People aren't always rational, but unless someone is a child, or clearly and seriously insane, its better to let them make their own decisions. This is true both because its the morally right thing to do, and because they know themselves better than you or any government official can know them.
You have choices but they have consequences you dislike.
Strictly speaking even if you are being held up at gunpoint you have a choice, you can run, you can attack the mugger, you can give him your wallet, you can be passive. But despite the fact there there is still choice, you are being force in any normal sense of the term. The same holds true for taxes, but not for what store you chose to shop at.
Now you are making a broad brush statement about the marketing expenditures
Figures where in links in my earlier posts (and I think I quoted them as well) If all the money that is claimed as marketing expenses for drug companies was adds, they would have like half of the add budget for the country.
Read these blog posts. The first two make a more important general point, the 2nd more directly deals with your question.
Supply, meet demand. Demand, meet supply. I just knew you two are going to hit it off!
meganmcardle.theatlantic.com
Prophets of profit
meganmcardle.theatlantic.com
Why can't we just fund R&D from pharmaceutical advertising budgets?
Why can't we just fund R&D from pharmaceutical advertising budgets?
29 Jan 2008 04:28 pm
Even if companies could, they won't, for reasons I just explained. But mostly because pharmaceutical advertising budgets aren't really very big. People who think that there is a gigantic pool of capital that could be sucked out of the pharmaceutical advertising budget are being misled by accounting terminology. People who rail against the pharmaceutical industry are fond of noting that about 20% of industry revenues go to marketing, with the implication that this is all wasted on advertising baldness cures during Golden Girls reruns. But just the top ten firms in the pharmaceutical industry took in about $350 billion in revenue in 2007, 20% of which is $70 billion. The entire US expenditure on advertising by all companies in all media forms totaled something like $150 billion in 2007. I know it seems like every other commercial you see is for Botox, but most advertising is not done by pharmaceutical firms.
In fact, advertising is only a small fraction of that marketing expense. Over half of it expense consists of free samples, the offering of which seems to me like an unalloyed public good.
meganmcardle.theatlantic.com
First you say that people have the wrong numbers for the marketing budget, then you say that people are not including testing costs and then you say they are irrelevant anyway because, heck, you think the risks are too high to be justified by normal returns. Huh?
The fact that the numbers for advertising are too high, isn't very relevant because it doesn't really matter what the numbers are. If they where 1 cent or $200bil, they wouldn't change the equation for justification of investment in R&D and testing very much. I only bring up the facts about the advertising because many people think that its relevant. So I refute the point two ways, I show that the ad budgets are mostly irrelevant to the issue, and I show that even if they where relevant, they issue of advertising isn't as large as people thing it is. There is no way the drug companies spend $70bil a year on adds.
you think the risks are too high to be justified by normal returns. Huh? What are normal returns? What are the risk/returns of the industry versus those of other industries?
Since most attempts at developing a drug, don't result in an approved marketable drug, and since most marketable drugs, are not very big successes, and since the cost per developed drug is very high, the drug companies business model only works if they can make massive profits on the very successful drugs.
Its somewhat similar to the movie industry where the blockbusters pay for all the failed moves, but the move industry doesn't have to pay hundreds of millions of dollars to test each movie, and then get approval from the FDA, before releasing a movie.
Very few, or perhaps even no other industries, have to go through as many massively expensive failures for each profitable success. So if you limit prices or profits, either explicitly, or with monopsony buying powers, you get less, probably much less investment in new drugs.
Just the consideration of the possibility or such measures, may have already reduced the growth of new drug investment below what it would have otherwise been, and redirected it towards safer incremental drugs. |
