I own an old SF novel called _The Cold Cash War_ that includes a sub-plot where the large corporate cartels decide they won’t do business with the Government any more. Or any of it’s employees, for that matter.
Imagine the scene:
Doctor: I’m sorry, Senator, but we’ve had to cancel your hip replacement.
Senator: Why?
Doctor: Nobody will sell an artificial hip to me or to the hospital, because we accept GovCare. They say they can’t afford to give their product away.
Senator: You can’t get one somewhere else?
Doctor: Do you want a Russian hip? Or worse, a Government Issue unit?
Senator, shuddering: No, I see why that’s not an option…
(P.S., I just spotted the typo. “any of its employees” is what I should have written.)
Nonsense, Glenn. The solution to this public health menace is simple. Require these evil, greedy corporations to sell their product to hospitals that service Senators.
Karl, that old SF novel was just as flimsy, but a man can dream, can’t he?
A more plausible ‘punch line’ is that there aren’t any providers because they all went bankrupt.
Keep up the yeoman’s work of digging up the entrails of “free” healthcare. It appears to be everything we feared – stifling to innovation, cost inflating, in bed with the worst of medical-industrial complex (ahem, AMA); and even more – costs that will kick in and escalate well after it is entrenched as law, perks and out clauses for senators and their constituents, corruption in bound form.
On the other hand, look at how the pie is sliced. The US pharmaceutical industry spends around 24.4% of its revenue on promotion, vs. 13% on R&D. Profits are around 20 to 25%. In 2008 total US pharma R&D spending was a bit over 60 billion. Taking a reduction of 15 billion a year doesn’t seem to threaten a 500 billion dollar a year industry fatally. The linked article leaps from “proposed health care bill might cost as much as 15 billion a year” to the implicit assumption that it’ll all come out of R&D. That appears not to be the case.
Seems as if the goose that lays the golden eggs is having its feed delivered in a platinum pail by a butler.
The US pharmaceutical industry spends around 24.4% of its revenue on promotion, vs. 13% on R&D. Profits are around 20 to 25%.
What’s your source for those figures? And what’s the definition of the categories?
Just how does Big Pharma spend $100 billion a year on “promotion”? Do they spend it on television or print advertising? Lobbying? The cost of all those free physicians’ samples they give away? Could it be the $80 billion that the Obama administration extorted from them in exchange for promising to go easy on them? Will it include the $160 billion that Nancy Pelosi wants to extract from them?
I take issue with Mr. Clapp’s premise that “they’ve got so much, they won’t miss the money”.
First, couched as it is in the rest of his argument, it implicitly accepts the idea that outsiders have the right to look at the revenues and expenses of the pharmaceutical companies and arbitrarily decide what is “enough” profit or the “right” kind of expenses. If you don’t own a company, you don’t have that right. If you want that right, buy a company or start your own and compete.
Second, assertions that public takings represent a teensie-weensie amount, so small the lucky contributors will never even miss it, is the nose of the camel for constant increases in those takings. “It’s just a little bit!” becomes “It’s just a little bit more!”, endlessly recycled.
Third, it’s their money. It doesn’t matter whether or not they will miss it, it’s not anyone else’s to take on that basis.
Mr. Clapp, if pharm is so good why don’t you start your own business rather than hobbling the ones that are already out there? Given the margins, you’ll be able to show us how it’s really done.
tl james says:
it’s their money. It doesn’t matter whether or not they will miss it, it’s not anyone else’s to take on that basis.
Yeah. And its my $8000 and the Gov’t doesn’t have the right to tell me what to do with it.
The high taxes crowding out R&D costs is only half the problem. The bigger problem is the reduced revenue stream as price controls and regulations and the nationalizing of “essential” products like flu vaccines and Cipro for Anthrax reduces the revenue stream, which loses rate of return on the R&D costs, which reduces the incentive for R&D, which reduces the incentive. Money spent on R&D will be better spent bribing senators like Dodd for a bailout.
This is already happening on a smaller scale when every miracle drug hits the market the ambulance chasers kill it with a class action suit and then use a portion of their revenue to pay off the DNC to block tort reform, the real reason health care is so explensive. I only wonder why the trial lawyers agreed to the shutting down of their gravy train. I’m sure they’re getting paid some other way, I just haven’t figured out how yet.
By far the vast majority of pharmaceutical research is snapped up by the industry from universities, who do the research on the taxpayer dime. I have no figures to cite whatsoever, but from personal experience in my local university’s pharmacy department I’d be surprised if the ratio of patents purchased versus patents developed is less than 30 to 1, and my own estimate would be closer to 50. Most of these patents are purchased for strategic reasons.
Drugs without patent protection are DOA. I have a friend who’s tried to bring his cancer drug (cures gliomas in dogs 100% of the time) to market three times, but no pharma will touch it, and understandably so, because the molecule IP is in the public domain. The most promising permanent cure for Type I Diabetes is being slowly funded to market by donations, because the drug it’s based on was originally patented in the 1950’s. Fifteen years ago the most promising cancer therapy on the horizon was monoclonal antibodies, but the development’s stopped now that the patents have grown stale.
Drugs with patent protection virtually never make it into a generic now. The original maker pays a generic company to act like they’ll bring it out, then the maker sues the generic and gains an automatic 30-month effective extension on their IP. Or they patent a minor tweak to the product, barcoding diabetes blood test strips, for example, and gain another term of patent protection. The best insulins for diabetes are now almost all off the market, having been replaced by new synthetic insulins that are highly problematic but patent-protected. The newer insulins are priced at approximately eight times as much as the old ones.
My point here is that we’ve created a system where the biggest rewards don’t come from bringing out new technologies. And it’s important to remember that we created this system, and that we can tweak it. Capitalism, as well, is a construction, and patents, and copyrights, and money, too, all invented to harness self-interest for the public good. If we forget the reasons that we invented these systems and just cry “Patriotism!” every time they seriously and obviously aren’t serving us as well as they could, we just end up turning ourselves into willing idiots.
I own an old SF novel called _The Cold Cash War_ that includes a sub-plot where the large corporate cartels decide they won’t do business with the Government any more. Or any of it’s employees, for that matter.
Imagine the scene:
Doctor: I’m sorry, Senator, but we’ve had to cancel your hip replacement.
Senator: Why?
Doctor: Nobody will sell an artificial hip to me or to the hospital, because we accept GovCare. They say they can’t afford to give their product away.
Senator: You can’t get one somewhere else?
Doctor: Do you want a Russian hip? Or worse, a Government Issue unit?
Senator, shuddering: No, I see why that’s not an option…
(P.S., I just spotted the typo. “any of its employees” is what I should have written.)
Nonsense, Glenn. The solution to this public health menace is simple. Require these evil, greedy corporations to sell their product to hospitals that service Senators.
Karl, that old SF novel was just as flimsy, but a man can dream, can’t he?
A more plausible ‘punch line’ is that there aren’t any providers because they all went bankrupt.
Keep up the yeoman’s work of digging up the entrails of “free” healthcare. It appears to be everything we feared – stifling to innovation, cost inflating, in bed with the worst of medical-industrial complex (ahem, AMA); and even more – costs that will kick in and escalate well after it is entrenched as law, perks and out clauses for senators and their constituents, corruption in bound form.
On the other hand, look at how the pie is sliced. The US pharmaceutical industry spends around 24.4% of its revenue on promotion, vs. 13% on R&D. Profits are around 20 to 25%. In 2008 total US pharma R&D spending was a bit over 60 billion. Taking a reduction of 15 billion a year doesn’t seem to threaten a 500 billion dollar a year industry fatally. The linked article leaps from “proposed health care bill might cost as much as 15 billion a year” to the implicit assumption that it’ll all come out of R&D. That appears not to be the case.
Seems as if the goose that lays the golden eggs is having its feed delivered in a platinum pail by a butler.
The US pharmaceutical industry spends around 24.4% of its revenue on promotion, vs. 13% on R&D. Profits are around 20 to 25%.
What’s your source for those figures? And what’s the definition of the categories?
Just how does Big Pharma spend $100 billion a year on “promotion”? Do they spend it on television or print advertising? Lobbying? The cost of all those free physicians’ samples they give away? Could it be the $80 billion that the Obama administration extorted from them in exchange for promising to go easy on them? Will it include the $160 billion that Nancy Pelosi wants to extract from them?
I take issue with Mr. Clapp’s premise that “they’ve got so much, they won’t miss the money”.
First, couched as it is in the rest of his argument, it implicitly accepts the idea that outsiders have the right to look at the revenues and expenses of the pharmaceutical companies and arbitrarily decide what is “enough” profit or the “right” kind of expenses. If you don’t own a company, you don’t have that right. If you want that right, buy a company or start your own and compete.
Second, assertions that public takings represent a teensie-weensie amount, so small the lucky contributors will never even miss it, is the nose of the camel for constant increases in those takings. “It’s just a little bit!” becomes “It’s just a little bit more!”, endlessly recycled.
Third, it’s their money. It doesn’t matter whether or not they will miss it, it’s not anyone else’s to take on that basis.
Mr. Clapp, if pharm is so good why don’t you start your own business rather than hobbling the ones that are already out there? Given the margins, you’ll be able to show us how it’s really done.
tl james says:
it’s their money. It doesn’t matter whether or not they will miss it, it’s not anyone else’s to take on that basis.
Yeah. And its my $8000 and the Gov’t doesn’t have the right to tell me what to do with it.
The high taxes crowding out R&D costs is only half the problem. The bigger problem is the reduced revenue stream as price controls and regulations and the nationalizing of “essential” products like flu vaccines and Cipro for Anthrax reduces the revenue stream, which loses rate of return on the R&D costs, which reduces the incentive for R&D, which reduces the incentive. Money spent on R&D will be better spent bribing senators like Dodd for a bailout.
This is already happening on a smaller scale when every miracle drug hits the market the ambulance chasers kill it with a class action suit and then use a portion of their revenue to pay off the DNC to block tort reform, the real reason health care is so explensive. I only wonder why the trial lawyers agreed to the shutting down of their gravy train. I’m sure they’re getting paid some other way, I just haven’t figured out how yet.
By far the vast majority of pharmaceutical research is snapped up by the industry from universities, who do the research on the taxpayer dime. I have no figures to cite whatsoever, but from personal experience in my local university’s pharmacy department I’d be surprised if the ratio of patents purchased versus patents developed is less than 30 to 1, and my own estimate would be closer to 50. Most of these patents are purchased for strategic reasons.
Drugs without patent protection are DOA. I have a friend who’s tried to bring his cancer drug (cures gliomas in dogs 100% of the time) to market three times, but no pharma will touch it, and understandably so, because the molecule IP is in the public domain. The most promising permanent cure for Type I Diabetes is being slowly funded to market by donations, because the drug it’s based on was originally patented in the 1950’s. Fifteen years ago the most promising cancer therapy on the horizon was monoclonal antibodies, but the development’s stopped now that the patents have grown stale.
Drugs with patent protection virtually never make it into a generic now. The original maker pays a generic company to act like they’ll bring it out, then the maker sues the generic and gains an automatic 30-month effective extension on their IP. Or they patent a minor tweak to the product, barcoding diabetes blood test strips, for example, and gain another term of patent protection. The best insulins for diabetes are now almost all off the market, having been replaced by new synthetic insulins that are highly problematic but patent-protected. The newer insulins are priced at approximately eight times as much as the old ones.
My point here is that we’ve created a system where the biggest rewards don’t come from bringing out new technologies. And it’s important to remember that we created this system, and that we can tweak it. Capitalism, as well, is a construction, and patents, and copyrights, and money, too, all invented to harness self-interest for the public good. If we forget the reasons that we invented these systems and just cry “Patriotism!” every time they seriously and obviously aren’t serving us as well as they could, we just end up turning ourselves into willing idiots.