On Oct 27, 10:34*pm, wrote:
Kurt Ullman wrote:
In article ,
"Robert Green" wrote:

"Kurt Ullman" wrote in message
*"Robert Green" wrote:
What I noticed helping my neighbor with her Part D problems (they are
substantial) was that the veryt same meds she was taking in 1998 have almost
tripled in price. *I believe that a lot of that rise was meant to compensate
for any future discount the drug companies might have to give to Medicare.
You have to use this drug's profits to pay for the next drug's
development.

No you don't any more than you have to use the revenue gained from
(say) an oil well to search for new oil elsewhere. Even worse, in the
pharma area it's like using the profits from an oil well somewhere to
look for copper ore in another part of the world. Bringing it back to
the pharma area why should someone who needs (say) BP medication pay
an excessive price for it so the drug company can search for a drug
for an unrelated illness.

The costs of that have been going up, too. I am reminded of
a line from West Wing. Josh and Toby are discussing drug prices. One of
them holds up a pill and notes that this one cost 14 cents. The other
agrees but then added that the first one cost over $500 million (and
that was years ago).

So what. The 14 cents is just the immediate raw material, production,
and selling cost and will be burdened with its share of the
amortization of the original research cost. Plenty of industries like
this. A case in point is the movie business where billions are
invested in movies that will not earn their keep until the future.

* *Also most of the low hanging fruit has been picked in the
pharmaceutical industry as we can see by the more expensive to find, get
approved and then make biologics and similar medications. We have seen
the obstacles just over the last couple months when drug companies have
pulled the New Drug Applications for 3 late-stage drugs because the
studies did not show efficacy. VERY expensive failures.

Just the usual lousy job of the researchers.

* *When price fixing occurs (and no matter how you want to paint the
picture when government decides how much they will that is price fixing)
in the US one of two things HAS to happen. Prices elsewhere will have to
go up or innovation will dry up. (And either way we might get an answer
to the nagging question of exactly to what extent has the US consumer
been subsidizing overseas drug costs.) *There are no other viable
alternatives.

So I suppose the financing of development of a promising new drug (or
avenue) can't be done by the entrepreneur going to the venture
capitalist (or Wall Street, or the banks, or some other money source)
and presenting a proposal and obtaining financing?

There are so many things wrong with the above, that I don't know
where to begin. First, let's for the moment just accept the premise
given that the govt is going to somehow fix the price of drugs at a
low
level producing low or no profits.

First, for the most part, you'd never get to the stage of having
a promising drug to seek financing for. The drug companies
today spend huge sums on speculative research trying to find
drugs. Everything from sending teams into rainforests to
search for plants, to advanced bio labs. Usually, only after
huge expenditures do you get to the point where you THINK
you might have a new viable drug. And even then many, if
not most wind up failures.

And given that prices are going to be fixed artificially
low, what entrepeneur is going to seek to go into business
with a new drug? Even in today's environment, how many
entrepeneurs show up with a new drug seeking financing
to start a new company. It's rare indeed. Compare that
to other businesses, like the internet or software and the
barriers to entry are clearly very high.

And finally, even if they did seek financing, what fools
would invest knowing the govt was going to screw around
and set the price for the drugs?



Isn't this the way
new ideas come to fruition (and the product to market) in most
industries?

I'd like to see the percentage of new drugs that were approved
over say the last 3 years that came from new companies formed
within say the last 10 years. I agree they are there, but I'll bet
they are dwarfed by the drugs brought to market by the established
drug companies. Also, the assumption per the above discussion
is the govt is going to fix prices artificially low. If that happens,
goodbye to the new companies.


The situation is complicated in the pharmaceutical
industry because the current players have all the expertise, contacts,
politicians in their pockets etc. and drug development requires oodles
of money. But even if it's the current players doing the new
development there's no reason (other than a "gimmie more" gambit) *the
new drug or idea should be subsidized by an older drug. Big bucks from
(say) Lisinopril should simply give the drug company the idea that
some other product can also make a fortune. It's not some socialist
equalizing of the cost between (say) the high BP people and those
suffering from senile decay.

This is one of the stupidist things the resident commie has posted
yet.
It's like saying the profits from Apple's MACs should not have
been used to develop the iPOD. Or the profits from the iPOD should
not have been used to develop and market the iPhone. Obviously
totally clueless about business. Even the local bakery uses profits
from the bakery to expand into a cafe or add a deli, etc.




As to the subsidizing of overseas drug costs this is another red
herring showing just how little most people know about business.

After posting the above, we know the really clueless one is you.



If
you have a product that has a finite life span (here drug patents but
it could be tomatoes rotting in the fields) you have an interest in
getting what you can for the product as long as it covers the marginal
cost of production and distribution. In the case of tomatoes there's
not much capitalized cost to recover but in the case of drugs (and
movies) there are huge amounts. Sell the product for what you can get
as long as you don't detract from the sales at full price.

Wrong again. From economics 101 we know that the correct
goal is to sell goods at the price that maximizes profits.


Anything
over the marginal cost will go to reduce (or repay) the capitalized
development cost. You're only subsidizing the overseas consumer if you
could make more elsewhere (which you can't). In fact, by selling to
(say) Bangladesh at half price really does the American consumer a
favor; the drug can be priced lower in the US than it otherwise would
be.