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Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (53249)	10/19/2004 5:15:27 PM
From: Original Mad Dog	Read Replies (2) \| Respond to of 57110

Take enough of the profit incentive out of the equation and it just doesn't even make any sense to develop new products, in this case, drugs. This isn't fucking rocket science, people need only look at themselves and what motivates them and what they need to survive to understand what is driving the economy. There is something about medical products that makes people set aside that important bit of common sense. Just yesterday at lunch I was having a conversation with somebody about the issue of importing "cheaper" drugs (really the same drugs sold under a price controlled system) from Canada. This person was a Kerry supporter and I'm not, but I observed that IMO neither candidate was addressing the real issue. Canada and most other countries besides the U.S. have imposed increasingly strict price controls on drugs -- that's why the "same" drug is cheaper there than here. This cuts into drug industry profits .... but to a great extent they make it up by charging Americans (either directly or through insurers) full prices. As a result, Americans have been shouldering an ever increasing proportion of the world's R&D costs for new medicines. If we route all of the U.S. prescription drug orders through Canada or the Netherlands or Timbuktu to get the best price control du jour, sure we will pay less, but ultimately everyone else will do that too, and the price for drugs will become whatever the most stringent price-controlling country says it should be. Her response was "great, then we will be able to afford drugs." I responded, "Not so fast." If everyone pays less money for something as R&D-oriented as medicines, then the obvious result will be less money going into R&D for those products. Less money for those companies means they build fewer research labs and hire fewer smart people to run them. We live a lot longer than our grandparents did, on average, because these companies were incentivized to invent great medicines. I don't think we are better off if a lot less money is available to develop new medicines. Her response was to rant about drug industry "profits", and would not listen to the point that drug industry return on equity is not substantially higher than returns in many other industries -- and if you make it much lower than other industries, investment dollars will not flow into drug-making at all.