Re:At $2.1M, Novartis gene therapy will be world’s most expe...
by aaavl2821 on Saturday May 25, 2019 @02:57AM
(#20007519)
Avexis spent ~$700M on developing this drug. But drug prices don't just cover costs for developing the drug. They also have to cover losses from other failed r&d projects, and also cover the cost of capital
money isn't free. If for profit companies didn't fund this research, no one would. Opportunity cost of money is a real cost and it is reflected in the price of any commercial good -- drugs are no exception
Is there profiteering in some cases? Yes. Is there in this case. Probably a bit. But it is not realistic or fair to think drug companies should price solely based on a cost-plus model, ignoring losses from failed research efforts and the cost of capital
However, cost of capital is a huge driver of costs and reducing it would be very valuable. The question is how to do that
If you're curious to see how these different things affect drug price, I made a tool where you can play around with different drivers of drug prices (incl cost of capital) to see how they affect price: https://www.baybridgebio.com/drug_pricing_calc.html
money isn't free. If for profit companies didn't fund this research, no one would. Opportunity cost of money is a real cost and it is reflected in the price of any commercial good -- drugs are no exception
Is there profiteering in some cases? Yes. Is there in this case. Probably a bit. But it is not realistic or fair to think drug companies should price solely based on a cost-plus model, ignoring losses from failed research efforts and the cost of capital
However, cost of capital is a huge driver of costs and reducing it would be very valuable. The question is how to do that
If you're curious to see how these different things affect drug price, I made a tool where you can play around with different drivers of drug prices (incl cost of capital) to see how they affect price: https://www.baybridgebio.com/drug_pricing_calc.html