The cost of Pharmaceuticals

stone, are you seriously suggesting that if profit margins on pharmaceuticals were capped at, say, 15% that drug companies would no longer have an incentive to research and then produce new drugs?

Regardless of the merit of such a cap, I don't see how such a lucrative market would remain untapped.

i.e. they would make LESS but they would still make as much or more than most industries.
 
Most drugs do not work anyway and are nothing more than placebos for half the people taking them. This according to former chairmen of Glaxo or some other drug company.
 
"Certainly an inventor ought to be allowed a right to the benefit of his invention for some certain time. It is equally certain it ought not to be perpetual; for to embarrass society with monopolies for every utensil existing, and in all the details of life, would be more injurious to them than had the supposed inventors never existed; because the natural understanding of its members would have suggested the same things or others as good. How long the term should be is the difficult question. Our legislators have copied the English estimate of the term, perhaps without sufficiently considering how much longer, in a country so much more sparsely settled, it takes for an invention to become known and used to an extent profitable to the inventor. Nobody wishes more than I do that ingenuity should receive a liberal encouragement." --Thomas Jefferson to Oliver Evans, 1807. ME 11:201
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MADness said:
If the market is so fucking good at regulating profits then why do we need patents?
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stone said:
Patents exist solely to encourage innovation. Remove the ability to patent drugs and you remove the incentive to develop them in the first place.
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MADness said:
stone, are you seriously suggesting that if profit margins on pharmaceuticals were capped at, say, 15% that drug companies would no longer have an incentive to research and then produce new drugs?
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They have no incentive to do anything beyond what would earn them 15 percent. Does that hurt the company? Nope. It hurts the consumer who would've benefited from the now foregone innovations.

This is what economists call "incidence," or burden. Paying a tax is not the same thing as bearing the burden of a tax. Incidence is ultimately borne by people, not corporations. Sure the corporation would be paying your excess profit tax, and sure the corporate entity is earning that 15 percent profit. However, who bears the burden of these policies? Employees, shareholders, and consumers.
 
MADness said:
i.e. they would make LESS but they would still make as much or more than most industries.
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You care more about their profit than you do about the products, i.e. drugs and vaccines, that they research and produce. I don't know where I got the idea that you people don't actually care about whether new, helpful drugs are introduced into the market.
 
I think a company would still invest in the development of a drug knowing it can make at most 15% profit, instead of the current 19% (for instance, just an example). The incentive for inovation comes from selling more of the drug. 15% of $10 million is more than 19% of $5 million, for instance.

I'm not saying X or Y is the answer, I'm saying I understand the need for it, and if someone comes up with a real plan, I wouldn't be averse to it.
 
Imposter said:
I'm saying I understand the need for it
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I know - the problem is that you don't understand the consequences of it. Good intentions alone make for horrible policy.
 
I think I can wrap my mind around the concept of companies wanting to make a profit, and that profit being good for employees and shareholders.

Can you wrap your mind around the idea that patronizing me isn't a good way to convince me of your argument?
 
Imposter said:
Can you wrap your mind around the idea that patronizing me isn't a good way to convince me of your argument?
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I don't think it's possible for you to be convinced. You've latched on to the idea that pharmaceutical companies make "too much" money.
 
From the Congressional Budget Office:

Total returns from selling a brand-name prescription drug vary significantly among different drugs. As noted above, the average cost of developing such drugs, including failures, is around $200 million in 1990 dollars. But on average only three in 10 drugs earn that much in discounted returns (after deducting manufacturing, advertising, distribution, and other non-R&D-related costs). For most drugs, the returns from marketing do not exceed the average capitalized costs of development. As a result, for a company's average returns to exceed its average development costs, the company must discover and market a highly profitable drug from time to time.
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In other words, pharmaceutical product development is a rather risky venture - a 70 percent chance of a loss. Your plan would demand that companies bear that risk without the possibility of a high return. That results in the company declining to undertake the risk, i.e. the development of a new drug.
 
my brilliant idea is to do this

a) own an insurance company
b) own a pharmaceuticals or health care company

that way i see both ends of the profits, and on top of that i can offer cheaper co-pays because i'm not overcharging my insurance company so i make a profit. Then think about the benefits i can offer my employees. That means more skilled, happy employees = less employee turnover rate = higher quality service = more customers = more profit.

god i'm such a fucking business genius.

(another thing you could do is own an auto-service/gas station franchise + insurance company - basically same thing, only much less risky in terms of market stability, but less profitable because health care is also highly profitable-depending)
 
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