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> What price might you charge if the major purchaser for your drug has committed to pay whatever “other customers” pay? Biogen, the drug’s manufacturer, came up

> What price might you charge if the major purchaser for your drug has committed to pay whatever “other customers” pay? Biogen, the drug’s manufacturer, came up with a price of $56,000 per year. So then I should be blaming the people setting the high price, as they're choosing to do this.

hanniabu 5y ago
Yeah such garbage logic, the company is clearly exploiting here
- connicpu 5y ago
  Because the rules set forth by the law have created an incentive to set the price that maximizes their profit. They have a customer who has to buy their product no matter what, and as a corporation beholden to shareholders they have a legal duty to maximize returns. I agree that it's a terrible system that incentivizes corporations into exploitative practices, but we can't really do anything about it without changing the rules they have to operate under.
  - kelnos 5y ago
    Just because someone is incentivized to do something, it doesn't mean they're absolved of all responsibility or blame when they do that thing.
    - Gimpei 5y ago
      Of course it doesn't. But a lot of the time, those people will not care whether you blame them or not. They'll just keep doing it. If there's a loophole, some unscrupulous person or company will always exploit it. Go ahead and blame them. When you've gotten that out of your system, change the law.
  - Grimm1 5y ago
    That's a misunderstanding that I see a lot, they do not have a legal duty to maximize returns to shareholders. Not the source I usually use for this but, https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co...
    - bpodgursky 5y ago
      I mean, you could give lectures and try to convince the CEOs to give up free money, or you could set up a system of rules that actually incentivizes reasonable drug prices. I can tell you which is going to work better.
  - Hokusai 5y ago
    > and as a corporation beholden to shareholders they have a legal duty to maximize returns I never understood this point. If there is a legal requirement to maximize profit, CEOs should be legally required to have low compensations so as to maximize profit. But that is not the case. Why "maximize profit" does not apply to wasteful hyper paid CEOs? Worse even. Most companies reduce profits by moving them to other countries with lower taxes. Would not that be against the law?
  - hellbannedguy 5y ago
    We all, including politicians, threw their hands up when Skirelli got greedy. SEC went after him for show. Not one law was enacted to prevent another greedy entity from doing the same thing. (I don't even blame the guy. Everything he did with that drug was legal. I do blame politicians whom did nothing to stop the greed afterwards. I really think most of these old coots on both sides actually believe totally free market medicine will save them one day from old age.)
  - triceratops 5y ago
    > they have a legal duty to maximize returns They have a fiduciary duty to shareholders. That just means they have to act honestly, fairly, and always in the best interest of the shareholders. That's not at all the same thing as a duty to "maximize returns".
dcolkitt 5y ago
Most corporate entities have a fiduciary duty to maximize their shareholders’ returns. If your solution to a problem is “companies just need to stop trying to make money”, then you’re probably going to be disappointed.
- icehawk 5y ago
  Do they really though? https://medium.com/bull-market/there-is-no-effective-fiduciary-duty-to-maximize-profits-939ae50d0572 https://medium.com/bull-market/there-is-no-effective-fiducia...
- foo_barrio 5y ago
  The board dictates what the company does and share holders can vote the board out if they don't like what they are doing no? Most boards are interested only in money but that reflects the share holders and board more than some sacred pursuit of corps.
  - dcolkitt 5y ago
    Public companies that don’t maximize profits will usually be targeted by activists who will replace the board and management with people who will max profits. Say a company exists that doesn’t aggressively pursue profits. It makes $1/year and is worth $10 per share. If it started maxing profits it could make $2/year and be worth $20/share. An activist can come in and continue to pay well above market price, knowing that once he acquires enough shares, he’ll replace the board and raise the value of the shares. The simple logic is that almost every public company will eventually evolve to maximize profit regardless of what other social mission they advertise. The sole exception is if a founder retains control of a very large proportion of voting stock.
s1artibartfast 5y ago
If you don't like a price of the product doesn't work, the best remedy is to not buy it. We need to change policy so Medicare doesn't have to buy it. This would fix the problem many drugs, not one.

hanniabu 5y ago

Yeah such garbage logic, the company is clearly exploiting here

connicpu 5y ago
Because the rules set forth by the law have created an incentive to set the price that maximizes their profit. They have a customer who has to buy their product no matter what, and as a corporation beholden to shareholders they have a legal duty to maximize returns. I agree that it's a terrible system that incentivizes corporations into exploitative practices, but we can't really do anything about it without changing the rules they have to operate under.
- kelnos 5y ago
  Just because someone is incentivized to do something, it doesn't mean they're absolved of all responsibility or blame when they do that thing.
  - Gimpei 5y ago
    Of course it doesn't. But a lot of the time, those people will not care whether you blame them or not. They'll just keep doing it. If there's a loophole, some unscrupulous person or company will always exploit it. Go ahead and blame them. When you've gotten that out of your system, change the law.
- Grimm1 5y ago
  That's a misunderstanding that I see a lot, they do not have a legal duty to maximize returns to shareholders. Not the source I usually use for this but, https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co...
  - bpodgursky 5y ago
    I mean, you could give lectures and try to convince the CEOs to give up free money, or you could set up a system of rules that actually incentivizes reasonable drug prices. I can tell you which is going to work better.
- Hokusai 5y ago
  > and as a corporation beholden to shareholders they have a legal duty to maximize returns I never understood this point. If there is a legal requirement to maximize profit, CEOs should be legally required to have low compensations so as to maximize profit. But that is not the case. Why "maximize profit" does not apply to wasteful hyper paid CEOs? Worse even. Most companies reduce profits by moving them to other countries with lower taxes. Would not that be against the law?
- hellbannedguy 5y ago
  We all, including politicians, threw their hands up when Skirelli got greedy. SEC went after him for show. Not one law was enacted to prevent another greedy entity from doing the same thing. (I don't even blame the guy. Everything he did with that drug was legal. I do blame politicians whom did nothing to stop the greed afterwards. I really think most of these old coots on both sides actually believe totally free market medicine will save them one day from old age.)
- triceratops 5y ago
  > they have a legal duty to maximize returns They have a fiduciary duty to shareholders. That just means they have to act honestly, fairly, and always in the best interest of the shareholders. That's not at all the same thing as a duty to "maximize returns".

dcolkitt 5y ago

Most corporate entities have a fiduciary duty to maximize their shareholders’ returns. If your solution to a problem is “companies just need to stop trying to make money”, then you’re probably going to be disappointed.

icehawk 5y ago
Do they really though? https://medium.com/bull-market/there-is-no-effective-fiduciary-duty-to-maximize-profits-939ae50d0572 https://medium.com/bull-market/there-is-no-effective-fiducia...
foo_barrio 5y ago
The board dictates what the company does and share holders can vote the board out if they don't like what they are doing no? Most boards are interested only in money but that reflects the share holders and board more than some sacred pursuit of corps.
- dcolkitt 5y ago
  Public companies that don’t maximize profits will usually be targeted by activists who will replace the board and management with people who will max profits. Say a company exists that doesn’t aggressively pursue profits. It makes $1/year and is worth $10 per share. If it started maxing profits it could make $2/year and be worth $20/share. An activist can come in and continue to pay well above market price, knowing that once he acquires enough shares, he’ll replace the board and raise the value of the shares. The simple logic is that almost every public company will eventually evolve to maximize profit regardless of what other social mission they advertise. The sole exception is if a founder retains control of a very large proportion of voting stock.

s1artibartfast 5y ago

If you don't like a price of the product doesn't work, the best remedy is to not buy it. We need to change policy so Medicare doesn't have to buy it. This would fix the problem many drugs, not one.