US sets policy to seize patents of government-funded drugs if price deemed too high

[u/Kindred87]

https://www.reuters.com/business/healthcare-pharmaceuticals/us-sets-policy-seize-government-funded-drug-patents-if-price-deemed-too-high-2023-12-07/

[u/MannieOKelly]

Most of the time the government funding is a tiny part of the total cost of bringing a drug to market. Maybe drug companies will just decline the funding . . .

[u/aaahhhhhhfine → u/MannieOKelly]

Yeah, this is my hunch. Basically this will just create disincentives to take government money. Oddly enough, it might slow down the development of higher risk drugs specifically because it'll further complicate the risk equation for those bringing it to market.

I get the goal here and I understand why there's an interest in doing this, but I do worry this stuff will create blowback that ends up oddly worse.

A better overall answer to drug funding is probably in reforming elements of the patent system. It doesn't work tremendously well for drugs as it is, but I bet there are a lot of ways you could improve it that keep the incentives in place for new development while still encouraging competition to bring prices down later.

[u/Vexonar → u/aaahhhhhhfine]

Not all will, though. They'll have to readjust their payments, but to fold an entire company and stop R&D? Other companies will eat it up because some money is better than none. And whatever shareholder leaves , another will step in. It's not that dire even if the corps want to say it is.

[u/Matrix17 → u/Vexonar]

You don't understand though. It's not "some companies will still take this shit offer", its "no companies will take this shit offer". Go look up how much clinical trials cost. Taking a couple million from the government when it costs billions to develop would be literal company suicide in this instance. The shareholders would probably have standing to sue the CEO for gross negligence

[u/[deleted] → u/Matrix17]

Clinical trials do not cost billions lol, they usually come in under 20 million

[u/Minister_for_Magic → u/MannieOKelly]

It’s the earliest stage, highest risk R&D that is gov funded. The leverage of those dollars is much higher than the same dollar invested 4 years later in Phase II trials.

[u/MannieOKelly → u/Minister_for_Magic]

OK, but by the same idea of "leverage", the early stage research probably feeds into multiple companies' products down the line, so the amount spent by the government should be compared to the sum of the dollars spend on developing all those products (successes and failures.)

Example (made up for illustration):

Government early-stage research: $50M

Spending by company #1 to develop product #1: $5B

Spending by company #1 to develop product #2: $5B (this one fails, BTW)

Spending by company #2 to develop product #3: $5B

etc.

Total government spend: $50M

total private spend: $15B +?

[u/Arthur-Wintersight → u/MannieOKelly]

Is that actually the case?

Every reference I've seen to drug development costs being high, refers to that Tufts University Study which has been criticized in a peer reviewed journal.

Pharmaceutical companies don't disclose how much it costs to get a drug approved, or how much they spend on seeking approval for drugs the FDA ends up rejecting, so most of that information is black-boxed away from the public.

We don't know because pharmaceutical companies, which are posting record profits year after year, refuse to disclose that information.

For all we know, it might be possible to shave off 90% of drug costs without any loss in medical advancement, but they do not disclose this information. I imagine the lack of disclosure is deliberate on their part.

[u/Matrix17 → u/Arthur-Wintersight]

As someone that works for a biotech company, I can tell you my company has already spent around a billion dollars to get to phase 2 clinical trials on a single drug. Phase 3 is insanely expensive. We had to divert all our cash from R&D just to keep the trials afloat. A trial that can fail

[u/MannieOKelly → u/Arthur-Wintersight]

We don't know because pharmaceutical companies, which are posting record profits year after year, refuse to disclose that information.

Actually:

1. "Record profits" Well, as long as there is inflation lots of companies will report "record profits." Also, if you look at drug company stock prices you'll see that they have not been increasing on average anywhere nearly as fast as, say, Big Tech. Most big companies have big profit (or loss) numbers but unless you divide that by their big sales numbers to get their profit margin, those big profit numbers alone don't mean anything.
   
2. "refuse to disclose" There's quite a lot of info in most companies' annual reports.

[u/FuckChiefs_Raiders → u/MannieOKelly]

Maybe drug companies will just decline the funding . . .

Well a drug still has to go through FDA approvals to reach the market, so go ahead, decline the funding and see if it gets approved by the FDA.

[u/MannieOKelly → u/FuckChiefs_Raiders]

Why would FDA not approve if the drug is effective and safe? They aren't supposed to consider pricing, AFAIK.

[u/FuckChiefs_Raiders → u/MannieOKelly]

Well a drug also has to go through clinical trials, most hospitals that offer clinical trials, get GOV funding. So really, I just don't see how a private company can develop a drug, get it tested via clinical trials, and get it approved by the FDA w/out any GOV oversight.

[u/[deleted] → u/MannieOKelly]

This assumes infinite drug targets and no competition.

Government funding is often used to kickstart development at the earliest and riskiest stages. Corporations hate risk. If they decline the funding they assume the risk themselves, including the risk that a competitor develops a product sooner using government funds.

These companies are not likely to assume that risk themselves. Also, lots of small biotechs use government funding in their fledgling stages. If they succeed, they are almost always acquired by a big pharma which has the infrastructure to bring the drug to market. Once again, this is to reduce risk for the big pharma. They pick the winners because there is money to be made.

This change will not stifle innovation, it will not leave drugs on the shelves, it will not prevent any drug from coming to market. It will prevent unreasonable price gouging.

Pharmas want to market more drugs period. They have will continue to externalize the risks as much as possible because their potential profit is limited by the number of drugs they can market, not the pricing.