If you US were to compete on a level playing field with the rest of the world, instead of subsidizing the drug companies, then that would show in their average COGS. They would have to raise prices elsewhere.
Except that governments force the prices down elsewhere. As long as its most of the world forcing prices down (rather than one or two countries which perhaps the drug companies could try to fight), and as long as the lower prices still exceed the marginal production cost of the drug, and as long as there is the potential threat of countries allowing domestic production of drugs that the patent holders won't export, the governments are likely to have the upper hand.
I suppose if you actually get less new drug innovation for a sustained period of time, in such a way as to make it fairly obvious that the price controls where responsible, that you just might get a successful political movement to get rid of the price controls, but that's far from a sure thing, and even if it happens it won't happen for a long time.
Your argument that they would decrease R&D is silly... that's all they have if they want to stay in business. Marketing maybe...
Marketing might be increased, unless the total money available goes down so much that the companies shrink. It has a nearer term, and less risky payoff. R&D is an expensive and often long term bet, that in many cases doesn't pay off at all (or starts to pay off only to result in problems being discovered later, and multi-billion dollars in legal expenses and payouts).
Investment flows change based on expected return. Reduce the expected return and you reduce investment. With less possibility of large future profits, the companies will be less willing to undertake large risky investments. Also they will be less able to do so, as they will have less funds with which to make the investments. |
