Monday, September 23, 2019
"Death Spirals" and Big Pharma
While in class today, I realized a similarity behind the fear of budget cuts in the defense industry and the issue with Big Pharma that we talked about today in class. In the issue of the F-35s, a budget cut to this program would cause a so-called "death spiral", with budget cuts following more budget cuts, because as the number of planes made decreases, the cost increases, eventually ending with the termination of the program. Theoretically, one wouldn't think that making fewer planes is more expensive, but because you are making only a few planes, it is much harder to mass-produce them with cheaper methods and profit more. When I thought about it, I realized this somewhat applied to the issue with limiting drug prices, at least in the eyes of the pharmacy companies. We talked about how this would create less incentive to produce/research drugs for rare diseases, but did anyone think about why? Its the same idea as the F-35 planes. If you are spending lots of money researching, testing, and producing (A process that takes about 10-15 years and billions of dollars) a drug for only a few people, there is going to be much less of a profit, and probably a much higher expense. Because they have to create smaller quantities of the drug, just like budget cuts would force manufacturers to make fewer and fewer F-35s, the cost of actually producing the drug rises. Along with the rise in production costs, the market this drug is going to be applicable to is much smaller, leading to a lower profit that might not compensate for the higher production costs. Pharmacies are using this idea to argue that if there was to be a cap on the price of mass-produced drugs, this would create less excess revenue that could be used to balance out the cost of creating treatments or cures for the much more rare diseases, where manufacturing is less cost-efficient. And while we all wish that our medicines could be less expensive, or wonder why certain drugs are cheaper in other countries, this argument does hold a lot of weight. It makes sense that Pharmaceutical companies are going to want to make excess revenue off of more marketable drugs, to (hopefully) use this extra money to develop and produce drugs for smaller but still seriously afflicted markets. That doesn't mean that these companies aren't charging too much: in fact, I think that they are. Putting a cap that isn't too low will probably be a good thing, as it will allow medicines to be more available to the mass market, while still creating enough excess revenue to fund the creation of less marketable drugs. Also, if the only concern is that there won't be enough excess money to fund the development of drugs for more rare diseases, there are still other ways for these companies to access the money they need, without overcharging the rest of the population.
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You raise some very interesting points, and for the most part, I agree completely: there should be a cap on the cost of pharmaceuticals to allow better access to well-needed drugs, however, it should not be so restrictive that it prevents companies from using their profits to develop new, rare treatments. As someone personally interested in the field of medicine and potentially pharmaceutical research, I realize the vast extent of research funding, but as a consumer I recognize the need for easier, cheaper pharmaceuticals. While the current legislative movement towards the cap on drug prices is a decent start, an important balance between being too restrictive and too lenient is essential for ensuring both accessible drugs and well-funded pharmaceutical research. How do you think the right balance should be determined without bias? Since practically everyone is directly impacted by the availability of medicine, and indirectly impacted by the funding of its research/discovery, how can one determine the right balance of regulation? Perhaps looking at the prices of drugs internationally is a good baseline for costs of older, more common drugs(like insulin), but how should realistic standards be set for new drugs on the market?
ReplyDeleteI think that looking at the prices of drugs internationally, and looking at the costs for research and development (per year instead of over the full ten to fifteen years it might take), and comparing that to the annual profit of the companies might be a good way to start. If there is a large difference between how much these companies are making, and how much R&D is costing them, then that can be used as a baseline to judge how much we can reduce the price of drugs. Also comparing these reduced prices to pricing in other countries, and the cost of R&D in other countries might give us a better idea of what a fair price of a drug would be, to allow accessibility for consumers and ability to develop new drugs.
DeleteI also agree that that pharmaceuticals are making money off the marketable drugs tin order to increase the amount of research and development especially because r&D is 17% of the drug company's spending. However, what about the fact that drugs will not research for a "cure", but rather a treatment for something that causes the consumer to come back and buy it again. I understand that drug companies need money, but is it really ethical when presented the opportunity to be able to cure people, which provides a lot of money, decide not to for the sake of business? By giving treatments but not cures to things that many people have in common like alergies, the companies are able to make the most profit through it, so some that that is more targeted to one person or a small group of people will not generate the most amount of money. One the other-side, once a cure is created from a company, the price of the drug must be substantial because of the amount of time and effort it took to make the drug as well that the fact that it can cure patients with only one dose. Who would be willing to pay such as sum that could be anywhere from the high hundred thousands too potentially above a billion. This is no way for the common person to be able to access a drug with an expense tag like that unless you are rich. Not only that, spending so much money on a product like that will really put the company out of business. And losing money would mean less money to research and develop drugs. It's a never ending cycle.
ReplyDeleteI think that there actually isn't a ton of research indicating that these companies are neglecting searching for a cure, and it is actually quite difficult to find a true cure for a disease. Often diseases (like allergies) can be genetic, and research on these cures is usually in the biotechnology field under the idea of gene therapy, and less under the field of actual drugs and medicines. This doesn't mean that some people aren't deliberately ignoring looking for a cure, but I looked into it more and that seems to be the minority.
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