There are two strange assumptions in this article. One that paying more for something makes it better. And secondly profits gained are always reinvested in research and development.
Paying more for something does not make it better especially in the realm of healthcare. There are lots of reports and studies that show that American spending on healthcare is one of the highest in the world and among comparable nations it's health outcomes are the lowest (basically american consumers are getting fleeced). Here is an article from our friends at Fox News http://www.foxnews.com/health/2013/07/10/united-states-healt...
So paying more for healthcare does not mean better outcomes.
To bring it back to the drugs debate, perhaps it is the American consumers that are getting ripped off and paying higher amounts for drugs doesn't result in better drugs being developed but instead just results in higher profits for drug companies.
Drug companies are private enterprises. They don't exist for the public good, but they exist to make money. So higher profits WILL result in more money being removed and not invested in R&D. If the companies weren't doing this they wouldn't be living up to their responsibilities as corporations.
That's true at some level, but not in general. Remember that the people who invested the money that paid for the research that caused the drugs to be developed could very well have just sat on their money and not invested it in the first place. Those capitalists had a choice as to how much money to invest in drug discovery, and since they're greedy capitalists they invested the amount of money that they thought would make them the most money. There's a diminishing returns thing going on where there are a whole bunch of possible research avenues open, so the more money they put in the lower percentage return they get. When the percentage return drops below what they could get from other investments, they put money in those investments instead.
To the extent that drugs start to have higher profits then the greedy executives will see that they can make even more money by investing more money in drug research, possibly much more than the increased profits but also possibly much less. It all depends on how fast the investors think that the diminishing returns on investment kick in.
The author doesn't mention any examples of this actually happening, which makes me wonder if it's just theoretical. Does it happen?
Also, how much of big pharma's costs goes to marketing? They don't have consumer marketing expenses outside the USA.
"From this new estimate, it appears that pharmaceutical companies spend almost twice as much on promotion as they do on R&D."
[1] http://www.plosmedicine.org/article/info:doi/10.1371/journal...
It's up to a regulatory body to make sure the manufacturers aren't exploiting their position in the market.
I'd hate to have the mental-state that regarded such a situation as 'the most hopeful thing I can say'. Is almost as though the author has been briefed that higher prices are the aim here.
Also, if you look at research money on the diseases that affect the most people, it is mostly not coming from big-pharma anyway, but rather from state backed research, much of it from the countries that the author reckons are raising US drug prices. Personally, I suspect that the main reason for high drug prices in the US is actually having such a massive army of middlemen who do not have interests aligned with the patient, but that is only a guess.
Mind you, this got me thinking, if you were going to expect any of that to affect the pricing of essential drugs, you would expect it to push prices down in the US, given there is what amounts to the worlds largest drugs industry subsidy. Also, I notice that big pharma is not generally skint, so if there is a shortage of new drugs (is this actually true in general, or is it just truthiness?), I would agree with you that it is not down to a shortage of money.
We just have a completely different market, and the prices reflect that. With state-sponsored healthcare, you have one buyer who represents a vast proportion of a nation's market. The economics become reaching most the market on a narrow margin, vs reaching a tiny market on a more favourable margin.
Apparently the narrow margin scales to beat the private margin, based on those sales being made.
Since the drug companies know that Canada or countries in Europe could -- if they so chose -- make new laws that strike down the validity of their patents. But that would take time to do and require specialized laws that only dissolved drug patents or whatever. So they sell the drugs cheaply.
There's no negotiating like that here in the US because this is where the major pharma companies are headquartered and where they spend a lot of money lobbying for excellent protections. As a result their patents are safe here.
But their patents are not safe overseas which is why those countries tend to get a better deal on their drugs on the whole. It's different because those involved in the buying can alter the regulatory environment. Those involved in the buying here can't make such a credible threat and as a result, higher prices.
Drug companies fund the vast majority of drug research and they're much happier with already proven drugs (which are already paid for and have zero risk) than new drugs which aren't approved by regulators nor proven profitable yet.
If it were possible to fund the R&D for new drugs the same way tech/VC is done these days I would 100% agree with you. But the cost is so high and the timeline so long that no sane VC would write those checks and as a result it's big institutions only.
So what ends up happening is that we overpay for drugs so that the drug companies have enough money to spend 2x what they do on R&D on advertising, telling us which overpriced drugs we need.
http://www.citizen.org/publications/publicationredirect.cfm?...
