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Because the insurance company's share of the premiums has been fixed at 20%, and that can no longer be attacked by Democrats because they're so loath to admit that the entire ACA was tantamount to their party robbing the country to pay off their campaign donors Drugs, liability insurance, and hospital billing schemes are other the most obviously extortionate medical expenses we're collectively stuck paying for, tort reform is poison, and Martin Shkreli put a hateable face on the first one
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Dec 21, 2016 22:18
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Vladimir Putin posted:Yeah but do most people who are arguing this really understand that? I mean if that were the case won't most people argue that premiums are too high and not indirectly helping themselves by saying that drug prices are too high? When a company charges $1,000 for a pill to US health insurers, charges $4 for the same pill in India, and gives it away to poor people in the US for almost free, there are going to be questions. The level of price optimization is ridiculous.
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Dec 21, 2016 22:29
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Vladimir Putin posted:What do you feel about the debates in drug costs going on right now? I personally don't get it. Many drugs cost $100,000 per year. I think there was a huge controversy over a hep c drug that was $90,000 per year. There's a huge controversy over this right now but I don't see how this impacts the average person. 1) It gives endless obfuscation for the industries to use when the public briefly becomes riled up at healthcare costs. At the last pharmacy society meeting for my state we had an expert panel on why the hell drugs are so expensive. The insurance expert blamed the drug manufacturers, the manufacturers countered that what they really charge is different because of rebates (but they can't actually tell you the rebates, trust us they're big though). This has been Mylan's primary argument of defense behind their EpiPen price jacking. They also have patient assistance programs, which are quite nice if you qualify, but often patients with a primary insurance, and almost always non-documented immigrants will not qualify for these programs. 2) It limits access. The equation basically becomes: does your insurer cover this. If it doesn't you have no chance of affording it at the fake inflated sticker price. The medication I'm trying to get covered is sold for $40/month in most countries, it's $700/month in the US if I want to pay without coverage. Back in the 90's blockbuster drugs would pretty much max out around <$300/month cash price, which while high isn't completely beyond comprehension. Now my CHC program regularly mails arthritis injectibles to patients that would cost them over $4,000/month without coverage. 3) Corporations grow fat on the government teat. I actually really like the HepC drugs you mention, they're a fantastic breakthrough medication that's given orally instead of injected, shorter therapy duration than the old treatment, works much more often than the old treatment, and has a much better side effect profile than the old treatment. So thumbs up for Gilead actually contributing something of worth to the medical world (they make the best HIV combination pills too). The problem is, everyone is getting on this profit train. HepC drugs, HIV drugs, Rheumatoid Arthritis medications, this is where all the big bucks are going now. They know that no consumer will ever pay for these things themselves, instead the equation becomes "How can we get medicaid/medicare to cover this?" And we are paying this cost in the end, just in a roundabout way as our taxes slide straight through the public payer programs to pharma's bottom line. They have no reason to not keep shooting for the moon in prices, as long as they can keep slipping it on public insurance formularies as medically necessary treatments. Meanwhile rebates don't apply to cash prices, so patients with high deductibles or no insurance are poo poo out of luck.
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Dec 21, 2016 22:41
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The Gilead HepC pill is probably worth the 90K because it is a true cure. You're cured and you never have the disease again. It's more or less an unbelievable breakthrough and overnight every other treatment more or less exited the market apart from a couple of competitors. I think AbbVie has one and some other company has a competing product. I actually got really mad at the backlash over the Gilead HepC price debate. It's a true innovation and it saves the system a shitload of money over the long run. The insurance companies know this but they also knew most people would only see the price tag and they used that over and over to get Gilead to lower their price. They effectively used the public discourse over drug pricing for their own means. Finally I would say that the days of Gilead making money over HepC are rapidly coming to an end due in large part to the fact that people are getting cured and there are less and less people available out there that need the product. I've seen multiple financial analyses about this and I'm sure the insurance companies have seen these as well. That's why I'm alway suspicious about who's driving these discussions about drug price. Apart from the hosed up niche cases of people gaming the regulatory system the insurance companies stand to gain the most and I'll bet they are driving a lot of the discussion just like they did in HepC.
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Dec 21, 2016 23:20
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A factor in healthcare costs is that the US indirectly subsidizes most of the world's medical research by being the economy from which funding for R & D flows.
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Dec 22, 2016 00:02
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Vladimir Putin posted:The Gilead HepC pill is probably worth the 90K because it is a true cure. You're cured and you never have the disease again. It's more or less an unbelievable breakthrough and overnight every other treatment more or less exited the market apart from a couple of competitors. I think AbbVie has one and some other company has a competing product. it's extremely hosed up when 'the discourse' forces useful drugs to be affordable, true. probably a conspiracy. it would instead be better (more anti-kkkorporate) if the treatment for your ailments cost more than the average person takes home in two years, and you had to take it forever
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Dec 22, 2016 01:25
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Subvisual Haze posted:It's really quite remarkable when you look at the cost breakdowns. We spend as much per capita on public healthcare expenditures (Medicare/Medicaid/etc.) as most nations spend on their entire universal healthcare system, then we pay the same amount again in individual/private expenses. The system is a gigantic Frankenstein's monster that I have very little hope can get sorted out to provide actual efficient healthcare short of burning it all down and starting over with universal public coverage (which realistically will never happen). People in other countries also consume less healthcare. A huge part of the problem with America is that people are far less healthy than other countries. "Lifestyle" diseases are a bitch.
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Dec 22, 2016 01:40
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$30 copay for ventolin HFA. (MSRP of $80) Or $5 ventolin from India and $20 slow boat shipping. That's how crazy this country's system is
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Dec 22, 2016 02:29
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A Wizard of Goatse posted:it's extremely hosed up when 'the discourse' forces useful drugs to be affordable, true. probably a conspiracy. it would instead be better (more anti-kkkorporate) if the treatment for your ailments cost more than the average person takes home in two years, and you had to take it forever That's my whole point. The discourse on a 90K drug impacts almost no one. Even if you reduce it 100x to about $900 most people will still complain that it's too much and many people will still be unable to afford it. The whole HepC debate impacted only insurance companies who wanted to shave maybe 10-20k off of it. OK now it's 70K does that make a difference to the average person? But Gilead got called to congress to testify over it and it was driven by popular anger. That's the insurance industry driving the discourse for their own gain.
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Dec 22, 2016 02:36
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Shouldn't we want insurance companies to cut the costs they have to pay to drug companies as much as possible since that theoretically leads to lower premiums?
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Dec 22, 2016 03:29
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Republicans posted:Shouldn't we want insurance companies to cut the costs they have to pay to drug companies as much as possible since that theoretically leads to lower premiums? Do none of you read? He literally pointed out that in this particular case it was just padding their own margins.
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Dec 22, 2016 03:34
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Xae posted:People in other countries also consume less healthcare. Maybe. Australia is about as fat as we are but they aren't spending money like a drunk. Our system just sucks plain and simple.
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Dec 22, 2016 03:36
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LeftistMuslimObama posted:Do none of you read? He literally pointed out that in this particular case it was just padding their own margins. health Insurers are literally, literally fixed in what margin they can legally charge, based on how much they spend on medical expenditures like.... drugs the theory here is that a handful of gigantic corporations specializing in accounting and law were unaware of the single most high-profile law regulating their industry and/or unable to figure out that 25% of $90,000 is a gently caress of a lot more than 25% of $70,000, or $50,000, or $900, and so conspired to manufacture public outrage about a bottle of pills that costs more than a new Mercedes. which nobody could otherwise authentically care about because, uh, $900 to permanently cure a major disease is still more than a homeless man can afford A Wizard of Goatse fucked around with this message at 04:28 on Dec 22, 2016 |
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Dec 22, 2016 04:14
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A Wizard of Goatse posted:health Insurers are literally, literally fixed in what margin they can legally charge, based on how much they spend on medical expenditures like.... drugs It's kind of a silly theory. The health insurance markets (individual and group) are extremely price sensitive. If insurance companies wanted to raise their own costs in order to increase retention per policy, they wouldn't be doing any of the well-known cost controlling measures such as requiring pre-certification, beefing up utilization management, denying claims, or introducing narrow networks. These all reduce costs which lead to more competitive premium rates for marketing purposes.
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Dec 22, 2016 04:36
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esquilax posted:It's kind of a silly theory. The health insurance markets (individual and group) are extremely price sensitive. If insurance companies wanted to raise their own costs in order to increase retention per policy, they wouldn't be doing any of the well-known cost controlling measures such as requiring pre-certification, beefing up utilization management, denying claims, or introducing narrow networks. These all reduce costs which lead to more competitive premium rates for marketing purposes. To a point. One of the huge problems is that the "customer" of the Payer is the Employer. Decoupling the two would be a huge fix for everyone.
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Dec 22, 2016 04:46
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A Wizard of Goatse posted:health Insurers are literally, literally fixed in what margin they can legally charge, based on how much they spend on medical expenditures like.... drugs The conflict between payers and manufacturers in this space is well known and has gotten worse over the years. Drugs regarded as the most effective by the medical community regularly get excluded from formularies because the payers don't want to pay the full price and use it as leverage. The post I originally responded described how he couldn't get his network to cover drugs outside their indication. The payer/manufacturer pricing battle is a real thing and payers use whatever leverage they can to reduce their costs.
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Dec 22, 2016 04:58
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Xae posted:To a point. Well it depends. Employer provided health insurance is fairly "progressive" in that it's a greater proportional benefit to those of lower income than higher earners, and a greater benefit to those with families than those without. Decoupling health insurance from employment would likely reduce purchasing power for people in the lower income ranges and those with the highest healthcare expenses in the short term. It would also lead to massive short-term inflation as $500B in yearly health expenditures starts being included in the CPI, hopefully with a corresponding increase in incomes. My personal pet theory is that the increasing cost of employer-provided health insurance over the past 30 years (and corresponding decrease in income as a % of total comp) is a major factor in the stagnation of wages at the lower end.
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Dec 22, 2016 05:17
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esquilax posted:Well it depends. Employer provided health care is a relic of WW2 wage controls. It is also the reason why the individual markets are expensive. The majority of "Healthy, Productive" people have employer provided healthcare. This means the individual pools are riskier. This means anyone in a low end job benefits or without a job pays a higher rate because they are in the riskier pool. If all insurance was individual then we would see lower rates in that market as the lower risk individuals would lower the aggregate risk. It would also mean that you wouldn't have to deal with changing doctors if you change job. It would also mean that your insurer needs to win your business, not your the business of the Director of Benefits at your company. If they pissed you off you could leave quickly. Employers like benefits though because they are untaxed compensation. My employer kicks in $350/mo towards my insurance. That is completely untaxed. That gives it a nearly 2:1 impact per dollar spent compared to wages.
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Dec 22, 2016 06:33
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Subvisual Haze posted:Well the main reason I think is that pharmacies are actually transparent in what they're going to charge you for things. Patients can and do pay cash prices for their medications at times, and we can can even give them a quote on what it costs with or without insurance before they get their pills. Compare that to medical care, where you basically take the tests your doctor orders you to, and then a month later you get a bill for 10x what a CT scan should cost. The time delay and lack of upfront pricing of healthcare services makes it harder for consumers react. As for the rebate system itself At my hospital things like IV fluids, aspirin, and acetaminophen are considered no charge items so no you aren't charged $30 for a baby aspirin. reagan fucked around with this message at 21:12 on Jan 15, 2017 |
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Dec 22, 2016 16:14
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Xae posted:It is also the reason why the individual markets are expensive. The majority of "Healthy, Productive" people have employer provided healthcare. This means the individual pools are riskier. This means anyone in a low end job benefits or without a job pays a higher rate because they are in the riskier pool. Do you have a source for this? CMS AV/MV calculator analyses from 2013 showed 4% lower claims for people enrolled in the individual market. And, though premiums and not cost, current data shows a difference of about 10% lower premiums in the individual market comparing benchmark plan and average employer plan after adjustments.
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Dec 22, 2016 16:18
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Vladimir Putin posted:The conflict between payers and manufacturers in this space is well known and has gotten worse over the years. Drugs regarded as the most effective by the medical community regularly get excluded from formularies because the payers don't want to pay the full price and use it as leverage. The post I originally responded described how he couldn't get his network to cover drugs outside their indication. The payer/manufacturer pricing battle is a real thing and payers use whatever leverage they can to reduce their costs. You still haven't gotten to the part where fighting to reduce America's astronomical medical expenses is a terrible corporate conspiracy and the insurance companies are just pocketing the savings in blatant violation of federal law rather than using them to reach a more competitive price point, because health insurance prices stop just short of the point where even a let-them-eat-cake law outlawing not being able to afford insurance isn't enough to keep people from deciding en masse they'd rather eat today and deal with the fine tomorrow. A Wizard of Goatse fucked around with this message at 16:35 on Dec 22, 2016 |
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Dec 22, 2016 16:18
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A Wizard of Goatse posted:You still haven't gotten to the part where fighting to reduce America's astronomical medical expenses is a terrible corporate conspiracy and the insurance companies are just pocketing the savings in blatant violation of federal law rather than using them to reach a more competitive price point. If payers don't care about savings from manufacturers why do they regularly exclude the best performing medicines from their formularies?
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Dec 22, 2016 16:33
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You mean to say the corporation that factors cost into its calculations arrives at different conclusions about the efficacy of treatments than the medical researchers who don't? Pish tosh! They care about savings from manufacturers in the sense that manufacturers would like very much to charge their captive market 'what have you got', and insurers would rather control prices and determine what to charge their customers for themselves. Drug manufacturers are fighting everybody to keep their prices arbitrarily high, hence the huge battle over generics. A Wizard of Goatse fucked around with this message at 16:49 on Dec 22, 2016 |
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Dec 22, 2016 16:35
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A Wizard of Goatse posted:You mean to say the corporation that factors cost into its calculations arrives at different conclusions about the efficacy of treatments than the medical researchers who don't? Pish tosh! No I'm saying that payers regularly exclude treatments from its formularies to either leverage price from manufacturers or to save on costs by not providing coverage for these medications to the patient. That's one of the tactics they use to lever on P and L. The drug pricing issue is a legitimate one but it's also complex and it has many parties with different issues. Having observed more than one series of debates move through the public discourse can assure you that each party with a financial stake in these issues has the resources both financial and intellectual to use multiple strategies to influence the outcome. Public opinion, among other methods, is used by both payers AND manufacturers to get what they want. Because they are so effective what the public sees at the end is just the result of a blunt instrument without understanding where it came from. Ok Gilead got called before congress to testify and had their emails seized to determine how they priced their HepC drug. But most people who understood the situation knew that the origins and the public outrage was driven in large part by payers who knew all the relevant financial analyses. Most people don't even understand the financial, epidemiology, cost-effective analyses, nor the context of the discussion. The public just saw the price tag and flipped out. So in the end the payers used that ignorance effectively to drive the discussion.
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Dec 22, 2016 16:49
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i don't know dude you're making all these vague handwaving references to secret knowledge that the foolish public is being sinisterly manipulated into... supporting being able to get treated for diseases? but you yourself are ignorant on, or at this point straight-up ignoring, commonly understood and well-sourced facts that render your specific conspiracy theory utterly nonsensical. Do you work for Pfizer by any chance?
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Dec 22, 2016 16:58
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A Wizard of Goatse posted:i don't know dude you're making all these vague handwaving references to secret knowledge that the foolish public is being sinisterly manipulated into... supporting being able to get treated for diseases? but you yourself are ignorant on, or at this point straight-up ignoring, commonly understood and well-sourced facts that render your specific conspiracy theory utterly nonsensical. Do you work for Pfizer by any chance? Public opinion gets manipulated for personal gain in multiple venues not just drug pricing. It's pretty obvious.
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Dec 22, 2016 17:02
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reagan posted:I'm a hospital pharmacist and on our side I can tell you all about the countless insulin pens and inhalers that are either lost by nursing or used once and sent back to the pharmacy after one use. There's layers upon layers of waste in our healthcare system and until someone puts their foot down its only going to get worse. Yesterday a floor lost a bag of oritavacncin (something like $4000) and wanted us to make another. They ended up finding it but just lol this happens constantly. As an entirely 340b outpatient pharmacy it's a little hard not to hate hospital pharmacies in general at the moment. Various hospitals were caught abusing the hell out of the 340b program to get cheap drugs but then still charge patients full price and refer them to collections agencies when they don't pay, and as a result 340b program compliance has become a mess lately. Also drug companies have gotten really canny lately in figuring out that if they can get their already profitable medications a designation as an orphan drug (indicated to treat a rare disease state that wouldn't normally be researched) then they can dodge 340b pricing entirely.
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Dec 22, 2016 18:37
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Vladimir Putin posted:The Gilead HepC pill is probably worth the 90K because it is a true cure. You're cured and you never have the disease again. It's more or less an unbelievable breakthrough and overnight every other treatment more or less exited the market apart from a couple of competitors. I think AbbVie has one and some other company has a competing product. The computer I'm currently posting on is hundreds if not thousands of times faster than the computers sold 15 years ago, but it was probably significantly cheaper. In almost every industry, technological advances actually reduce the cost of the goods even if there is a substantial increase in efficacy/output. The price of Sovaldi was not set because of how effective it was, how much it cost to develop, or how much alternate forms of treatment cost. If you spend time doing research and read the results from the senate finance committee investigation in to Gilead and Sovaldi, they make note that in none of the communications they found discussing the pricing of Sovaldi was the concept of making a return on investment for their purchasing of Pharmasset, the company that developed Sovaldi. They never mention recouping R&D costs either, but they do talk about potential PR issues and public backlash at different prices. You will see Gilead compares their 90k drug to a 180k liver transplant and claims what a great value it is, but only ~20% of people with chronic HCV end up needing a liver transplant. That 180k per person turns in to 36k pretty quick. Also, by setting their drug price as high as they can, that also builds a stepping stone for them to continue to release Hep C treatments using Sovaldi as their baseline cost to compare to. This has already happened with their drug Harvoni, which is around 100k. As soon as they iterate their drug and find something slightly more effective than Harvoni, we'll be seeing another pill at 110k for a treatment. Sovaldi is a fantastic drug, and I'm truly happy for all the people it was able to help, but it should not have cost as much as it did. The cost was not justified by R&D costs or an ROI on the purchase of Pharmasset, it was based on exploiting the 2003 Medicare Modernization Act and current pharmaceutical patent laws. Reik fucked around with this message at 21:46 on Dec 22, 2016 |
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Dec 22, 2016 21:42
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Reik posted:The computer I'm currently posting on is hundreds if not thousands of times faster than the computers sold 15 years ago, but it was probably significantly cheaper. In almost every industry, technological advances actually reduce the cost of the goods even if there is a substantial increase in efficacy/output. 1.) The drug industry is nothing like the computer or software industry. Things get more expensive to do and discover as time goes on due to regulations (rightfully so) and the nature of the research. The amount of drugs approved year by year FDA has gone down since the 'golden age' of drug discovery, and costly late stage failures have gone up. For about a decade people in the industry were making GBS threads themselves because they were worried all the 'easy' stuff was discovered and there wasn't anything more they could do. That has recently proved false but things almost never get cheaper. They just get harder and more expensive. 2.) Almost no industry engages in ROI-based pricing. That's just insane. Nobody goes 'hey we invested $10 in this let's set the price to $11'. No industry does that, especially not something based in high-tech. Value for these industry is based on innovation, not capital investment. You can sit on your sofa and invent a new app and you don't price it based on fact that you thought of it in 10 seconds. You price based on the value it brings to the market and how it differentiates to other apps already on the market.
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Dec 23, 2016 00:59
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Well once the Medicaid expansion gets repealed, I'll be back to not having insurance and the previous plan of "declare bankruptcy if I get bills I can't pay."
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Dec 23, 2016 02:56
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FuturePastNow posted:Well once the Medicaid expansion gets repealed, I'll be back to not having insurance and the previous plan of "declare bankruptcy if I get bills I can't pay." Maybe congress will exempt medical debt from bankruptcy like they did with student loan debt
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Dec 23, 2016 04:55
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That might be the only alternative to the individual mandate (outside of single payer) with a prayer of working...eventually. e: to elaborate, it would be the most American thing for the GOP to tout they've successfully eliminated the mandate and then sidling through removal of the ability to discharge medical debt. It would still be a de facto mandate and would ultra-gently caress anyone that feels they don't 'need' insurance and then has a catastrophic injury/illness. Highbrow Slick fucked around with this message at 06:46 on Dec 23, 2016 |
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Dec 23, 2016 06:29
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Vladimir Putin posted:1.) The drug industry is nothing like the computer or software industry. Things get more expensive to do and discover as time goes on due to regulations (rightfully so) and the nature of the research. The amount of drugs approved year by year FDA has gone down since the 'golden age' of drug discovery, and costly late stage failures have gone up. For about a decade people in the industry were making GBS threads themselves because they were worried all the 'easy' stuff was discovered and there wasn't anything more they could do. That has recently proved false but things almost never get cheaper. They just get harder and more expensive. 1) There was nothing "Hard" about Gilead getting Sovaldi. They spent $11 billion buying the company that had already developed it. The actual cost to manufacture the pills is negligible. In 2014 and 2015 combined Gilead had $31.5 billion in sales from Sovaldi and Harvoni alone. There was nothing difficult about this, this was easy money. 2) You can't tell me the reason they have to price so high is because of high R&D costs and then say they don't price their drugs to recoup their high R&D costs. Any publicly traded company is driven by ROI-based pricing. Gilead is beholden to their shareholders who are buying stocks based on their expected return. If their stock isn't producing enough RoE because they weren't able to compensate for their $11 billion capital investment their stock price is going to go down and their CEO is going to get fired. FuturePastNow posted:Well once the Medicaid expansion gets repealed, I'll be back to not having insurance and the previous plan of "declare bankruptcy if I get bills I can't pay." Are you healthy right now? The EHB requirement of ACA increased the popularity of critical illness insurance, which would only cover things like heart attacks, cancer, etc. Because it's not comprehensive health insurance, it doesn't qualify for the tax penalty, but it can also be medically underwritten making it very cheap in comparison. Reik fucked around with this message at 18:31 on Dec 23, 2016 |
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Dec 23, 2016 18:29
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Vladimir Putin posted:2.) Almost no industry engages in ROI-based pricing. That's just insane. Nobody goes 'hey we invested $10 in this let's set the price to $11'. Nobody sets the price equal to "Investment / Target ROI", but they use it as a threshold. If you aren't making at least $11, you won't make the investment. Edit: of course, the dollar figures involved in this calculation would presumably be present values of best expectations, not unit costs. PerniciousKnid fucked around with this message at 18:40 on Dec 23, 2016 |
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Dec 23, 2016 18:38
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FuturePastNow posted:Well once the Medicaid expansion gets repealed, I'll be back to not having insurance and the previous plan of "declare bankruptcy if I get bills I can't pay." I'm pretty sure someone in this thread suggested that in those cases, you just put in the lowest expected income for ppaca site and you get the most subsidized insurance possible w/ no penalty. That being said it'll likely still be too expensive.
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Dec 23, 2016 19:15
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Relevant to the current discussion Generally, STATnews has been a very good source, as long as you check the authors and root cites.
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Dec 23, 2016 19:40
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Discendo Vox posted:Relevant to the current discussion Well yeah, generic price fixing has been painfully obvious for a couple years now to people who have to purchase drugs for their pharmacy. The pharmabro was just an idiot who advertised what he was doing, everyone has been doing it to a lesser degree. Artificial and real drug shortages along with a shitload of generic manufacturer mergers have made price gauging a non-stop phenomena. I think it was two years ago when suddenly the diuretic pill Bumetanide went from having 10+ generic manufacturers selling it via my wholesaler to only one having it available in the space of a month. I think I still have the print out of the cost override screen showing the acquisition cost of a patient's Bumetanide fill going from <$5 to >$500.
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Dec 23, 2016 19:56
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Reik posted:1) There was nothing "Hard" about Gilead getting Sovaldi. They spent $11 billion buying the company that had already developed it. The actual cost to manufacture the pills is negligible. In 2014 and 2015 combined Gilead had $31.5 billion in sales from Sovaldi and Harvoni alone. There was nothing difficult about this, this was easy money. PerniciousKnid posted:Nobody sets the price equal to "Investment / Target ROI", but they use it as a threshold. If you aren't making at least $11, you won't make the investment. 1.) Gilead ran the bulk of the clinical trials which costs many multiples of preclinical discovery programs. They also assumed the risk of FDA rejection which would have basically zeroed out their $11 billion price tag. You're not wrong that many preclinical and early stage clinical candidates are trending towards being discovered by smaller biotechs and not in house but to say that this was easy money is simply not true. Put another way, Pharmasset would also have known the market potential. Why didn't they simply reject such a low offer from Gilead if the market potential is many multiples of that per year and orders of magnitude over the lifetime? The answer is pretty simple in that it wasn't easy money. $11 billion was the worth of the drug when they bought it with all of the risk and uncertainty and need for future development priced in. 2.) Again to have non-value pricing in a innovation based industry is just insane. ROI factors as a threshold but never dictates pricing. Look at it from the flip side. You can spend $10 billion dollars developing a drug but if there's no value to the market the price will go below what you need for a ROI. This has happened multiple times in the drug industry where companies take a multi billion dollar write off on approved drugs because they did not have enough value to the market to get a return on the money they put in it. There are very (in)famous cases of this all throught the industry and there are not so famous cases that you can dig up. A bunch of drugs that cost a shitload of money to develop got approved and on the market right now that multiple parties know (or are very sure) will result in a multibillion loss in development cost. Pricing based on capital investment in this field makes absolutely no sense.
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Dec 23, 2016 19:58
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Vladimir Putin posted:1.) Gilead ran the bulk of the clinical trials which costs many multiples of preclinical discovery programs. They also assumed the risk of FDA rejection which would have basically zeroed out their $11 billion price tag. You're not wrong that many preclinical and early stage clinical candidates are trending towards being discovered by smaller biotechs and not in house but to say that this was easy money is simply not true. Put another way, Pharmasset would also have known the market potential. Why didn't they simply reject such a low offer from Gilead if the market potential is many multiples of that per year and orders of magnitude over the lifetime? The answer is pretty simple in that it wasn't easy money. $11 billion was the worth of the drug when they bought it with all of the risk and uncertainty and need for future development priced in. The price tag for Sovaldi was not set when Pharmasset was purchased. There is a reason this stirred the pot so much, because it was an unprecedented price tag for a disease with such prevalence. Gilead bought Pharmasset in November 2011, submitted Sovaldi to the FDA on April 9, 2013, it was approved December 6 2013. An eight month turnaround on FDA approval is incredibly quick. This doesn't happen for a drug that has any measurable chance of being rejected. They knew they had something special and they exploited it. There is not a publicly traded company out there that isn't in the business of maximizing their stock price. It's actually illegal for the CEO to not try and produce the best results for the shareholders. Stock prices are based on expected earnings/return per share. Every publicly traded company's number one goal is maximizing this RoE, and when you acquire another company for $11 billion you better expect to make that back quick or else your RoE will take a serious hit.
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Dec 23, 2016 20:23
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Don't you mean ROI. ROE is rules of engagement like people shooting each other.
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Dec 23, 2016 21:02
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