I did not know that the price of drugs was increasing. I'm worried about the fact tha tis has not been regulated. What is the story behind the price increases? I need the facts because if this behavior spreads to other sectors of the economy, the U.S would have to either adapt new regulation policies or cringe away from the situation altogether.
The increase in prices for medication seems to be getting out of control. Those medicines are already expensive, without the price increase, in comparison to other medicines. There is need for government regulation within the health care industry.
These drugs are able to be sold at prices much higher than the cost of producing it because of the government munificence that we read about in "The Price of Inequality" as well as patents that allow firms to have a monopoly over a drug that they made for a long period of time. Gilead Sciences' new $1000-dollar-a-pill Hepatitis C drug Sovaldi is selling very well despite the hefty price tag because people are in need of these drugs. These are very sad developments; drug companies are supposed to help people, not exploit them.
I would disagree Hikaru, drug companies--especially publicly traded ones--are supposed to make money. Unfortunately, they happen to have the position of providing highly needed medications as well. That is the problem, these companies have no incentive to heal patients at an affordable rate, or at all for that matter.
I think the problem too for these drug companies is that developing a successful drug and getting it through all of the FDA testing is very risky business. There are a lot of sunk R&D costs and one of the best ways to recoup these expenses is by charging high prices. If there weren't patents that protected these drugs, there would be little incentive to invest in research. I know there have been instances like in Brazil where the government simply stated that patents would not be honored because a massive public health crisis was underway and people needed medicine. Brazil is an interesting case study on this so I'd recommend a google search on it.
this is very convoluted it seems. especially, since the market is connected to the health care industry for hundreds of thousands of healthcare investors in the market. i agree that the pricing for medicines for terminal diseases because it is a matter of life and death for people, basically.
Sanjay, you make a great point. The image in the link below shows how long some of the R&D takes for certain medical sectors. I also read somewhere that about 3 out of every 10 drugs actually make it to the market from the R&D phase and that does not even guarantee profitability for those drugs. That may be a good average for a baseball player, but not so hot for the pharmaceuticals. http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2953249/figure/F1/
Finding a balance here is incredibly difficult. On one hand, there has to be a large incentive for companies to invest in the R&D of new drugs. As a society we (presumably) want some of our best minds working to improve our health-care capabilities. High profits are the best way, at least that I know of, to draw highly-skilled individuals to a certain industry. In addition to the talent, a significant amount of capital is required to develop new drugs. Again, capital is invested where it can return a profit. On the other hand, in order for these drugs to help people we must get them into the hands of those in need. High prices prove to be a significant obstacle here. So the real question is, how do we keep prices low while providing a high incentive to innovate?
The solution that first jumps into my mind is subsidies. But these subsidies would be very costly, and I'd imagine the government would have to cut funding to other programs to be able to afford increasing its subsidies to pharmaceutical companies. We could just increase taxes -- though again we run into a huge roadblock. Or, we could increase our debt.
It's possible you think that pharmaceutical companies are exploiting the sick, and that very well may be. But keep in mind that when you cut their profits, you inevitably reduce their incentive to invest in drug research. Our future scientists may start gravitating towards wall street.
Does anyone have another solution as to how we can keep drug prices low while maintaining a high incentive to innovate -- other than through subsidies?
I did not know that the price of drugs was increasing. I'm worried about the fact tha tis has not been regulated. What is the story behind the price increases? I need the facts because if this behavior spreads to other sectors of the economy, the U.S would have to either adapt new regulation policies or cringe away from the situation altogether.
ReplyDeleteThe increase in prices for medication seems to be getting out of control. Those medicines are already expensive, without the price increase, in comparison to other medicines. There is need for government regulation within the health care industry.
ReplyDeleteThese drugs are able to be sold at prices much higher than the cost of producing it because of the government munificence that we read about in "The Price of Inequality" as well as patents that allow firms to have a monopoly over a drug that they made for a long period of time. Gilead Sciences' new $1000-dollar-a-pill Hepatitis C drug Sovaldi is selling very well despite the hefty price tag because people are in need of these drugs. These are very sad developments; drug companies are supposed to help people, not exploit them.
ReplyDeleteI would disagree Hikaru, drug companies--especially publicly traded ones--are supposed to make money. Unfortunately, they happen to have the position of providing highly needed medications as well. That is the problem, these companies have no incentive to heal patients at an affordable rate, or at all for that matter.
ReplyDeleteI think the problem too for these drug companies is that developing a successful drug and getting it through all of the FDA testing is very risky business. There are a lot of sunk R&D costs and one of the best ways to recoup these expenses is by charging high prices. If there weren't patents that protected these drugs, there would be little incentive to invest in research. I know there have been instances like in Brazil where the government simply stated that patents would not be honored because a massive public health crisis was underway and people needed medicine. Brazil is an interesting case study on this so I'd recommend a google search on it.
ReplyDeleteThis comment has been removed by the author.
ReplyDeletethis is very convoluted it seems. especially, since the market is connected to the health care industry for hundreds of thousands of healthcare investors in the market. i agree that the pricing for medicines for terminal diseases because it is a matter of life and death for people, basically.
ReplyDeleteSanjay, you make a great point. The image in the link below shows how long some of the R&D takes for certain medical sectors. I also read somewhere that about 3 out of every 10 drugs actually make it to the market from the R&D phase and that does not even guarantee profitability for those drugs. That may be a good average for a baseball player, but not so hot for the pharmaceuticals. http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2953249/figure/F1/
ReplyDeleteFinding a balance here is incredibly difficult. On one hand, there has to be a large incentive for companies to invest in the R&D of new drugs. As a society we (presumably) want some of our best minds working to improve our health-care capabilities. High profits are the best way, at least that I know of, to draw highly-skilled individuals to a certain industry. In addition to the talent, a significant amount of capital is required to develop new drugs. Again, capital is invested where it can return a profit. On the other hand, in order for these drugs to help people we must get them into the hands of those in need. High prices prove to be a significant obstacle here. So the real question is, how do we keep prices low while providing a high incentive to innovate?
ReplyDeleteThe solution that first jumps into my mind is subsidies. But these subsidies would be very costly, and I'd imagine the government would have to cut funding to other programs to be able to afford increasing its subsidies to pharmaceutical companies. We could just increase taxes -- though again we run into a huge roadblock. Or, we could increase our debt.
It's possible you think that pharmaceutical companies are exploiting the sick, and that very well may be. But keep in mind that when you cut their profits, you inevitably reduce their incentive to invest in drug research. Our future scientists may start gravitating towards wall street.
Does anyone have another solution as to how we can keep drug prices low while maintaining a high incentive to innovate -- other than through subsidies?