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The Great American Drug Deal: A New Prescription for Innovative and Affordable Medicines

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Developing life-changing drugs is risky and expensive—but that’s not what makes them unaffordable.

Drug pricing is a staple of every news cycle and political debate. And while we’ve struggled for decades to agree on solutions that serve all patients without jeopardizing the invention of new medicines, many Americans suffer because they can’t afford the drugs they need.

Do we really have to choose between affordability and innovation?

In  The Great American Drug Deal, scientist and industry expert Peter Kolchinsky answers this question with a decisive  No.  The pharmaceutical industry’s commitment to creating new lifesaving drugs destined to become inexpensive generics can be balanced by the healthcare system’s commitment to making those drugs affordable for all patients—a Biotech Social Contract. Through deep research and compelling stories of breakthroughs and breakdowns, Kolchinsky presents solutions for striking a balance that are bold yet realistic and tackle today’s most pressing questions,

Why doesn’t insurance make drugs affordable?
How can we prevent price-jacking of older drugs?
Why are drugs more expensive in America than elsewhere?
How can we guarantee that all medicines eventually go generic so they are only temporarily expensive?
What systemic failures led to the opioid crisis, and how can we prevent the next one?

The Great American Drug Deal  offers clear-eyed scrutiny of all players in the industry and examines vital ideas for closing loopholes, encouraging investment, dealing with bad actors, and educating consumers. It’s time we resolve to support patients and fuel discoveries that ease suffering now and for generations to come.

268 pages, Kindle Edition

Published January 17, 2020

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Displaying 1 - 30 of 30 reviews
Profile Image for Richard Zhu.
79 reviews40 followers
June 29, 2020
If anyone asks you why drug prices are so expensive, you respond with, "Not really" and you give them this book. Some takeaways:

- The drug industry as a whole does not make exorbitant profits. With profit margins from 10-20%, it has lower margins than banks/software and more in line with those of oil/gas.
- Most complaints about drug pricing comes from "branded" drugs, which are under patent and sold exclusively by the drug company that brought it to market. The way to think about these is that the high prices charged during the exclusivity period (10-20 years) is a way to incentivize and pay off the R&D costs associated. Once it's paid off and the drug goes generic, prices drop dramatically and it becomes part of the firmament of cheap drugs that permanently elevate our standard of care.
- The expensive "branded" drugs that bring in billions of dollars a year often are the only things keeping a drug maker's product portfolio afloat. Naïvely applying price controls to these drugs in the hopes of limiting what Americans pay for drugs can lead to a 20% reduction in drug prices and a < 10% reduction in expenses for a couple years, but the long-term effects on innovation within the drug industry is likely to be chilling, limiting the amount spent on early-stage drug development.
- Forcing people to make out-of-pocket copays/deductible for drugs is like making someone pay every time they call the police or fire department -- for folks where such a payment puts them under significant duress, some will just refuse to call. Access to drugs should not be gated by ability to pay, this is why we have health insurance. And as it turns out, the economics are such that a small increase in revenue (~2% increase in premiums or a ~0.40% increase in net income tax rate) is enough to eliminate all out-of-pocket payments for drugs.
- Thanks to 2nd-order effects of laws, we've created bad incentives for health insurance companies. Consider the "Medical Loss Ratio": in order to prevent health insurance companies from overpricing their premiums and making extra profit, we've mandated that insurance companies have to spend 80-85% of revenues on patient care. The rest of the revenue is spent on operations, with anything leftover as profit returned to the shareholders. Notice that this seemingly well-designed policy links the absolute profit of health insurance companies to the overall amount spent on healthcare (hospital services, administrative/doctor/nurse salaries, drugs). Hence, health insurance companies have no incentives to contain healthcare expenses, only to maintain appearances of doing so.
- Americans do not subsidize drugs only for other countries in which the same drugs are sold at much lower prices. You need both American and foreign drug markets to keep drug prices where they are -- if any one of them were to removed from the equation, you would see a dramatic rise in drug prices.

To sum up: drug prices are not high -- they're set to incentivize creation of novel therapies that permanently increase our standard of care. However, the cost to do so should be borne by all of society. This will require changes to how health insurance works. Drugs going generic is the key to cost-containment and we should do all we can to ensure that it continues to work.
Profile Image for Anne Rolim.
17 reviews
November 2, 2020
Quite an insightful look into the pharma & biotech US and global markets. Absolutely recommend for anyone interested or affected by the theme. Much of it I was not aware of and came out of with much more knowledge on drug pricing & development than I had previously.
I believe it could have been more concise as I saw repetitive themes being brought on (to be fair, they might have been put there to bring home the argument - but unfortunately made it a longer read). Nevertheless, the author’s proposed approaches could no doubt save money for healthcare and treat many more people in the future.
Profile Image for JRennet.
14 reviews
April 20, 2022
This book tries to address the problem of drugs pricing and offers a solution. The problem is that the whole book is flawed from the beginning. The author assumes that there is only one possible model, the capitalistic model currently in place, and only one solution, that is act on the insurance companies. He never acknowledges for example that would be possible to not have private companies working on drug development (at least in principle) and throughout the whole book he cherry picks examples to "prove" his point, dismiss other possible views or simply writes down his assumptions as ground truth.
I found the book extremely narrow sighted, annoying, for it takes the reader as someone that would just believe everything without critique or without questioning and overall extremely manipulative. Also, very poor self-critique (on the capitalist system in US, on the financing system, on the biotech companies, on all the things the author clearly holds dear)
I would never recommend it to anyone
21 reviews
July 25, 2020
How do you make drugs more accessible and affordable while still maintaining incentives for innovation? Peter Kolchinsky, a scientist and biotechnology investor, argues that governments, pharmacy benefit managers, and insurance companies must shift the burden of funding innovation away from consumers (through onerous co-pays and selective reimbursement of generics and specific drugs) and allow pharma companies to reap the profits in the marketplace. To balance this, he argues that novel drugs, treatments, and therapies should contractually become generic ("contractual genericization") after a certain period of time and should only be afforded limited extension of patent protection for very specific use cases: formulation resulting in improved benefits/side effects; more convenient administering and usage; and extension of addressable market to treat additional diseases and consideration. Society significantly benefits from the long-tail effect of having a larger collection of generic drugs ("the pharmaceutical armamentarium") for considerably longer after the patents expire and far after companies reap the rewards of their research and development investments.

However, the fundamental flaw in Kolchinsky's argument is how does one pay for this and how does one shift the healthcare burden among the various healthcare players? He espouses universal health insurance to ameliorate out-of-pocket drug costs to consumers, but doesn't explore how such a program would restructure and reorganize the interactions between drug suppliers (pharmaceutical companies), intermediaries (PBMs/insurance companies/governments), and the end-user (consumers). Somehow, Kolckhinsky argues that the carefully established incentives and regulations would afford consumers better pricing, accessibility, and choice, but the tangled history of US healthcare, rising healthcare spending (per capita and as a % of GDP) point to a market failure not so easily resolved.
Profile Image for Manik Patil.
33 reviews9 followers
November 13, 2020
A serious, compelling and informed call for change.

The Great American Drug Deal: A New Prescription for Innovative and Affordable Medicines is an examination of prescription drug pricing in the United States.

Authoritative: Peter Kolchinsky, PhD, is a biotechnology investor, scientist, and passionate about this topic. He co-founded and runs the Boston-based investment firm RA Capital Management. Peter wrote this book because he wanted to defend his industry against the facile and disingenuous arguments.

Empathetic: Peter expresses empathy for those who cannot afford the expensive drugs and provides viable paths. Along the way, he coins the term: "Biotech Social Contract," describing the relationship between the pharmaceutical industry and society.

Pragmatic: Peter diagnoses current problems in US healthcare and prescribes pragmatic solutions for having Cost vs Value discussion by honoring both sides of the 'Biotech Social Contract'. In addition, he provides a critical thinking lens necessary to guide Public Policy.

This book is a must read for every biotech researcher, investor, citizen, and elected representative interested in understanding the mechanics of of biomedical innovation, drug pricing, and affordability.
January 1, 2023
Very informative and accessible, going into the right amount of depth to convey the nuances of the complicated drug development and commercialization process without getting into the weeds. Made some excellent points and was very pro-patient. Would recommend to anyone wanting to learn more about drug development, pricing, or insurance.
Profile Image for Courtney Smith.
11 reviews
July 14, 2020
An interesting take on the issue of drug pricing. This book points out the under appreciated benefit the pharmaceutical industry in the form of generic drugs, that can be used by anyone for cheap. What is the cost to society? Investing into the brand name version of drugs while they are patent protected, similar to paying a mortgage to eventually own your home. This is different from other health care costs (like diagnostics procedures or surgery), which will continue to increase over time. The book argues that high out of pocket costs for drugs, which are regulated by insurance companies, are the root cause of patients’ complaints on drug prices, and this is where reforms should occur.

This book provides a very useful outlook of US drug spending (less than 10% of all healthcare spending) and pharmaceutics profits (~20%, nothing outrageous). While insurance reform could improve drug costs incurred by patients, the book does not focus on many areas for improvement in the pharmaceutical industry itself. However, there are many useful suggestions on how we as a society can improve drug spending and maintain the innovation that we all benefit from.
3 reviews2 followers
October 31, 2022
The Great American Drug Deal: A New Prescription for Innovative and Affordable Medicines centres around Peter Kolchinsky's thesis that on-patent drugs are a time-limited price that society pays for indefinite access to cheaper generics once patents expire. His recurring analogy comparing initial on-patent drugs to a mortgage is a brilliant and intuitive explanation. He lays out how upfront higher costs to society fuel continual innovation and cost savings to the healthcare system which is often realized primarily after 'genericization'. Overall a convincing argument.

Fundamentally his 'biotech social contract' thesis is sound, well laid out, and easy to comprehend. He discusses what are currently edge cases where this would break down (non-'genericizable' drugs such as gene therapy) and thoughtfully proposes regulation to deal with the eventuality of these edge cases becoming more common. He courageously chastises companies that are skirting the 'biotech social contract' hoping to align their incentives with the whole system - I say courageously because I do not doubt that some of the industry do not appreciate his suggestions that may affect their bottom line. As an initially skeptical reader, this framework helps separate good-intentioned and bad-intentioned biotech companies as they are certainly not a homogenous group.

Outside of his key thesis, certain sections read as naive. He seems to have (unstated) assumptions that the system works perfectly to deal with biotech bad actors and that public systems are perfect at policing and regulating the industry.

* Advertising He glances over the risk of direct-to-consumer advertising, only listing upsides. Sure, there are upsides but downsides like drug overutilization, minimizing lifestyle changes and more are absent. There is no exploration of companies that skirt around the rules or their settlements which barely impact their bottom line (eg: off-label marketing with gabapentin).

* Generic Drug Issues There is a great book about all of the issues with generic drugs and how stretched the FDA is in its capacity to regulate Bottle of Lies: The Inside Story of the Generic Drug Boom by Katherine Eban. Or listen to this long-form interview. A key tenet of his 'biotech social contract' is that society benefits from the everlasting gifts of generics but this assumes that generics are safe and effective - an assumption that may not always be true.

* Opioid Crisis The last chapter of the book felt like a last-minute add-on to briefly acknowledge the potential harms of the industry while containing it so it doesn't bleed into the other chapters.

* It's all the insurance industry's fault! While this argument is valid, it feels like a cop-out or a shrug "not the biotech industry's fault". In fairness to him though, it is not exactly the point of the book. ¯\_(ツ)_/¯

Overall, I highly recommend the read to patients, physicians, and those in biotech as a framework for viewing the industry's responsibility to society. Albeit with the caveat that he glosses over realities that counter his arguements.
May 30, 2022
A central argument of this book is that brand name drug prices aren't the problem-- the problem is that insurance makes the drugs unaffordable. I thought this was some BS at first-- and I still think it's flawed -- because the prices don't account for how effective the drugs are at solving the problem they intend to solve. I think prices should reflect the value they offer to the person who is buying the drug-- and when a cancer treatment costs tens of thousands of dollars and offers only small gains over cheaper alternatives-- I'm not sure I agree that the price is fair.

He argues that brand name drug prices are like a mortgage -- you pay a lot for the first 15-30 years, and then you live rent free. I think this is a valid argument -- and he is right to highlight the value that generic drugs give to society (and how they are not very profitable-- thus who is really incentived to make them, let alone market them). He argues for contractual genericization-- where all drugs would go generic after a period of time and could only extend their patent period for a small number of reasons for only a few months at a time.

He sets forth a lot of policy proposals - and I think many are valid. I don't think any of his proposals will lead to the type of savings we need to generate to get our spending under control in the USA. This doesn't mean they are bad policy proposals, they just won't control costs that well. We need more systemic reform than what he offers to achieve cost containment.

Overall, it's an interesting book on a very narrow topic and presents an argument you don't often here... So I think it's a valuable read for the Health Policy community. His bias as a biotech exec comes through, but everyone has their bias, and these are still valid arguments.
Profile Image for Vidya.
195 reviews
July 31, 2020
This was a timely read given the executive orders passed last week. I’m still turning this over in my mind, but think the logic of the arguments presented here are sound. The key takeaways and insights are the following. First, branded drugs are a very small portion of overall healthcare spend yet draw a huge amount of ire - this does not make sense. Additionally, drugs are the only part of healthcare that structurally decrease in cost over time through genericization. Second, the key argument for high branded pricing has always been to support innovation, but I love the mortgage analogy and the positioning of generics as a long-tail benefit that you’re also buying that very much benefits society both in terms of health outcomes and reducing cost (obviating the need for surgery). Next, actual pricing hasn’t really increased (lower than inflation when you normalize for patients served and new therapies) so this concept of massive increases that require legislation seems to based on a flawed understanding. Next, the driver of unaffordability is not pricing but cost sharing with patients which is a backwards framework. So insurance reform is the key solution and we need universal coverage with lower out of pockets. Since if you decrease cost now, drugs remain too expensive for patients but margins get squeezed to stifle innovation which is bad for society. Tying prices to other countries also won’t help since overall pricing will just go up and drugs simply won’t be available elsewhere. I could go on, but I think I agree with much of this and it’s presented well in this book. Would love to hear how the insurance industry would respond here as this is definitely a biased author (in the sense that he’s a biotech investor, as am I), but hard to see how the current insurance incentives and structure makes sense. Worth reading.
Profile Image for Kevin Luo.
98 reviews3 followers
November 9, 2020
Drug pricing is a huge talking point between the pharmaceutical/biotechnology industry, politicians, citizens, and people. It is often an extremely controversial topic and extremely nuanced due to the challenges of understanding the US healthcare system which is unbelievably convoluted and complex. Peter Kolchinsky in this book discusses the benefit of the biotechnology industries, justifies drug pricing, and gives rationale as to why this is so. He discusses that innovation is for the benefit of our society and that high prices during patented times are a mortgage that society pays to reap the benefit of generic drugs for the rest of time. This is part of what he deems "the Biotech social contract." He delves into insurance, PBMs, and costs of drugs in other countries as well and discusses how the root of a lot of our issues is actually the misallocation of insurance resources that ultimately and fairly draw the ire of individual patients. He does make simple many ideas, but I will say that it is a lot easier to read coming from a healthcare background. There are some redundant parts, but the use of analogies and strong reasoning make this book an extremely strong one. Would highly recommend.
1 review
September 22, 2021
This book bases a whole argument that insurance companies, or the US government acting as the insurance company. should be the only ones to bare the cost of pharmaceutical prices. The argument is that insurance premiums are the problem, not pharmaceutical prices. But the baseline argument is faulty when the pharmaceutical companies set the list prices, in conjunction with PBMs, that insurance companies (or the gov) pay. Rising prices mean the insurance companies scramble to compensate with higher premiums. The US government spends billions in taxpayer money to invest in drugs only to gauge us later. We grant them legal monopolies as an incentive, and they abuse them (shout-out antitrust). I tried reading to get the other sides perspective, but the whole baseline argument jumps to conclusions that just aren’t true.
Profile Image for Gunnar Esiason.
63 reviews5 followers
June 19, 2020
I can confidently say The Great American Drug Deal is one of the better healthcare books I have read in a long time. Easier to understand than ‘The Antidote’ and far more engaging than ‘Superbugs,’ The Great American Drug Deal is an in depth look at the inner workings, shortcomings and successes of the American healthcare industry. Kolchinsky’s thesis that generics pay lasting dividends to society at the cost of branded drugs is one worth deeply considering. He defends the biotech industry, but is also honest about where it falls short. Most importantly, Kolchinsky offers reasonable and actionable solutions to the problems far and wide in America’s healthcare system and drug pricing debate. The Great American Drug Deal is easy to read - it’s for the career biotech worker or novice - and is thoroughly researched. I truly enjoyed it.
Profile Image for Gunner Laine Hardy.
12 reviews7 followers
February 12, 2022
This book is truly a remarkable insight into the global healthcare and drug pricing system aided by serval logical solutions to its many ills. These solutions bring more insight into the challenges of the drug pricing frameworks, insurance reimbursement mechanisms, and largely the future of medicine. I appreciated the humble consideration of the various stakeholders and is highly recommended. Regardless of whether you love or hate the capitalistic pharmaceutical industry, you’ll learn a lot from this book about a side often not explored.

Note: It is a rather in depth and specific look into healthcare which may require some precious knowledge.
Profile Image for Jeff Heuer.
18 reviews5 followers
April 20, 2020
I learned a good amount about new drug development and pharmaceutical market structure and mechanics from this book. It could stand to be quite a bit shorter and still make its key points well. The book is, transparently, a defense of pharma profits by a biotech investor, and critique of health insurer efforts to constrain those costs. I’d be interested to hear an insurance industry or public health policy response.
1 review
March 27, 2021
Thought provoking book that explores many of the economic incentives pharmaceutical companies and the US faces. Good read for anyone looking for a simple yet comprehensive overview of consequences that result in the pharmaceutical industry from us healthcare system and a way to address them.
8 reviews3 followers
November 24, 2021
A refreshing and quantitative assessment of the drug industry and how we talk about drug pricing that upended a lot of my preconceived notions and made me think differently about the future of health care
Profile Image for Frank David.
Author 2 books4 followers
November 29, 2022
Smart, well-written book about how to make medicines more affordable while still providing sufficient incentives or drug companies to develop new therapies. These ideas are becoming increasingly discussed, esp. in light of the Inflation Reduction Act and other efforts to control drug prices.
2 reviews
January 23, 2023
Lots of information packed in a relatively short book. I don’t know if I agree with the author’s solution to the reducing the cost of prescription drugs to patients, but there are many nuggets of information about how the pharmaceutical industry works which made this a worthwhile read.
Profile Image for Samantha Michele.
15 reviews1 follower
March 21, 2021
Interesting, compelling, well-researched book that challenged a lot of the overly-simplified views I had on the drug industry.
28 reviews3 followers
April 1, 2021
Absolutely brilliant.

It is the story of affordable medicine in US.
Detailed, nuanced, scientific, thorough and yet never boring.
15 reviews
April 10, 2021
A persuasive argument that drug patents are justified but insurance is the real culprit behind Americans' inability to provide affordable prescription drugs.
22 reviews1 follower
October 3, 2021
A biotech hedge fund founder's perspective on drug pricing. Interesting, well reasoned ideas on a topic that is more complicated than it seems.
Profile Image for Shruti Biyani.
5 reviews2 followers
December 23, 2021
Great book for someone in biotech. Some of the key challenges with the current drugs and therapies are very well highlighted.
April 12, 2021
Peter nicely presents thought-provoking ideas on why drug prices are higher (or not) and how drugs can be made affordable. All his arguments are well supported by strong examples.

If you don't have time, just read the last chapter which sums up very well the main ideas the author wants readers to takeaway.
Profile Image for Brendan Conley.
2 reviews1 follower
June 9, 2021
Mostly well written book with great information pertaining to health insurance and PBM’s in America. Definitely a bias toward the pharmaceutical industry, where you can tell he defends them more than he should, seeing as he’s an investor and active member of the industry. Good information in here, but keep an eye out for the bias
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