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Comment by ncallaway | Hacker News Reader

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

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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.

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.

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.

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...

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)

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.

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