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Politics : A US National Health Care System? -- Ignore unavailable to you. Want to Upgrade?

To: Road Walker who wrote (3058)	12/4/2007 5:50:38 PM
From: TimF	Read Replies (1) \| Respond to of 42652

No marketing is variable as well. But perhaps not as variable as R&D, because they will have to market whatever drugs they have available, and because a cut in marketing will have more immediate negative results than a cut in R&D. As for "They can't reduce R&D, that is their product." Nonsense. If they expected return on the product is much lower they will simply have less product. Companies will shrink, or some will go out of business. It might take some time for the adjustment to happen, but the investment dollars sooner or later will shift towards higher returns. This happens most clearly when a product becomes obsolete (not much investment in new steam locomotives these days), but it will also almost inevitably happen, at least eventually, if returns on a product are reduced. Look at homebuilders. Houses are their product, but they are still building less of them, now that home prices have come down. People respond to incentives. Maybe they will be smart enough to get ahead of the game, or maybe they have to be hit over the head with poor results first before they change their behavior, but either way the investment will be reduced, if prices go down on a sustained basis (in the short run they might just eat the loss, and it might even be rational to do so, but that can only go so far) And not only will R&D be reduced but it will focus less on risk and innovation, and more on safer bets. When you don't get blockbusters with massive returns, you can't afford as many misses. So you stop swinging for the fences and you go for more singles. Not just because you can't afford as many failures but also because in this case going for the singles is probably cheaper.