The development costs per a Forbes analysis are as follows:

> "The median per-drug R&D spending of companies that developed more than six drugs – that’s only 8 companies – was $5.8 billion."

...so that is $5-6B USD per drug DEVELOPED in large companies.

Gilead - maker of Sovaldi/Harvoni for HepC treatment - has been on a development tear of late, and almost certainly falls into that range IMO [2].

For companies that produce fewer drugs - the estimates are between $700M-$1B per drug.

Note these are prices for drug R&D only ("development") - there is no guarantee those drugs developed make it to market ("approval") - Over 90% do not.

edit: source links

1 - https://www.forbes.com/sites/matthewherper/2017/10/16/the-co...

2 - https://en.wikipedia.org/wiki/Gilead_Sciences#2010_to_2019

I imagine those numbers wouldn't be all that reliable for a bunch of reasons - companies would have vested interests in over or under reporting costs for various reasons, technology progressions mean previously expensive to develop drugs may be cheaper if they were to be redeveloped now, and sample size probably wouldn't be large enough for the raw data to be used when bankrolling pharma research ventures.

Edit: I should contextualise this by noting I have basically no experience with pharma so grain of salt blah blah

I think your points are fair. Sample size for their analysis was about 100 drugs. FDA approves about 25 per year.

My main point is that drug development is more expensive than most realize. Beyond R&D, a lot of that cost is in postmarketing (after approval) safety studies and surveillance- to catch side effects not observed in clinical trials. This process can be made somewhat more efficient as you suggested, but at the end of the day a human is reviewing every side effect report and reporting those back to regulatory agencies etc.

I am not qualified to discuss the economics re: your point on pharma r&d - drug discovery is it’s own thing aside from actual drug development.

I dont think you should be downvoted because thats valid, yet hard to use as an argument, paranoia.

The basic assummption in cryptography is “assume the target system is already compromised” so i would wager you are partially correct. Its just that its not the whole story, especially if u think that private persons get massssive discounts if they try to privately pay (from reading below comments about quotes to insurance companies vs private people).

Its a sad dynamic thats probably ruining more loves than it should.

Drug development is incredibly costly. It's also something of a long term gamble. It can take 10-20 years to develop a new drug. A lot of that time is spent testing safety and waiting for approval. As a drug company, you need to have several new drugs in your pipeline at any given point, or you'll be seriously fucked if one (or more) of your products don't pan out. It's basically a high-risk-high-reward type of gambling situation.

Imagine having thousands of people on payroll, some working on drug design, some designing experiments to test the drugs, some doing the legal paperwork to get drugs approved etc, and suddenly the patent for your best selling drug expires and your latest drug doesn't work. You're pretty much boned.

Drug R&D includes failures - not saying they aren't for profit companies but there is significant cost (in the billions yearly) and risk in running a pharmaceutical research company

These drugs are priced this high for the sake of health insurance and the screwy pricing market based around it.

When you get the final bill with the “adjustments” and “discounts” it will be far less.

If you signaled to the provider you are paying cash it’s far less.

My physical therapy was $1200 a visit to my insurance provider, and magically $40 out of pocket once my insurance cut off my covered trips.

It’s priced based on ability to pay. US it will be 100,000 other countries it will be less.

Yup, the generic version of the drug is price at $384 per bottle of 28 pills in India

Here's an article on how the patent did not affect it's price in India: https://m.economictimes.com/industry/healthcare/biotech/phar...

Ability to pay? Is that a joke?

Considering that 40% of Americans can't cover a $400 emergency expense[0], what makes you think they can pay $84,000 for a 12-week treatment?

[0]: https://money.cnn.com/2018/05/22/pf/emergency-expenses-house...

Maximized for the total bottom line it isn't a joke. That some people die is not a consideration for those that control access to these drugs, the question is how many people should die in order for them to make the most money of the ones that stay alive. Think of the ones that die as marketing.

This is the only sincere appraisal of the healthcare industry in the US I’ve seen on HN in months. Thank you for your clarity.

As with most commercial goods there's a market identified and the goods priced accordingly to maximize profit.

This means that somebody is priced out no matter what. Given the state of American healthcare it's easier to reconcile if you remove the emotional part and view a drug treatment as, say, a television. If I make a 50" television and price it at $500, I accept that some people will not buy it and target my television to my intended market.

What I'm saying is the drug companies are probably fine saying "ok, some people can't afford it, but we maximize profit by selling at a premium to those that can."

All that said, if it's life saving you might be surprised what people can and will do, savings notwithstanding.

Taking the television example a bit far - one can imagine that one company makes radio, other makes ~telephones~ cellphones, oven, etc. These are all electronic gadgets that are used for different purposes.

However, most if not the entirety of drugs is to cure disease and save lives (or significantly improve the quality of live). There is one market as opposed to a market each for the types of gadgets.

Which is why something as trivial as say a surgical equipment gets priced exorbitantly because without that there’s no “whole functioning gadget” (surgery).

The free market economy doesn’t work in this case.

> The free market economy doesn’t work in this case.

While I think this is self evident, it depends on your definition of "working."

If we - a I personally think we should - attach a social caveat to capitalism that requires we do what we can for people less fortunate, it fails miserably because we lack a mechanism for fostering unfettered profit while ensuring healthcare is available to all in a reasonable form. No such mechanism may exist, but I think the problem is we keep trying to shoehorn half measures into the current system and expecting a miracle.

>If we - a I personally think we should - attach a social caveat to capitalism that requires we do what we can for people less fortunate, it fails miserably because we lack a mechanism for fostering unfettered profit

In the case of intellectual property/technology you are mistaken. Patents have an expiration. Capitalists are provided a time limited monopoly for the sake of extracting rent in exchange for development of that technology. But after the expiration, it becomes public domain.

In this case, all of the drugs mentioned will eventually run off patent and be available in generic form for very little cost. Future generations will benefit considerably. This is where the moral argument becomes most powerful. Think of the potentially tens to hundreds of billions of people that will benefit from this in the future. Should we stop the pipeline of drug development because some people can't afford it today?

You're operating on a false dichotomy, though. Why is this the only environment you can envision wherein drugs can be developed?

Because it's the only system shown through out history to work?

If there are better alternatives, why aren't other countries uses such a model? Why is the US _THE_ powerhouse, followed on by other highly market driven economies?

People "envision" schemes all the time. I prefer to live in a world where my drugs are real, not envisioned.

Because the only alternative economic system, Communism, was a total failure at drug development compared to the system we have. We have an example of a working system and another, much less productive defunct competitor.

> All that said, if it's life saving you might be surprised what people can and will do, savings notwithstanding.

Withholding a life-saving treatment has to be criminal in some way.

I just can't imagine a hospital sending people home to die because they can't pay.

You'd be looking to criminalize rational behavior - a difficult and quite often counter-productive endeavour.

First, there's survivorship bias. The hospitals that eat the costs of saving lives eventually go under or can't compete with the ones that invest in better doctors, equipment and so on. What you see in the end is lots more hospitals who are willing to withhold life-saving treatments than ones that will treat anyone no matter what. We may in theory want everyone to be treated, but in practice, our market behavior of seeking cheaper treatments and better doctors sways hospital behavior as well.

Second, there's unintended consequences. A hospital going under to save some lives can have disastrous consequences on the rest of the community - non-life-threatening issues turn into fatalities with the hospital gone, leading to more lives lost than if the hospital was "cold-hearted" and "calculating". Hospitals are faced with this moral dilemma every time they do their budgeting.

Third, there's utilitarianism. Is saving one life no matter how costly the way to go? What if you can save two lives for the same price? Is saving an old person's life the same worth as saving a young one's? What about "saving" someone's life but leaving them functionally crippled, vs dealing with non-fatal conditions in people which might bring them back to full function? How should a hospital spend its finite resources?

When you mix in all these concerns with the practicalities of the situation(noone is working with perfect information, and hospital staff often has to make snap judgements), you're bound to get different outcomes, including sending people home to die, depending on how the hospital lands on this balancing act.

It's difficult enough to craft a law to deal with the moral issues, but then you also need to think of the legal issues in enforcing it, and how the enforcement could lead to further unwanted consequences. Then, purely from a utilitarian POV, think about funnelling all the costs of enforcement into a charity - which one is more effective?

Except it isn't. You can debate the moral questions behind drug pricing. But it's entirely legal for pharma companies to set the price for the drugs to maximize their profits. It's logical.

What exactly is logical about letting someone who figuratively has you by the balls decide the price for a drug?

The logical thing would be having your insurance negotiating on your behalf ahead of time.

Also "but it's legal!" is not a valid argument in a debate about whether something should be legal.

Closest thing is called EMTALA:

https://en.wikipedia.org/wiki/Emergency_Medical_Treatment_an...

Americans tend to go into massive medical debt, still they can have that credit extended to them because over their careers they’ll make more than 84,000 and probably pay it off if they live.

Collecting part of that amount is still profitable because there’s no basis in the actual cost of treatment rendered.

Compare to someone in (poor country) who is lucky to collect a few hundred dollars a year, no one will ever extend that person 84,000 in debt, because they don’t have any chance of making that amount over the course of their entire career.

Ability to pay is significantly different from “savings.”

The $400 emergency expense number is about having savings (extra money in the bank) which is really a complicated issue relating to financial literacy and debt to income ratios. You could have someone making 6 figures living in an expensive house, driving a nice car, who can’t come up with $400 because he’s overextended himself. It’s a question of liquidity rather than ability to pay. If his wages get garnished, maybe he loses the house and has to sell the car, but the medicine still gets paid for.

That really should be an argument for collective payment so the mean ability to pay counts and nobody is priced out. I'll never understand how people can support the US health care system.

Most Americans wouldn't end up paying the 84k. Their insurance would pay for most of that, and negotiate it down further - the other day I was picking up a drug that without insurance would cost over $1,000. I paid $34.

That’s garbage. People without insurance are utterly fucked. The uninsured are sacrificed as a negotiating point against insurers. “List price is $5000. We’ll cut you a deal at only $2000!”

Yep, that's all true. It's worse, actually - the government sets reimbursement rates as well, so when they tell a hospital 'we are only going to pay you 60% of what you charge' what do you think a hospital is going to do in response?

This is a valid thing to be concerned about, but it appears to be false. Gilead has programs that help uninsured people get their drugs, including Harvoni. https://www.gilead.com/purpose/medication-access/us-patient-...

It depends on your plan. If you’re on a HDHP, chances are that prescriptions are not covered until you hit your deductible.

Even if that's the case, unless your deductible is $40k, which I have never seen before, the insurance would still cover the majority of the cost. Plus if you have chronic Hep C, you're likely spending thousands a year as it is and will continue to do so indefinitely.

Out of pocket maximum is the relevant figure, and that's $8k for individuals and $16k for families:

https://www.healthcare.gov/glossary/out-of-pocket-maximum-li...

Insurance is something you pay on all year long, you will eventually pay the 84k and more.

sure - let's say you pay your own insurance, which most people do not do - let's also say you pay an average of $5,500 a year for it, and have insurance from age 26 to 72 - that's 46 years. So you have now spent $253,000 over your lifetime, which is definitely above the 84k.

If you only have one disease or hospitalization in your life, however, you're rare - this is also extremely unlikely given your chronic Hep C. As an example, the average cost per person in the US, including healthy people, is $10,000 a year, 4,500 more than your insurance cost.

In all health insurance, the healthy are subsidizing the sick. If you have Hep C you are costing your insurer a lot more than you're paying them. If you're a very healthy individual and rarely have any issues, you're overpaying by a lot.

The vast majority of Americans have some form of medical insurance so a patient's out of pocket expense would typically be far lower.

Insurance increases net costs via added overhead. So, it’s ~80k * ~1.30 * (number receiving treatment) / (people paying insurance). Aka, it’s both more expensive and more affordable.

Health insurance in the US has overhead capped at a maximum of 20%, or 15% in large employer groups.

https://www.healthcare.gov/health-care-law-protections/rate-...

Spending 80% of your premium on direct heathcare cost means ( 1 / .8 - 1) = 25% cost increase, but that’s on top of the heathcare providers insurance related overhead. Insurance only adding 30% to total heathcare costs is a reasonable ballpark though likely an underestimation.

What percentage of the recepients costs are insurance related overhead as well? (Yes, that includes the time doctors spend arguing with insurers).

Surely, there is room for optimization, but in the alternative case of taxpayer funded healthcare, I'm sure the government is going to ask doctors for justifications for the same reasons insurers do. Someone needs to provide a second opinion on whether or not procedures and medications are appropriate for accountability purposes.

Fraud in government programs have much harsher criminal penalties and are more aggressively pursued.

https://www.propublica.org/article/health-insurers-make-it-e...

https://www.propublica.org/article/we-asked-prosecutors-if-h...

https://www.propublica.org/article/how-to-make-health-insure...

Governments add far less overhead in this area because they have more data and can thus use random inspection of bills for validation. Further, when setting rates every insurer has a separate negotiation involving even more overhead.

The government hires health insurance companies to do the inspections. I don't know of any US government that doesn't contract implementation of Medicaid/Medicare to UHG/Anthem/Humana/etc. So all the insurers have all the data anyway, and they are not inspecting each and every bill, they are also using heuristics.

Using heuristics on smaller sample sizes is inherently less efficient. You can get reasonable polling data on 50 million voters using 10,000 samples. That’s 1 sample per 5,000 voters. Drop the election down to a local election with 10,000 voters and the same ratio provides 2 samples telling you almost nothing.

Thus, if 5 insurance companies send patients to the same doctor you simply have more overhead.

In many other countries getting treated for hepatitis C won't cost you a dime besides your regular health insurance payment.

Prices are often negotiated by health insurers and are pretty much guaranteed to be lower for that reason. Depending on what system you are in, you might never even learn what your treatment cost. Not that you should care.

That depends on the treatment and politicians’ willingness to pay for it. Take cystic fibrosis in England: Until this year, modern, highly effective (and, yes, expensive) treatments available for years in the US—covered at low out-of-pocket cost by insurers there—were unavailable through the NHS.

The same was true of hepatitis C in England - even though NICE, the body responsible for assessing what drugs should be available on the NHS, found that the new treatments were cost effective at the price they were being sold for, the NHS balked due to the total cost of curing everyone and refused to offer it to anyone except a handful of patients who already had severe liver damage.

This is true. The new HCV drugs, even at the outrage inducing price of $90k, easily met the NICE cost effectiveness threshold.

The issue was really volume. There wasn’t enough money to treat everyone.

The exception or the rule?

It isn't priced on the customer's ability to pay: it's priced on the companies' ability to gouge.

Well, it is discriminatory pricing. If someone isn’t saying it is too expensive you haven’t priced the product aggressively enough. In the US market the profit was maximized at 100k, in other markets the profit is maximized at a lower price level because almost no one can afford 100k.

It cost exactly 11 billion for Gilead to "develop" Sofosbuvir

(they bought Pharmasset who discovered the drug [1])

[1] https://en.wikipedia.org/wiki/Sofosbuvir#History

They didn’t buy an approved drug, they bought a clinical lead. They still spent a ton getting it approved.