Quote:
Originally posted by Hank Chinaski
burger and I have reached agreement. He thinks that perhaps some limited price control over drugs in the patent period might result in a more optimum amount of research.
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Burger can correct me if I'm wrong, but you guys (you and club) keep confusing profits and R&D expenditure as if they're the same thing. You seem to think that pharma companies do not exist to benefit their shareholders in some way, and that the only money available in the world economy to be invested in pharma R&D must come from the pharma's holdings. Neither of these things is true. The question about profits has to do with setting the optimum prices in the context of a business that has monopoly characteristics. It's not always a monopoly, because you have generics, etc., but there are short-run monopolies. You and club do not want to think of pharma companies as having this characteristic, so you keep fighting off the obvious truth that patent rights are about bestowing this sort of limited monopoly power. If you accept this -- at this point, I understand that this is a highly counterfactual hypothetical -- then it follows from very basic economic principles that net social utility is maximized by some sort of price regulation. (This tends to reduce pharma profits, and may reduce funds available for R&D, although I think that argument is not as interesting as what I keep waiting for one of you to say, which is that we should permit pharma to exploit their monopoly power because we want to incent them to invest in R&D and create wonderful things. I asked about government spending on R&D to offer an alternative to this, but you guys are so busy fighting the notion that pharma has monopoly power that you haven't gotten there yet.)
So, to recap: We are talking about two things at once -- (1) what pharmaceutical pricing is optimal, and (2) how do we encourage pharma to invest the optimum amount in R&D.
