So, Timex, I guess the question is this:
Is the pharmaceutical industry in the non-US market profitable?
If so, then it should continue to be profitable in the US even with drug prices comparable to those in the rest of the world. It would merely be less profitable.
If not, then why should Americans be subsidizing the rest of the world?
So instead of being umethically profitable it would be a terrible crime against capitalism to just make it immensely profitable?
I’d be first in line to help draft legislation to end this bs.
I’ve asked the same question. I do not like the fact that we subsidize everyone else’s pharmaceuticals (and defense). But the alternative is to kind of cut off our nose to spite our face. If we imposed the same price restrictions, we would stop subsidizing those other nations, but if reducing the revenue of the pharmaceutical industry by 13% reduced in fewer new drugs, then we’d all be suffering.
Now, looking at some of this investment data, we see that the net profit margin for the pharma industry is around 17%, with many individual companies operating significantly lower. So we are potentially taking about a significant cut to the industry funding that probably couldn’t just be hand waved away.
Of course, it’s possible that everyone else could raise their prices, and then we could potentially implement similar price controls, and the pharma industry would still have similar resources while we wouldn’t be subsidizing everyone.
Not automatically true. We wouldn’t be suffering, we’d just have less new drugs introduced and at a slower pace. On the flipside we’d have better general access to drugs, lower costs, and more wealth spread across the population. Depending on how much wealth was spread around by reducing the takings of drug companies, and how much the health of the poorest was improved by better access to drugs, we might well reduce suffering.
That is a massive net profit margin.
I love how people use the economic efficiency argument to prevent regulation of the industry. The industry spends so much on marketing and rent seeking (lobbying, nice stuff for doctors, etc.) that can’t be described as anything but a deadweight loss.
It’s one of the classic combinations that lead to the uglier side of capitalism: highly inelastic consumers + monopolies + asymmetric information. But don’t worry, sick person living in the United States, there’s always the health insurance industry to take care of your expenses.
That is a massive net profit margin.
But we established previously that we’re taking about reducing revenues by potentially 13%.
Also, comparing it to all other fortune 500 firms doesn’t necessarily mean that much. Many industries run extremely narrow margins, but huge volume. Like international oil corporations, for instance. BP runs a profit margin of around 1-2%. Different industries function differently.
You really think R&D budgets (which are really the only utility they are providing to the economy) would take a big hit?
This is from here: http://www.bbc.com/news/business-28212223?. Provocative headline of the article notwithstanding the data looks solid (based on a couple of blogs I have read about it). Just check out Pfizer, wow, look at them go. Their net profits alone are more than 300% of their R&D budget. These are huge companies as well selling huge volumes, not a corner store out in the middle of nowhere charging a 50% markup because there’s noone else around and they don’t sell much anyway.
I’m not trying to be insulting here, more tongue-in-cheek, but you should refrain from posting in this thread and get a job at one of these companies asap, there are alot of people that get paid alot of money to say the things you are saying in other public forums.
$22 billion in profits? That’s poverty levels, better let them do whatever they want.
The big companies hardly do R&D anymore. Companies like AZ spent 10 years or more utterly failing to come up with profitable new drugs, and so they’ve pretty much given up, hence those relatively tiny R&D figures in that table. The current pharma paradigm is for startups to find funding from VCs until their first drug trial succeeds or fails. On failure they liquidate and the VCs try again. On success, Pfizer or AZ or whoever buys them. Vertex and a few other more or less independent mid-size R&D companies are now the exceptions.
Exactly. Was just going to post this same idea.
You really think R&D budgets (which are really the only utility they are providing to the economy) would take a big hit?
If you cut their revenues by 13% (not their profits, but their revenues), which is a large amount, I would expect virtually all sectors of their business to take some hit.
This does not appear to be true at all.
Merck is one of the world’s largest spenders of R&D in any industry.
They are actually the 10th largest spender on R&D of any company in the world. Number 8 is actually Johnson & Johnson.
Yeah, I can let you all know from first hand experience, the big companies do PLENTY of R&D. Though, that is the part of the industry I work in. The shocking part is just how much money they spend on marketing the drugs. If anything needs to be regulated, it is marketing and lobbying. That is a bigger part of the cost per drug than the R&D.
And in terms of getting a generic certified with the FDA, that is a long and laborious process. This particular asshole is using a loophole in the FDA that basically allows them to restrict access to other companies who would develop a competing generic drug. Without access to the original drug, you cannot directly compare efficacy, safety, stability, etc. And you won’t be FDA approved.
This is so weird. How can that be?
I mean, we know exactly what the drug is, chemically. It’s the chemical compound which is approved for use, right?
Why does a generic need to be approved by the FDA at all? If it’s the same chemical, then it’s the same.
Generics use a special approval process.
I don’t see how a company can slow down their generic competitors, though. If the competitors need a sample of a drug, why can’t they obtain it from the drugstore like everyone else?
Medicaid is forbidden by federal law from negotiating with drug companies on the price they pay for medications. And who gets to pay for these exorbitant prices? The government. And by the government that means the taxpayers: You, me and everyone in the country. The federal budget is over 30% dedicated to healthcare and this is one reason why. Another example of corporate socialism, just like who gets to pay for environmental clean up after a fossil fuel company fucks the environment or how the government subsidizes corporations by giving gov’t assistance to workers earning poverty level wages.
This is all possible because of corporate lobbying.
“Free market” bullshit at work.
If Medicaid or Medicare could negotiate prices… they would control the market. The commercials certainly pay more and keep providers profitable, but once Medicaid or Medicare sets a rate, they’re only going pay so much more than the governmental payors. You can certainly make arguments about whether or not the government should set prices since that is what many other countries do, but let’s just be realistic of what it would actually mean if States and the Federal government actually got into the the market of setting prices like that.
Just so you know, Medicaid and Medicare do not cover costs for providers. I am not exactly sure where they sit with pharmaceuticals… and I am referring to providers (not just physicians when I say that) that are not a part of research hospital systems which qualify for a lot of other funding programs typical local county and regional hospitals do not.
The average profit of the top companies (going by the data shown) is 20%, reducing the revenues by 13% will leave the profit on 7%, still outperforming many industries (and assuming equal marketing expenses) and pretty healthy.
You could say money would be invested anywhere else, but the interesting thing is that growth in the industry is way below current profit margins anyway (which means profits are not being reinvested). While a healthy profit margin is necessary to offset possible downticks in the future, as long as there’s profit and that profits outpaces current growth you are OK and most likely not missing extra investment.
While I agree with you regulation in US prices would affect the industry, it’s not clear that it will affect the consumers in meaningful ways. That is, it’s not clear the R&D and the drugs affected by lower profits would be the most useful ones, specially in a regulated market where it actually pays a lot to have a proved and efficient drug. Regulations do not mean prices are forced too low, it means they can’t be predatory. It also means you have more negotiating power if your treatments are cost effective and provide really significant health benefits (that is, marketing loses some of it’s importance).
Case in point: Hepatitis C drug that actually cures it. Cost in the US $84k. cost in Egypt $900 (we have to assume this is at a profit, although probably it will take too long to offset R&D at this price?). What’s the price in a regulated market like Spain? $30k. Which yes, it’s about 40% of the US price, but it’s definitely not cheap considered it can sell for less than $1k. It’s not an unreasonable control, it’s an acknowledgement that in the case of a lethal, otherwise incurable illness, prices for a cure can be high but need a cap.
They need more than just a therapeutic dose to do testing, a lot more. Each pill only has 25 milligrams of active ingredient tied up in a bunch of starch and sugars to make an oral capsule.The companies have to show equivalency in a large number of tests for both the isolated active ingredient (maybe; I have never worked with solid oral medications) and the formulated capsule. If the new owner limits supply, this could get very tricky. Manufacturing it is probably fairly easy but regulatory approval is no minor feat.