University spinoffs are pretty common, but the university tends to be a small minority owner of the spinoff (unless the shares are donated back to them later), exercise no control of the operation of the company, and don't transfer IP to the spinoff after the spinning-off has happened. OpenAI is not doing any of that with its for-profit.
The research is an inconsequential percentage of the development cost, essentially a rounding error. Those commercial development organizations foot almost the entire bill and take all of the risk.
Can you explain more what you mean by this, with some numbers? This is not my understanding, but maybe we are thinking of different things. For example, NIH in 2023 spent over $30B of public funds on research^0, and has been spending in the billions for decades.
$30B is trivial, people don’t grasp the scale of investment in these areas. Total research investment alone in the US is 10x that. There was a time when the US government was a major contributor to this R&D but that was half a century ago. Private investment dwarfs government investment at every stage with only a few exceptions.
Some of the most productive areas of US government biomedical research have not come from NIH but from DoD. Most people do not realize that virtually all modern trauma medicine was invented by US military research as a very active ongoing program. If you get in a bad automobile accident, most things that happen will be the product of US military research. But interestingly, these programs have very sparse research budgets, literally just single millions of dollars in many cases. But that is trauma medicine, not drug development.
Drug trials in particular are extremely expensive. People like to pretend these don’t exist. A few million in research costs doesn’t write off billions of dollars in development costs. There is no mathematical way to argue otherwise.
According to CBO pharma spends ~$90B on R&D (https://www.cbo.gov/publication/57126) so $30B I would not call trivial or a rounding area, but your points still stands that it is the minor share.
> A few million in research costs doesn’t write off billions of dollars in development costs. There is no mathematical way to argue otherwise.
There could be an important distinction between infra R&D and last mile R&D. The cost of developing a drug in our current system might be $3B today on average, but if you also had to replace all the infra R&D USG invested in over decades (GenBank, PubMed, and all the other databases from NCBI and the like) that these efforts depend on, it might be much higher. So I could still see an argument that the government pays for the research needed by all the drugs, then private sectors builds on that and pay for the last mile for each one.
However, I think you've put forward strong points against the argument "the research is done using public funds, and then privatized and commercialized later".
> Drug trials in particular are extremely expensive. People like to pretend these don’t exist.
I think in general people are frustrated because for all the money going into pharma people have not been getting healthier in the USA, in fact, in the median case, the opposite. So some big things are going wrong. I think you've shown that the problem is not that government is paying for high drug development costs and industry is coasting.
They do and they would. This is exactly the argument in tech of startup acquisitions. Sometimes it is just simpler and more efficient to outsource the early bits if there is an ecosystem that supports those early bits. The early stages of development, while cheap, often requires something from the team that is not available in a big company. R&D works this way generally.
Transitioning from “nice idea” to “consumer product” is a vast chasm. Most people that do not actually have experience taking things from research to production grossly under-estimate the amount of effort involved. From a purely economic perspective, the “research” part of the total bill is dwarfed by the activity required to turn it into a salable product.
This is a huge problem in the US. Tax-payers are subsidizing a lot of medical advances, then the US government gives it to the private sector, privatizing whatever medical advances were paid by tax-dollars.
Socialism seems to create a lot of markets for the Capitalist private sector.
Do the private companies get some special IP rights on the public sector research? It seems like in a competitive market, those private companies would have thin margins. What stops a lower cost competitor from using the same public IP? I’m clearly missing something important here.
I suspect that's due to the misleading nature of the 'public research, privitized profits' trope. The reality is that publically-funded biomedical (for the lack of better word) science does not generate anything production-ready.
Academia produces tens of thousands of papers per year; many of these are garbage, p-hacking or low value - the rest are often contradictory, misleading, hard to interpret or just report a giant body of raw-ish data. It is a very valuable process - despite all the waste - but the result of this is too raw to be actionable.
This body of raw 'science' is the necessary substrate for biotechnology and drug development - it needs to be understood, processed, and conceptualised into a hypothesis (which most likely fail) strong enough to invest billions of dollars into.
Pharmaceutical industry is the market-based approach to prioritising investment into drug development (what is it, 100B$ p/y?) - and even a leftist who might want to debate in favour of a different economic model would have to agree that this job is hard, important, and needs to be done.
And yet a big portion of my paycheck is still going right into the private companies hands. Let that be clear: the government takes money from you and siphons it off to corporations and earns itself backchannel $$$ from those corporations.
