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Comment by dfa | Hacker News Reader

Wonderful! So this means I and other Americans will soon legally be able to purchase prescription drugs from other countries where drug companies sell them for much less money? Oh, I forgot; "globalization," as meant by multinational corporations and policy makers, doesn't work that way.

Globalization is not a two-way street, and while it would certainly be foolish to bet against it when it means American jobs being shipped to other countries where labor is cheaper and the cost of living is lower, betting against consumers being able to import goods from those same countries where multinationals sell their products for cheaper seems, for the time being anyway, to be a pretty safe bet.

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The only problem with globalization is the lack of truly free trade. If countries didn't have to subsidize nonproductive sectors of the economy then the costs of living would equalize much quicker - see farm subsidies, tariffs, and the ban on imports of certain goods.

I don't think it's the only problem with globalization, but having recently paid out-of-pocket for an expensive, patented prescription drug, I think it's one of the biggest, and much of the hollow pro-globalization, pro-free trade rhetoric I hear from government and big business never addresses it.

I am curious about why others downvoted my original post; do people here really think this sort of protectionist price discrimination is OK?

I think it's only okay in certain circumstances. Many governments participate directly in their healthcare markets, which affects the prices at which pharmaceuticals can be sold in such a country. If goods with manipulated prices are allowed to be traded freely, the prices in other countries will be affected as well. Companies that produce the goods in question will either have to accept lower profit margins or refuse to sell their goods in manipulated markets. Regardless, such a policy would lower the expected value of future technological advances in the field, which would result in less effort being directed to such advances.

It is undesirable for technology to advance at a slower pace than would be possible if people were expected to pay market prices for the products the technology would help to improve or create. If you value future advances in technology, you should want your government to minimize manipulation of the markets for such technologies. If, on the other hand, you'd like as many people to benefit from current technology as cheaply as possible, you should want your government to force prices down as much as possible.

If they dislike the price controls and monopsonies that exist in other countries, they can avoid those markets entirely. Once they agree to participate and begin exporting their drugs, we should have every right to import them back at a discount. As large corporations have shown in the past, they have no issue with planned economies, as long as the planning is done in their favor (China, Dubai).

It is horribly unjust for Americans, many of whom have no or poor health insurance, to be forced to pay more money than anyone else on earth for prescription drugs. If Big Pharma, which spends disproportionate amounts of money on direct marketing to consumers, can't produce the medications we need cheaply and efficiently, that represents a market failure, and the government should step in and take the lead role in drug development. Research could be done through the NIH grant system and the results could be given away, unpatented, to the entire world. We could get the same results for less money, as the NIH doesn't need to make a profit and has no stock holders to answer to. It could even serve to improve our global reputation, showing the US to be a force for good in the world.

> If they dislike the price controls and monopsonies that exist in other countries, they can avoid those markets entirely. Once they agree to participate and begin exporting their drugs, we should have every right to import them back at a discount.

As I mentioned, both of those options would make drugs less profitable, which would lead to fewer advances in technology. Prohibiting the reimportation of drugs can be a sensible policy.

> It is horribly unjust for Americans, many of whom have no or poor health insurance, to be forced to pay more money than anyone else on earth for prescription drugs.

Unfair, perhaps, but unjust? Fixing this problem would either require selling to everyone at American prices (which could also be described as unjust), or selling to everyone at the lowest prices available. Both options would be less profitable that the current system, which would slow the rate of advancement in drug development.

> [Maybe] the government should step in and take the lead role in drug development.

That can also be a sensible policy, and the American government already does fund a considerable amount of drug development.

Prohibiting the importation of drugs cannot and is not something anyone should be for. It is highly immoral and it says that your own government wants to deprive you of things that others have. Now if the governments that get the discounts are forced to ban the export of drugs, well then that is completely different story.

> It is horribly unjust for Americans, many of whom have no or poor health insurance

They do, however, have free health care. You do understand the difference, right?

No, it isn't as good as most paid care. So what?

> Pharma, which spends disproportionate amounts of money on direct marketing to consumers,

What's "disproportionate"? You do know that marketing includes free drugs for poor people, MD education, and the ads that tell people that there are treatments for their illnesses/conditions, right? Which of those do you find objectionable?

> can't produce the medications we need cheaply and efficiently, that represents a market failure,

Does it? I'd like a pony, but the fact there isn't one in my front yard isn't actually a market failure.

If you think that you can develop anti-biotics for less, go for it. You'll get rich, you'll save people's lives, and you'll drive those evil drug companies out of biz.

You were planning to go through the FDA right? (Of course, if you can fix the FDA, then all new drugs become cheaper.)

> and the government should step in and take the lead role in drug development.

What rational govt that has pension/retirement obligations would spend money on a drug that significantly increased lifespan?

> the NIH doesn't need to make a profit

The NIH has no skin in the game. If it screws up, no big deal. In the rare cases where someone finds out, NIH defenders will swing into action. If Merck screws up, folks lose their jobs, stock value goes down, etc.

The NIH is driven by interest groups. Pharma is driven by what folks will actually spend money on. I know which one I think accurately represents what people value....

Since money is predominantly allocated by insurance companies, not individuals, I would say that Pharma knows what insurance companies will spend money on.

> Since money is predominantly allocated by insurance companies, not individuals, I would say that Pharma knows what insurance companies will spend money on.

Insurance companies are somewhat driven by what their customers want. If 20% want something, it tends to happen. Govt bureaucrats, not so much, and Congress rarely passes laws for 20% of the population.

I voted it down because I didn't think the tone was constructive. It seemed to be accusing Thiel of not considering the big picture, when in fact Thiel is considering something much, much larger. You're asking about differential pricing of prescription drugs, while he's wondering about the impact of a spot market on human organs. What did you think of that part?

Thiel isn't arguing that globalization is a done deal. If anything, he agrees that what we have is astonishingly incomplete: "we stand at a level of globalization that compares with the previous peak year of 1913". Rather, he's asking whether the economic world as we know it could withstand true globalization.

But to answer your question: yes, I think it's only to be expected that corporations will seek to maximize their profits through price discrimination. And also to be expected that true globalization will make this more difficult to do. But while it's clear that those paying the higher price would benefit in the short-term from paying a lower price, it's not clear to me who would benefit in the long-term from forcing companies to choose a single set price somewhere in the middle. It probably depends on how this would be enforced.

I would say it is being in a state of constant expansion. Kinda hard when you live on earth. Its just so... finite.

Does Thiel address that point, or argue that there should be exceptions for American pharma companies?

Our healthcare industry is psuedo-nationalized, in the sense that we have an inefficient domestic market in order to subsidize our ridiculously expensive regulatory approval process, all of which provides enough excess cash flow to fund lots of good research. Things would be different with fewer trade barriers, but the main result is that either a) the FDA would get weaker, or b) our domestic pharma industry would look a lot like that of e.g. India (cheap stuff derived from other people's research, not as much new stuff). I guess we'd buy the next generation of Lipitor, Prozac, and Viagra from the Swiss.

You actually already buy a nice chunk of your meds from the Swiss. Switzerland is a nice place to incorporate.

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