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Comment by julianlam | Hacker News Reader

Why do prescription medications cost so much, and generics so little (comparatively)?

Artificial inflation to recoup R&D.

Not sure pricing to recoup costs is artificial.

The government backed monopoly to ensure that supply remains artificially restricted to ensure that the market will support the higher prices is

Drug companies have a portfolio of compounds they research. Most don’t pay off, so R&D costs make their way into the pricing of those superstar and other drugs that do work. Also, timelines are pretty long.

Drug companies spend more on marketing than R&D

So?

So pharmaceutical companies spend far less on marketing outside the US, partly because every other country besides New Zealand makes those incessant drug ads illegal, and partly because governments negotiate prices and keep profit margins down. If the argument is that R&D costs are what make drugs expensive, then we could easily eliminate an even greater expense by just copying what other developed nations do.

Don’t you think drug companies would be doing that (not advertise) if it would increase their profit?

Of course advertising increases their profit. It does that by increasing their revenue even more than the cost of the advertising.

For the rest of us, that giant increase in revenue is an increase in our healthcare costs.

Ah so sounds like your logic is: ban advertising -> less costs -> less revenue & lower patient costs -> same profit.

I think I can spot a flaw in that logic.

That last step contradicts my previous comment.

Well, R&D costs are able to make their way into the pricing due to the artificial supply restriction.

If supply was not artificially restricted (through patents), then competitors would be able to manufacture the drug, supply would expand, the price would collapse, and the original inventor would not be able to recover their R&D costs.

In that light, the entire market itself looks essentially artificial, given drug manufacturing couldn’t exist without government guaranteed property rights, which are themselves a kind of monopoly on use.

But yes, the reason brand name drugs are drugs are more expensive than generics is due to intellectual property, both the patent and the trademark.

Without temporary monopolies granted by patents, those prescription medications wouldn’t exist in the first place.

Unless we came up with a different funding mechanism. Joseph Stiglitz for example has advocated a prize system for pharmaceuticals, though he doesn't suggest replacing the patent system entirely.

https://www.project-syndicate.org/commentary/prizes--not-pat...

Salk didn't need that temporary monopoly to invent the polio vaccine, which has gone on to be one of the biggest success stories of vaccines and modern medicine general.

Okay? Does that disagree with anything I wrote?

My point was to whether it was artificial not whether it was bad.

We can have artificial interventions in markets, and that can be a net benefit and a good thing.

I’m not sure why everyone is responding as if “artificial” and “bad” are the same thing

What percentage of research is performed outside of the companies? (by college/government)

Not sure they're just recouping costs and not lining their execs pockets.

It's easy to tell. Just look up how much profit is being made.

I think the argument is that artificial comes in with IP law, which some people feel is superfluous.

I do think that corporate price gouging is a huge problem that does need to be addressed. But especially with smaller business types — creatives, et al— I still haven’t gotten any grownup answers about what would compel people to get professionally good at something and innovate in the complete absence of copyright: the vastly better business model would be waiting for someone else to do something new and interesting, stealing their work, and then undercutting them in the market because you don’t have R&D/et al costs to recoup. You can’t say that wouldn’t happen because it’s exactly what the AI companies did to billions of people, scoffing at any protest. And ironically, they’re now whining about the Chinese doing it to them.

I'm with you on all of that. There is, nevertheless, a strong argument that IP protection (particularly for creative / "culturally significant" works) is too long. Twenty years - interestingly enough, the original time-period in the US - of protection seems like a better (for society) deal than life of the author plus seventy. I think, in fact, most artists would agree: if you went back in time and asked a playwrite or filmmaker in (say) 1940, I'd bet they'd rather someone freely revives their work in 2026 than that it be sat on by a corporation that has forgot it (or they) ever existed.

I’ve never met anyone that didn’t think copyrights were way too long in the US, and I’ve got a very large sample size of artists and attorneys. The only people that support such things are executives or counsel for large IP-holding entertainment companies.

I have, however, met a ton of very well-paid tech workers that were extremely against copyright, entirely, especially where it came to paying artists, such as musicians, for their labor. Pretty ironic because the market for software development labor market would probably land somewhere between graphic designers and company IT worker if the commercial software business had no IP protection.

Separating out what is artificial or not seems more like an exercise in rhetoric; defining things as fundamental and real. The whole economy is an imaginary thing dreamed up by our natural human brains.

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