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To: Road Walker who wrote (183426)	2/3/2006 7:37:19 PM
From: BelowTheCrowd	Read Replies (1) \| Respond to of 186894

An interesting out-take from the book I linked to: Much of the case for drug patents rests on the high cost of bringing drugs to market. Most studies have been sponsored by the pharmaceutical industry and are so quite suspect. The Consumer Project on Technology examined the cost of clinical trials for orphan drugs – good data are available for these drugs because they are eligible for special government benefits. A pharmaceutical industry sponsored study estimated the average cost of clinical trials for a drug at about $24.5 million 1995 dollars. However, for orphan drugs where better data are available, the average cost of clinical trials was only about $6.5 million 1995 dollars – yet there is no reason to believe that these clinical trials are in any way atypical. [Note, I worked for a clinical research organization for a while and tend to agree. The drug companies overstate the costs.] A 2002 report of the Center for Economic and Policy Research also estimates costs orders of magnitude less than those claimed by the pharmaceutical companies. It also finds that, holding output of pharmaceutical products constant, private companies tend to spend twice as much as public medical research centers to come up with new drugs. As one might suspect, the report documents that the additional costs of the private drug monopolists are mostly legal and advertising costs: the first to get patents and defend them, the second to convince doctors to prescribe “their drug” instead of the alternative, most often a generic and cheaper alternative. The pharmaceutical industry is also less essential to medical research than their lobbyists might have you believe. In 1995, according to a study by two well reputed University of Chicago economists, the U.S. spent about $25 billion on biomedical research. About $11.5 billion came from the Federal government, with another $3.6 billion of academic not funded by the feds. Industry spent about $10 billion. However, industry R&D is eligible for a tax credit of about 20%, so the government also picked up about $2 billion of the cost of “industry” research. So private industry pays for only about 1/3rd of biomedical R&D. By way of contrast, outside of the biomedical area, private industry pays for about 2/3rds of R&D. I'll repeat my assertion. We have a corrupt system that is designed to flow lots of money to certain entities, to the detriment of the general public. The cost of drugs is only a small part of it and the market is anything but free.

To: Road Walker who wrote (183426)	2/6/2006 2:07:05 PM
From: TimF	Read Replies (1) \| Respond to of 186894

OT The customer determines the market, and the governments are the largest market. If the government provides medical services and gets a lower cost buying in great quantity then its just market power. If the government makes itself a monopsony buyer by law (either directly or more likely by making itself a monopoly provider of health care or health insurance) by law than it isn't just market power. The government isn't just acting as a consumer but as a regulator and using the law to give itself an advantage. That isn't an example of a free market in operation. We may have an "open internal market" but it is forcefully manipulated by our law Much less so than in most other developed countries. Forget "price controls", they have cost leverage. You can't forget price controls. Explicit price controls is one of the methods that some of the countries use. For some <political> reason we've decided to give the domestic leverage to the drug companies. We do give monopolies to companies with patents but other than that we don't give domestic leverage to drug companies in a systematic way.