I am responsible for the Pricing of Branded Pharmaceuticals

While I understand a company needs to make a profit on their research why are some products priced to the point that no normal person can afford?

Most of it has to due with the cost of R&D and the number affected with disease, The average cost of development is very high ~$1 Billion and if there is only 10,000,000 people with the disease they are going to have to split the cost among a lower number. 1/3 of all drugs don't even make their R&D costs back

"The second pill cost them 12 cents, but the first pill cost them 400 million dollars"

Quote from 'The West Wing'

The cost now is about $1 billion for the first pill.

$1 billion is a lot of money to develop anything. Can you give us some breakdown on that cost?

it's mostly the size and complexity of the drug trials, as well as how many studies you have to do to prove safety.

It's sounds reasonable regarding new or unique products, but why generics invented many years ago and consuming by millions cost so much?

It is usually a competition factor, when there is a generic, companies will cut price to drive competition out, once the competition is out, price stabilizes. I specialize in branded products so I can't pretend to be an expert in Generics. I still think Generics are very cheap compared to Branded.

This kinda sounds like a monopoly to me.

Well it's not technically a monopoly, there are really only a handful of companies that have the power to influence the generic market and most of them have the backing of Branded companies

Why do you think Generics are "cheap?" some drugs have to be branded because people are sensitive to them (e.g. thyroid drugs), but honestly, most generic drugs are just as efficable as branded ones.

Its cheaper because they don't have to do nowhere near as much R&D, they just have to make sure its as safe and at least 80% as effective.

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Sorry, I mentioned that in another reply. I said that I generic medication because of cost and that in most drugs there is a 95% or over similarity.

I had no idea about the 80%, do you have anywhere I can reference this percentage? No offense but you do admittedly work for a branded prescription company.

EDIT: I don't know why I didn't just Google http://en.wikipedia.org/wiki/Generic_drug#Quality_standards I thought it would be harder to find. This is very surprising. I'm now looking to see if specific generics publish their bioequivalence somewhere.

http://www.fda.gov/drugs/resourcesforyou/consumers/buyingusingmedicinesafely/understandinggenericdrugs/ucm167991.htm

yes, the cost of developing a drug is high, but isn't a lot of that drug development is funded by our tax dollars? pharmaceutical companies don't start the drug development from scratch, they work of research that's already been conducted by government or academic institutions. and how much of that $1 billion goes towards marketing costs?

$1 Billion is just for development, and government and academic institutions do a lot of the early development. Pharma companies do have to pay the institution for the rights to the compound

How does this compare to the massive profits that are still made by the pharmaceuticals? Isn't there a point where, ok we've cleared x billions of dollars, these prices can drop so the average person can actually afford the treatments? Or is it just business as usual?

The pharmaceutical company only has a short timeframe to make this profit, so yes the prices do drop when the drug goes generic. Also these profitable drugs do have to support the non profitable drugs and fuel R&D for future drugs.

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Yes, 17 years from the day the drug is discovered, that includes the time it takes to get the drug approved anywhere from 9-15 years. Not that long of actual marketing of the drug, plus 1/3 of all drugs don't even make their development costs back.

The average cost of development is very high ~$1 Billion

You guys need a new excuse as that one has been repeatedly debunked.

I have worked on a drug that cost over $1.2 billion to bring to market and we only had three years of exclusivity. 1 out of every 5000 compounds make it to market

Do you think policies should be put into place to curtail 'evergreening'? (the practice of making frequently medically unnecessary formulation changes in order to extend patent protection)

If so what would be effective?

Same questions for the practice of buying off generic manufacturers after patent expiration in order to retain a monopoly post patent expiration.

The government has been putting in restrictions against that, there are a couple of provisions in the AMP final rule that discourages it, but they can do more.

The generic manufacturer only has an exclusive 6 month window (if they were the first to file), but I think that Pay for Delay benefits the manufacturers (Brand and Generic) much more then the consumer. If Branded companies where responsible for the additional costs to the consumer then that would force a major change

So in the UK, all pharmaceuticals have a unique code that identifies the combination of ingredients and formula. This is called the product license number.

Yet, branded ibuprofen is many times more expensive than non branded, despite the chemical composition and formula of the tablets being identical (this is proven by them having the same unique identifier.)

What's worse is that different types of pain relief (i..e super fast acting, targeted) also have the exact same identifier - meaning they are identical to non-branded and branded but "normal" ibuprofen - yet they can be even more expensive. The only difference between the products is packaging.

This was proven on the UK TV program Watchdog earlier this year.

How do companies get away with that, and why isn't it false advertising?

More info here; http://www.bbc.co.uk/programmes/b006mg74/features/pain-killers

In the US, Generic Drugs can be 80% efficacious as branded but average about 90-95% efficacy. The companies get away with it because the consumer is uninformed. People have to be responsible for what they put into their body and research any drug you use.

But these drugs need to be identical so they can all be licensed. The only thing that they can change is adding flavourings and preservatives?

Ibuprofen is ibuprofen, regardless of how it's branded. Same with aspirin, paracetamol, codeine and so on.

Thanks for the response.

That's true Ibuprofen is Ibuprofen, water is water too yet people will spend $8 on a bottle of water, it's marketing and consumer who doesn't care

Why does the US fund the worldwide research for these products? You can get the same drugs elsewhere much cheaper and it has been made illegal to import most of these. It is like a mafia racket. Let us sell a tube of cream for over $300 that is a high tier and insurances barely cover it while buying a doctors office a $400 lunch today. Do you think the system is as broken as most Americans perceive it?

Those are mostly FDA issues, we have a very stringent and regulated system of approval. Being a diverse population, we have to make sure that they are safe for everybody. The US cannot guarantee the safety and efficacy of products that are manufactured at none approved FDA sites. These imported cheaper drugs have a much higher incidence of being counterfeit. The system isn't broken, Drugs account for 10% of all healthcare spending and the US paid less in 2012 then 2011.

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No Canada has very safe facilities, but Canada imports most of their drugs from sites not FDA Approved. Also Canada does have a (slightly) higher rate of counterfeit drugs then the US in their pipeline.

That's really interesting. Canada doesn't audit the supply chain of drug manufacturing but actually depends on the FDA to do it since the heparin deaths (found in China).

We don't have the budget so we piggy back off the U.S!

A lot of countries do

Why does remicade STILL cost an insane amt per 100ml bolus?! I remember when I was 14 it would have been 12k without insurance, hasnt changed much since then.

It will be off of patent in the US in October, pricing will drop then. Check to see when it loses exclusivity in your country.

Why are the United States and New Zealand the only two nations in the world to allow direct to consumer advertising of pharmaceuticals? If legislation were passed to outlaw advertisement, would this significant reduction of the marketing budget reduce costs for consumers?

Edit: spelling

I think it would lower it short term, but pharma companies would just increase their marketing to doctors instead. If you outlaw marketing to doctors that would be a bigger impact

Is the outsourcing of r and d to other companies becoming more popular. I read that more companies are opting to have labs in india and china perform clinical tests in order to save money

Yes it is very popular now, but in the US you have to make sure the drug works on all segments of the population (black and white as well as Asian and India) In Japan in order for your drug to get approved you need to do a study there.

This is a very important topic, so thank you for doing this.

I know you said you've never priced any generics, but, why, exactly, is there such a drastic price difference? My 12 y/o autistic son takes Risperdal. A generic monthly dosage costs ~$18 while the branded product can be as high as ~$120. That's a 600% price jump. If I go into a grocery store and see the difference between generic products and branded products (be it motor oil, detergent, or cookies) the price difference is 50%, 100% maybe. Luckily we have insurance, but what gives?

Also, you said a lot of the cost is due to price matching; how in the world do branded products remain competitive once the pill goes generic? I know Lipitor, the most prescribed drug in the country, went generic two years ago. How does a company like Pfizer intend on keeping their hold on the market when generic makers have reduced the price so sharply and they're functionally selling the same product?

Its the life cycle of the product, Branded Risperdal is at the end of the life cycle of the product, it has had it's price increase annually for years before the generic came out. The company kept raising the price as the plans demanded increased rebates for the product. There is a lot of patient assistance that pharmaceutical companies due to make the branded drug competitive, i.e. free samples, co-pay cards, lowering the cost of a Rx

Can you speak briefly about how you got into the position you're in?

I'm interested in pricing strategy, especially in R&D heavy industries.

Feel into it because of the other positions I had in the pharma industry. I have experience in Managed Markets, Contracting, Finance and GP

How do you feel about drugs for depression such as zoloft / paxil / prozac, I saw your post about drugs costing millions to research and develop etc but, while these drugs are a lifeline to people who are clinically depressed (myself included) - are simply addictive in their own right and while the help they are simply an interim solution for the problem.

I was on prozac, by the end if I missed a dose or 2 I went into a very shakey state, which as someone who has been involved in illegal addictive drugs before recognises as withdrawal. I am now on Zoloft, and think I am on the way towards not being dependant on it, but again my question is...

How do you feel about drugs that cure problems by essentially getting patients 'hooked' on it, and the costs associated with patients paying for such scripts etc.

Its sad but unfortunately that is the best that is available for that class of drugs for that disease state. Sometimes the side effects of the drug are just as bad as the disease.

As someone who has pretty much been saved by these drugs - I thank the people who came up with the compound. It's an expensive solution though, especially when there isn't government aid etc to help pay for it.

Thanks for the answer tho.

If I can follow up though - how do you feel about manufacturers in countries such as India etc producing cheaper alternatives - does the benefit of the drug outweigh the cost of producing the compound? (obviously from a professional viewpoint its wrong and potentially could lead to errors in production, and impacts your job in a corporation which came up with the compound in the first place) - I mean for you, personally?

They are allowed to, I buy cheaper alternatives all the time to Brand Products. It is just the nature of business.

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If you have insurance then your insurance is responsible for that choice.

What do you think are some of the things citizens and elected officials can do to lower the price of pharmaceuticals? Is it just a capitalistically driven entity that will have to be dictated by a complex structure of supply and demand?

I think a lot of pharmaceutical use is not needed . People see a product on TV or in a magazine and will ask for it at the Dr's, this creates an artificial demand for the product. There are so many pieces to the puzzle its hard to give one answer, if customers do more research they can bring their costs down, but most patients will take the advice of a Dr, Pharmacist or health plan who are incentivezed in their own way

To my understanding there is an dangerous lack of R & D going into new antibiotics to combat microbial resistance to existing antibiotics. Is this due to the lack of potential profitability from a new antibiotic, or is it something else? While I understand that this may not be in your wheelhouse/the scope of the AMA, I think it's worth mentioning.

There is research going on to antibiotics with respect to MRSA, but as this is a newer problem it will take years for it to get through the discovery and approval process. Also most of the diseases already do respond to antibiotic use so it's hard to pour money into a new drug when there is already cheaper alternatives that cure 98% of the the indication

What did you do in school, and what sort of jobs did you have before this one? About how long have you been in the industry?

I have a BS in Management and I am finishing my MBA in Finance and Strategic Management in December. I have been in the industry for about 9 years and have been in pharma since I was 24

I understand the need to recoup R&D costs. But is there a way to write off any losses for drugs that weren't profitable enough? With that mechanism in place, would it enable your company to price its products lower with the assurance that your loss is deductible?

Also, is there any benefit in setting up a non-profit company (that is owned by your greater, for-profit company) in order to further reduce costs in the US?

There could be, you would have to probably get that answer from someone who understands tax law then me.

Have you come across any practices/policies/laws that, if changed, could help lower the cost of branded pharmaceuticals?

There are tons of them but the impact may be felt in other areas of the healthcare. Longer patent life, easing of regulations, not as much oversight but these also may have very big negative impacts as well.

What about the pricing in developing countries - are pharmaceuticals a similar price in all countries? If so, is there any way to make pharmaceuticals for diseases that affect many people without a lot of spending power more affordable, while still allowing pharmaceutical companies to recover their R&D costs?

No, a lot of governments will control the price of drugs in their country. The FDA will grant special statuses to drugs that will allow them to save money on R&D, such as Orphan Status or Blockbuster status. You will see a greater share of costs between pharmaceuticals teaming up for R&D.

Part of what drives R&D costs so high is that often multiple pharmaceutical companies are chasing similar leads and repeat the same tests and trials that others have already tried and deemed unsuccessful. Why isn't there more transparency and sharing about unsuccessful leads so that R&D money isn't wasted on repeating failures?

You are beginning to see that now as more companies realize how much they waste on R&D. Its a very competitive environment where most companies don't want to give up their proprietary knowledge.

http://www.prnewswire.com/news-releases/ten-pharmaceutical-companies-unite-to-accelerate-development-of-new-medicines-170329346.html

Of the drugs in your company, what drug do you see having the most potential to dramatically drop in price due to introduction of a generic or introduction of more manufacturers?

I can't really talk about any of the specific drugs I work on, but usually non life threatening, chronic, improvement of life drugs will have have the biggest impact from generic introduction in the class

Why do certain medications cost more at some pharmacies than at others? Consumer Reports did an article about it a few months ago but it didn't really answer my question. For instance, my epilepsy medication (without insurance) can cost $30 a month at a Kroger grocery store and $50 a month at Walgreens. From the perspective of your job, why is this?

Also, what's with the Ritalin (methylphenidate) shortage?

There can be a couple of factors for that: It can be the price that the pharmacy pays for it from the Whoesaler (3 companies control 95% of the wholesaler market in the US: ABC, McKeson and Cardinal). They could be using different markups of the WAC Price, or just using a co-pay card and not telling you

The company kept raising the price [of Risperdal] as the plans demanded increased rebates for the product.

Can you expand on this? What does the product life cycle typically look like for a targeted drug like this, and what kinds of insurance deals and other events affect the price over time? There's obviously more at work here than simply making back the R&D costs.

The marketing costs and rebates paid to health plans to have the drug listed on formulary are going to be the top hits to GTN for a phrama company. Most pharma companies will pay a rebate to a health plan in order to make the drug available. Depending on the level of competition you will have to pay a higher or lower rebate.

Pricing of Propecia vs. Proscar. Explain yourself without using the word "vanity".

What do you want me to explain?

What do you do on a typical work day?

it's too different every day, I do Forecasting, Analytics and Analyis Competitive Intelligence and a ton of Ad Hoc work

Something I've always wondered about in particular, but I'm not sure what the right question would be:

What is the logic behind kid-sized cough medicine? Things like robutussin. It costs almost twice as much as normal cough medicine, but the only difference I can find is that the dosage is adjusted for kids.

Its just marketing, consumers are uninformed and when they see just for kids they are willing to pay a premium

How much of the costs that go into a pill are unreasonable? For example giant bonuses or expense categories like expected legal battles

Those are general expenses and not really incorporated into the price of the drug, the biggest factor is usually the rebates being paid to health plans.

What is the largest profit margin for a drug you've priced, based solely on raw materials and labor?

You can't look at it by just raw materials and labor, R&D and promotion are two very big costs. The highest GTN I have seen is around 75%, but I have also marketed drugs with less then 15% GTN. Lifecycle and class of drug is also a big factor

How can a prescription cost you 8 dollars one month than go up to 89 the next month? Whats the justification in this? Same brand, same quantity...

Is the drug still covered by your plan? Did a generic recently come out for it?

Why is there such a price difference between America and other countries for cancer medicine?

There is no price controls in America. The US shoulders the burden for the rest of the world in terms of cost. America is the biggest market and one of the few countries that can afford high priced medicine mostly due to the multi payer model. In a lot of countries as long as you're approved in US you are approved in their country.

Don't a lot of the products in America come from the massive Swiss companies, like Novartis?

Most blockbusters come from multinationals like Novartis and Pfizer, but there is 80/20 rule in pharmaceuticals. 80% of Rx's are Generic, so Teva Mylan and Actavis are the biggest suppliers. 80% of the total spend of pharmaceuticals come from Branded Products.

Do pharmaceutical companies do any type of research about prices of their products being sold on the street?

If you're talking about illegal sales, no not really. But one of the major things I look at is Out of Pocket Cost (OPC), which is the actual price a consumer paid for my product.

What's your education like?

College and Grad school

Do you know if there are any cases of outsourcing companies working on the (essentially) same drug twice from different companies, simply to make a profit? In other words, a company presents them with a drug that had failed previously with another company the outsourcing company was working with.

Usually they will try to change something in the formulation to make it different, the molecule will be the same though.

As someone who has worked in and with the pharmaceutical industry for more than a decade, it's pretty clear you really don't know what the hell you're talking about.

Yeah you're right I'm making this all up

How does it make you feel that people die because they can't afford medications that may help them?

Most branded companies will have patient assistance programs to help with indigant patients, there are also government programs.

Can you forward a message to the people that try to patent these branded drugs soley in the name of profit for me? "Fuck you." Thanks for doing the AMA!

I will but I think that most of the people who do develop these drugs are in it for the good, I think the people who put the most pressure on profits are shareholders

How the hell do you sleep at night??

Why would I have trouble?