Indian Gov't Uses Special Powers To Slash Cancer Drug Price By 97%

suraj.sun sends this quote from the Times of India: "In a landmark decision that could set a precedent on how life-saving drugs under patents can be made affordable, the government has allowed a domestic company, Natco Pharma, to manufacture a copycat version of Bayer's patented anti-cancer drug, Nexavar, bringing down its price by 97%. In the first-ever case of compulsory licensing approval, the Indian Patent Office on Monday cleared the application of Hyderabad's Natco Pharma to sell generic drug Nexavar, used for renal and liver cancer, at Rs 8,880 (around $175) for a 120-capsule pack for a month's therapy. Bayer offers it for over Rs 2.8 lakh (roughly $5,500) per 120 capsules. The order provides hope for patients who cannot afford these drugs. The approval paves the way for the launch of Natco's drug in the market, a company official told TOI, adding that it will pay a 6% royalty on net sales every quarter to Bayer."

Comments

Just keep in mind the tradeoff

[elrous0]

I know I'm going to burn karma for saying this (wouldn't be the first time), but do keep in mind that the R&D costs for developing these drugs is paid from the profits these companies make. Now, maybe governments themselves should be doing the development instead of for-profit companies, maybe the drug company profits are too high, and maybe Bayer were dicks to charge that much for a drug in a poor country. But if you're going to keep the system as-is, you had think long and hard before you just start ripping patents left-and-right. It may be politically popular, but you can't have your cake and eat it too.

If you're going to say "X company doesn't get to patent its drugs" you need to come up with a replacement for the money that X company put into its research and development. If the government wants to serve its people this way, that's fine, but they also have an obligation to pony up the money for their own R&D program (and not one that just does knockoffs of existing drugs). Because without that profit motive from those patents, the drug companies sure aren't going to be developing anything new.

Re:Just keep in mind the tradeoff

[Anonymous Coward]

1. Most drug company expenditure is on marketing;
2. Most drug research is academic;
3. They can settle for less profit;
4. If they won't settle for less profit, someone else will be prepared to take their position in the market.

Problems solved.

Re:Just keep in mind the tradeoff

[zlives]

I wonder: On the opposite side, if the drug companies no longer develop new treatments; would a non profit based entity (govt, charity) do the work? and if they would then perhaps that is whats best for humanity?

Re:Just keep in mind the tradeoff

[elrous0]

Well apparently the academic institutions, small biotechnology companies, and NIH are motivated by profit too, or they would be putting the drugs into the public domain, wouldn't they?

Re:Just keep in mind the tradeoff

[CensorshipDonkey]

Somewhat wrong. Research and development (R&D) is a relatively small part of the budgets of the big drug companies.

If this is actually true, I'd like to see some figures or at least a link.

Re:Just keep in mind the tradeoff

[tonywong]

If you read the article it does give the circumstances of the ruling. I would be inclined to agree with you on principle, but from the article:

Economist and intellectual property expert James Love said, "The Bayer price of Rs 34,11,898 per year ($69,000) is more than 41 times the projected average per capita income for India in 2012, shattering any measure of affordability. Bayer tried to justify its high price by making claims of high R&D costs, but refused to provide any details of its actual outlays on the research for Sorafenib, a cancer drug that was partly subsidized by the US Orphan Drug tax credit, and jointly developed with Onyx Pharmaceuticals. Bayer has made billions from Sorafenib, and made little effort to sell the product in India where its price is far beyond the means of all but a few persons."

This is in direct contravention to the WTO TRIPS agreement:

Under Section 84, a compulsory licence to manufacture a drug can be issued after three years of the grant of patent on the product, which is not available at an affordable price. Under the World Trade Organisation TRIPS Agreement, compulsory licences are legally-recognized means to overcome barriers in accessing affordable medicines. This is the first time in the history of the Indian Patents Act, 1970, that the provision under Section 84 has been invoked.

Re:Just keep in mind the tradeoff

[cpu6502]

1. Advertising actually save money because it encourages more sales.
2. Academic research is funded by drug companies and other corporations.
3. They don't make that much profit. I don't see Bayer in the top 100.
4. Doubtful. No company sells at a loss. Bayer would just avoid India completely, and not release their patented drugs until 10-20 years later (after they recover their initial R&D investment).

Re:Just keep in mind the tradeoff

[punker]

While it's true that the big pharmaceutical companies don't develop most of their own drugs, they do pay for the R&D done by the small firms. More importantly though, they tend to be what takes the drugs out of the lab and into a usable form. They primarily handle the drug safety (i.e. drug trials), manuafacturing, and marketing (because it's no good if the doctors don't know about it). They're just later in the chain, but they have done their work to create the drugs. If the Indian people/government paid for the work done prior to it being acquired by Bayer, then maybe you can justify setting the price so low for the work they did. But if not, it's just a straight ripoff. They better hope they know everything about the drug, because Bayer certainly won't be looking to help them.

Re:Just keep in mind the tradeoff

[sjames]

If they choose not to market a drug in India at all, I guess the government will save a lot of deliberation when they approve a local company to make the generic. It's not like they can't figure out how it's being made.

Re:Just keep in mind the tradeoff

[Microlith]

1. Advertising actually save money because it encourages more sales.

Thus, advertising gives you cancer. QED.

Re:Just keep in mind the tradeoff

[Anonymous Coward]

1. Yes, because advertising for cancer drugs increases demand. In what universe?

2. And at a pittance compared to government funding. Plus they demand tax cuts for doing it, so...net loss.

3. Because that kind of comparison is valid, even if it were true.

4. So let's see, Bayer is going to pursue profits from medicine by sitting on their hands instead of taking a lesser cut? At what price? The lives of human beings? You're not defending them, you're indicting them for gross indifference manslaughter. You've made them criminals.

Re:Just keep in mind the tradeoff

[sycodon]

I have a relative with a PhD working at a drug company doing drug development. We have had many conversations about her work and how it may eventually end up on the market. Her single department has a budget of over a millions dollars a year just for the people and facilities and supplies (yes, you have to buy all the shit to do the experiments with). They have about 20 different departments focusing on different kinds of drugs.

Now add on top of that all the trials which are well known to require upwards of a hundred million to conduct, review, and have certified by the feds.

So, your assertion that R&D for a new drug is a small part of budgets is misleading.

But, I will say that the reformulating of a drug and making small changes is complete crap and should be disallowed.

Re:Just keep in mind the tradeoff

[Anubis IV]

1. Most drug company expenditure is on marketing

Simple fix: Ban drug advertisements. That's the way it used to be and the way it should've stayed, since there is no valid reason why consumers should be the target of drug marketing when they shouldn't even have any say over their prescriptions.

Bonus: No more hastily spoken disclaimers regarding dry mouth and constipation at the end of every other commercial.

Re:Just keep in mind the tradeoff

[nedlohs]

http://www.sciencedaily.com/releases/2008/01/080105140107.htm

of course 56% of those marketing dollars are "samples" according to http://www.medicine.mcgill.ca/MJM/issues/v08n01/orig_articles/barfett.pdf. Which end up being drugs for uninsured poor people at the doctor's discretion, when I was uninsured and jobless in the US the doctor gave me samples of some antibiotics, for example.
 

Re:Just keep in mind the tradeoff

[Hatta]

No amount of marketing can change the number of people who need a drug. That is fixed. If the number of sales is less than this number, that can be fixed by educating doctors. If the number of sales is greater than or equal to the number of people who need a drug, more marketing just leads to overprescription. Whatever savings you're imagining here are subsidized by encouraging people to take drugs they don't need. That's bad all around.

Re:Just keep in mind the tradeoff

[Artraze]

> Most drug company expenditure is on marketing;

On the other hand, advertising, by definition, increases profits or it's a waste of money. Thus, advertising actually _decreases_ individual costs because they sell more units and can thus amortize the overhead costs (which are the primary costs) across more units.
For example, suppose your overhead is $1000, which cores things like labs, employees, trials, and other failed drugs and the cost to manufacture is $1. If you only sell 100 units, you must charge $11/each to break even. Suppose you then spend $200 on advertising and sell an additional 100. Now your break-even price becomes $7/each. The advertising money actually reduced the unit cost.

Now, I suppose you could argue that they're greedy and will still charge $11/each, but that's blatantly ignoring the basic economics that set the price in the first place. After all, they could be charging $20/unit to start, but the idea is that the 'greed' is an overhead cost, not a unit cost, and therefore also amortized across the units.

A viable argument is that on a macroeconomic scale, this increases the overall cost of healthcare because the drug price does factor in some advertising money. To this I have to say: whatever. That just get's too hard to trace. For advertising, if that ad money isn't in your drugs, it's in your Pepsi. Medically, the drug does some good (kinda part of the approval), maybe those people that missed it had much more costly problems because they didn't know the drug existed and had complications with their un/poorly treated condition.

> 2. Most drug research is academic;

Regardless of the truth in this (hint: it's rather limited), most cost is in bringing the drug to market. It's not as if these hypothetical academics make the compound, solve the engineering issues to produce it, and run all the trials. At best they find the drug compound, and usually it's more the mechanics, leaving the drug company to find the molecule that actually exploits that mechanism without killing people. Oh, and then develop the manufacturing process and run years of trials.

> 3. They can settle for less profit;

I guess. Given how much a crap shoot drug development can be, it's hard to define what exactly 'profit' is. Because often times it's just money to pay for the next year's research when income is down.

> 4. If they won't settle for less profit, someone else will be prepared to take their position in the market.

This is blatantly false. If this was the case then the Indian company would have done that, right? But no, they let Bayer do all the real work and are just spitting out chemicals. Hell, they probably are copying Bayer's manufacturing process as well, right off the friggin' patent. No wonder it's so cheap for them.

Finally, regarding your point 3 in particular, let us not forget the elephant in the room:

LIABILITY

If/when this drug is discovered to be doing something bad, who's responsible? This mindless manufacturer? I'm betting not. The Indian governement? HAHAHA. Bayer is the one at the end of the barrel and they won't have any 'excessive profits' to pay damages with. Woohoo!

Re:Just keep in mind the tradeoff

[StandardDeviant]

The public drug companies are required to file financial reports with the SEC, which generally detail their budgets (at least to a sufficient level of granularity for this discussion). EDGAR is one avenue of getting at them (10-Q for example for quarterly reporting). But yeah, he's not lying, R&D expenditures are not the majority line item for most large pharmaceutical companies. If anything, Big Pharma has been on the whole aggressively cutting R&D over the past few years.

Just for one concrete example, here's Pfizer's 10-Q from late last year:
http://yahoo.brand.edgar-online.com/DisplayFiling.aspx?TabIndex=2&FilingID=8236559&companyid=5709&ppu=%252fDefault.aspx%253fcompanyid%253d5709%2526amp%253bformtypeID%253d13

Click into "Financial Statements" there. I think the given figures are in units of "millions," so they spent about $2.1Bn on R&D during the given quarter, compared to $4.6Bn for "Selling, informational and administrative expenses" (which probably includes marketing) and $3.7Bn for "Cost of sales" (not sure, might be raw materials and manufacturing?).

Re:Just keep in mind the tradeoff

[Anonymous Coward]

1.) Most R&D medicine is taken by volunteers who don't get paid for being part of the clinical trials.

2.) Most of the scientists and others conducting the clinical trials don't get paid

3.) The government pays for a ton of R&D and contributes a lot to R&D.

4.) Pharmaceutical corporations don't get independently audited to ensure that their government established monopoly prices are justified.

5.) Advancements in medicine will occur, and have occurred, perfectly fine without patents. There is absolutely no evidence, whatsoever, that patents facilitate drug advancements. Most of the evidence suggests otherwise.

http://levine.sscnet.ucla.edu/general/intellectual/against.htm

the pharmaceutical cartel gets all the free work of others and it gets to charge monopoly prices for it and keep the profits to itself.

Re:Just keep in mind the tradeoff

[Wain13001]

Popularity of a product doesn't lower the price...it results in a raised price or more production which lowers the cost for the company, but it doesn't necessarily lower the price.

Viagra is currently $8-12 dollars per pill *with insurance* under most plans in the US...and you only get 8 or 9 pills (forget how many) for what is supposed to be a 3 month supply.

Only when there is a legal generic in the US will that price drop (mass production/increased availability lowers price). Did the advertising impact the cost? yes it did, it made everyone on earth aware of the product's availability which greatly increased the potential market value, which in turn means the price the market is willing to bear in fact can often go *up*...not saying it did with V or not, just saying that it's not as simple as you're making it.

Re:Just keep in mind the tradeoff

[glop]

If you compare a country where advertisement for drugs is illegal, you can see that:
- new drugs are used just as well (as long as the doctors and patients see the value proposition)
- drugs are actually cheaper in countries where said advertisement is illegal (and we are talking expensive countries here, where most stuff is selling at prices similar to those of the US except for know ripoffs such as Verizon cell phone service or internet).

In such countries the doctors are usually determining what your ailments are and offering what they think are the best corresponding drugs. So drug companies just have to convince these experts that you need the drugs and they will be used. That seems quite reasonable, efficient and reasonably respectful of individual freedom, although there is some abuse (drug companies sometimes offer free seminars in tropical islands for instance).

In the US, advertising to end users also increases some risks that people will ask for drugs they don't really need. When you see the list of side effects, it's easy how to see how this could be quite dangerous and 'give cancer' as was said...

Example: Lovaza is refined Omega3 with some testing done (basically filtered fish oil...). They have ads on TV all the time and the drug is very expensive. You can buy Omega3 for much less from all kinds of supplement manufacturers. That seems to contradict your theory.

Re:Just keep in mind the tradeoff

[Xtravar]

Yeah, his example only works on things like Viagra, which are completely optional.

Re:Just keep in mind the tradeoff

[PraiseBob]

3. They don't make that much profit. I don't see Bayer in the top 100.
You must've missed Pfizer at 31, and Johnson & Johnson at 40. Those two make more than Target, Kraft Foods, Goldman Sachs, Morgan Stanley, Dow Chemical, and obviously most other companies on the planet.

They can take a 97% decrease in price and still remain profitable? What other industry can possibly have that level of markup and keep customers? It is only possible because of patent restrictions, and a "captive market" where people die or have horrible illnesses when they don't take your product.

Re:Just keep in mind the tradeoff

[EvilBudMan]

Did you see the numbers? It's almost $50 a pill. Some drug company has now patented a propellant for asthma medicine. Since you can't use the old inhalers because of environmental concerns, if you want asthma medicine that used to be off patent is now back on. The patent office is screwed up entirely. Bayer may have lots of research tied up in this but many companies are mere patent trolls.

Re:Just keep in mind the tradeoff

[Artraze]

Mod parent up.

This is exactly what happened here:

"BAY 32-9006 was first developed by Onyx Pharmaceuticals. Onyx subsequently partnered with a large and well known drug company, Bayer (Bayer is the "BAY" in BAY 43-9006) to complete development of the drug."
-- http://cancerguide.org/rcc_bay43-9006.html

So this was developed by companies, not academia or the NIH.

Re:Just keep in mind the tradeoff

[GameboyRMH]

No amount of marketing can change the number of people who need a drug. That is fixed.

Correct, Viagra is an exception to the rule (along with things like eyelash extending drugs, acne suppression drugs and other vanity shit) as you don't need it to survive. Savings only applies for drugs you don't need.

Pharma is a lot like digital media in that production and distribution is dirt cheap, and all the costs are in development. You can pretty much look at any pill in a pharmacy and they all cost peanuts to actually produce, like software it's just a matter of pricing it so that the expected sales pay off. And like digital media if there are people who want it and can't afford it, there's a very good chance that the vendor is screwing themselves by pricing too high.

Re:Just keep in mind the tradeoff

[zill]

Here's Bayer's 2011 annual report.

Last year they spent 17.975 billion euros on manufacturing, and 2.932 billion on R&D. "Selling expenses", which I assume are mostly advertising costs, was 8.958 billion. Note though that these data also include Bayer's GM food and material science divisions. Medical R&D only accounts for 66.4% of their total R&D expenses. I'm too lazy to tabulate how much of their manufacturing and advertising costs are from the medicinal division.

No offense, but all I had to do was type in bayer.com and click on the "annual report" link on their front page. All that probably took less time than typing "can anyone show me the stats".

Re:Just keep in mind the tradeoff

[bws111]

Guess what category 'educating doctors' falls under? That's right, marketing. How do they educate doctors? By buying ads, and sending reps to talk to the doctors. How does a busy doctor have time to talk to a rep? The rep buys him lunch. How does the rep convince the doctor that his meds are right for the doctor's patients? By giving him samples. All of the above costs money (lots of it) and it all comes out of the marketing budget.

As for consumer level advertising: you are assuming that everyone for whom a medicine is appropriate will go to the doctor and tell them about the problem, even if they don't know anything can be done about it. This is nonsense. Before Viagra (and its widespread advertsing), how many men went to their doctor and complained about ED? Almost none, first because it was embarassing, and second because every man knew there was nothing that could be done anyway. Do people with joint pain go to the doctor, or do they just assume it is part of aging and put up with it (or worse, self medicate)? Is constantly feeling sad normal, or is there something wrong that can be fixed?

Re:Just keep in mind the tradeoff

[poity]

1. Yes, because advertising for cancer drugs increases demand. In what universe?

isn't that an argument AGAINST the initial (implied) claim that Bayer spends more on ads than research? It doesn't seem like Bayer would spend money on ads over research when obviously as you've pointed out cancer treatment demand doesn't increase just due to more awareness. So that's more of a rebuttal to the GP anon than to cpu5602

2. And at a pittance compared to government funding. Plus they demand tax cuts for doing it, so...net loss.

which government would fund this, India? If the Indian government had funded the research in its totality, I wonder how it or the tax paying population would respond to another country taking the research without compensation. The solution then is a global fund, but who pays how much?

As for points 3 and 4, it would seem that in a world where research is given away, the countries or companies which invest in their production capability will always win over those which invest their research capability. Just build your factories and wait for the other guys to publish the formulas.

Re:Just keep in mind the tradeoff

[Anubis IV]

Doing your due diligence in researching drugs is fine. Asking questions of your doctor after doing your reading is fine. Realizing that you had neglected to mention a potentially important detail is extremely valuable. I don't want to discount any of those, because they are very good things. But consumers are not meant to have any say over their prescriptions, and by that I mean that the choice of what prescription you're walking out of the doctor's office with at the end of the day should still be the doctor's and not yours (obviously you should still have the right to refuse and the right to seek a second opinion, of course).

Because of that, there's no good reason to be marketing to consumers, since the only thing you can be doing is indoctrinating an uninformed bunch of people who have no basis for understanding the complex interactions taking place and the results that might occur. For similar reasons, licensed engineers are barred from advertising in America by most of the major engineering associations. People have no basis for measuring the credibility of the claims being made, nor could they without years and years of training, so you'd be taking advantage of their cluelessness by addressing them directly.

Re:Just keep in mind the tradeoff

[NormalVisual]

If you are capable of such research, you ARE a doctor.

No, not really. You're assuming that the doctors are really researching every new thing the drug companies push on them, and that you have to have an M.D. to read and understand the available information. I recently had the doctor prescribe two rather expensive (and new) medications that also weren't covered under my insurance. I did a bit of research, found a couple of much less expensive alternatives, and spoke to him about it. He agreed that there likely would be no problem with the substitutions and wrote some new scripts, and after having been on the different meds for a little while, he says that the cheaper meds have done just as well as he would have expected the others to do. So, a little research by this non-M.D. is saving me a little over $250/month.

Re:Just keep in mind the tradeoff

[dkleinsc]

No amount of marketing can change the number of people who need a drug. That is fixed.

Actually, it isn't. For instance, there are endless TV ads describing a list of symptoms and instructing the viewers to diagnose themselves with a disorder X and ask their doctor for a prescription for treatment Y. This may motivate somebody to seek out medical aid for a real problem, but what the drug companies are really hoping for is that a layperson will be convinced they have X (even if their regular doctor tells them they don't) and shop around until they get a prescription for Y. And since it's a treatment rather than a cure, this same person will get treated with Y for years regardless of whether they really need it, so long as the side effects aren't too bad.

This is part of what's wrong with for-profit health care: It's profitable to create demand that's not only useless but actually counterproductive and sometimes dangerous.

Re:Just keep in mind the tradeoff

[Miamicanes]

> Bayer would just avoid India completely, and not release their patented drugs until 10-20 years later

To a large part, this tactic is why most countries grant compulsory licensing in at least some instances -- to make it impossible for a company to metaphorically "take its ball and go home". Most countries besides the US take the attitude, "If the IP owner isn't interested in selling it here, and won't allow anybody else to sell it here by granting them a license under reasonable terms, we aren't going to stand in the way of somebody else independently taking the initiative to do an end run around them, make it themselves and sell it here anyway." India just happens to be notorious (within the pharmaceutical industry) for doing it openly, loudly, and proudly when lifesaving drugs are priced out of reach for most Indians by rent-seeking drug companies.

India is also somewhat unique in that it doesn't grant or recognize patents for "method of use" or "molecules", only manufacturing processes. So when finasteride was repurposed in lower-dose form as Propecia for baldness, it wasn't eligible for a new patent in India. That's why Propecia is patented and expensive in the US, but costs next to nothing when purchased from India. Likewise, when Indian companies came up with new ways to manufacture atomoxetine (the ingredient in Strattera), they were able to get their own patents and begin selling it, even though the original patent for Strattera was still in effect and valid in India. In the US, you can combine two old drugs in new doses into a new drug, and get it patented for another 17 years. In India, you'd be laughed at (unless you somehow came up with an innovative new manufacturing process that did something differently than just making the two original drugs by their original processes, mixing them together, and pressing them into tablets containing both).

Re:Just keep in mind the tradeoff

[Hatta]

Guess what category 'educating doctors' falls under? That's right, marketing.

Not a chance. Education and marketing are mutually exclusive.

How do they educate doctors? By buying ads, and sending reps to talk to the doctors

That's not education.

How does a busy doctor have time to talk to a rep? The rep buys him lunch.

Also not education.

How does the rep convince the doctor that his meds are right for the doctor's patients? By giving him samples.

Still not education.

Re:Just keep in mind the tradeoff

[cfulmer]

When was the last time you saw advertising for an anti-cancer drug? The advertising is for things that many people didn't know was a problem -- toenail fungus, restless leg syndrome or problems that they were embarrassed to see their doctors about (Viagra.)

Re:Just keep in mind the tradeoff

[Ihmhi]

I don't that strategy is viable.

I 100% your post.

Re:Just keep in mind the tradeoff

[TubeSteak]

As for consumer level advertising: you are assuming that everyone for whom a medicine is appropriate will go to the doctor and tell them about the problem, even if they don't know anything can be done about it. This is nonsense.

http://en.wikipedia.org/wiki/Direct-to-consumer_advertising
5 of the top 10 Big Pharma companies are from Europe.
The USA and New Zealand are the only two western countries that have legalized direct to consumer (DTC) advertising of pharmaceuticals

You should read more about ethnocentrism and try to reconsider some of your views.
Especially light of the fact that Europe has cheaper health care costs and better outcomes than the USA and its perscription happy marketplace.

Re:Just keep in mind the tradeoff

[punker]

Where are you coming up with this? Do you know any drug reps? Are you in the business? Getting white papers, case studies, etc to doctors is probably 70% of what drug reps do (I know more than a few of them). The other 30% is price negotiation. But all of that is drug marketing.
And this is all just a matter of accounting, because the point was "Major pharmaceutical companies spend more on marketing than R&D". The accountants put these costs under marketing.

Re:Just keep in mind the tradeoff

[P-niiice]

Since when does less profit = loss? Less profit (even a little less) and putting the money to good use elsewhere would be the cure for so many of our problems today, it's uncanny.

Re:Just keep in mind the tradeoff

[next_ghost]

And it's still not education. Actually, in places where medical care is run by the state, we call this corruption.

Re:Just keep in mind the tradeoff

[lgw]

Bayer's profit margin is about 6%. Far less than Apple or Google or the like. Greedy? I hope so - far more people are motivated by greed than altruism, and I want whatever motivation cures cancer! I would you prefer eveyrone was nice to one another, and no cure for cancer?

Re:Just keep in mind the tradeoff

[Hatta]

Getting white papers, case studies, etc to doctors is probably 70% of what drug reps do

Still not education, because you can't actually trust an industry representative to give you accurate data. He's going to give you the results from private industry research which always err in favor of the industry. Any results they choose to share will play down risks, and play up efficacy over an academic study.

What we need is real continuing education for doctors. With classes, and tests, and papers, oh my!

Re:Just keep in mind the tradeoff

[chfriley]

Viagra and Cialis are NOT "COMPLETELY OPTIONAL."

If you are a prostate cancer patient increasing blood flow to the area for up to 3 years will improve healing - for nerve damage and the like. They are only "optional" in the sense that physical therapy is optional or that statins are optional. You want healing for both continence and potency among other things.

A little knowledge goes a long way, but to claim that it is completely optional ignores the studies showing the benefits for at least prostatectomy patients.

The example still holds though: if Doctors and patients are not aware of the benefits of a drug, they won't prescribe it.

Re:Just keep in mind the tradeoff

[batkiwi]

For instance, there are endless TV ads describing a list of symptoms and instructing the viewers to diagnose themselves with a disorder X and ask their doctor for a prescription for treatment Y

Fortunately that's illegal in most countries apart from the USA.

Re:Just keep in mind the tradeoff

[Kalriath]

Drug companies have zero motivation to cure illnesses. They are motivated to treat the symptoms of illnesses, and extend the lives of those people who have them while still not treating the illness itself.

Re:Just keep in mind the tradeoff

[DragonWriter]

How can you possibly describe a producer who invents a product (recently) and is offering it for sale to the public as "rent seeking"?

The extra price you can charge above the natural market price for a product due to a monopoly is called a "monopoly rent".

Seeking to extract such a price is "rent seeking".

Patents are legally-granted monopolies.

Seeking to protect monopoly rents in one market by refusing to sell in another market because, even with the monopoly, the prices received in the second market would be so low that flow from the second market back into the first market (and flow of purchasers from the first market into the second market, which amounts to the same thing) would reduce monopoly rents in the first market is a pretty obvious example of extreme rent-seeking behavior.

Re:Just keep in mind the tradeoff

[__aaltlg1547]

Sending drug reps to persuade doctors to prescribe your expensive drug still ain't R&D.

Let's put this in perspective:

From Bayer's 2011 Annual Report
(millions of Euros)
Net sales 36,528
Cost of goods sold (17,975)
Gross profit 18,553
Selling expenses (8,958)
Research and development expenses (2,932)
General administration expenses (1,713)
Other operating income 859
Other operating expenses (1,660)
Operating result (EBIT) 4,149

That's right. Bayer spent 3x as much on marketing as on R&D. Marketing was their biggest expense category, after COGS, by a wide margin.
In contrast, R&D is only 8% of their net sales.

But all of the marketing is related to new drug introduction. They could cut their research and it would directly increase their profit. But it would also put them in a situation where they'd lose sales of new drugs in a few years. The fact that their managers believe it's in their best interest to spend 2.9B per year on R&D implies that they make considerably more than that per year on patented drugs. Maybe 6B/year. Maybe more.

Now let's get back to India. How many people in India do you think could have shelled out $5500 a month for a cancer drug -- even if it is life-saving? The per-capita GDP in India is only about $1500/year. Bayer can't be making a lot of sales on a drug that people simply can't afford to buy.

They supposedly can make it locally for $175 per months' supply. This will results in a lot more sales, and India's apparently going to have a forced-licensing arrangement whereby Bayer will still get some money. Just not 97% profit. But 6% of the net sales on a drug that Indians WILL be able to buy may bring in more revenue than 97% on the Bayer-branded drug that Indian's WON'T be able to buy.

I expect Bayer will complain for a while then quietly pocket the royalties and maybe in a couple years they'll figure out that they can make more money by licensing their patented drugs in poor countries than they can by selling them at the same prices they'd stick to USAnians.

Domestic use only, I presume

[OldGunner]

The issue with compulsory licensing would get very muddy if Natco Pharma is allowed to export the medication outside of India's borders.

there's a reason they're overpricing this drug

[ruebarb]

average life expectancy according to an article on the BBC is extended by only 3 months -

http://news.bbc.co.uk/2/hi/health/8367614.stm

with results like that, you have to overcharge like hell to get your money cause the patients will only be around three more months than usual if they weren't taking the drug -

but if you're desperate and dying anyways, why not blow 2 months salary on a 120 day supply, right? And yet, I have no sympathy for the drug companies - I wonder why....could it be their way of using lawsuits to keep generics off the market for a few extra years while they re-release a "timed" version of their product?

Drug companies are vultures - and I'd love to see more university/public funding of this research for the public interest and less for the profit motive - especially when lives are at stake

Re:there's a reason they're overpricing this drug

[Anonymous Coward]

Wow, so they make you pay almost 6 grand for a 3 month supply of a pill that can't actually keep you alive long enough to take all 120?

That argument is empirically false in this case.

[langelgjm]

That argument does not work in this situation. Bayer had priced the drug so high in India that it was clear they had no interest in serving the Indian market. I'm on a listserv for this type of information, and someone close to the issue noted that "Last year Bayer sold 493 boxes of 120 tabs of Sorafenib in India. That was enough for about 49 people, in a country with a population of 1,210,193,422."

Any money Bayer was making in India off this drug was a rounding error compared to the lucrative North American and European markets. Furthermore, Bayer argued to the Indian court that the Indian population did have access to the drug through an infringing version produced by Cipla, while at the same time Bayer was suing Cipla for patent infringement, trying to get their product off the market.

Given the 6% royalty rate that NATCO has to pay to Bayer, I wouldn't be suprised if Bayer ends up making more money with the compulsory license than before.

Re:Companies will stop selling New drugs in India

[Maximum Prophet]

If a drug has been patented, and made it's way through FDA approval, it's chemistry is well known, and any decent lab will be able to make it. Not selling in a market is only cutting off the nose to spite the face. They will continue to sell in that market, because rich people will still pay for it rather than the generic.

R&D are sunk costs. *Any* sales over your fixed production costs results in profit. If you want to maximize profit, you sell. (Of course, as others have pointed out, you have to make sure none of the low cost sales gets resold to someone in another country. YMMV)

Re:Protections

[betterunixthanunix]

Realistically what are Bayer's options, how do you combat something like this?

Buy off some Indian politicians and get that government back in-line: get that government to stop working for the benefit of its citizens, and to start working for the benefit of foreign corporations.

Drugs are like software

[Maximum Prophet]

Any decent chem lab can reproduce almost any drug given the patents and FDA approval documents. (Some drugs are difficult or perishable) People are responding that the big pharm companies will leave these markets, but if they do, it's unrelated to this.

R&D are sunk costs. *Any* sales over your fixed production costs results in profit. If you want to maximize profit, you sell.

What this might do, is limit the number of new drugs in the pipeline, but even that isn't a given. It's possible that (most) every good idea is being worked on, and all the great scientists are working on them. Once you've reached idea saturation, more money in a system just increases profits to the shareholders.

Wait, wait, I hear people yelling. If there's more money given to the shareholders, then they will invest in venture startups, and many more great new drugs will be discovered. Maybe. It's also possible that too much money in the drug company ecology will just lead to more viagra clones if not "snake oil" type products. More money might lead to more advertising, causing people to misuse drugs they don't really need.

Academia? More than you'd think

[Sycraft-fu]

Since the public has decided they do not wish to pay more taxes to education, public funding has been getting slashed over and over. So we turn to the only place we can: Companies. They are willing to give money to fund research. However they own the results when they do that.

If you don't like that I'm afraid universities will need more public funding and that means higher taxes.

Re:Protections

[theArtificial]

Thanks for the quick reply. You make it sound very noble especially the foreign corporation bit. Your argument is: ignore everything everywhere when it benefits the citizens? Please, I'm not a defender of corporations, but surely you must see that this is a slippery slope?

Nonsense! Capital will flee

[unassimilatible]

If they won't settle for less profit, someone else will be prepared to take their position in the market.

Who is "they"? Spoken like a guy who doesn't own stocks. Scare investment capital from drug companies, and it won't go elsewhere in the market - it will go to Exxon and Apple! Buh-bye, private R&D!

Government will never give out free gas and iPhones, so my investment dollars will go there.

I have a very rare disease...

[bmajik]

...that can only be cured by the heavenly touch of Natalie Portman's hand upon my forehead.

Without this treatment, I fade in and out of conciousness, slowly losing body weight, muscle mass, and organ function. I have only 6 months to live if I do not get the treatment I need.

I've asked Mrs. Portman many times if there is a way she could lay her hand upon my forehead for the prescribed 8hr sessions 3 times a week. I've offered her all of my money. I've sold my home and my surviving family members have taken up disreputable work.

Alas, she refuses to lower her price, she has told me that she will not help me even if I pay her 1 million dollars per week!

I emplore you, caring people of the modern world. Please won't you save me?

I desperately need Natalie Portman's healing hand to save my life. But I cannot afford the outrageous prices she is demanding.

Can't someone do something?

Citation please

[unassimilatible]

Only a handful of truly important drugs have been brought to market in recent years, and they were mostly based on taxpayer-funded research at academic institutions, small biotechnology companies, or the National Institutes of Health (NIH)

Nice general talking points there, now how about some proof in the form of cites?

Besides, it's utterly pointless to say one does more than the other. How about encouraging as much funding you can going toward lifesaving drug research, instead of private sector capital fleeing to oil companies and tech?

Re:Protections

[betterunixthanunix]

Your argument is: ignore everything everywhere when it benefits the citizens? Please, I'm not a defender of corporations, but surely you must see that this is a slippery slope?

Well, if governments are not supposed to work for the benefit of their citizens, then I have to wonder what you think the proper thing for a government to do might be. Where would you suggest that slippery slope leads?

Keep in mind that the governments of the US and of western European nations work very hard to benefit their citizens at the expense of other nations, which is basically how India found itself in this situation. The west became wealthy through the exploitation of other countries; even our poorest citizens have better lives than the citizens of some of the countries we took advantage of. We pushed other countries to adopt certain industrial regulations that our corporations wanted, like copyrights and patents, rather than using our influence to affect changes that would benefit the working class (e.g. better education, better food and water, better living conditions, etc.). If we are willing to let another nation languish in poverty so that we can continue to exploit its labor force, we really cannot complain when other countries ignore corporate profits so that their citizens can get affordable medicines.

At the end of the day, a government that is not doing what benefits its citizens is a government that fails the legitimacy test.

Re:Protections

[Kalriath]

This is completely incorrect. India is a signatory to the TRIPS agreement, which explicitly permits compulsory licensing of medications where public health interests prevail such as in this case. Bayer has no legal remedy apart from appealing (in Indian courts) India's determination of what is a reasonable royalty rate.