Were it not for a (probably illegal in this case) monopoly, other people would be able to make that same pill for $5 per tablet. And then nobody would pay $50 for the pill.

Supply and demand IS NOT the same as "charging everyone as much as they will pay for everything". It's inherently unfair to everyone who has to buy that thing, and that's why people think it's a rip-off, because it is.

[edited to remove some hyperbole]

You've just pushed the problem around. Saying "get rid of the free market" in only a solution if you have a concrete alternative.

In a monopoly situation, the price tends towards 100X in my example, which is still less than the value provided. Even in a monopoly, nobody's paying more for a product than they receive value from it.

Yes, it may still seem unfair, but what else are you proposing? Nobody should sell the product? How is that making anyone better off?

You only see people asking questions about "well, who captures the extra value? what's fair?" etc when you don't have a market. When you actually have a market, then these questions cease to be relevant, because the price is already set.

The problem has nothing to do with free market concepts breaking down, or disagreements about what's fair. The problem is that we've artificially prevented this market from existing. Fix that and the problem goes away.

In theory, you could calculate the exact value provided by this drug (under the QALY model).

Under your theory a fair method to price life saving drugs doesn't exist. The person getting the drugs will effectively extract infinite value while the company will only extract a finite value.

Not really true, I'm afraid. People killing themselves (or allowing others to kill them) to ensure a payout to their families happens with some regularity.

2. Usually this happens because they place a higher value on their children's life and well being than their own. So even in the case were someone does place a value on their own life, it's only in relation to someone else's life.

The case of 2 is interesting because it shows that of the people who would accept a finite sum for their own life, very few would accept a finite sum for their chidren's life.

Since paying for the child's healthcare is the responsibility of the parent in a free market, we are back to my previous point that their is no fair free market way to price life saving drugs.

Who is worse: the person who doesn't save the child, or the person who saves the child, and sends a bill later?

Fairness is whatever two people will agree to pay for a service.

Imagine how silly it would be if we all paid the same amount for seats on an airline - which is how it worked before deregulation. Many seats would go empty, the utility would not be maximized, and we'd be missing out on the great transfer of wealth from the rich to the poor.

You might say that without it airplanes would not fly at all, and you might be right. But it's incredulous to claim that without these profits the medicine would not exist at all; it has existed already for 5 decades. (And we have patents as a system specifically designed to allow for funding the creation of drugs)

Such simple thinking is full of the holes for exploitation and there will always be someone who will exploit them. Medicine is especially sensitive, because medicine can be priceless in value for the human who needs it, but that same human might not be able to pay that much. You can introduce government help, but if such exploitation is allowed, it would simply end up in a waste of tax money.

One thing is to allow companies who invest into products creation to receive the profit from it by using monopoly and charging as much as they like, and completely another is buying the company and starting to charge many times higher for the medicine that was available for years.

This might not be a popular view, but I can see no reason to think that such an exploitation should be tolerated. I simply cannot see how such things benefit humans as a society. I might be missing here something and if I do, please let me know.

I don't think you'd advocate for literally forcing the company to make it and sell it for a specific price.

There's also the concerns I went over here: https://news.ycombinator.com/item?id=10248817

Nope, don't force the company to make it. Force the company to give the formulation to another company that will. This article states the reason it is able to be priced so high, at least for a time, is that other companies will have to reverse engineer it and get a line running. Take out the time of getting the product formulated right and the original holder has to think about the ramifications of any shenanigans they will attempt to pull.

[0] http://fortune.com/2013/01/10/are-generics-really-the-same-a...

It's only because the pharma companies can deal with consumers in the US on an individual basis that you guys get screwed over so much on your pricing.

That's not true at all. The biggest private insurance companies in the US are what? 30-40M lives? That's bigger than Canada. They routinely negotiate for lower drug prices.

Do you know where I could find out whether the NHS is covering Daraprim at the new prices?

Now, in my world every rational person has to see that this is insane. There's no way that the previous price was even remotely possible (even with a loss) that requires the new price.

I don't see any data that supports your 'no one would be willing to make it for less' argument. The only reasons that doesn't seem to happen are either technical (the monopoly on the drugs manufacturing process) or legal (can't do that or you have to pay for .. creating cheaper drugs). Can you back your unlikely scenario? Looking at the article in question, is 750 the 'right' price and no one's willing to create the drug for less? Were they losing about 700 a pop before they increased the price?

What. The. Hell?

There are currently no other companies that are willing to make and sell the drug.

* The only reasons that doesn't seem to happen are either technical (the monopoly on the drugs manufacturing process) or legal (can't do that or you have to pay for .. creating cheaper drugs).*

The patent is expired, and saying "monopoly" is describing an outcome, not an input. Yes, it's a monopoly, because no other company is willing to go into that market right now.

Looking at the article in question, is 750 the 'right' price and no one's willing to create the drug for less?

I would deny that any price is "right". If you want to refer to "right", define it and give a way to calculate what price can be right.

As I said in the other comment, there's no good system to determine who should capture the value from a product that costs less to make than it's worth to purchasers, other than a free market.

1) I'm not convinced that no one is interested to create the drug. Numerous people in this very discussion list issues to create a 'replacement' drug, even if the patent is expired. If they are correct (see disclaimer above) that might be a reason why others haven't tried it - or why they haven't succeeded yet.

2) 'Right' price is ambiguous, I agree. In my world, drug prices are ethic problems and have no connection to the so-called free market. No, a working, helping, proven drug cannot cost hundreds of $currency. We can discuss about the need to offset the R&D costs and I'm fine with drugs that costs my health insurance a ~largish~ sum, as long as the end user can get instant and easy access to the drug.

Your comments about putting a price on a person's life and your opinions on drug prices - as far as I can follow! - are impossible to understand from this person's pov. The lack of empathy and the trust in random business/market theoretical stuff to find a reasonable solution for the access to drugs that might very well save lives - that just doesn't compute, doesn't make sense in my world.

I don't believe in free markets. I certainly don't believe in free markets when we're talking about the basic needs of each and every human (for the sake of the argument let's limit this to nutrition and health for now). Health care should be free. Drugs should be affordable. Changing the price of a drug that was obviously doing okay (it was on the 'free market', right?) and multiplying the price by 65, because .. why not? .. is immoral and should be illegal. There's no 'value' to 'capture'. We're talking about a product that the company obviously produced with some sort of margin for ~13.5~ and that benefits the population at large - or at least the subset of the population that requires the drug. There is _no_ reason to increase the price, especially by that ridiculous value, other than inhuman greed. But maybe (see disclaimer) that's what a 'free market' is about - I wouldn't know.

Replace interested with "no one is interested and able". The reasons don't matter (insofar as they cannot be changed), the fact is that no one else is making them.

The lack of empathy and the trust in random business/market theoretical stuff to find a reasonable solution for the access to drugs that might very well save lives - that just doesn't compute, doesn't make sense in my world.

This doesn't come from a lack of empathy. I am (or try to emulate) a utilitarianist. To my mind, the question to ask is "which system will produce better outcomes overall"?

As I've said elsewhere in this thread, this particular example has them covering the cost of the drug for anyone who can't afford it; so the value of a life is irrelevant. The question is "is it better for a health insurance company or the drug manufacturer to have the money?" This doesn't seem obvious.

On the other hand, any claims of "fairness" fail to compute. If doing X improves the world, who cares if it makes things less fair?

Health care should be free.

The world should be perfect. I agree. Now, do you have any way of bringing the world to perfection? Saying "Health care should be free" while ignoring the fact that currently, health care needs to be rationed, does nobody any good.

Who pays for health care, if it's free? Who becomes a doctor, a researcher, if the prices are driven down by politicians with similar arguments to yours?

There's no 'value' to 'capture'.

That sounds to me like saying that every drug company should be selling at cost or close to cost. The problem with that is that there's then much less incentive for investors to fund pharmaceutical startups, which leads to less new drugs being developed, and so on.

You can't ignore economics when building your utopia.

Yes.

> What if the company stops making the drug, then?

A non-profit government sponsored entity manufactures the drug at cost.

Doable. But I think you put too much faith in the government. The government is a natural monopoly itself. If they're doing a shitty job you don't get any other options.

Disagree. A government can be held accountable. Some asshole ex-hedge fund manager attempting to corner the market on a drug can't be.

Accountability is not really the main measure we care about (though it's related to it). It's efficiency. We only really care about accountability because its supposed to increase efficiency. People are supposed to get punished when things are running poorly.

The problem is, no one really gets punished when large government organizations are running inefficiently. The business does not go out of business. There is no competition. There is no real incentive to innovate and beat your competitors.

I think we need to reevaluate pharma law. But I don't think replacing the current monopoly with a government one will do much good of anything.

I've long held the belief that whenever there is a supposed failing of private enterprise- it's almost always actually a failing of government. I've yet to be proved wrong. Government makes the barriers of entry too high in the drug market. It's way too easy to have a monopoly because the government basically grants you one.

Fix pharma competition.

Drugs should be priced based on their cost to produce and whatever R&D needs to be amortized, not by how much value you can extract.

Could you point out the flaw here?

I'm trying to remember the name of the company that this happened to. It was like 8 years ago and I think I remember them being a cardiac arrest medical. Anyhow, the company CEO flat out refused the FDA regulators demands that they get their manufacturing process up to standards. The FDA went to another manufacturer (I believe Johnson and Johnson) and asked if they would make the medication and they accepted. The FDA then shut down the prior company.

When lives are impacted, the FDA doesn't mess around. They put CEOs in prison for the crappy decisions they make.

"not having a manufacturing process up to standards" and "raising the price insurance companies have to pay".

The closest to perfect solution in my mind would include all the details to make the medicine in the patent itself (I'm not sure how detailed patents has to be today). This would make it easy for other companies to create a competition once the patent expires and essentially would create a free market.

In the scenarios when it happens that there is only a single player in the market for one or another reason, things get a little trickier. I guess one of the solutions could be a commitment by government to buy/prescribe certain amount of medicine. The price of a unit should be predetermined in such cases to avoid exploitation.

Overall the actual knowledge of how to make a medicine and having a market for it, should make such situation pretty rare when only a single player is left in the market.