Why should the market price be $300? If it only costs $12.53 to manufacture, someone could sell epipen equivalents for much less than $300 and capture the whole market.

All of that is before you even take into account how much it costs to re-tool your production line to make something different. Sure, you could lower the barriers to entry until they're barely existent and offer almost no consumer protection, but I'm not really sure we want to make it so easy that a company will spin up a production line to make a drug for 6 months while they think they can undercut the competition.

Then again, I'm a big pharma biologist, so I probably am a bit biased toward safety and large, slow movements.

Critics of this policy say that it would disincentive new drug development. That may be true, but for many people it doesn’t matter because they can’t afford them at current monopoly rates anyways, and our insurance industry is broken for them.

I wonder how you would go about researching a better patent-expiration scheme and the effects it would have.

Edit: maybe I misunderstood you- are you saying even with no patent protection, the barrier to entry is still high enough to disincentivize new entrants because of safety regulation and retooling costs? So patents aren’t the only roadblock, or not even necessarily the main roadblock?

I've never worked in generics, so I'm certainly not an expert, but I am saying both that we need some of the safety and quality controls by the FDA (or some system to replace them without relying on companies' good will) and that there are big hurdles even disregarding the FDA or other regulatory bodies.

But you can’t get at identical prices without communication between parties. Without communication, initial price setting is as if both companies make a bid in a sealed envelope.

It would be highly unlikely that both bids would be identical, and the lowest bidder with a price above $12.53 makes all the profit.

If the historical price is X, but I can charge 4X because people need the drug, let's charge 5X so I can make even more profit because demand is inelastic.

No, it isn't. The default strategy is not collusion. It's lowering the price to capture more of the market.

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

That's a misreading of Smith's point, but it's also irrelevant here, because it's quite a leap to assert that "the default strategy is to engage in blatantly illegal activity".

Collusion is illegal because it harms consumers, not because collusion is the "default strategy".

In fact, collusion is not the default strategy simply because it is not stable in the long term; there's a lot of research which demonstrates this.

for plausible deniability, the two companies typically don't directly talk to each other, but a lot of signalling happens via public statements and marketing channels to indicate a desire not to compete (as a simplistic example: raising prices when the competitor lowers theirs).

Either way, I think there are some hidden forces here that keep these prices so high. Like if the FDA would open the market to competitors from Europe, or even countries like India, I think that "market price" you say would dramatically lower.

I think the U.S. pharmaceuticals market both lacks competition from generics, as well as has some weird laws like "Medicare can't negotiate prices with pharma companies," which only encourages pharma companies to raise their prices as much as possible.

The law I mention is almost solely responsible for all the "drug X increased price by 5,000%" headlines you've seen lately. Pharma companies have figured out they can shamelessly rob taxpayers and nobody will do a thing about it, as long as they donate to the right politicians (from both parties).

That's a common statement, but not really true.

Medicare Part D, which covered prescription drugs, is managed by private insurers who can negotiate for the price of drugs.

In Medicare Part B, which covered physician administered drugs, Medicare pays the average sales price. Which means every time a private insurer gets a lower price, some of that is passed onto Medicare.

So the statement "Medicare can't negotiate drug prices" is technically true, but ignores all the other ways it can get lower drug prices.

(Yes, procedures from doctors aren't the same thing as drugs from manufacturers.)

>"An authorized generic is made under the brand name’s existing new drug application using the same formulation, process and manufacturing facilities that are used by the brand name manufacturer. The labeling or packaging is, however, changed to remove the brand name or other trade dress. In some cases, a company may choose to sell an authorized generic at a lower cost than the brand-name drug product."

While this is different from what common language calls a 'generic drug' [2], in some cases either kind of "generic" could, may, or must be substituted by pharmacists, depending on various circumstances and the particular state's regulatory regime [3].

This interacts with the epinephrine autoinjector market in two ways. First, there is little upside for the manufacturer of the authorized generic to make the list price significantly lower, as the list price is rarely paid by the end-user out of pocket, and frequent mandatory substitution laws cause makers of Authorized Generics to gain marketshare as long as they're slightly cheaper than the brand

Second, Authorized Generics of combination devices are only subsitutable for a corresponding brand, so different devices like Auvi-Q and Adrenaclick are technically a different market entirely: the doctor's prescription will note the exact sort of device. Therefore, while there are other epinephrine autoinjectors, the marketshare among them is decided in doctor's offices and insurance plans, rather than by direct consumer choice through the end-user's own spending.

[1] https://www.fda.gov/newsevents/newsroom/pressannouncements/u... [2] https://www.fda.gov/drugs/developmentapprovalprocess/howdrug... [3] (2008) (for illustration only) https://www.uspharmacist.com/article/generic-substitution-la...

The unique thing about the Drug market is there are no knockoffs. A "Brand Name" drug in the USA has the _exact_ same active ingredients (and sometimes inactive, take inhalers) as the Generic. Even more hilariously, most drug companies will create a "generic" version of their drug as well as a "branded" because they can sell the same exact thing at a higher price point.

If I'm not mistaken, the formulation could be wildly different as long as they match kinetics, yield, and safety profiles set by the FDA, and an individual may have some issue with one formulation over another.

What you're referring to is the ability of a pharmacist to substitute one drug for another, if for instance it wasn't on your insurance's formulary (list of drugs they'll pay for). Drug A may be slightly different than Drug B, but the Drug B your insurance will pay for. Drug B might also _just happen to be_ a generic (because the pharmacist is trying to get your the best deal for your money). There's guidelines from the FDA, DEA, the state insurance commissioner, and state laws the pharmacists must be aware of so it varies greatly between states on what they're allowed to do. Made for a fun rules engine to implement in software.

Doctors can mark a prescription as DAW (Dispense As Written) which then the pharmacist can make 0 substitutions. Insurance companies aren't usually a fan of said doctors.

Sometimes the FDA certifies a dosage of a generic based on a different dosage. This caused a problem not long ago when the dosage they assumed was fine didn't dissolve right, hence the absorbed dosage varied and was sometimes way too low. To add insult to injury, it was a psychotropic drug, so everyone assumed patients complaining were "just imagining things" for a long time.

I've had to use transdermal medication (patches) before, and one of the inactive ingredients that changes is the adhesive, I've noticed that the "brand name" version didn't cause skin breakouts, and the generic did.

I am a parent of two young children with tree nut allergies, and I strongly prefer the Auvi-Q despite them gouging my insurer/employer. I use the generic epi-pen for school and child care since that’s what teachers are familiar with.

List price for Auvi-Q is around $5000 an injector. I carry _four_ of them everywhere I go. It’s utterly ridiculous for a dose of medicine worth less than $2, but when I need to use one I’m glad I’m not using a syringe or more complicated off-brand.

But if you are being serious...

Because $300 dollars for a drug that people rely on to live is too high, and it makes more economical sense to continue to sell alive people a drug at a price they can afford for longer, than keep selling it at $300 for a short time, until they go bankrupt and die.