Security quote of the week [LWN.net]

Security quote of the week

Posted Sep 16, 2021 7:54 UTC (Thu) by Cyberax (✭ supporter ✭, #52523)
In reply to: Security quote of the week by ddevault
Parent article: Security quote of the week

> It's not an R&D investment from the companies seeking to make a return

It is. Pharma companies have the largest R&D percentage among ALL industries: https://www.cbo.gov/publication/57126#_idTextAnchor003 - see figure 1. They have even edged out semiconductor manufacturing.

> The COVID-19 vaccines received over $12B in public funds via Operation Warp Speed, significantly more than your $5B napkin figure.

Yet without these $5B there wouldn't be anything to spend this $12B on. Moderna and BioNTech worked for a decade on R&D for these vaccines.

You should also understand that in case of Moderna these $5B were spent by people and companies who have seen most of their other investments in pharma fail (90%+ failure rate!). So they _need_ massive returns on at least _some_ of investments to break even.

> Why should a private company receive the patent and profits when the public made the investment?

Because the public has NOT made an investment. Investment assumes risk, and the public simply bought fully developed vaccines. It was private investors who put their money at risk and funded the development.

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Security quote of the week

Posted Sep 16, 2021 8:24 UTC (Thu) by ddevault (subscriber, #99589) [Link] (3 responses)

>It is. Pharma companies have the largest R&D percentage among ALL industries.

I understand that R&D is the greatest cost in medicine, that's not the question. The question is where the money comes from. Private companies put up a lot, but the public puts up much more - so why should the company be given the sole right to exploit the public's health and well being with the results? These companies take the artificial monopoly granted by patents and then extort the public in a non-competitive market - the demand has no choice but to buy! Capitalism cannot work here.

I don't buy it, not one bit, but if we assume that what you say is true: is it just or moral? Hell no! The system should be torn down with prejudice, the patents seized with eminent domain and returned to the public to save lives. All future R&D should be publicly funded and medical companies will have to live with restructuring their business model to earn their margins from the (regulated) manufacture and sale of the products. And the public R&D money is there: given your $5B figure, the US war of terror^W^W^Wwar on terror's budget would have covered the cost of over 1,600 novel drugs, or about 80 per year, and, bonus, would have saved US lives instead of murdering far away brown people.

Future generations will view us with horror and disgust, and we deserve it. We live in a post-scarcity world where we chose to re-introduce artificial scarcity in order to enrichen the few at the expense of destroying the planet and ending lives. Humanity possesses enough food, homes, and medical resources to ensure that every human being will never die of unnecessary hunger, exposure, or injury or illness, and we *choose* to let them die of these things.

It's fucking horrible, and medical patents are one of the foremost evils of this warped system.

Security quote of the week

Posted Sep 16, 2021 9:41 UTC (Thu) by Cyberax (✭ supporter ✭, #52523) [Link] (2 responses)

> The question is where the money comes from. Private companies put up a lot, but the public puts up much more

The absolute overwhelming majority of money for drug development funding comes from private sources. Around 80-90% of it (depending on the calculation method) - https://www.drugcostfacts.org/public-vs-private-drug-funding

The public and private academic funds are mostly used for fundamental research.

> Capitalism cannot work here.

So far capitalism is the only source that allowed us to get highly efficient vaccines within 6 months of disease discovery.

> All future R&D should be publicly funded and medical companies will have to live with restructuring their business model to earn their margins from the (regulated) manufacture and sale of the products.

This means that there won't be any more R&D. RIP.

Oh, and if you're expropriating everything, are you going to return investors money that they sank on failed pharma companies? I invested in an anti-sense DNA company a while ago and it totally failed (like the whole approach). I would like to get my money back, with interest.

> And the public R&D money is there: given your $5B figure, the US war of terror^W^W^Wwar on terror's budget would have covered the cost of over 1,600 novel drugs, or about 80 per year, and, bonus, would have saved US lives instead of murdering far away brown people.

Reality: high inefficient bureaucratic apparatus will be used to distribute money to cronies in the bureaucracy. Since 90% of drug candidates fail and it takes almost a DECADE to move a drug from initial screening hits to Phase 3, the funds can be embezzled with a perfect cover.

Security quote of the week

Posted Sep 29, 2021 7:27 UTC (Wed) by Randakar (guest, #27808) [Link] (1 responses)

The problem here is that your sources are flawed. That site - https://www.drugcostfacts.org is produced by a political lobbying group working for Big Pharma.

For background: https://www.citizensforethics.org/reports-investigations/...

As for COVID, and who funded it: Here: https://bobsullivan.net/beyondthebumpersticker/whos-fundi...

Security quote of the week

Posted Sep 29, 2021 8:42 UTC (Wed) by Cyberax (✭ supporter ✭, #52523) [Link]

> The problem here is that your sources are flawed.

Care to point errors in them? SEC data is public.

Your own link contains tons of information about scum like T*ring Pharmaceuticals that doesn't relate to actual R&D at all.

The reality is that pharma development is EXPENSIVE. For a typical approved drug there are 10 drugs that failed in clinical trials. For each Moderna there are hundreds of startups that failed (just ask antisense DNA/RNA guys).

This is quite clear from the stock performance: ^DRG (Pharma Index on Nasdaq) went up from 320 in 2006 to 800 now. Meanwhile, NASDAQ overall went up from 2300 to 14500 now. BTW, this is one of the reasons pharma companies pay dividends.

Security quote of the week

Posted Sep 16, 2021 9:27 UTC (Thu) by excors (subscriber, #95769) [Link]

> Because the public has NOT made an investment. Investment assumes risk, and the public simply bought fully developed vaccines. It was private investors who put their money at risk and funded the development.

I think that's not quite right - e.g. the EU gave a non-refundable €324M to Sanofi for 300M doses (https://www.reuters.com/article/us-health-coronavirus-eu-...), but it failed in trials and has delivered zero doses so far. The UK has ordered 540M doses across 8 vaccines for a population of 67M (https://www.bbc.co.uk/news/health-55274833), because of uncertainty about approval (only four have been approved so far, and some are restricted to certain age groups) and about supply levels. They weren't buying guaranteed supplies of fully developed vaccines, they were preordering before trials had completed and before production capacity had been built, and they were accepting high levels of risk at the time.

(I'm not disputing that private investors also put a lot of money into it, especially across the decades of R&D before the pandemic started and governments panicked. And they did that based on some expected ROI, and if governments change the rules now so the investors lose out on that return, I wouldn't feel sad for the investors but I'd be concerned about who's going to fund the next decades of R&D so we're prepared for the next pandemic. I think removing patent protection would need to come with a detailed plan to guarantee some extra billions of dollars of public funding per year, and then it'd start to be possible to debate whether it's a better alternative; it doesn't seem useful to complain about the patent protection in isolation.)

Security quote of the week

Posted Sep 16, 2021 12:48 UTC (Thu) by Wol (subscriber, #4433) [Link] (5 responses)

> > It's not an R&D investment from the companies seeking to make a return

> It is. Pharma companies have the largest R&D percentage among ALL industries: https://www.cbo.gov/publication/57126#_idTextAnchor003 - see figure 1. They have even edged out semiconductor manufacturing.

Have you ever heard of "Creative Accounting"?

Last I heard, the amount of R&D on the books was usually roughly ten times the *real* R&D spend.

I would take those figures with a LARGE scoop of salt.

Cheers,
Wol

Security quote of the week

Posted Sep 16, 2021 13:07 UTC (Thu) by pizza (subscriber, #46) [Link] (3 responses)

> I would take those figures with a LARGE scoop of salt.

Large Pharma companies routinely spend 2-3x on marketing/advertising as they do on R&D:

https://www.nationalnursesunited.org/press/rn-report-phar...

(Granted, that article is five years old, but links to the underlying research and citations are provided therein)

Whether or not you trust 3rd parties to be objective, This report, using data taken directly from Large Pharma's 2019 public financial disclosures, shows marketing budgets of 10-250%(!) of R&D:

https://www.pharmacychecker.com/askpc/pharma-marketing-re...

(And that uses the pharma companies' definition of "R&D" which has been somewhat scandal-plagued over the years)

Security quote of the week

Posted Sep 16, 2021 13:13 UTC (Thu) by pizza (subscriber, #46) [Link]

> budgets of 10-250%(!) of R&D:

D'oh, that should be 110-250%

(in other words, they all claimed to spend more (sometimes considerably so) on marketing than they did on R&D)

Security quote of the week

Posted Sep 16, 2021 19:59 UTC (Thu) by Cyberax (✭ supporter ✭, #52523) [Link] (1 responses)

> Large Pharma companies routinely spend 2-3x on marketing/advertising as they do on R&D

Everybody is spending comparable amounts on marketing and sales, so this is not an argument at all. Your cereal manufacturer is likely spending more.

Want to lower that number down? Then you need to extend patent protection time. Right now a typical drug remains under patent protection for about 8 years after it's approved (patents are filed before the Phase 1 trials!). So companies have to aggressively promote drugs to have enough time to get profit.

Let's take an example from your list
> GlaxoSmithKline €21,891 €4,568 €11,402

GSK is spending 20% of its revenue on R&D. For comparison, Intel: $13.56B out of $77.9B (17%).

Profit margin for pharma companies is a more complicated story: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7054843/

Security quote of the week

Posted Sep 16, 2021 20:38 UTC (Thu) by pizza (subscriber, #46) [Link]

> GSK is spending 20% of its revenue on R&D. For comparison, Intel: $13.56B out of $77.9B (17%).

...20% of revenue on R&D, and *over 50%* of revenue on marketing.

Meanwhile, Intel actually spent $19.7 billion, aka 25% of gross revenue, on R&D. They made about $20.9 billion in net profit, leaving $37.3 billion in non-R&D expenses. Of that, $24 billion was attributable to opearating costs (ie salaries and production costs of goods sold), leaving about $13.3B (18%) for everything else, notably including CapEx for future fab expansion.

(My source for this is Intel's 2020 financial report: https://www.intc.com/news-events/press-releases/detail/14... )

> Profit margin for pharma companies is a more complicated story: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7054843/

I'm not sure what your point here is, but okay, let's take the summary of findings of that article:

"In this cross-sectional study that compared the profits of 35 large pharmaceutical companies with those of 357 large, nonpharmaceutical companies from 2000 to 2018, the median net income (earnings) expressed as a fraction of revenue was significantly greater for pharmaceutical companies compared with nonpharmaceutical companies (13.8% vs 7.7%)."

...So large pharma companies have a median profit margin 80% higher than non-pharma companies. That doesn't exactly support the assertion that R&D expenses are bleeding big pharma dry.

Security quote of the week

Posted Sep 18, 2021 2:24 UTC (Sat) by mbg (subscriber, #4940) [Link]

> creative accounting

Indeed, working out how much it 'costs' for pharma to develop a new drug is not at all easy. Even working out the year-to-year R&D costs is difficult, due to complex corporate structures, R&D tax incentives, financing, etc. A lot of what is called 'R&D' on balance sheets you and I might call marketing (case in point: clinical trials that exist simply to introduce doctors to the drug, *after* it has been approved).

The bigger issue is the massive failure rate of drug development candidates. Costs of successful drugs need to be amortized against all the ones that didn't make it through the pipeline.

Needless to say, industry sources come up with much larger 'costs' than independent sources. A summary here: https://www.cmaj.ca/content/180/3/279.short

As to alternatives to massive big pharma profits, two people who have given it serious thought are Jamie Love from Knowledge Ecology International, who favours prize pools, and the economist Dean Baker.

In fact, Dean has written a lot recently on the costs of and profits from COVID-19 vaccine development: https://www.cepr.net/financing-drug-development-what-the-...

Security quote of the week

Posted Sep 18, 2021 7:26 UTC (Sat) by flussence (guest, #85566) [Link] (1 responses)

> Because the public has NOT made an investment. Investment assumes risk, and the public simply bought fully developed vaccines.

Oh shut up.

I paid for my vaccine with the $150-200 of electricity I burned on Folding@Home for a year, as did several million other people. I'll toss you a lmgtfy link if you need help finding exact user numbers, and we can crowdfund you a pocket calculator if you need to know how much public investment in R&D that equates to.

What did you contribute?

Security quote of the week

Posted Sep 18, 2021 23:50 UTC (Sat) by Cyberax (✭ supporter ✭, #52523) [Link]

Folding at home have not contributed to the mRNA vaccines. It's a completely different area.

Me? My code was likely used in Illumina sequencers used to investigate the virus.