SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Politics : A US National Health Care System?
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: i-node who wrote (13302)2/7/2010 12:02:53 PM
From: Alastair McIntosh  Read Replies (3) of 42652
 
In effect, higher US drug prices are a form of foreign aid.

I understand this view but I'm not sure it really is like foreign aid.

Your post is good start to countering the irrational claims of foreign aid, free riding, subsidizing the rest of the world, etc.

What seems to be overlooked in these discussions is that the drug companies are quite happy with differential pricing. It is a profit maximizing strategy common in industries with large fixed costs and is natural outcome of profit seeking behaviour.

Differential pricing by drug companies is not just inter-country. There are large differences in prices for different groups in the U.S. as well. Large HMOs and pharmacy benefit managers are able to obtain large discounts (similar to those negotiated by Canadian Provinces) compared to consumers with unmanaged drug coverage or without insurance.

Different prices will emerge anywhere that markets can be separated into groups with differing willingness to pay. This benefits both suppliers and purchasers.

To demonstrate why companies with low marginal costs use differential pricing consider the airline industry. There is no direct benefit to an airline to require buying tickets 14 days in advance, staying over a Saturday night, etc. They only do this to separate low from high willingness to pay customers. If they couldn't price differentially airline travel would be reduced and tickets would significantly more expensive.

Same with pharmaceuticals. Differential pricing expands the market, decreases costs per unit sold and tends to lower prices for all consumers.
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2026 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News