One of the most striking results of economic theory is that a country that imports anything it wishes at the best prices available, without considering whether the source of the goods discriminates against that company (say by not enforcing patents) befefits from the trade. The country that excludes any goods or refuses to export to a country that has a discriminatory import policy loses from its failure to trade. Almost no one but well-educated economists believes this. Obviously, the drug company that won't discriminate in prices, i.e. sell cheaper to poor countries (with not reexport enforcement), loses by the refusal to trade if demand in the country for the drug is elastic.
It is easy to show that the company benefits from price discrimination letting the marginal revenue for the drug equal the marginal price for the drug in each country. Most companies do this to a point.
My proposal is that a group of small poor countries subsidize the manufacture of drugs by paying bounties for production inside their territories. They should give land, omit taxes for (20 years), eliminate income, and payroll tax on the products as a matter of public health and national police power (thus protecting from developed country retaliation), and let the producers bid using price equivalents for a set of useful expensive drugs. If the US complains, tell it to contribute to the subsidy or forever shut up about caring about the poor sick people of the world.
As long as profit can be made, drug companies will disvoer and manufacture drugs. Since it is easier and cheaper to test new drugs in poor countries with lousy tort law, the poor countries could easily transfer much drug discovery to themselves. No single company could win by not bidding. Any cooperation among the drug companies would violate antitrust law.
Alternatively, medicoterrorists could bomb drug plants until the owners gave in and invested in the poor countries. I much prefer the former policy, and I think the drug companies woulde as well.
The main problem in developing new drugs is that there are few people rich enough with the disease to finance the research and development. This will change very soon. Federations of people suffering from a disease will soon start financing new biotechs devoted to discovering cures for minor diseases. Already there are special provisions for unpopular disease drugs. At least one drug company (Merck) has given away and paid for production of a poor peoples' disease: river blindness.
Perhaps the best approach would be awarding huge international prizes for the discovery and testing of new drugs. Then anyone who wished could manufacture the new drug and sell it for what it could get. Of couorse, once a company started the explore, it would be hard to stop. There is no guarantee that every exploration would be profitable. But even losses have a market value (tax loss carryforward). That is something Bill Gates could do with his stash. |
