Lyman BioPharma Consulting LLC

Advice and Resources for the Biotech Industry

Advice and Resources for the Biotech Industry

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Hollywood and BioPharma: Differentiated by Unique Economic Models

Filed in: Drug Pricing |Economics |Pharma Industry |Pharma Industry |Regulation

In my previous post, I detailed numerous similarities between the pharmaceutical and film industries. Now it’s time to point out the substantial differences between these two businesses that illustrate their different economic consumption and pricing models.

Production Costs - Big Barriers to Entry in Pharma, but Not Film
Nobody’s producing drugs in their basement that are going to earn them a ton of money. Okay, let me rephrase that. Nobody’s producing legal pharmaceuticals in their basement that are going to earn them big bucks. Creating prescription drugs is a very expensive enterprise. The cost of bringing a new drug to market has been estimated by the Tufts Center for the Study of Drug Development to be about $2.6 billion. That’s a huge hurdle to making money. There’s no getting around extensive research, filing multiple patents, complicated manufacturing steps, expensive clinical trials, and detailed regulatory and FDA filing requirements. How long might it take just to recoup those costs? Let’s return to my previously cited example of a very poor selling drug. Seattle’s CTI BioPharma sold only $3.47 M of their non-Hodgkin disease/B-cell lymphoma drug Pixuvri worldwide in 2015 (all sales were in Europe). If it cost the company the current industry “average” of $2.6 billion to develop it (which it didn’t), it would take about 749 years just to recoup that money, based on 2015 revenues. And that’s without showing a profit. It’s a pretty safe bet this drug will never recapture its development costs no matter what they were.
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Would Government Buyouts of Pharma Companies Really Be A Good Way To Lower Drug Prices?

Filed in: Drug Pricing |Economics |Pharma Industry |Politics

Here’s a novel way to lower health care costs: make the US government a purveyor of drugs. In a recent article in Forbes, Peter Bach and Mark Trusheim suggested that the US government could reduce drug costs by buying Gilead and distributing its hepatitis C medicines at a greatly discounted price. The idea, on the face of it, is an interesting one to consider. In their scenario, the government buys Gilead for a 30 percent premium on its current stock price, spending $156 billion. The government would then sell off the R&D operations as well as a strong franchise of HIV drugs, reducing the “net cost” down to $77 billion. Other financial adjustments reduce the price further, lowering the cost to treat each patient down to $15,733 from what they claim is the current cost of $42,000. This represents a pretty nice cost savings when spread out over a patient population of 3.2 million people (including about one out of every three people in prison). Gilead’s hepatitis drugs certainly rank at or near the very top of innovative medicines coming out of biopharma in the last 25 years. However, the Forbes article did not delve into some of the far-reaching ramifications of what government buyouts might mean to other players. Let’s take a deeper look below the surface to see what such a buyout might portend.
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Not Accepting the Outcome When the (FDA) Vote Doesn’t Go Your Way

Filed in: FDA |Politics |Pharma Industry |Regulation

Donald Trump’s recent pronouncement that he would not necessarily accept the results of the presidential election elicited an avalanche of angst across America. Such a move would threaten the very pillars of democracy that have been in effect for some 240 years. While Trump and his supporters will undoubtedly have feelings of disappointment, disillusionment, and anger if he loses (which is looking increasingly likely), challenging the outcome itself would be unprecedented. What would Donald Trump do if he were CEO of a biopharma company that had its drug rejected by the FDA?
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The Covenant Between BioPharma Companies and Their Customers

Filed in: Drug Pricing |Economics |Historical Perspectives |Pharma Industry

Outrageous drug price increases have been a hot-button news story for most of the year. Even those who work in the industry know that drug pricing is incredibly complicated, tied to all sorts of group discounts, bundles, and a system of rebates (which are themselves tied to market share of the drug) that benefits both drug companies and pharmacy benefit managers. What was once explained by industry wags as the unfortunate actions of just a few exploitative bad actors (e.g. Turing and Valeant) has continued to expand to more firms. Generic drug maker Mylan (seller of the EpiPen) and Taro Pharmaceuticals have now been caught up in the contretemps, as has newcomer Novum Pharma. Venture capitalist Bruce Booth wrote a nicely detailed commentary comparing “innovator” vs. “exploiter” companies, but I’m not so sure that it’s easy to quickly distinguish one from the other. Many of the companies categorized as innovators (meaning they actually do R&D, and generate new products that meet unmet medical needs), are also responsible for some of these outrageous price hikes. These include companies that make drugs for multiple sclerosis and those who peddle high priced insulins.
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How Can You Make Money in Biotech If Only One In Ten Companies Turns A Profit?

Filed in: Economics |Drug Pricing |Pharma Industry |Politics

It’s that time of year when we can finally sit down to enjoy the long awaited knock down, drag out battle of some national heavyweights. No, I’m not talking about Clinton vs. Trump; that fight may be too painful to watch. I’m talking about the upcoming clash between two battle-tested opponents. This fight pits lobbyists representing “Usurious” insurance companies against those for “Greedy” biotech and pharma firms. In the battle of Goliath vs. Goliath, the razor arrows have been sharpened and the lines in the sand have already been drawn.
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True or False: Only Two Out of Ten Drugs Earns Back Its Development Costs?

Filed in: Drug Pricing |Pharma Industry |Economics |Patents

Drug pricing has been much in the news lately, with patients, pundits, and politicians all decrying the astronomical costs of many medicines. In response to this contretemps, trade organizations representing drug makers have provided explanations of why their prices are actually reasonable and provide good value to patients. According to a recently published white paper from BIO, the biotechnology industry’s trade association, “only two of every 10 drugs on the market ever earn back enough money to match the costs of R&D and the FDA approval process before their patent expires.”

Is this really true?
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