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Politics : American Presidential Politics and foreign affairs

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To: RMF who wrote (36165)	8/3/2009 12:20:33 PM
From: TimF	2 Recommendations Read Replies (1) of 71588

Apparently, the pharmaceutical companies can give money to MY senator and congressman and that allows them to sell pills to ME for $5 bucks while Canadians get those same pills for $1 buck. Is that capitalism or is that a PAYOFF??? What allows the company to sell the drug to you for $5 is the demand for the drug. That part largely is capitalism, with a possible question about the intellectual property rights / patents for the drug. The payoff, to the extent it exist, isn't capitalism, but is more a defensive measure than it is an example of grabbing a special privilege. Its not that Canada somehow has the "right" or "natural" price for the drug and the drug company pays off congress so it can charge more. Its that Canada's government forces down the price of the drug and the drug companies may pay congressmen to keep the same thing from happening here. If drugs where a high variable cost /low fixed cost item than Canada wouldn't be able to drive down the price so much. The drug companies aren't going to lose money on every pill they sell and try to make up for it with volume. But drugs have a high fixed cost (high R&D costs, expensive testing, to a lesser extent large costs for setting up drug production factories), with a low variable cost (once everything is set up for high volume production, each new pill of most drugs is very cheap to produce). So the high margins in the US for on on-patent prescription drugs cover the fixed cost, and every other additional sale (to Canada, to European countries that push the price down, and drugs in the US once they go off patent and have competition) only has to cover the low variable costs. The drug companies might not be happy about having to sell for a lower price in places like Canada, but they haven't been able to change the drug policies there and they would rather get a small additional profit, than no additional profit at all.

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