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If we take the somewhat liberal assumption that pharma's marketing budget is ecomically optimal at present - eg marginal costs equal marginal revenue, how is ma

If we take the somewhat liberal assumption that pharma's marketing budget is ecomically optimal at present - eg marginal costs equal marginal revenue, how is making marketing more expensive helping anyone? All it will do is decrease revenue/drug which will have a knock-on effect on marginal revenue of R&D: reducing gross R&D expenditure and thus approved drugs. In the end, you can have more new drugs (new antibiotics, orpan drugs, etc.), or cheaper drugs(Less qualified, fewer, off label usage, not qualified for efficacy, etc.) There are different ways to make either happen but short of attacking an inefficiency in the system there's no free lunch. Equipment costs money and scientists need to eat.

danShumway 8y ago
> If we take the somewhat liberal assumption that pharma's marketing budget is ecomically optimal at present - eg marginal costs equal marginal revenue Do we take that assumption? Sure, if we take the assumption that we're operating at perfect efficiency already, then I suppose there's no need to mess up an already good system. And maybe we are; I've even seen a few articles suggesting that we're suboptimal, that pharma is bleeding money at the moment. In which case, maybe the takeaway is the opposite, that we should extend exclusivity to 25 years or something. But that's a very different claim to make. I suspect that the author of the linked article would claim that pharma is not at all optimal, and I suspect that any entrenched industry in a large market being optimal is the exception rather than the rule. I think it's generally a mistake to assume that things cost a lot because they have to. Often in a free market it is because of large (solvable) inefficiencies or bad business practices, which is exactly what enables newer industries and businesses to out-compete and displace older ones.

danShumway 8y ago

> If we take the somewhat liberal assumption that pharma's marketing budget is ecomically optimal at present - eg marginal costs equal marginal revenue Do we take that assumption? Sure, if we take the assumption that we're operating at perfect efficiency already, then I suppose there's no need to mess up an already good system. And maybe we are; I've even seen a few articles suggesting that we're suboptimal, that pharma is bleeding money at the moment. In which case, maybe the takeaway is the opposite, that we should extend exclusivity to 25 years or something. But that's a very different claim to make. I suspect that the author of the linked article would claim that pharma is not at all optimal, and I suspect that any entrenched industry in a large market being optimal is the exception rather than the rule. I think it's generally a mistake to assume that things cost a lot because they have to. Often in a free market it is because of large (solvable) inefficiencies or bad business practices, which is exactly what enables newer industries and businesses to out-compete and displace older ones.