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Comment by rtl49 | Hacker News Reader

Well, I certainly wouldn't expect a business executive to invest in a drug he suspects will be unprofitable. That aside, if the drug is unprofitable, and society has established as a general principle that the private sector is the appropriate venue for drug manufacturing, then I don't understand the objection to a price increase in principle. Without more information, we just don't know that this is an instance of price gouging. I'm open to that possibility, but I suggest waiting for actual evidence before taking your pitchfork out of the shed.

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I'm going to repost a comment I made elsewhere that may shed some light:

Maybe we need a charity that builds a research war chest to threaten companies like this with redevelopment. It costs a lot to replicate a pill and go through the FDA hoops, and once a private company does, the price just gets competed down to the point where it doesn't cover sunk the redevelopment costs--so in some scenarios no one bothers.

Instead, a charity doesn't have to take profit into consideration and can just threaten: drop your price or we'll persue independent redevelopment. With only the credible threat of spending on independent redevelopment, they could devalue a lot of these orphan drugs, and then buy up the rights/trade secrets to them for open release.

Competing businesses can't do this, because they can't pose a credible threat, because following through wouldn't make business sense. A charity can have non-business aims.

I wonder if insurance companies would have some motivation to at least partially fund such a charity?

Not likely; insurance companies have no incentive or motivation to reduce the cost of healthcare. The more money that moves through the healthcare system, the more money that passes through the insurance company. That gives them power, giant transient account balances, and "too big to fail" status.

I agree in part. It seems like in practice it looks like insurance companies have little interest or capability to reduce healthcare costs. However, I don't understand your reasoning as to why. The high cost of drugs puts the health insurance companies in competition with drug companies for actually ending up with money in hand flowing through healthcare.

The health insurance companies collect money monthly from all enrolled participants. That money sits on their books until it has to be paid out for claims. Higher healthcare costs means that the insurance company can raise the monthly premiums, which means that it's got more money sitting in it's accounts before the claims get paid. That money isn't under a mattress; the insurance company has it invested in something that's earning interest. So higher healthcare costs == more interest earned on the premiums as they pass through the insurance company on the way to paying claims.

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