When the Patient Is a Gold Mine: The Trouble with Rare-Disease Drugs

This article does a pretty good job of grappling with the fact that you can&#x27;t have your cake and eat it too. On one hand the article acknowledges that treatments for orphan diseases have been successful, and many more have come out since the Orphan Drug Act was passed, as compared to before when these diseases were largely ignored. At the same time, it notes that clearly this is a lot of money to spend on one patient.<p>There is a tendency to believe that the normal dynamics of markets should be suspended when the product is &quot;really important.&quot; Of course, that&#x27;s backward. When the product is really important, the <i>worst thing</i> you can do is turn it into a low-profit economic ghetto by reducing incentives to invest. At the same time, when the government takes over the role of the market by granting a temporary monopoly, there clearly has to be <i>some backstop</i> at work.<p>The interesting thing to note that the company in the article, Alexion, is not even an unusually lucrative company. In 2015 its operating income was $536 million on 2.6 billion of revenue, or about a 20% operating profit margin. For comparison, Alphabet&#x27;s operating margin is over 25%. Google also does much better in terms of return on equity and revenue per employee metrics.

The company has only 4 more years of patent exclusivity in the US, and 3 more years in Europe. If there is really SO MUCH MONEY to be made by selling it, wouldn&#x27;t we expect other companies to be developing their own version right now, so they can sell it in 2021. And wouldn&#x27;t the presence of many different sellers reduce the price? [1] End result, new drug that benefits patients, at steadily lower prices... isn&#x27;t that what we want? Is there some reason to think that other companies will NOT want a piece of that large pile of money?<p>I intensely dislike the way pharma companies &quot;buy&quot; the opinions of prominent doctors and get them to sell their drugs for them. There are many similarly unethical things that the pharma companies do, but having made a drug that seems to help patients, and then charging as much as they can for the <i>limited</i> time that they can does not seem unreasonable.<p>This econtalk episode [2] on &quot;price gouging&quot; seems particularly relevant, it&#x27;s really very entertaining (and educational)<p>[1] <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Generic_pharmaceutical_price_decay" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Generic_pharmaceutical_price_d...</a><p>[2] <a href="http:&#x2F;&#x2F;www.econtalk.org&#x2F;archives&#x2F;2007&#x2F;01&#x2F;munger_on_price_1.html" rel="nofollow">http:&#x2F;&#x2F;www.econtalk.org&#x2F;archives&#x2F;2007&#x2F;01&#x2F;munger_on_price_1.h...</a>

Where did the $850 million to bring the drug to market go? What is that spent on? The drug or chemical itself is often discovered somewhere else, in say a university lab financed by the NIH, then licensed to a company. Rarely are the subjects of testing compensated for being guinea pigs for the drugs. There are also not that many doctors overseeing the trials.

Serious question - what&#x27;s stopping somebody reverse engineering the drug &#x2F; figuring out how to make it, then producing it for much cheaper? Obviously it&#x27;s not legal, but that&#x27;s not going to stop somebody when they have potentially 300k a year to save.

for people interested, there are 4 videos on the topic of orphan drug legislation here: <a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;user&#x2F;thehealthcaretriage&#x2F;videos" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;user&#x2F;thehealthcaretriage&#x2F;videos</a>

This is inevitable in a value based economy. And yes, there can be cost based economies. Something is terribly wrong when greed can legally come in the way of a sick person and their cure. There are too many solutions to this problem if you think about it. Government could sponsor all medical research and share the research to companies to manufacture based on cost based pricing. Companies can be restricted from increasing price of their drugs beyond what they were launched with. People should be allowed to freely import life saving drugs and equipments from other countries. The government has the solution, what is needed is a will to solve.

I have a rare disease. One of the drugs developed in recent years to treat it costs about $300k&#x2F;year and only works for about 5 percent of patients with the condition. I have made dietary and lifestyle changes to get better for a pittance compared to what conventional treatment costs. I get called a loon.<p>But here is what I think about these high priced drugs:<p><i>Joe was a successful lawyer, but as he got older he was increasingly hampered by incredible headaches. When his career and love life started to suffer, he sought medical help. After being referred from one specialist to another, he finally came across an old country doctor who solved the problem.<p>&quot;The good news is I can cure your headaches... the bad news is that it will require castration.&quot; You have a very rare condition which causes your testicles to press up against the base of your spine and the pressure creates one hell of a headache. The only way to relieve the pressure is to remove the testicles.&quot;<p>Joe was shocked and depressed. He woundered if he had anything to live for. He couldn&#x27;t concentrate long enough to answer, but decided he had no choice but to go under the knife. When he left the hospital he was without a headache for the first time in 20 years, but he felt like he was missing an important part of himself.<p>As he walked down the street, he realized that he felt like a different person. He could make a new beginning and live a new life. He saw a men&#x27;s clothing store and thought, &quot;that&#x27;s what I need .. a new suit.&quot;<p>He entered the shop and told the salesman, &quot;I&#x27;d like a new suit.&quot; The elderly tailor eyed him briefly and said, &quot;Let&#x27;s see... size 42 long.&quot; Joe laughed, &quot;That&#x27;s right, how did you know?&quot; &quot;Been in business 60 years!&quot; Joe tried on the suit. It fit perfectly. As Joe admired himself in the mirror, the salesman asked, &quot;how about a new shirt?&quot; Joe thought for a moment and then said &quot;sure...&quot; The salesman eyed Joe and said &quot;let&#x27;s see...34 sleeves and...16 and a half neck.&quot; Joe was suprised, &quot;that&#x27;s right, how did you know?&quot; &quot;Been in the business 60 years&quot; Joe tried one the shirt, and it fit perfectly. As Joe adjusted the collar in the mirror, the salesman asked &quot;how about some new shoes?&quot; Joe was on a roll and said &quot;sure!&quot;<p>The salesman eyed Joe&#x27;s feet and said &quot;Let&#x27;s see... 10-1&#x2F;2...E.&quot; Joe said astonished, &quot;that&#x27;s right, how did you know?&quot; &quot;Been in business 60 years!&quot; Joe tried on the shoes and they fit perfectly. Joe walked comfortably around the shop and the salesman asked &quot;how about some new underwear?&quot; Joe thought for a second and said, &quot;sure!&quot; The salesman stepped back, eyed Joe&#x27;s waist and said &quot;Let&#x27;s see... size 36.&quot;<p>Joe laughed, &quot;Ah ha! I got you I&#x27;ve worn a size 34 since I was 18 years old.&quot; &quot;The salesman shook his head, &quot;you can&#x27;t wear a size 34, it will press your testicles up against the base of your spine and give you one hell of a headache.&quot;</i><p><a href="http:&#x2F;&#x2F;jokes4us.com&#x2F;dirtyjokes&#x2F;castrationjoke.html" rel="nofollow">http:&#x2F;&#x2F;jokes4us.com&#x2F;dirtyjokes&#x2F;castrationjoke.html</a>

Great insight into how and why Pharma spends the highest percentage of its revenues on marketing, more than any other industry.

Martin Shkreli explained that most of his revenue came from insurance companies and health services and not the patient directly. He raised the price of a drug that had better alternatives but those alternatives were too pricey, bringing it&#x27;s price up, brought them down too.