Shek

Without monopolistic rents created through a government sponsored monopoly (i.e., patents), there won't be new drugs.

As an example:

Without allowing big pharma to make big profits on their blockbuster discoveries, then you lose the seed money for future R&D as well as the capital from investors that fuel R&D as well. You can do this by creating a market that forces them to sell their first pill for $0.04 instead of selling their first millions for much more to recoup the cost of that first pill.

__________________
"So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3

bonehead

What is to stop pharmaceutical companies from other countries from coming out with the next, "wonder" drug? We can outsource other things so can't we can do the same with the drug industry as long as it saves the consumers money.

gunnut

That fact that we come up with most of the innovations in pharmaceutical industry tells you something. If other nations had the environment to do it, they would have done it long ago. They haven't. Therefore something about our country is working right.

__________________
"Only Nixon can go to China." -- Old Vulcan proverb.

Shek

Big pharma is big for a reason - it takes lots of capital (both human and financial) to start up in the industry, and therefore, it favors countries with both, and the US fits the category. Where's the best undergraduate and graduate institutions? Where's the highest salaries for those with solid science degrees at both levels? Where's the economy where people want to put their money? The US.

These are some of the reasons why the US is the largest innovator in the industry, and the fixed costs of attracting the right talent, building the right labs, enforceable intellectual property rights, etc., means that you won't see pharma R&D being outsourced anytime in the near future because it simply isn't as viable elsewhere except Europe. However, because of socialized medicine, you won't see the profits, and so you don't see the same quantity of breakthroughs.

bonehead

There is where it all fails. Big pharmaceutical companies are about making money. Period. The financial and physical health of the populace is far more important in my book. With all the trillions injected into the industry what do we really have to show for it. Cure for the common cold? Not yet. AIDS? NOPE. Cancer? No. New super antibiotic for the newer strains of resistant bacteria? Nada. No real break troughs since we hammered polio. We are finding out the hard way that even our trusty flu shots are not nearly as effective as we first hoped. Now if we rationally ask ourselves which would make more money, "a one time cure or a long term treatment?", you will see why the cures will forever be on the horizon, ie false hopes. In the meantime, failing livers and diabetes will be on the rise as the pills foisted on us today only partially improves the malady, yet creates other problems down the road. Our healthcare system is being battered by the current status quo.

Now if the auto manufacturers had the same kind of pull we would not have Toyotas, Hondas, Wvs etc to choose from and we would be paying $50,000 for a taurus while or Canadian brothers would be able to get a taurus for $10,000 because all the profit had to be made in the U.S. As drivers we would all be waiting for the next coveted breakthrough....a taurus that can break the 20MPG barrier will be out sometime in 2012. As consumers we need a little competition here.

Shek

Bonehead,

If your stock broker (don't know if you have one or not; if you don't, let's just say you do for this scenario) came to you and had two options for you:

Company A is researching on a breakthrough technology that will be highly demanded. However, there is an extremely large chance that the company may go under if another company is able to get the technical plans for the breakthrough, which it can't prevent due to the lack of intellectual property rights (e.g., an employee that leaks the plans is not liable for any damages).

Company B is not researching anything; however, it is known for paying money to lure employees over from other firms and then using their knowledge to bring products to market. While they don't have superstar status, their "stealing" of other firm's technology allows them to always make a profit.

Which company's stock do you buy, and why? Feel free to expand on your answer, but I'd like to know as I think we're missing the big point in this conversation.

SteaminDemon

Healthcare is out of control. Lack of competition means higher prices naturally. The Food &Drg admin is raiding companies who have talked about the benefits of natural medicines. A recent small business was raided for 71 million worth of supplies and equipment because they explained the benefits of this natural plant. That is a shame. It would be a whole lot cheaper to go that route. A majority of the medicines are derived from natural plants. If we would go the way of natural medicinal options the money that would be saved would be worth it for all. Saving money.....saying that is like telling someone they have a disease.

bonehead

Shek. If I had to chose I would pick company B as it reminds me most of Microsoft which has done well over the years. There is big risk and thus big returns with company A, but company B is where the steady and less risky income will come from. In my heart I would be pulling for company A however as I prefer to see hard honest work rewarded. In the scenario you described company B looks to be the sure cold hearted bet.

You are correct. I do not think we are looking at the same picture. I am worried about the health of a nation and you are looking at the bottom line of a big company. I do not begrudge any company for its patents and the companies should make a profit from its legitimate R&D. One red flag is why are these companies paying doctors to prescribe their medicine? If they really had the better or best medicine the doctors would be prescribing the meds anyway. My concern is that my healthcare choices are rapidly being reduced to an ever more expensive medicine that, more often than not, causes further problems down the road. I want more choices than just what the american pharmaceutical companies can make money on. As a consumer I demand a choice and these companies are doing everything possible so I have but one choice, take their med or nothing else. The FDA is nothing but a pawn for these companies and the health of the nation is at risk. People are being duped into believing that only a chemical made from a pharmaceutical company can alleviate pain, make you feel better or heal you etc.

Shek

Bonehead,

I'll return to the rest of your post, hopefully tomorrow, but I want you to think about the choice you just made. I just described a world without government sponsored monopolies, i.e., no legal patents. In this world, Company B is the better bet because you won't lose money on research, but instead will reap the benefits of Company A's research.

However, there is no incentive for Company A to spend money on pursuing research, as it won't benefit them as soon as their formula is released to other firms and generics appear. They cannot recoup their investment, and so that investment won't occur. You just spoke as what I would deem to be the voice of a rational investor, and so Company A won't get anyone to invest in their research.

We are left in a situation where Company B won't make any profits, either, because nobody has the incentive to spend big money on R&D, since they won't have the ability to recoup their investment.

This is why temporary legal patents are provided for - they create the incentive for firms to compete in developing new drugs, and when they get the blockbuster, they will reap big profits during the course of their government sponsored monopoly (which typically lasts only about 8 years since on average, it takes 12 years from the issuance of a patent until it makes its way through clinical trials).

The big prize of profits is what creates competition, and as soon as the patents expire, generics enter and serve the market at cut throat pricing, while big pharma is on to researching the next big winner as well as seeing how they can tweak existing drugs to squeeze more benefits out of them (i.e., more benefits for patients, which means more profits for them).

Lastly, Microsoft has been successful like company B because they won the race to earn patents and found a product people liked and were willing to pay for, creating both a legal monopoly for their specific patents and large market power for themselves because of consumer demand. Also, it is worthwhile thinking about the cost structure of the OS/software market, as it is very similar to big pharma - lots of R&D over years with beta testing prior to rollout of the product - the first copy of a version of Windows costs probably tens of millions of dollars if not in the hundreds, but every other copy costs probably less than a dollar.

As a follow-on thought experiment, if Microsoft hadn't been granted legal patents for the specifics of their GUI, would Windows for the IBM have ever been developed? If so, when and how would that have changed the pace at which the US economy (and other economies) grew in the 1990s and beyond?

bonehead

I was not aware that company A and B were the only companies period. I ventured Company B could move on and leach off of another company after sucking company A dry. I still see Microsoft as blatantly stealing from Apple and later from a myriad of other companies through the years. Now it is out to ruin Yahoo because apparently, not enough people have signed up for MSN and all the windows crap that goes with it. I will say that one good thing MS has done is that they ended the days where seemingly every company had its own computer program and now things are more standardized.

Again, I have no problems with patents. I think patents are the correct way as it rewards the effort of having a better product. My argument is that I should not be coerced, lied to or otherwise forced into buying the patented product, especially when it may not be the better product. For instance I feel that if I am thirsty I should be able to get a glass of water, juice, milk, beer etc and cure what ails me. The pharmaceutical companies however, want to create a new disease called "dehydration disease" and want to make a pill I can take instead of a glass of water. Only something approved by the FDA can cure a disease. That is my gripe. Mankind has existed for thousands of years, yet we only have been able to cure/heal ourselves since the adoption of whatever a pharmaceutical company makes and the FDA approves. I call B.S. loud and clear.

Many "new" drugs are bases on natural substances so it stands to reason taking a natural substance, ie non patentable, may work as well as or better than something a pharmaceutical company makes. The FDA should be evaluating these products. They should approve those that work as advertised and eliminate from the shelves those products that are found to be harmful. If it turns out (for instance) that a mixture of honey and spices shrinks tumors better than a $17,000 chemo treatment then so be it. If the honey and spices turns out to be so much snake oil then let the public know. We are entitled to that knowledge. As the current system stands it is not difficult to conceive that the pharmaceutical companies are making money from our poor health. If this is the case then they will deny us information that would allow us to be healthy because they would not make any money from a healthy person. Nor would they ever find a cure, because, again "what sane person would go through the agony and expense of chemo if they were healthy?" With the billions of dollars at stake, it becomes clear to me that pharmaceutical companies have put profits as their first goal and a desire to help people is way down on the list. Pharmaceutical companies should be reined in, but the only entity that can do so , the FDA, is whipping them along. If/when pharmaceuticals come out with a superior product, they should reap the rewards, but we are instead forced to pay a premium for marginal medicines that in the end usually only makes us sicker.

Come on Shek What is really most important. The health of a nation or the bottom line of a pharmaceutical company?

gunnut

Apple and Google are far more dangerous than Microsoft. I have no proof. Just a gut feeling.

No one is forcing you to buy anything. You don't have to buy the anti-dehydration pill if you don't want to.

So the evil corporations don't want to find cures so they can sell remedies? That means there is a market for cures. You are very welcome to try to find cures for the diseases. If you do, you can put them out of business for good. No one is stopping you. Go ahead and try.

The bottom line of corporations is good for the nation. It motivates people to do things.

What do you do for a living? Do you make more money than what is absolutely necessary to keep yourself alive? What do you do with that extra money? Do you donate it to people looking for cures?

bonehead

1) RIIIIIGGGHHT. Apple and yahoo have been eating up other companies for the total monopoly/market share. Yeah sure.

2) The companies you are defending are investing billions in advertising to show you that only their product works. At the same time these companies are actively limiting your ability to chose other products.

3) If you or I found a cure, the pharmaceutical companies would never allow the FDA to test/ approve it and thus the cure would never gain acceptance. That is the nature/politics/power of big money.

4) What do I do for a living? I improve people's lives. What I do not do is profit from people's poor health and try to keep them in poor health to protect my profits.

Shek

No, they differentiate their products from others and then it comes down to you and your doctor making a decision. If your doctor is unethical because he doesn't take your interest as being his in contradiction with the Hippocratic oath, then the source of limiting choice is unethical behavior, not advertising.

Can you show me a wire diagram where the FDA answers to the drug companies and not vice versa? Do you have any convictions to demonstrate this link on an informal level? I see a big assertion, and I'd love to hear some evidence. I'm sure that there are attempts on the fringes and wouldn't be surprised at all, but there's no way that any such attempt by a drug company in your example would go unpunished by both the market and the government.

What is the cure for cholesterol? What is the cure for high blood pressure? Do you propose that pharma stops selling drugs that target these conditions if they can't create a drug that is a cure?

What about Gardasil? Why would pharma ever sell this vaccine, or for that matter, others, if it doesn't cure, but instead, prevents something from ever even occuring. All for a shot that probably costs a few dozen dollars.

No, the incentive is to find the best medicines out there so that even when a patent runs out, it is still the best and will outcompete the rest of the field of similar medicines. Furthermore, a healthy person will eventually have a chronic condition, such as high blood pressure, high cholesterol, etc., that will bring in revenue. Preventing disease and or curing disease is either revenue neutral or revenue positive, and so your incentive argument for keeping people down doesn't hold.

gunnut

Where did Yahoo come from? I said Google.

What is a "monopoly?" According to you it's a company that strives for total market share/domination.

Can you buy 3rd party hardware and put together a computer that runs Apple OS? Nope. However, you can do that with Wintel platform. If you want an Apple computer, you have to buy directly from Apple. They control the entire process from the hardware to the software. Microsoft doesn't do that. Neither does Intel.

Music bought from iTune store cannot be played in any machine other than iPods and computer loaded with proprietary Apple software. Where as MP3s can be played anywhere, using a variety of 3rd party MP3 players and software, across a multitude of platform.

No one objects to Apple's monopolistic practices because everyone is focused on Microsoft. If their places are switched, people would scream bloody murder about how Apple controls not only the desktop OS market, but also the branding of the computers, nearly all the retail software, complete dominance of online music purchase, and the portable players used to play the proprietary music format.

Shek

What makes Apple desireable right now is that you have consistently from your iPod to your iMac, etc. Also, as a small player, virus writers aren't interested in spending time to infect 5% of the PC market. This is one of my reasons for wanting to jump platforms, despite the higher prices. However, once (and if) Apple really starts grabbing a large share of the market, Microsoft or some other competitor will really tighten up the security gaps and stop writing bloated code OS.