Big Pharma claims lower prices means giving up miracle medications. Ignore them

I don't think this article's analysis makes sense.

If pharma companies lose revenue, they have to cut something. Presumably the intention is to force them to cut profits. I found this analysis of global pharma industry profitability: https://www.ispor.org/docs/default-source/euro2023/poster-is... They found that the average profit margin across the pharma industry was around 20%. So even if pharma companies cut their profits to zero, prices would only drop 20%, right?

And even the idea of cutting profits to zero isn't realistic. Pharma investment is similar to venture capital; investors make risky bets in the hopes that a few of them will pay off big. Why would investors agree to take that risk if they get zero profit in return?

Some people propose things like "the government should fund drug development". OK, that's a fine proposal; it has pros and cons. But that's a very different proposal than "the government should institute price caps on privately-developed drugs". Don't try to justify the latter proposal by conflating it with the former.

US pharma already benefits from academic research which is paid for by tax money. This is a classic example of socializing the costs and privatizing the profits. Often times, you’re looking at 10-100x the cost for “statistically significant” uplift in efficacy. What happened to value-based medicine?

Drug for discussion:

Bimzelx (for psoriasis). This costs six figures or more per year, from what I can glean. Watching baseball a lot, I see this advertised multiple times per game, and God only knows what else they spend on marketing.

  (I don't have psoriasis or know anyone with it, if that matters)

Looking at UCB's financials (helpfully broken out by drug), they took in $242 million on that drug alone in fiscal 2024. So that's how they can afford all those ads. It's also probably something patients would demand, and maybe even be happy to pay for out of pocket.

> they will help the Medicare program cap what individual patients spend out of pocket on their prescriptions in a year at $2,000.

So if you want clear skin, you probably have to pay big bucks. But maybe these immensely profitable drugs subsidize the life-saving ones.

What needs to happen is more and more money has to go to pharma from tax payers for novel medicine research. Today there is some, yes. But the vast majority of money comes from the markets. And anyone that has invested across the bio sector knows it’s capital intensive and almost everything fails. Money is just burned through so quickly.

So yes with lower returns investors will look elsewhere. Especially since overall pharma doesn’t really outperform. There’s no alpha across the sector.

So the money has to come from somewhere. If not then yes, innovation will slow down.

Am I summarizing this article right?

* The US premium paid is 150% of R&D costs, therefore cutting it will only cut spending on the costs that aren't R&D

* M&A did not drop in the first year of the program, which covered 10 drugs, therefore the program will have no effect once phased in

* We think AI might develop new drugs for us someday, so it's safe to throw away the existing system today

Not very solid reasons to go after the golden goose!

> Most other wealthy countries, like Australia and the UK, use the government’s central role in their health care system to negotiate lower prices while also fostering their own medical innovation sectors.

These wealthy countries are relying on the US to subsidize their medical innovation. The US drug market is the one where the profits are and which determines how much investment is worth it.

If funding pharmaceutical research is a common public interest, then it should be funded the way all common public interests should be: taxes. Taxes pay for the weather predictions that make modern agriculture possible. Taxes pay for the basic physics research that keeps Moore's Law on track. Taxes pay for the transportation and logistics infrastructure that make the modern economy possible. Taxes pay for the fire engines that might keep your house from burning down some day. Taxes can and should pay for the pharmaceutical research that makes modern medicine effective. This kind of generalized "everybody needs it but no single person can pay for it and trying to do it through capitalism distorts everything" benefit is precisely what taxes are designed for.

Why not make these same arguments for cars, food, or anything else that we buy? Just have the government negotiate maximum prices that manufacturers can charge. Maybe AI will help make cars cheaper in the future.

What good is a miracle if the only people who can afford it don't need it because they can afford to maintain their health?

First, one thing to keep in mind: "Big Pharma" is the medical equivalent of "venture capital" in technology. They buy up a lot of patents and very early stage startups in the hope that 1 or 2 of 100 investments actually strike it big, and that explains a part of why new medical innovations cost so much - all the loss has to be distributed.

> It is a harrowing proposition: that in trying to control drug prices for 67 million Medicare patients now, we might inadvertently prevent the development of future drugs that could save lives. Implied, if not stated outright, is that we’re putting a cure for cancer or Alzheimer’s or some other intractable disease in jeopardy.

Well... given that a lot of the fundamental research in pharmaceuticals happens at universities and/or on taxpayer grants, what exactly is preventing the US government from taking over the later stages of development and the associated risk itself, and only use external providers for manufacturing at scale?

Of course, it's a rhetorical question. The answer is two-fold here - primarily the obvious: large parts of the US (and most Western nations facing similar questions) prefer a "small state", preferably as small as possible. But there's also a second answer... the US' very dark history in government-run medicine. The Tuskeegee syphilis study, the consistent discrimination against PoC and women in medical research, MKULTRA or the US just about permanently burning all of its trust across the world by using "vaccination drives" as a pretext to verify Bin Laden's presence in that compound in Pakistan [1] - antivaxxers, Covid deniers and their ilk didn't sprout up from nothing, they have very fertile soil.

[1] https://www.npr.org/2021/09/06/1034631928/the-cias-hunt-for-...