> But I do appreciate the fact that some market incentives (profits) exist to encourage greedy companies to come out with new drugs. I fear lower innovation in its absence.

I think of this as a "prayer to innovation", in the cargo-cultism sense. Like tax relief for the wealthy, the prayer goes that "if we can just give these people more money, they'll improve our lives".

Multiple studies have found links between drug pricing and the development of new drugs, but it doesn't work in the obvious way. Large pharmaceutical companies often rely on purchasing smaller startups who do the actual research into developing new drugs [1] but don't have the expertise in bringing the new drug to market and making it successful. The larger pharma companies need financial capacity for this, but since the patents have expired on a lot of other successful drugs before the companies recovered the profits they wanted, they're relying on captive markets for the monopolies they still have in niche pharmaceuticals [2].

These companies are profit-motivated. They aren't working for the public interest. They have no particular desire to "innovate"; their business model instead relies on identifying innovators, buying them, and then selling the product of their research at high prices for as long as possible.

Price controls for pharmaceuticals would ultimately reduce the funding available for the R&D startups, which would limit the creation of new drugs. But it's not clear that allowing big pharma companies to continue charging extortionate rates for life-saving medicines is a good solution to this, nor is it a guarantee for future innovation.

It seems like single-payer insurance and more federal funding for pharmaceutical R&D would be a far better solution than defending predatory drug pricing.

[1]: https://www.forbes.com/sites/stanfleming/2019/06/20/the-rela...

[2]: https://www.healthaffairs.org/do/10.1377/hblog20190228.63655...

> They have no particular desire to "innovate"; their business model instead relies on identifying innovators, buying them, and then selling the product of their research at high prices for as long as possible.

Isn't that to a great degree how Silicon Valley works too? Google didn't develop Android, for example. It acquired Android, Inc. and then plugged it into the Google ecosystem. Such acquisitions are a fundamental pillar of R&D. They enable startups to do what they do best, and allow big companies to take over when it is time to try and bring a product to market.

Sure, but Google and Pfizer (to pick an example at random) aren't exactly equivalent. Few people will die if Google suddenly decides to jack up their pricing on one or more of their services.

The incentives and market pressures are likewise different. Despite the valid criticisms of Google's anticompetitve practices, they have a far less captive market than any large pharmaceutical company does. If Google behaves too badly, they'll become vulnerable; meanwhile, a pharmaceutical company can increase drug pricing for vulnerable people as much as they care to, as long as the company has a patent-protected monopoly on the drug, and people will either find a way to pay it, or they will die.

This business model deserves far more scrutiny than any Silicon Valley darling simply because people's lives and well-being are at stake.

To ratchet Rayiner's argument forward to its next step: if the difference between Google and Pfizer is that Pfizer's work is more important, why would it make sense to de-incentivize it by capping its profits? Shouldn't we want drug development to be an attractive industry for entrants?

I wonder how important the R&D part actually is. The most benefit for society seems in a steady supply of many pharmaceuticals we already have.

Of course R&D into research for cancer, Alzheimer's, new antibiotics etc would be critically important - but one would need to know if pharma companies actually prioritize that at all.

>why would it make sense to de-incentivize it by capping its profits

Because like most publicly traded companies all they start caring about it profit maximization over everything else.

Well, how is this unlike deregulating any other market that has an acute impact on people's lives? Why, for instance, are unregulated ICOs bad, but unregulated pharmaceutical profits not?

Keeping the pharmaceutical R&D market healthy does not necessarily depend on continued predatory pharmaceutical pricing. Let's take a closer look at one example, adalimumab (Humira). Adalimumab was developed initially by a research partnership between Cambridge Antibody Technology Group -- which was publicly funded -- and BASF Pharma, which at the time was a biotech section of a massive German chemical corporation. BASF commissioned Cambridge Antibody Technology to create a tumor necrosis factor-neutralizing agent using some new phage technology [1]. They succeeded, the long and expensive trial process was started, and eventually that section of BASF got picked up by Abbott Laboratories [2], which eventually became AbbVie, which now owns and markets Humira.

This brings us to the present day: Abbott paid $6.9 billion for Humira and all of BASF Pharma's other assets. Using the typical market value logic that's popular on HN, let's assume that this is approximately all of the costs associated with developing Humira and getting it to market.

AbbVie made approximately $16 billion off of Humira in 2016 alone. [3] AbbVie's pricing for Humira is massively asymmetrical depending on which country it's being sold in, and as the linked article suggests, appears to be "priced in the United States primarily on the basis of what the market will bear."

The most common defense of predatory pharmaceutical pricing in the United States by far is that we can't regulate these prices because it will hurt pharmaceutical development. So, my question to you, or rayiner, or anybody else exploring that position, is: at which point in that process did predatory United States pharmaceutical pricing help develop Humira?

Was it in the public funding of a UK research group? Or was it in the funds of a massive German chemical company? Or is it that doctors in the US wouldn't know to prescribe the drug without the massive marketing campaign AbbVie has waged, especially in the US, to urge patients to "ask your doctor about Humira"? Or, perhaps, is it in the development of patent "thickets" that AbbVie uses to protect its biggest revenue stream, or in the corrupt kickbacks it was paying out to drive sales? [4]

This is the part where this argument loses me. Whenever I look at the details, I don't see any evidence that pricing in the US has anywhere near a 1:1 correlation with drug development. The NY Times article for instance links to a Journal of the American Medical Association study which found:

"Per capita prescription drug spending in the United States exceeds that in all other countries, largely driven by brand-name drug prices that have been increasing in recent years at rates far beyond the consumer price index. ... Although prices are often justified by the high cost of drug development, there is no evidence of an association between research and development costs and prices; rather, prescription drugs are priced in the United States primarily on the basis of what the market will bear."

To answer your question directly: in this case study, I see no evidence that a reasonable amount of regulation on pharmaceutical pricing in the United States would have had any discouraging effect whatsoever on the development of this drug; it would however have made a huge difference to the health and well-being of many, many people.

[1]: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2958567/

[2]: https://www.wsj.com/articles/SB976832374667325423

[3]: https://www.nytimes.com/2018/01/06/business/humira-drug-pric...

[4]: https://www.huffpost.com/entry/opinion-humira-costs-patents_...

> To answer your question directly: in this case study, I see no evidence that a reasonable amount of regulation on pharmaceutical pricing in the United States would have had any discouraging effect whatsoever on the development of this drug

With the benefit of hindsight? I suspect you are correct. But pharma portfolios operate on the lognormal success model of VCs. Without the blockbusters, you can’t fund “development” of the failures that could lead to another blockbuster. (Of course, much if large pharma R&D is by way of strategic partnership and acquisition.)

As to your pricing of the Humira acquisition: I personally would have included some consideration to the existing market exclusivity of the drug. The transaction price is unlikely to be just the “replacement cost”.

> But pharma portfolios operate on the lognormal success model of VCs. Without the blockbusters, you can’t fund “development” of the failures that could lead to another blockbuster.

That was the point of my whole Humira example though: high pharmaceutical prices did not fund its development.

This assertion that drugs have to be expensive or they can't be developed keeps getting repeated, but there's little evidence to support it and even less evidence that they need to be this expensive. This argument is further troubled by little details like drugs being 600% more expensive in the US than in other countries, indicative of more of a "how much money can we extract from vulnerable people" strategy than a "how much will it cost to develop the next great drug" strategy.

For extra credit, take a look at AbbVie's notable products (https://www.drugwatch.com/manufacturers/abbvie/#abbvie-produ...) and see if you can identify any that they developed, or that they funded the development of.

To put this into perhaps more familiar terms, AbbVie's behavior is far closer to Intellectual Ventures than to Y Combinator, and yet people here keep defending it.

Fine. Where did BASF get their money from? How much, in your esteemed opinion, should it cost to develop a therapeutic Ab from a drugable target? How should my industry pay for pipeline failures?

The rationale for regulating ICOs has nothing to do with capping profits or maximizing distribution of benefits from lawful enterprise; it's to stop bogus pump-and-dump investment scams. And pharma is intensively regulated, far more so than the finance industry is.

Bogus pump-and-dump scams suck because they hurt people. Pharma is regulated in some respects, but their profit margins aren't. This also hurts people.

I think your point is well taken but Google does a metric crapload of innovation on the Android platform.

> It seems like single-payer insurance and more federal funding for pharmaceutical R&D would be a far better solution than defending predatory drug pricing.

That seems like just another prayer to a different god. As much as I would like to believe that the government is motivated by doing what is best for its people, it seems more interested in self preservation and maintaining its own power. I don't see much evidence of the government being motivated to be wise with the money we give it.

The Forbes article glosses over the tremendous amount of work needed to move a candidate that works on cells in a dish (or a mouse) through clinical trials and into something that can be picked up at CVS.

These are hard—-and capital-intensive—things in their own right—it’s not like Apple snapping up your an app and adding it to the next iOS release.

Federal R&D does not aim at bringing drugs to market. It aims at basic biology.

Governmental regulations (safety, etc.) make the cost of developing a new drug extraordinary. Without exclusive patents on the back end companies won't have a reason to foot the bill on the front end.

Even without regulations developing and testing a new drug wouldn't be economical if somebody else could steal your formula the moment you figure out that it works.

This dynamic already exists in diagnostics. There's a huge second mover advantage in diagnostics because it's relatively hard to patent a diagnostic effectively. I know a few people in diagnostic companies that have very much soured on the industry as a result.

Yep. These realities exist in so many other industries too. Entire businesses are setup as fast followers.

It turns out that most of these new drugs have done more harm than good. See Purdue, for example. With very few exceptions, new drugs != better health. Our healthcare industry is a disaster and intellectual monopoly laws are a big reason why. We need to ditch those and focus on good outcomes, which does not mean focusing on giving vast rewards to some novelty regardless of efficacy.

If a new drug isn't useful it doesn't matter if the manufacturer has exclusive rights to it.

If people are buying/being prescribed drugs that don't improve their health that's a different problem that won't be solved by changing intellectual property law.

The problem is it does in practice. Almost all of the profitable drugs turn out to be useless (often harmful actually). I agree there is another problem here: medical science is laughable bad (and that’s a problem of tooling and poor data science tools, which I work on), as the combinatorics are much larger than our tools are currently capable of handling. But in the meantime, while people are still allowed to pitch junk science as fact, and medical decisions are based on junk science, the least we can do is stop rewarding monopoly profits to drugs with scant real evidence of support.

Purdue's new delivery mechanisms were actually a huge benefit to the right patients. The problem is they abused it and actively sold the drug to the wrong patients repeatedly and worked hard to push back oversight.

The problem was you could make unnatural "lottery-winnings" money selling OxyContin, and people respond to incentives. Ditch the incentives for selling novelties and the boring businesses focused on the actual health outcomes of the patient will thrive.

> But I do appreciate the fact that some market incentives (profits) exist to encourage greedy companies to come out with new drugs. I fear lower innovation in its absence.

There were more new drugs released before Bayh-Dole. If anything, the fact that you can now make a lot of money creating new drugs is probably reducing innovation.

We issue these monopolies because discovering new drugs and putting them through patient trials is expensive and actually manufacturing the drugs after you discover them is cheap. Not sure how you can solve the pricing problem without reducing innovation in the space.

First mover advantage isn't worth much for generic drug manufacturing. The product is a commodity at that point. It wouldn't be worth much in tech either if you were allowed to clone a product 100%.

Intellectual property even protects things that copyright and patents don't. Like you can't commit industrial espionage and steal the secret codebase of a SAAS company that keeps its software on its own servers. That's just as artificial as a patent.

Even real estate property is artificial. You didn't make the land that your house is on. Why should you have a monopoly on it? Because someone government issued someone else a piece of paper 300 years before either one of us were born?

We need to stop using the phrase IP. It’s an illogical euphemistic marketing term invented by the industry. More accurate phrases are intellectual monopoly laws or intellectual slavery laws.

They have done horrible things for the drug industry. The root cause of the opioid crisis is patent law. You made 100x+ more money selling patented drugs, even if the patented drug is worse for the patient. We need to ditch these laws. Perhaps you could switch the system to where you get a bonus check for a novel patent; but we gotta ditch the monopoly rights aspect of these laws as they are horrible for 99% of the population.

All property is a monopoly. Is it slavery that I can't grow some crops on your lawn.

No, because if you were to do that you preclude me from using my lawn.

It is intellectual slavery that you are telling me I can’t copy your book that i bought from you on my lawn, even though you are not affected.

You are allowed to copy other's books. You just can't derive a revenue from them.

> You just can't derive a revenue from them.

I wish this were the case, but you cannot distribute them either. I would love to collaborate with a team on an app that let's you instantly query all books ever published and revenue from that is the least of my concerns and it would be easy to do if we weren't forbidden from doing that by intellectual slavery laws.

You seem to be under the strange assumption that it's morally acceptable to use knowledge others generated to claim an advantage for yourself over other people. If your friend did research, and found a great house for him and his family, at a great price, told you about it, and then you went and bought it, most people would consider that highly unethical. Your friend did all the work to generate the knowledge, and you used it against him. Certainly you could demand that if you pay someone for knowledge, then it ought to be yours, but I think you undervalue knowledge at that point. The idea you could pay a few tens of dollars and be entitled to someone's perhaps decades of research is absolutely ludicrous. Be willing to pay thousands upon thousands for that privilege (which by the way, you can certainly negotiate).

> You seem to be under the strange assumption that it's morally acceptable to use knowledge others generated to claim an advantage for yourself over other people. If your friend did research, and found a great house for him and his family, at a great price, told you about it, and then you went and bought it, most people would consider that highly unethical

This is a bizarre argument. I am not claiming any such thing. What I'm saying is if my friend writes a book, and publishes it to the world, I should be free to copy and benefit of the knowledge in my friend's book. I'm not saying if my friend tells me a secret I should use that secret against him. That's bizarre. I believe in the right to privacy and secrets. I don't however, believe in the right to restrict what people do with knowledge that's been intentionally and willingly made public.

> I think you undervalue knowledge at that point

I think you overvalue the incremental knowledge generated in our time, and greatly undervalue the hard won knowledge of the past thousands of years (which was almost entirely generated without intellectual monopoly laws). The words we are using? Invented and given away freely. Even the letters. Even the concepts of words and letters! These computers? They are running on binary notation (330 years old—the 330 is written in Indian-Arabic numerals from over 1k years ago). The current contributions of all our best scientists, engineers, authors, musicians, etc, are trifles compared to the body of work we are building upon.

> I don't however, believe in the right to restrict what people do with knowledge that's been intentionally and willingly made public.

But it's not been made public. It's only available to the group of people that buy the book. As evidence of the fact it's not intended to be public, I cite the fact that the author has sought out legal mechanisms to potentially prosecute those who share what he or she has published.

> The words we are using? Invented and given away freely. Even the letters. Even the concepts of words and letters! These computers? They are running on binary notation (330 years old—the 330 is written in Indian-Arabic numerals from over 1k years ago). The current contributions of all our best scientists, engineers, authors, musicians, etc, are trifles compared to the body of work we are building upon.

The good news is that intellectual property expires after a while. There is no danger the next binary is going to be patent encumbered. Firstly, because it's likely 'obvious' (although I recognize this has been exploited due to asking patent clerks to go above and beyond the fields they are familiar with) and secondly because it's unlikely to be encumbered for thousands of years.

Buy selling a book or work to the public you are making it public.

“After a while” now means 90 years after the creator is dead, or something atrocious like that. So that new study on Alzheimer’s that the government paid for with your tax dollars? Yeah, you can’t read that unless you shell out a small fortune (or go to scihub, which most true scientists use and support). People are dying. This is a real serious problem and we need to start changing the wording so people realize it’s not just bad economics to have intellectual monopoly laws, it’s bad morally.

The issue of government funded research is separate. I actually agree with you that it should be available to the public given that public has purchased that right. However the same cannot be said of private endeavors.

You are claiming that its okay to take peoples labor to save lives. Taking peoples labor is slavery. Yes it is wrong to do that even to save a life. Pressuring people -- sure. Shaming people -- great. Forcing them at the end of a gun barrel. No.

When the janitor cleans the authors home does the janitor then get to charge a royalty to everyone who enters the home?

Um no. Janitorial service is not intellectual property. It doesn't qualify in any way as a 'secret'. There's no 'secret' or private information being shared. If the Janitor publishes a tell-all story about what went on in the author's home, then yes, he does get to charge everyone who reads it.

I appreciate you engaging in the conversation. Thank you for your thoughts. I’m not sure if we’ll come to a consensus at all, but it’s interesting to read your responses. My take is “intellectual property” is a joke of a concept, that is completely arbitrary and has no grounding in the real world (because if you dissect any piece of work, you would find that it “infringes” on the “rights” of the “labor” of countless individuals before). It’s a lie. Plain and simple. Used to benefit the rich and powerful. Intellectual slavery or intellectual monopoly. Those are the true terms here.

You are just defining harm using your preconceived notions about rights.

How are you any more harmed by me preventing you from growing crops, than I am harmed by you preventing a sale of copy of my book because you sold it to them first.

One system is grounded in physical laws (you can’t “git clone” land), and the other is a manmade restriction on the mind’s natural ability to grow.

Depriving you of a future sale is just saying you are not entitled to some unnatural profit that you feel entitled to, even though your book is worthless in value compared to all of the intellectual products that you so freely use from prior generations.

Anyone who thinks their ideas are so precious and important that they should be able to control how people use those is oblivious to their true negligible contribution.