Not really. It's more like a butcher selling a beef tenderloin in 40lb cases for $5/lb or a trimmed steak for $200/lb. Same product, just a cut that's too big for consumers to handle.
In the case of my hypothetical butcher, he would be out of business, as the free market will push prices down. In the case of Genentech, using patent monopoly and regulatory procedure as a weapon nets them massive profit.
No its not like that at all. Almost all the cost of beef is the beef. Cows are a certain size, overhead is relatively low, and so twice as much beef costs roughly twice as much.
With pharmaceuticals, cost is highly unlinked with volume. Marginal cost is almost nothing, but fixed costs are very high. Its like the restaurant: because most of the cost of the product is overhead and per diner rather than the food cost, half as much food sells for way more than half the price. This is true even though restaurants are in highly competitive markets.
They took the previous development costs and research for the cancer drug, made some relatively minor optimizations for ophthalmologic application, and packaged it appropriately. It probably cost them a few million to go through the regulatory process.
End result is that Doctors can write prescriptions on-label and avoid compound pharmacies (eliminating risk) and Genentech makes $1B/year, mostly off of Medicare. The only "fixed cost" is the cost to the Medicare taxpayer.
Do you really believe that going through all 3 stages of drug trials cost "a few million"?
A quick search found this page which lists all the studies and trials they did, including 3 year followups of the Stage III efficacy trials (pretty much required for this sort of drug, I'd think): http://www.lucentis.com/hcp/dme/clinical-trials-dme.html
Try hundreds of millions, from everything I've heard about what it takes to get a new drug to market. Now, you can question their decision to grab a fragment of the original and tweak it for what they thought would be better efficiency, something you know only after many years and $$$, but otherwise the costs are baked into the regulatory pie.
And even then a new indication for the original would not be cheap to get through the process ... given that it's injected into the eye vs. bloodstream, I don't think it would count as a "routine" new indication, but would require going back all the way to the first stage safety trials.
ADDED: Looking closer, they did 2 sets of Stage III trials for 3 indications, three different diseases that all have a symptom this drug treats. Around 800 patents total for each indication, and they did a 3rd Stage III trial for the first indication, looks like they experimented with less frequent dosing in that 3rd trial.
If you believe that Stage III trials, the ones that in theory prove a drug actually works, have any value, then just doing this science was worthwhile, vs. practitioners having much more rough knowledge of what the original drug could do after compounding. If you don't believe in Stage III trials, well, we can sure cut the costs of future drugs if the drug companies don't have to prove they work....
You don't even need to get to the expense of drug trials. It's simply nonsensical to proceed from a premise that costs in drug development are something you can divvy-up on a strictly per-product basis. Any given drug is the result of a broad research program that has a few hits and many failures. Everything is heavily cross-subsidized, and that's pretty much the only way to run a modern pharmaceutical company given the nature of drug development.
At the end of the day, Roche (the parent company of Genentech), has revenues and profits quite similar to Google. They're profitable, but not ridiculously so.
And yet we have a contributor https://news.ycombinator.com/item?id=6870282 saying "That said, Genentech is on the wrong side of the PR angle here and unfortunately for them, some internal documents got exposed which make them seem less than angelic here. If the cost differential of producing the drugs really is small, then they don't have a strong position, because it makes them appear as if they are using one of the drugs as a profit center to fund future R&D.", which he clarifies as "they are using one of the drugs moreso than another as a profit center."
In this case an appeal to abstract fairness in pricing based on production costs. Which the author recognizes is probably not practical in the real world.
But that such a thing, "using one of the drugs as a profit center to fund future R&D", can even be thought of as a bad thing ("wrong side of the PR angle") ... well, the very much not nice part of me hopes for all these people who implicitly desire or demand the end of new drug development that karma is for real.
In the case of my hypothetical butcher, he would be out of business, as the free market will push prices down. In the case of Genentech, using patent monopoly and regulatory procedure as a weapon nets them massive profit.