price that leading oncologists said in a recent journal article would be a fair reflection of the benefit the drug offers compared with older therapies.
>>> Similarly, Pfizer set the list price for Ibrance, a drug to treat a form of advanced breast cancer, at $9,850 a month, a price that remains high even after the 20 percent discount demanded by insurers. The price was not based on manufacturing costs or research costs, according to an analysis by The Wall Street Journal. Rather, Pfizer set the price as high as it could without causing doctors and insurers to favor an alternative drug.
>>> The pharmaceutical industry often defends its prices by noting that drugs account for only 10 percent of nationwide health spending. But in employer-based health insurance plans, drug benefits account for 19 percent of spending, not much less than spending on inpatient hospital care, according to a recent analysis by the Kaiser Family Foundation. And surveys have shown that many Americans have difficulty paying for the drugs they need. Major drug companies often increase prices 10 percent or more a year, far faster than inflation, straining the health care system.
>>> Experts have proposed several ways to reduce drug prices, like fostering greater competition among drug companies or allowing the government to negotiate lower prices. Encouraging the development of innovative drugs and setting prices in ways that make lifesaving medicines affordable to all are not mutually exclusive ideas.
>>> _______________________________________________
>>> Ip-health mailing list
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>>> https://urldefense.proofpoint.com/v2/url?u=http-3A__lists.keionline.
>>> org_mailman_listinfo_ip-2Dhealth-5Flists.keionline.org&d=AwICAg&c=-d
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>>> NMDSTyxh3mvVCUlpWpphbw&e=
>>> <https://urldefense.proofpoint.com/v2/url?u=http-3A__lists.keionline
>>> .org_mailman_listinfo_ip-2Dhealth-5Flists.keionline.org&d=AwICAg&c=-
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>> _______________________________________________
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>> m7zWuuDZ0MUcV7Sdqw&r=-ddH8Zceq1hAY-PYLwkNHeKcPT9OK3Kb_YdJ7DDd_Uo&m=Ya
>> iUSWbhK0ahtfnyerOT0XK3VgtcJMqivApsdvz3jXE&s=_4MF9lbW3zrs2pV3e0Q6aNMDS
>> Tyxh3mvVCUlpWpphbw&e=
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>> org_mailman_listinfo_ip-2Dhealth-5Flists.keionline.org&d=AwICAg&c=-dg
>> 2m7zWuuDZ0MUcV7Sdqw&r=-ddH8Zceq1hAY-PYLwkNHeKcPT9OK3Kb_YdJ7DDd_Uo&m=Y
>> aiUSWbhK0ahtfnyerOT0XK3VgtcJMqivApsdvz3jXE&s=_4MF9lbW3zrs2pV3e0Q6aNMD
>> STyxh3mvVCUlpWpphbw&e= >
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