“What the Market Can Bear:” Drug Pricing, Capital Discipline, and the Case for a Smarter Biotech Model
The future doesn’t have to be priced like the past
President Trump signed an executive order (EO) on Monday to try to cut prescription drug prices to levels in line with what other countries pay (i.e., most favored nation [MFN]). During his first term, in late-2020, he signed an EO to apply MFN pricing to Medicare Part B drug prices, which was challenged in court and ultimately dropped by the Biden administration. President Trump’s second EO will almost certainly face legal challenges.
Provectus is a clinical-stage biotech (we’ve got work to do to become a commercial-stage one), but post-2017 leadership’s core business philosophy, at the outset of our journey to help Rose Bengal Sodium’s medical science survive and to work to help it thrive, was to make the our medicines, if and when approved, affordable and accessible on a global scale.
We hope President Trump is widely successful in bringing down prescription drug prices, but you can’t necessarily use executive branch muscle to force pharmaceutical executives to abandon the very playbook that made Big Pharma rich. At Provectus, we didn’t wait for mandates—post-2017, we began building a smarter biotech model from the ground up, prioritizing therapeutic impact, pricing discipline, and the authentic alignment of patients and shareholders alike.
The pharmaceutical industry has long justified high drug prices by pointing to high R&D and other related development costs. Articles and papers on the topic often cite figures such as in the range of ~$1 billion to more than several billion dollars per approved drug, including failures and capital costs. While assumptions to arrive at these numbers vary, the numbers themselves are real. But, they’re only part of the picture.
The fuller story reveals a pharmaceutical industry, and a complicit biotechnology industry that is Big Pharma’s food, optimized less for efficient innovation and more for extracting maximum return—regardless of cost structure or therapeutic need, let alone authentic societal impact.
Clinical Trials: From Science to Revenue Stream
Over the past two decades, many top-tier academic medical centers in the U.S. have evolved into commercially-focused clinical trial hubs, turning early-phase clinical research studies and late-stage randomized controlled trials into profit centers. Drug company sponsors now pay premium fees for patient access, imaging, biopsies, trial management, and so on.
This isn’t a condemnation of science—important work still gets done by dedicated, passionate doctors, nurses, and support and administrative staff to carry out clinical trials at their respective institutions. But the incentives have shifted. Clinical trials increasingly reflect what drug sponsors want studied and what institutions can bill—not necessarily what patients most need or what science demands.
The end result?
An industry-wide drug development model that is expensive by design, resistant to change, and structurally biased toward therapies with high commercial promise (e.g., pricing driven by what the market can bear).
WACC: The Corporate Compass—and the Hidden Arbitrage
Inside pharmaceutical companies, the weighted average cost of capital (WACC) is a core decision-making tool. A project must meet or exceed this threshold—currently ~9% for the pharmaceutical industry (see Aswath Damodaran, Ph.D, Professor of Finance at the Stern School of Business at New York University’s Cost of Equity and Capital (US) webpage)—to receive investment. This is basic corporate finance. In theory, adherence to WACC disciplines spending.
But here’s the disconnect: WACC should govern corporate investment in drug development, not drug pricing. In reality, Big Pharma drug prices are set based not on cost or return thresholds, but seemingly on what the market can bear.
If we reverse-engineer pricing decisions—taking the eventual drug price, projecting revenues and profit margins, and calculating the implied internal rate of return (IRR)—we find something striking:
IRRs can often exceed, vastly exceed, WACC.
This “hidden” arbitrage explains why, among other things:
Even me-too drugs can generate 30–50% IRRs or more,
High-priced orphan drugs cover development costs in short timeframes, and
Revenue-maximizing indications get prioritized over broader-access, lower-margin diseases.
The public pays as though each drug barely clears WACC, but shareholders receive returns (and executives receive compensation) far beyond what the risk profile would suggest, let alone require. That’s not capital discipline—it’s an unregulated spread between value created and value captured.
The Blockbuster Mirage
This incentive structure is amplified by the pharmaceutical industry’s fixation on the “blockbuster” threshold: $1 billion in annual revenue.
It’s a simple metric (i.e., roughly, the number of people taking a drug times the drug’s price), but it tells us much less than you’d think about clinical value or access. A small number times a big number can still be a big number.
A drug may help millions affordably and never cross the blockbuster line. Another may treat tens of thousands at high or extreme cost and earn the title. This revenue-first mindset encourages premium pricing over population health.
The blockbuster label doesn’t mean the drug is better—only that the model worked better for the company.
What the World Actually Needs
This is where models like Provectus Biopharmaceuticals’s become important. Instead of relying on monopolistic pricing to hit IRR targets, Provectus is developing therapies based on Rose Bengal Sodium (RBS) with a different set of principles:
Low cost of goods and scalable manufacturing,
Multifunctional use across disease systems (e.g., cancer, infection, inflammation, neurodegeneration, etc.),
Clinical evidence tied to real-world learning, and
Global access as part of the business plan—not an afterthought.
Rather than exploit the spread between WACC and IRR, Provectus is working to shrink it—delivering therapies that remain investable, certainly profitable, but not extractive.
This is not charity. It is business built on biology, not billing codes. It’s a model that treats the body as a system, not a series of markets—and that believes profit follows value, not dictate it (i.e., do well by doing good).
Ask Yourself…
If you’re an investor, policy advisor, physician, or biotech founder:
What if IRR discipline mattered as much post-approval as it does pre-clinical?
What if pricing were tethered to intelligent development, not maximum tolerance?
What if we invested not in what the market can bear, but in what the world needs?
At Provectus, we believe system-aware medicines, like those we’re developing based on RBS, aren’t just possible—they’re necessary. We invite those who see the same opportunity to help build them.
The future doesn’t have to be priced like the past.
Forward-Looking Statements
The information provided in this Provectus Substack Post may include forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, relating to the business of Provectus and its affiliates, which are based on currently available information and current assumptions, expectations, and projections about future events and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Such statements are made in reliance on the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are often, but not always, identified by the use of words such as “aim,” “likely,” “outlook,” “seek,” “anticipate,” “budget,” “plan,” “continue,” “estimate,” “expect,” “forecast,” “may,” “will,” “would,” “project,” “projection,” “predict,” “potential,” “targeting,” “intend,” “can,” “could,” “might,” “should,” “believe,” and similar words suggesting future outcomes or statements regarding an outlook.
The safety and efficacy of Provectus’s drug agents and/or their uses under investigation have not been established. There is no guarantee that the agents will receive health authority approval or become commercially available in any country for the uses being investigated or that such agents as products will achieve any revenue levels.
Due to the risks, uncertainties, and assumptions inherent in forward-looking statements, readers should not place undue reliance on these forward-looking statements. The forward-looking statements contained in this Provectus Substack Post are made as of the date hereof or as of the date specifically specified herein, and the Company undertakes no obligation to update or revise any forward-looking statements, whether because of new information, future events, or otherwise, except in accordance with applicable securities laws. The forward-looking statements are expressly qualified by this cautionary statement.
Risks, uncertainties, and assumptions include those discussed in the Company’s filings with the U.S. Securities and Exchange Commission, including those described in Item 1A of Provectus’ Annual Report on Form 10-K for the period ended December 31, 2024.