There is marginal cost, the cost to produce one more product independent of development cost, and fully amortised cost, which amortises the development (and, holistically, finances future development). Saying we should abolish innovator drug patents ignores the latter.
If we take the assumption that a life tomorrow is worth about a life today cutting pharma's revenues 97% means the development model is unsustainable. The government would have to develop drugs (or promise to refund all or most of the cost of developing a drug that gets FDA approved).
On the other hand we know that, since most people will pay whatever they able to for healthcare, drug companies have too much leverage. The market doesn't function well un-aided.
The problem here is the way this decision has been implemented throws up a lot of regulatory uncertainty. Having an objective framework for how innovator drug companies can be subject to need-based forced licencing (and under what boilerplate terms) would allow pharma companies to plan how to allocate development dollars.
New drugs are often about squeezing out those last few years of life-expectancy, and even if they're not, they're a marginal increase over today's drugs. Meanwhile today's drugs fail to save many many lives because they are unaffordable in order to pay for R&D on new drugs (which will also be unaffordable).
See, the system is very broken on both sides.
But the choice to me seems very clear:
- on the one hand you have +developing new future drugs. except those drugs will only be affordable to a tiny fraction of the world population. additionally this lines the pockets of big pharma and the bureaucracy that keeps the system broken as it currently is ("Bayer was disappointed")
- on the other hand developing new drugs will be slowed down for some time, but all people will be able to afford the many current ones that could be saving lives today, big pharma + your FDA bureaucracy will fail and maybe that opens room for a new and better system to emerge so that R&D on drugs may start once more but in a more efficient manner. All the while lives are being saved and quality of live is being improved because today's drugs are affordable to everyone.
Lives are being saved and quality of life improving...for everyone who doesn't have a disease we haven't yet cured or which hasn't become treatment resistant (biology is adamantly lassez-faire).
The industry needs regulatory upheaval and new ways of financing itself. But if the response is to throw away the ability to recoup the initial investment profitably, medical research will just start devoting funds to making treatments exclusive, e.g. only invest in custom/on-site medicine.
"we" don't know that. In fact, we know that it's wrong.
When people are spending their own resources, they plan their non-emergency spending.
For example, I'll bet that you don't take the vitamins that you should. You probably also don't exercise as you should. It's money and time that you could easily afford, yet ....
And then there are Flex spending plans. Folks put money into those plans so they can pay for health care with pre-tax money, giving them lower out of pocket costs for healthcare.
Look at how people handle their deductibles and co-pays - again, they try to minimize their costs.
If I were to say anything negative about this it would be that this sets a bad precedent for any new drugs coming to India -- knowing that the government can effectively void out drug patents after certain number of years, the big pharmas probably would not want to set up shop in the country altogether. Does that sound familiar?
This town is no longer friendly for business.
Under the new forced licensing terms, Bayer will still be making money. In fact, it might end up making pretty much the same as before, since volume will increase dramatically thanks to the 97% price cut.
That's why drug companies don't do differential pricing, because they can't stop the cannibalization of their wealthier markets.
Suppose that big pharma stops selling drugs in India. That wouldn't make much difference because the generic drug manufacturers would still make cheap copies of the drugs. The only downside would be that new drugs will take time to be introduced because of the time needed to reverse engineer the formulae and set up manufacturing capabilities.
I disagree here. Pure laissez faire capitalism works no better than pure communism or socialism. You need a mix of both to have a functioning economy and IMO it should be pretty clear at this point that health care works best (cheapest and most effective) on the socialism side. American has the most expensive health care in the world, but not the best service.
I agree that the more socialsist systems work better atm but this does not include development of new medication and equipment. Would you want that in gov hands too?
Agreed. Which is why health care shouldn't be a business. It leads to perverse profit incentives and it's an inelastic market in any case (you can't "opt out" of care for a heart attack).
>Would you want that in gov hands too?
Not in US government hands, no. But more competent governments could certainly handle this via grants (in fact, I think even the US does this to some degree), etc.
Relevant citation please.
[1] http://www.spunk.org/texts/intro/faq/sp001547/secC11.html
You have to consider both the seen and the unseen: consider the case where a drug is not developed in the first place because the return on investment is (expected to be) forcefully lowered below where it is profitable. Or even more abstract: research is slowed down due to more risk adverse behaviour, delaying a major breakthrough.
Investing in drug development is very expensive and very risky. Very risky investments command a large return on their success.
It's easy to focus on the large sums of money being made on specific drugs, but pharma as an industry isn't inherently more profitable that other industries as a result. The cost of lower prices on successful drugs is going to come from somewhere.
(1) the FDA regulating access, pricing, and financing to the pharmaceutical industry, effectively nationalizing it, and,
(2) the US effectively bankrolling pharma for the rest of the world (it does this to a large extent already, but this would throw the scales all the way).
It would also have little effect on what innovator (or generic, for that matter) drug companies could charge outside the US.
Then when the whole system is ineffective, corrupt, counter-productive, and an enormous wastes our tax dollars (see the current FDA, PTO, DOE, etc.), what will happen? Well, at best, nothing. At worst, the Statists will use the lack of success as an excuse to take over even more of the system. Maybe the FDA would then want to hire the researchers to design and test the drugs in the first place. They would need a bigger budget for that.
That said, what pricing would be fair? When people claim that these pills cost bugger all to make, the answer is (perfectly validly) that the second pill costs bugger all, the first one costs $$$$ in R&D. So I don't know how cheap they would have to be to be considered a fairer price, and I've no idea if it's possible for anyone outside the companies to work out - even if you ignore the fact that what's fair is so subjective.