Yes but is per unit profitability (measured at the pharma co) higher in the US?
That's what you need to be true for your claim to hold water, not that the overall revenue pool is larger.
That's what you need to be true for your claim to hold water, not that the overall revenue pool is larger.
https://i.imgur.com/6QOta9X.png
Full source:
https://aspe.hhs.gov/system/files/pdf/259996/ComparisonUSInt...
(The study was done by HHS and was focused on Medicare, which sets prices based on a weighted average of market sales price, including negotiated discounts by insurers.)
Selling your product for 50% more in the US may not be more profitable than selling in EU where your marketing costs are a lot lower.
Of course you’d sell in all markets where you can, but the claim was that US profits > EU profits because US prices > EU prices.
Also, there’s R&D/education that’s really marketing. E.g. advisory panels, grants to the “right” organizations, agencies or researchers
In which case you could kill this stupid marketing budget without much effect on R&D by outlawing drug advertising.
In reality, the established players halve their marketing expense and make it difficult for any upstarts.
Drugs aren't priced relative to what they cost to make or develop any more than airlines price flights based on how much it costs to fly someone between any given city. They're priced at the highest level the market will bear. Is it any surprise that the largest, most powerful economy in the world will bear higher prices? The drugs by definition have higher value because treating someone in a strong economy delivers more marginal value than in other markets. That's math.
Now we can talk about different systems but this is the one being held up today.
CFO: ABC pharma just got FDA approval to sell a generic version of Viagra, our revenue is projected to take a $1.5 billion hit.
CEO: Fuck. Start raising the price of insulin, I gotta hit these wall street estimates.
The issue is government allowing companies to be anti competitive. For example, the government is currently entertaining a lawsuit by one insulin company against another company trying to sell insulin for a lower price. While that lawsuit is ongoing Americans must pay the higher price. Thus really government willing to enforce continued monopoly is one of the problems
[1] https://en.wikipedia.org/wiki/Agricultural_subsidy#United_St...
I know I've set up kind of a straw-man. It might be that the consumer could choose to forgo an expensive drug or medical procedure without fatal consequences, but that's not the interesting case.
Right now insulin is expensive because the government is preventing companies that can produce it for cheaper from selling in the united states because of a lawsuit by the current market holder. That the government even has this power is a textbook example of the danger of governmental interference in the free market. People are literally dying because the government has made the market less free intentionally
Of course, there are competitive markets for both food and insulin in the US. Quoting from a letter to the WSJ yesterday,
> Eli Lilly makes three types of insulin, which in most states you can buy over-the-counter at Wal-Mart for $24 per 1000 unit bottle. One hundred syringes cost $12. I have serious diabetes mellitus and have managed it with Lilly insulin for a decade for under $100 a month.
For some drugs there aren't competitive markets, and in some cases the government prevents competition, but both are typically temporary situations (patents, first-mover advantages) that help to get the drug on the market in the first place. An extortionate price for a drug is better than no access at all, and doubly so when it is going to give way to genuine price competition.
(2) The government doesn't grow food. Sometimes it pays for it, and sometimes it gives people money so they can pay for it, but there isn't a public option in case farmers decide not to sell us beef, because the market works. (But yeah, the government does -- and should -- help people pay for drugs they can't afford when the prices are reasonable.)
(3) Food production is subsidised, but it shouldn't be. And these subsidies have little bearing on the possibility of extortion in the market.
Airlines are a great example of the race to zero profit. Airline margins are slim and thus the cost of travel often reflects exactly the cost of doing the flight itself. JFK to Heathrow requires participation in multiple markets, currency instability, multiple regulators etc which make the cost more excessive. Also london and new York airports are busier than sfo increasing airport fees. Thus in a market with low basically zero margins, the cost from ny to London is more as competitors that cant make the unit economics work leave the market entirely. New competitora cant enter the market at a lower price point because their profit would be zero.