4 ms·

Indeed charging the max possible is the idea. The idea is also that the market is free so a competitor could also extract profit by making the same drug for sli

Indeed charging the max possible is the idea. The idea is also that the market is free so a competitor could also extract profit by making the same drug for slightly less. Of course another competitor could come in and make it for even less. All these price cutters force the higher priced competitor to lower their price to still produce profit. The lower bound here is the cost of production below which all companies would stop production. So in a capitalist system in a free market profit should always be trending towards zero. The issue is government allowing companies to be anti competitive. For example, the government is currently entertaining a lawsuit by one insulin company against another company trying to sell insulin for a lower price. While that lawsuit is ongoing Americans must pay the higher price. Thus really government willing to enforce continued monopoly is one of the problems

arcticbull 7y ago
If that's the case, why does a flight from SFO-JFK cost way less than a flight from JFK-LHR in business class? Approximately the same distance, approximately the same cost basis. Dramatically more competition between JFK and LHR. It's not always about competition or cost basis.
- FeeJai 7y ago
  Why do you think there is more competition to LHR than domestically? The airport has been maxed out for almost 30 years, it is incedibly hard to get landing slots there. Also the weather over the atlantic makes flights longer and use more fuel.
- tathougies 7y ago
  Because I said profit is driven zero not revenue. JFK to lhr requires all sorts of international permitting that is a fixed and varying cost that domestic routes do not have. Airlines are a great example of the race to zero profit. Airline margins are slim and thus the cost of travel often reflects exactly the cost of doing the flight itself. JFK to Heathrow requires participation in multiple markets, currency instability, multiple regulators etc which make the cost more excessive. Also london and new York airports are busier than sfo increasing airport fees. Thus in a market with low basically zero margins, the cost from ny to London is more as competitors that cant make the unit economics work leave the market entirely. New competitora cant enter the market at a lower price point because their profit would be zero.
danmaz74 7y ago
No competitor can produce a drug which is still under patent.
patpending 7y ago
Is the market for drugs really free though? I believe that in a free market there is supposed to be no coercion between the parties to a transaction. In the case of drug purchases there may be a kind of coercion involved -- a health issue (diabetes, cancer, etc.) that makes one party to the transaction unable to negotiate effectively.
- tathougies 7y ago
  In a free market no outside agent interferes with buyer and seller. Nature has no will and thus no agency and thus is not an agent. Indeed the free market is key to solving the disparity between what someone has versus what someone needs. It is one of the few systems we know that solves this issue efficiently
  - patpending 7y ago
    If I understand you correctly, then it does seem true to me that nature has no agency. However, when the choice a consumer has is to either pay the asking price for a <em>needed</em> drug or to die then I think the consumer has no meaningful choice at all. Given how unequal the bargaining power is between the buyer and seller in this situation, it's hard to see a free market solutions applies: it might be efficient, but it's also brutaly inhumane. I know I've set up kind of a straw-man. It might be that the consumer could choose to forgo an expensive drug or medical procedure without fatal consequences, but that's not the interesting case.
    - tathougies 7y ago
      The choice shouldnt be between whether they need the drug or not but rather who to buy it from. The fact that there exists someone who needs a product is what drives the profit to zero in a free market because newer manufacturers are incentivized to provide the product. The choice is among from whom to buy not whether to buy at all. Right now insulin is expensive because the government is preventing companies that can produce it for cheaper from selling in the united states because of a lawsuit by the current market holder. That the government even has this power is a textbook example of the danger of governmental interference in the free market. People are literally dying because the government has made the market less free intentionally

arcticbull 7y ago

If that's the case, why does a flight from SFO-JFK cost way less than a flight from JFK-LHR in business class? Approximately the same distance, approximately the same cost basis. Dramatically more competition between JFK and LHR. It's not always about competition or cost basis.

FeeJai 7y ago
Why do you think there is more competition to LHR than domestically? The airport has been maxed out for almost 30 years, it is incedibly hard to get landing slots there. Also the weather over the atlantic makes flights longer and use more fuel.
tathougies 7y ago
Because I said profit is driven zero not revenue. JFK to lhr requires all sorts of international permitting that is a fixed and varying cost that domestic routes do not have. Airlines are a great example of the race to zero profit. Airline margins are slim and thus the cost of travel often reflects exactly the cost of doing the flight itself. JFK to Heathrow requires participation in multiple markets, currency instability, multiple regulators etc which make the cost more excessive. Also london and new York airports are busier than sfo increasing airport fees. Thus in a market with low basically zero margins, the cost from ny to London is more as competitors that cant make the unit economics work leave the market entirely. New competitora cant enter the market at a lower price point because their profit would be zero.

danmaz74 7y ago

No competitor can produce a drug which is still under patent.

patpending 7y ago

Is the market for drugs really free though? I believe that in a free market there is supposed to be no coercion between the parties to a transaction. In the case of drug purchases there may be a kind of coercion involved -- a health issue (diabetes, cancer, etc.) that makes one party to the transaction unable to negotiate effectively.

tathougies 7y ago
In a free market no outside agent interferes with buyer and seller. Nature has no will and thus no agency and thus is not an agent. Indeed the free market is key to solving the disparity between what someone has versus what someone needs. It is one of the few systems we know that solves this issue efficiently
- patpending 7y ago
  If I understand you correctly, then it does seem true to me that nature has no agency. However, when the choice a consumer has is to either pay the asking price for a <em>needed</em> drug or to die then I think the consumer has no meaningful choice at all. Given how unequal the bargaining power is between the buyer and seller in this situation, it's hard to see a free market solutions applies: it might be efficient, but it's also brutaly inhumane. I know I've set up kind of a straw-man. It might be that the consumer could choose to forgo an expensive drug or medical procedure without fatal consequences, but that's not the interesting case.
  - tathougies 7y ago
    The choice shouldnt be between whether they need the drug or not but rather who to buy it from. The fact that there exists someone who needs a product is what drives the profit to zero in a free market because newer manufacturers are incentivized to provide the product. The choice is among from whom to buy not whether to buy at all. Right now insulin is expensive because the government is preventing companies that can produce it for cheaper from selling in the united states because of a lawsuit by the current market holder. That the government even has this power is a textbook example of the danger of governmental interference in the free market. People are literally dying because the government has made the market less free intentionally