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Kreeblah posted:Giant pharma companies don't have to hide cures. They just have to be aware of things like Sovaldi and decide where their money is best spent to generate maximal returns and, therefore, the most investor attention. You realize that there are multiple Hep C cures on the market and that's what another big factor driving the cratering value for Gilead, right?
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Aug 8, 2020 02:48
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I've found this thought experiment to be a good illustration of many of the dysfunctions in the US healthcare system: Let's say a there is a magic box where if you feed in all of a patient's health records in and a proposed treatment (be it a prescription, surgery, whatever), it will tell you with perfect accuracy what the outcome for that patient would be (e.g. cancer in remission for 5 years, continues to smoke, dies on the operating table). Who would be interested in the magic box? Why would they want it? How much would they be willing to pay for it? And who has the information to feed into that magic box so it can operate?
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Aug 8, 2020 02:56
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wins32767 posted:I've found this thought experiment to be a good illustration of many of the dysfunctions in the US healthcare system: Let's say a there is a magic box where if you feed in all of a patient's health records in and a proposed treatment (be it a prescription, surgery, whatever), it will tell you with perfect accuracy what the outcome for that patient would be (e.g. cancer in remission for 5 years, continues to smoke, dies on the operating table). Who would be interested in the magic box? Why would they want it? How much would they be willing to pay for it? And who has the information to feed into that magic box so it can operate? The main interested parties are patients, private insurers (e.g. Aetna), public insurers (e.g. Medicare), providers (e.g. Brain Surgeons), treatment creators (pharma or medical device companies).
So the net is that the party most interested is too poor to pay much for the box, and the party with most of the information required to use the box loses money from its use. Switching to government run healthcare changes some of the incentives in a better way, but it isn't optimized for the optimal outcome for each patient, just the best bang for whatever bucks are allocated (until such a point as the providers get to regulatory capture).
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Aug 8, 2020 04:16
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One of my big issues with medical school and the training system is that the culture they instill in doctors is fundamentally broken. Medical errors are a huge cause of death and poor outcomes. Medical culture has far too much top down, "the expert is right" mindset to ever drive those errors close to zero and as the folks atop the pile, doctors are the most resistant to changing that culture. One of the good thing about consolidation on the provider side is that it will empower administrators to force a change of that culture. They'll probably just replace it with a cost optimizing one, but that'd be more amenable to change through incentives than the status quo.
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Aug 15, 2020 18:07
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Dumper Humper posted:\You have absolutely no proof that hospitals are going to be doing layoffs, the only scenario you can lay out is one where the poor loving insurance companies can't post record profits We ludicrously over treat in the US. My wife just had several thousand dollar procedure done to confirm that a couple thousand dollar procedure was indeed a false positive. That couple thousand dollar procedure is scheduled every two years to keep an eye on something she's had her whole life and has not caused any symptoms, all to avoid the doctor getting sued if the extremely small chance of it actually causing something bad did occur. I've had 3 CT scans in the past 3 years for the same recurring problem that I'd never had a scan for in the 10 years prior, all because I moved to a state where more defensive medicine is practiced. If hospitals don't end up doing layoffs, we haven't finished fixing the healthcare system.
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Oct 21, 2020 01:56
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Just to echo what everyone else has said, drug development is horrifically expensive for both good and bad reasons. For most of the last decade I've worked on software for various parts of the clinical trial pipeline (phase 1, phase 3/4, now RWE). Disclaimer: this post is from me, not my employer, etc. For those that don't know, the pipeline looks roughly like this: Phase 1: Gathering data to see what the drug does to the body (pharmacodynamics) and what the body does to the drug (pharmacokinetics). Healthy volunteers are used here, but there is some ethical sketchiness (e.g. some people take part in phase 1 trials as a full time job) with the idea to try to determine what the side effect profile is like in humans and what's the maximum safe dosage. Subjects are effectively hospitalized for days at a time with tests and labs performed on strict schedules. Study sizes are usually from single digits into mid hundreds. Almost all these trials are single site and don't last longer than a month or two. Phase 2: Trying to establish effectiveness of the drug. Give the drug to a bunch of people with some illness and see if they get better. These are usually teens to low hundreds subject counts and have low numbers of sites (one to tens). The goal is to have a measurable impact on the progress of a disease. Various endpoints are defined as proxies since these studies are generally reasonably short (months to a couple years). Think "did the tumor shrink" rather than did someone live longer. Phase 3: Does it beat what's already available. These are thousands of people with very complex inclusion/exclusion criteria. Since you're trying to show is the drug better than existing treatments and you can get approval for a cohort (sub-population with common traits) rather than the population as a whole, there is a lot of effort that goes into patients that are part of multiple cohorts to ensure you have sufficient statistical power. These studies are usually several years long, and dropouts are really problematic since it can lower the statistical power of results for various cohorts below the level required for approval. These studies generally happen globally and a few dozen sites, the logistics start to get expensive. You need to train a few hundred people in how to perform various tests, collect regulatory documents, negotiate contracts in maybe a dozen different countries, ship drugs internationally, etc. For all of these stages, there are dozens to hundreds of people at the pharma company doing protocol design, data management, coordination, regulatory/quality management, etc. in addition to the dozen to hundreds of clinical staff involved. For a successful compound that makes it to approval, doing all of these steps costs north of a billion dollars, and the vast majority of compounds fail to get approved, usually during phase 1 (one example is a drug that caused horrible, want-to-tear-your-skin-off itching for a couple days after taking it). Getting to a compound that might work is really a small fraction of what it takes to actually generate a successful treatment. wins32767 fucked around with this message at 21:25 on Oct 22, 2020 |
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Oct 21, 2020 17:48
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Jaxyon posted:I'm aware of the process by which drugs are approved, how long they take, and how much it costs.
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Oct 21, 2020 18:09
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BiggerBoat posted:Color me shocked that the net profits for the HCI were only 3%. I would have assumed much higher than that. At least double. Very few successful businesses wildly overspend on customer acquisition costs because it will rapidly drive you out of business (if it costs you $5 to earn $4, you can't do that forever). Now, if you didn't have a market based provider system and removed choice (e.g. forced people to go to a specific doctor or take a specific drug) you could get rid of all those costs with some degree of tradeoff. Having stricter standards of care around drug prescriptions would be a great way of lowering marketing costs since the drug companies would just lobby whatever body set that standard of care versus having to lobby every doctor.
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Oct 21, 2020 18:18
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I'd like to thank everyone for making this the best D&D thread I've been read in years. I'm not at all sarcastic. This is genuinely informative and interesting.
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Oct 22, 2020 22:03
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Jaxyon posted:Due to how little they spend on bringing drugs to market vs simply marketing them, the result of reduced revenues for them is unlikely to make a huge impact on innovation because it's not what's driving innovation. I thought this way too for a long time. I pulled numbers for this example from a bunch of places to illustrate why that's misleading. Retevmo just got approved this year, it's a cancer drug for certain kinds of cancer. It will be on patent through 2037, so a 17 year lifetime. It costs roughly $20k/mo and in the clinical trials, patients about 2/3rds of patients were on it for over 6 mo and the other 1/3rd was on it for over a year. For this thought experiment lets call it 9 mo and 15 mo on average. So that's (.67*9+.33*15) = ~11 mo So to calculate the Expected Lifetime Value of each customer (a business term that's somewhat morbid here, but it effectively means how much revenue do we expect to earn from each customer over the duration of their involvement with us) we can do: $20,000*11 = $220,000 per patient. Costs to manufacture a generic are between $00.01 and $1.45/unit, so let's call it $0.70/unit. A patient is going to need 60/mo so that's .7*60*11 = $462 Cost of distribution is ~20% so that means the Cost of Goods Sold is 220,000*.2+462 = $44,462 For a net profit per patient of ~175k, after R&D costs and customer acquisition costs. Let's assume the total addressable market that's treatable by this drug is 20k patients a year. That means the total value of the drug is 17 (patent lifetime) * 20,000 (patients a year) * 175,000 (profits less development and CAC). = 59.5 billion. Subtract out the cost of developing a new drug ($1b), and you have maximum potential profits of $58.5 billion dollars. That sounds great if your a pharma exec right? You spend $1b in R&D costs and you get $58.5b out the other end. Slam dunk, let's just crank drugs out the door, this is a money printing machine! Astute readers will note that there is a key cost we haven't accounted for, which is the sales and marketing costs to get more customers. Without customers none of that 59.5 billion dollars will get made. So how much should you spend on sales and marketing? Quite a lot actually. After you make back your costs plus some money to account for overhead, failed drugs, etc., you would, in theory, be making a profit by paying up to 175k minus 1 dollar per patient in customer acquisition costs. Clearly you could make more than a dollar with 175k spent in different ways, so you have to factor in cost of captial, etc., but at companies I've worked at we were willing to pay $20 to acquire a customer that had a total lifetime value of $22 because all the cheaper to acquire customers paid our R&D costs, overhead, etc. Even a 10% profit after CAC for marginal customers puts us at $157.5k sales and marketing costs per marginal customer. While all of that is waste from a societal perspective, it is the optimum profit maximizing solution in the current regulatory landscape. Since every dollar spent in sales and marketing more than pays for itself, it's misleading to look at the high marketing and sales spend and say "well since they spend so much on sales, they don't do much innovation". The sales spending is driving up the profitability of hits which means more money for R&D under the current model. The way to reason about innovation spending is looking at average net profitability (including CAC) per drug (including the failures). One could construct a single payer model that maintained the same level of profitability and get the same amount of new drugs, but it'd be certainly more expensive than other countries because they've been freeloading off the profits made in the US.
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Oct 23, 2020 01:32
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Jaxyon posted:Ah yes, the Virgin candyland of ideas that I draw my post from with my repeated references to studies, versus the Chad Unsupported Realism from silence_kit Because that sort of response is more conducive to a good discussion vs. just ignoring them.
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Oct 23, 2020 01:35
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Jaxyon posted:As previously covered, I don't consider productivity to be the same thing as innovation. quote:Is Merck spending most of it's R&D budget to find new markets to sell Keytruda(a drug they didn't invent) over the next few years creating innovation? quote:Do stock buybacks and dividends create innovation?
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Oct 23, 2020 02:22
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Jaxyon posted:I know what theyr'e doing and why they have to do that. I understand how validations work. quote:The point is they're taking a ton of their R&D budget, most of it in fact, and using that to prove that they can use that same drug they already came up with on other types of cancer, because every single usage has to be researched and proven. And they didn't come up with it. It's an acquisition from a EU company. What I don't get, and maybe because I'm over tired tonight, is why you're so focused on novel drugs versus arguing something like the Quality Adjusted Life Years (QALY) returns on spending are too low. Either it's worth doing label expansions or it's not, right? In other words, is a label expansion that costs $200m and results in 100k QALYs a year in improvement worse than a 1b spent on a new drug that returns 500k QALYs? Or are you arguing that the ratio is more like 200m/50k or 1b/1m? quote:Are they do that from a sense of innovation, or are they just doing the legwork to justify future marketing? E: F,B wins32767 fucked around with this message at 02:59 on Oct 23, 2020 |
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Oct 23, 2020 02:51
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| # ¿ May 10, 2024 10:45 |
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Jaxyon posted:The discussion is whether or not single payer would stifle innovation. I think defining innovation will help move that conversation forward because I don't think there is agreement on what it means. For me, innovation is creating different treatments for diseases, be it something that has no effective treatment or an improved treatment for a condition with at least one effective treatment. I would measure success in innovation by measuring the maximum potential QALY (or similar a metric) are generated per dollar in total R&D costs across the whole system. The denominator there includes VC money that goes to failed biotechs, pharma dollars that go to R&D, acquisition prices paid by pharma, etc. and the numerator includes patients that could benefit from a treatment more than their current treatment, regardless of if they take it. As an example, a new drug that could help 100,000 patients a year gain 1 QALYs and cost $1b to develop would give 1 QALY per $10,000. I'd consider that a great deal given the literature. Is that a fair place to start?
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Oct 23, 2020 03:22
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