The US should probably negotiate 'most favored nation' status so they get the lowest price offered among the OECD (maybe adjusted by national income per capita) such that there is less global free ridership - but even that probably won't do that much to shift the cost burden.
We should also invest in lowering the costs of drug design & trialing so we can lower the risk premium and startup cost.
Lee Mendoza, R. (2019). Incentives and disincentives to drug innovation: evidence from recent literature. Journal of medical economics, 22(8), 713-721.
> While high and continuously rising drug prices are typically claimed as the price of scientific innovation, the reviewed literature finds that this link only partially accounts for the problem. High risk aversion owing to information asymmetries and vastly intractable uncertainties is prevalent among innovating firms. Predatory business models abound. Reverse predatory strategies also exist to maintain product exclusivity without much added clinical benefits, and to constrain generic competition. CEO compensation practices contribute to rising drug prices.
Feldman, R. (2020). Perverse incentives: why everyone prefers high drug prices-except for those who pay the bills. Harv. J. on Legis., 57, 303.
> Quite simply, incentives percolating throughout the prescription drug market push players toward higher prices. At the center lies the highly secretive and concentrated Pharmacy Benefit Manager (PBM) industry middle players who negotiate between drug companies and health insurers by arranging for rebates and establishing coverage levels for patients.
> Thus, one should not be surprised to see competitive distortions and sub-optimal outcomes.
> presents a full picture of incentive structures in which higher-priced drugs receive favorable treatment, and patients are channeled towards more expensive medicines.
> In exchange for financial incentives structured in different ways to appeal to hospitals, insurers, doctors, and even patient advocacy groups, drug companies ensure that lower-priced substitutes cannot gain a foothold.
Here is an extremely recent study by one of the most famous econometricists out there:
It's not on these kind of diseases, this kind of work is usually done with public money, grants.
Money in big pharma is usually spent in researching weight loss and alternative drugs for common diseases. After all, the return of investment on these types of drugs is much higher.
For a big company to make a drug that costs 1 million dollars but only 1000 people in the world have it, and from those only perhaps 100 live in countries that can afford the drug might be a business opportunity but it's honestly not a huge profit which is why they will turn to public funding to research these.
Imo, if you use public money then the products should be free of intellectual property. Public money, public goods.
This isn't just some greedy behavior. Treating common diseases is how you reduce discomfort/misery the most, in aggregate. Aspirin for 100 million people who are 1.5 on the pain scale is more effective than some $50,000/pill analgesic for that one guy who happens to be at 11.
How much % of research today is publicly funded but privately patented? The principle of "public money, public goods" sounds good, until you you start mixing public and private funding. If you make a drug that's based on public research (that costs say, $1B), and then spend another $1B bringing that to market, should anyone be able piggy back off your work and compete against you? Why would anyone want to be the first company to do that? This is basically the exact problem that intellectual property laws are trying to solve.
Publicly funded research part is on the characterization of the disease and the mechanisms, not the actual design of the drugs themselves. A lot more intellectual effort goes into the actual development of the compound that can safely treat the patients.
I think we should publicly fund more drug development, but it is simply false that most drug development money is from government. I'm not sure which 'these kind' of diseases you are referring to.
Absolutely not. Take mebendazole, for instance. It's generic, it's on the WHO's list of most-essential medicines, but in the US there is only a single manufacturer (Janssen/Johnson & Johnson) who uses their monopoly to charge an outrageous $350 per tablet. In every other nation, the price per tablet ranges from $0.10 to $10.00.
given tropical diseases are so rare in the US though, there might not be enough liquidity to encourage good pricing
As for “free ridership”, the US only has so much military and economic power to compel the rest of the world to give them money because THEY own certain molecules and not anybody else. It is actually totally absurd to think the US can unilaterally set prices because of a self-inflicted victim complex. If the US wants less free riding it should spend less on research which is fundamentally impossible to profit from without mass scale coercion, or maybe should kick off some cooperative research funding agreements.
The TPP shakedown meant to force the global poor to pay tribute to US pharma in the guise of a trade agreement went down in flames and it went well below actually expecting poorer countries than the US to pay more for drugs - which is a bad pricing strategy anyways driven by envy since you will not achieve optimal profits if you price people out.
High drug prices do not encourage cornering the market on drugs, for obvious reasons?
> As for “free ridership”, the US only has so much military and economic power to compel the rest of the world to give them money because THEY own certain molecules and not anybody else. It is actually totally absurd to think the US can unilaterally set prices because of a self-inflicted victim complex.
Most developed countries have sufficient rule of law that they won't sell a drug if the creator refuses to sell it in the country. If that can't be enforced, that's too bad - as it will leave us all worse off in the long-run.
And US doesn't compel rest of the world to give money in fact it's the opposite. Almost all pharmaceutical company in the world would die if US refuses to increase their price like the rest of the world.
Except the cost of many drugs continues to go up, even as they're commercially available and R&D has been recouped (I also realize that R&D may be a bucket across multiple drugs, not just a 1:1 correlation, but nonetheless).
> We should also invest in lowering the costs of drug design & trialing so we can lower the risk premium and startup cost.
We already lower the costs of a lot of drug design by doing (some of) it at public universities.
Yes, it is a bucket. I would like your examples though.
> We already lower the costs of a lot of drug design by doing (some of) it at public universities.
Yes, we should do this more. Public funding is very rarely sufficient to go through the whole development -> market process.
A successful drug doesn't have to recoup its own R&D costs, it also has to recoup the costs of all the drugs that failed to make it to approval. It's not any different than VC investing. Just because one company in a portfolio returned 10x ROI, doesn't mean you can be like "alright guys, you made back all your money, now turn yourself into a non-profit".
Asking for lower price is simply asking for fewer whizzy new drugs. If our medical system price goes down, so will drug price.
I encourage you to read some econmetrics papers on governmental success rates as 'picking winners.' They are terrible allocators and would be more likely to try to build a pharma R&D center in Michigan and Wisconsin for general election concerns.
Nathan Rothschild, richest man in the world, died from an ailment that could be cured basically for free today using penicillin. But when penicillin came out, it was an expensive and "whizzy" new drug.
With insulin it is not same, but new better or changed product. Similar insulin to past is not that highly priced.
Pick one - heck, pick any of the three - or all of them at the same time.
Is the limitation really the payment model?
They're having trouble keeping up with demand, even at the current high prices.
It appears that the innovation has to occur at scaling the manufacturing.
Traditionally, avant garde tech is very expensive and available in limited quantities, then prices come down and things become more broadly affordable.
Every drug was a whizzy new drug at some point. Most of them are now common and affordable. The people who the drug will help cheaply in 20 years will benefit greatly.
https://beta.economist.com/by-invitation/2024/06/14/what-goo...
