I'm not sure what the right solution is, but making 160x the manufacturing cost seems a bit obscene. Not sure what the total cost of R&D was, but at that rate of return those R&D costs have to be recovered relatively quickly and then it becomes a pure profit machine.
The consumer costs are significantly lower for software. For example, the cost of ChatGPT is minuscule in comparison, while the R&D costs are still quite high.
The real difference between the two sectors is that for medicine, you have a captive audience. People are willing to give up their life savings for certain medical interventions. That same cannot be said for software.
The other real difference is that the addressable market for most drugs is quite small in terms of number of customers. The vast majority of people just don’t need a particular medicine, especially the life-saving variety. The more niche, the more you have to charge to make up for the large R&D costs.
There are, of course, also instances of gouging. But it’s not like these things should inherently cost $20/mo, or whatever, if you want to be able to pay biomedical researchers enough not to go do something else highly compensated like finance/consulting/whatever. Sadly, I had a lot of classmates in engineering school who went that route instead. We urgently need more nuclear reactors, but one of the smartest guys I know, a nuclear engineer, is doing healthcare private equity.
A lot of saas is more like $200+/mo for businesses, and chatgpt might be $20/mo for consumers, but there are companies paying $1m/mo or more for that api.
No one is mentioning the liability costs (and liability insurance costs) here in the US vs other western countries, which is playing into the costs of these new-to-market drugs. In 10 years or so, when there's an established history of non-issues with the drugs, premiums will be lower for the companies. Plus these initial versions will begin to lose patent protection and generics will flood the market.
Personally I'd rather have a system where these kinds of innovations are made and where they eventually become widely available than a system where govt or others forcefully take or force-price an innovation, thus harming future innovations.
Comments
I'm not sure what the right solution is, but making 160x the manufacturing cost seems a bit obscene. Not sure what the total cost of R&D was, but at that rate of return those R&D costs have to be recovered relatively quickly and then it becomes a pure profit machine.
Do you similarly object to the insane gross margins on software?
Like in software, pretty sure the main expense is R&D.
The consumer costs are significantly lower for software. For example, the cost of ChatGPT is minuscule in comparison, while the R&D costs are still quite high.
The real difference between the two sectors is that for medicine, you have a captive audience. People are willing to give up their life savings for certain medical interventions. That same cannot be said for software.
The other real difference is that the addressable market for most drugs is quite small in terms of number of customers. The vast majority of people just don’t need a particular medicine, especially the life-saving variety. The more niche, the more you have to charge to make up for the large R&D costs.
There are, of course, also instances of gouging. But it’s not like these things should inherently cost $20/mo, or whatever, if you want to be able to pay biomedical researchers enough not to go do something else highly compensated like finance/consulting/whatever. Sadly, I had a lot of classmates in engineering school who went that route instead. We urgently need more nuclear reactors, but one of the smartest guys I know, a nuclear engineer, is doing healthcare private equity.
A lot of saas is more like $200+/mo for businesses, and chatgpt might be $20/mo for consumers, but there are companies paying $1m/mo or more for that api.
No one is mentioning the liability costs (and liability insurance costs) here in the US vs other western countries, which is playing into the costs of these new-to-market drugs. In 10 years or so, when there's an established history of non-issues with the drugs, premiums will be lower for the companies. Plus these initial versions will begin to lose patent protection and generics will flood the market.
Personally I'd rather have a system where these kinds of innovations are made and where they eventually become widely available than a system where govt or others forcefully take or force-price an innovation, thus harming future innovations.