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Comment by jordanthoms | Hacker News Reader

Pharmac works fairly well in NZ - although it's not nirvana, there still are issues around what drugs they fund (Pharmac provides the drugs they select at cheap prices, but if they choose not to fund a drug because they don't consider it cost effective enough, you have to pay full price yourself).

However, I'm not so sure it's a good model for the world or for the US market, because it's actually quite selfish. NZ is able to get drugs cheap because the US consumers are paying extremely high prices which cover the development costs. If everyone was buying drugs at the price we pay in NZ, there would be far less incentive to develop new drugs.

With NZ being such a small market we can get away with it without having any impact on the development of drugs, but we're lucky that the Americans are picking up the development tab for us and we would have a problem if they stopped doing that.

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> NZ is able to get drugs cheap because the US consumers are paying extremely high prices which cover the development costs.

Any source for this? I heard quite often that the marketing budget is more or less the same as the development cost. Further, a lot of the costs is burdened by others.

Seems like you assume that there's a reason that the costs are so high or must be so high. Could be a easy "can get away with it".

There's been numerous explanations that e.g. companies force more expensive medicine than needed. E.g. cheaper is available, but to get a unique medicine from the company, you also are forced to get all the expensive stuff that they have.

The marketing budget is really high but the two biggest contributors to that are teaching doctors how to use drugs and handing out free samples of otherwise very expensive drugs. The first is necessary and the second isn't what most people outside of accounting would think of as a cost. Advertising is only a fraction of drug marketing costs.

> NZ is able to get drugs cheap because the US consumers are paying extremely high prices which cover the development costs.

This is an oft-repeated canard with no evidence ever presented.

Moreover a pricipal reason drugs are cheap is because Pharmac aggresively substitute generics once patents expire; this is not "selfish", it is exactly how the patent system is supposed to work.

Australia used to do the same until their US FTA requried that they "voluntarily" stopped using generics on patent-expired drugs. The price of medicine has soared there since.

> NZ is able to get drugs cheap because the US consumers are paying extremely high prices which cover the development costs.

And sometimes it's the opposite, with European pharmaceutical companies covering all their costs in their home market then selling the same drug at over 5x the price in the US while only having to cover marketing costs.

If it would be such a big problem for Big Pharma they would stop selling drugs in NZ. Just to set an example for other countries if not for anything else.

"Big Pharma" isn't a monolithic entity with greater coordination powers than New Zealand. (The very largest pharmaceutical company, Johnson & Johnson, has $70B in revenue compared to NZ's $180B GDP.) Furthermore, NZ can make a credible commitment to act irrationally for a long time through the democratic process, while individual pharmaceutical companies are driven by shareholders to maximize profits with a time horizon set by interest rates.

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