Geesh, no wonder they’re doing so well. Overcharging dumb, fat bastards in the US seems like a solid business decision, until they run a study. Now they’re going to feel the Bern.
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What we don’t know is the scalability of production. If it is not a major issue, then lower costs should be seen in the consumer market. If new production has a long time frame (for whatever reason), then there is no real savings because higher volume means replicating the existing system, which will have the same production costs. Interesting that Ozempic has a cost just a bit above basic insulin (sub-$5 vs $3).
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Interesting that in Germany it costs $59 and in the US it’s just under $1000. I don’t think this is a scalability of production issue.
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Screaming for a black market.
d fb
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Yeah like the white market is not profitable enough.
Oh wait a minute they are both the same market.
You do not live in the US do you? The internet was invented for the Pakistani pharma makers. Non-corporate guys with clear capsule shells.
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The Law of Supply and Demand does not dictate that you must sell at a minimum profit. Competition takes care of that. When competition is limited by legality, black markets take on the job.
Black markets are FREE markets! Funny thing, in this case a black market would do the job trust busters should be doing.
The Captain
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There is a black market. Around here there are several “clinics” offering Wegovy-like products at $25 per week. They use “compounded pharmaceuticals” rather than the brand name, and they are doing big business.
We have a friend who goes, and we have accompanied her. It’s in a small business park, all whitewashed walls with doctor-office chic, ie. A couple of cabinets, a scale on the floor, and a clinician (thin, of course) who chats you up for 2 minutes, gives you a shot in the arm or belly, and you are out the door.
Our friend has lost 30 pounds, and says it removes the “food noise”. Frankly, we are tempted. The business is owned by a local doctor, and the clinician has some sort of initials after her name, but more than that I can’t tell you.
Anyway, thriving business. Probably making a fortune.
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Monopolies are enabled by government granted patents and copyrights. I would not have a fundamental problem with the government requiring some sort of reasonableness standard for the profits reaped by the government patent enabled monopoly.
Steve
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Now, now. We don’t want to be using words like “dumb” and “bastards.”
Pete
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My bad - I was imagining the board’s discussion of their decision to overcharge US customers. Sometimes my imagination gets the best of me.
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The USA overpays for almost everything that benefits the world at large. For example, almost anything medical related, there is no way that companies around the world could innovate as much in the field if the USA wasn’t “willing” to feed them gargantuan sums of money, while everyone else around the world benefits at a substantially lower price. And this is across the board, pharmaceuticals, devices, new techniques, general research, etc. Another example is when military is required to keep evil at bay, sure enough, again the USA overpays massively. It’s amazing how the USA has been required to stem the tide in nearly every European war over the last century plus. Same for aid around the world. And the absurdity today is that we borrow much of the money to do so, sometimes from the very people we are helping. So, not only do we pay the bulk, we also pay them interest on it for decades to come!
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An obvious click bait headline.
From way down in the article…
,it spent nearly $5 billion in research and development last year.
You have to recoup that somehow. Sure you can produce it for $5, but if you don’t recoup the R&D, you are going out of business and the next class of drugs will never be developed. Long gone are the days of Salk (polio vaccine) and Flemming (penicillin) where life changing/saving discoveries are made and not patented.
During medical school, I worked one summer in the R&D department of a pharmaceutical company (that has since been bought out/mergered at least twice). Mostly writing research protocols and double checking data. The drugs involved were antidepressants. One major “side effect” from all the drugs was weight loss and some of those drugs were later marketed as weight loss drugs.
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Yeah. I have heard that narrative since I was a little kid. Just think. If we cut off all that foreign aid, the “JCs” could have another tax cut! They are more deserving, because only the “JCs” know the best use of all that money.
/sarcasm
Steve
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Sounds reasonable. The patent laws would need to be amended.
It should also apply to copyright which was meant to protect authors but now protect not just the author’s estate but whoever buys the copyright, like Disney.
Bring back the trust busters!
The Captain
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Thanks for the reply. Recouping R&D costs makes sense, but why are other countries able to get the same drug for a much lower cost? Maybe the pharma companies don’t deserve all of the blame, but their not blameless.
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One reason is that in the United States there is no central negotiator for drug prices. Instead there is a big patchwork of insurance companies and government agencies. And until recently Medicare was prohibited from negotiating drug prices. In other countries, there is one authority that says we will pay X amount for a drug, otherwise they walk away and find a cheaper alternative. It is still a free market solution. The only difference there is one customer and one vender instead of multiple customers.
Another is regulatory capture. I’ve posted before about my misadventures with Albuterol so I’ll try not to bore everyone too much, but in the US the price is based on what the market will bear. R&D costs play no role what-so-ever.
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They do–in the year they incur the R&D expense. It is a TAX DEDUCTION taken as a dollar-for-dollar expense. So, they got the money back–all of it.
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I’ve got a deal for you, then. Pay me a million bucks to prepare your tax return. It’s deductible, so you’ll get your money back.
—Peter
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Not quite, nice try though. Tax prep fees are deductible the NEXT year, not the year the fee is incurred and paid.
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Let’s fix that. You can pay me the million for tax consulting during the year, and I’ll toss in the tax prep for free. That puts things on the same footing as the R&D expenses.
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