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"I’m a health economist who has studied the pharmaceutical industry for the past 15 years. I believe the drug shortage problem illustrates a major shortcoming o

"I’m a health economist who has studied the pharmaceutical industry for the past 15 years. I believe the drug shortage problem illustrates a major shortcoming of capitalism." He is arguing against his own point. The problem is a lack of supply but he is promoting the wrong political answer to a politically generated problem. In a purely capitalist economy a lack of supply would cause prices to go increase and the market would respond accordingly. This industry is highly regulated. In some cases for good reason. Regulation always stifles capitalism and results in less profit for the manufacture. The fix for to much regulation is less regulation, not more.

majormajor 3y ago
Do you have a citation for regulation causing the low prices as opposed to competition? What's the distribution between commercial payers and government ones? In a perfectly competitive market the margin you can squeeze from a generic drug will shrink and shrink, and that can also cause reduced investment in new supply if you have more profitable alternatives and you don't have an infinite supply of investment in production capabilities. This argument looks pretty unappealing either way, though: "the problem with vital drugs is that they're too affordable to too many people who need them". Good luck with that political platform.
- radicalace 3y ago
  what? you said perfect markets reduce margins and cause people to make less of something… so the concept of a market is invalid in your opinion? this is completely incorrect. supply doesnt wink out of existence in the presence of demand just because margins got thinner and thinner. sometimes supply will disappear for various reasons, or maybe margins were super thin and some huge player made an irresponsible bet, but the market restores supply immediately in these cases just like all other cases. what you are saying is complete nonsense.
  - nradov 3y ago
    What you are saying is complete nonsense in the case of prescription drugs. It is impossible to restore supply immediately. The reality is that even for generic drugs it usually takes years to get high volume production running with full regulatory approval.
    - radicalace 3y ago
      wrong. when i said immediately i considered including the phrase “as quickly as logistics etc allows” but i thought it was way too obvious. do you think i meant it would happen instantaneously in front of our eyes like a f*ing magic trick?
      - nradov 3y ago
        It's pretty clear that you don't understand the first thing about how this industry actually works.
- bigfishrunning 3y ago
  > cause reduced investment in new supply ...which would cause the supply to be reduce, a slide down the demand curve, prices increase, and suddenly the margins aren't so thin, and everything bounces back. The market heals.
  - majormajor 3y ago
    You and the sibling seem to be working with a model where you can just ramp up production by snapping your fingers, and there aren't alternatives to playing in the perfectly competitive market. Why would anyone invest $$$$ to ramp up production of old generic drugs instead of new fancy drugs - especially when "new fancy" is sometimes small tweaks to get a new patent? There's no evidence provided here that the problem is in fact that "these generics are legally prohibited from being sold for a higher price" or that too much of their sales are to government-set/negotiated-rate health-plans. There's nobody quoted here saying "if it cost 1.25x,2x,3x,10x, that would justify investment, but we can't charge more." So if you look at what drug companies charge for patented drugs, "focus on the expensive stuff, and don't dedicate many resources to the generic pipelines" is a perfectly incentive market-based capitalistic decision for industry players to make. Government intervention to boost supply and add redundancies to supply chains looks like a great option.
  - nradov 3y ago
    That is an unrealistic, idealized model which only works when producers can actually react to price signals. Here in the real world, it takes years and a huge capital investment to set up a new drug manufacturing line which operates reliably and has full regulatory approval. And once running, it has to be kept running continuously near full capacity in order to be profitable. Pharmaceutical companies will only make that investment when long term steady demand is pretty much guaranteed. They aren't going to build up excess backup capacity unless someone specifically pays them to do so.
ben_w 3y ago
Regulation is only the opposite of laissez-faire capitalism and anarcho-capitalism, but nobody really does those things anymore anyway and there are plenty of other variations of capitalism in the world today. Public ownership and subsidies to support production of things critical to national interests are fairly common, and I think that would be the most appropriate in this case.
Buttons840 3y ago
So where do we start? Eliminating patents? (One point I'm hinting at is some regulations benefit the wealthy, but they are often the last things we think of as "regulation".) Since you believe this problem is caused be existing regulation, what regulations would you propose eliminating as a start?
radicalace 3y ago
why is this comment grey? clearly the price is determined by the market and if the price is too high it can only be caused by something interfering with the market, a monopoly, corruption or malformed regulation. either advocate for fixing this market or advocate for socialized medicine. there is no inbetween.
- nradov 3y ago
  How do we know when the price is too high? What is the correct price?
  - radicalace 3y ago
    you can know when a price is too high by adding up the cost of each part of a good or service. if capital detects arbitrage then it enters the market. making this cycle of renewal as frictionless as possible makes markets healthier and prices lower. corruption and poorly designed regulation increase friction. not just that. discerning and intelligent consumers are key to healthy markets as well.
    - nradov 3y ago
      So you can quote an Econ 101 textbook. Now how do things actually work in the real world?
- hayst4ck 3y ago
  Because OP is not critically thinking. They have a very simple idea of market mechanics with very simple ideas of market manipulation. If our market isn't working, it's just not "pure" enough, right? https://en.wikipedia.org/wiki/Anti-competitive_practices https://en.wikipedia.org/wiki/Anti-competitive_practices https://en.wikipedia.org/wiki/History_of_competition_law https://en.wikipedia.org/wiki/History_of_competition_law https://en.wikipedia.org/wiki/Natural_monopoly https://en.wikipedia.org/wiki/Natural_monopoly https://en.wikipedia.org/wiki/Tacit_collusion https://en.wikipedia.org/wiki/Tacit_collusion https://en.wikipedia.org/wiki/Regulatory_capture https://en.wikipedia.org/wiki/Regulatory_capture https://en.wikipedia.org/wiki/Tragedy_of_the_commons https://en.wikipedia.org/wiki/Tragedy_of_the_commons I don't think OP has read very many books and I would be surprised if they have a bachelors degree. OP reminds me of myself during Ron Paul's "the free market solves all problems" period on Reddit. Ron Paul presented a very simple idea of how things work, but once you start to think about how those ideas don't work, it's obvious that ignorance is being taken advantage of. Alternatively he did not respond to the best most charitable interpretation of the post. Simply put: OP's ideas wouldn't last (and aren't lasting) long outside of an ideological echo chamber. I think a strong obvious argument against a "less regulation" panacea is that we couldn't make our own masks because the free market sent all the production to China. Sending all of our manufacturing to China because they offered the best deal gives china incredible leverage over us. Clearly the "free market" must be analyzed not just in terms of supply and demand, but also in terms of power and coercion. There is no supply/demand curve for power.
hayst4ck 3y ago
> In a purely capitalist economy a lack of supply would cause prices to go increase and the market would respond accordingly. In a purely capitalist economy, those with capital would have the easiest time getting more capital, as they get more capital they get more and more influence and exist farther and farther from consequences. Then it's trivial to get things like citizens united, stock trading congress members, and regulatory capture. As ruling institutions weaken so to do the systems that enforce "pure capitalism." Thus "pure" capitalism plants the seeds of it's own destruction. "The free market solves all problems" is 2000's Ron Paul era thought, and it is clearly very wrong. The right results from a "free market" are not inevitable. The results, right or wrong, are a summation of the actions of it's individual participants. Culture is the first line of defense, and when culture fails, you must rely on regulation, and when regulation fails, you must rely on force. > The fix for to much regulation is less regulation, not more. The fix for the wrong regulation is the right regulation. Analyzing for less and more is intellectually bankrupt and shows lack of critical thinking. Less regulation used for regulatory capture is good, less regulation used for legitimate consumer protection is bad. More regulation that stifles innovation is bad, more regulation that prevents robber barrons and bullying of small business is good. You need to do more reading on "the tragedy of the commons." https://en.wikipedia.org/wiki/Tragedy_of_the_commons https://en.wikipedia.org/wiki/Tragedy_of_the_commons

majormajor 3y ago

Do you have a citation for regulation causing the low prices as opposed to competition? What's the distribution between commercial payers and government ones? In a perfectly competitive market the margin you can squeeze from a generic drug will shrink and shrink, and that can also cause reduced investment in new supply if you have more profitable alternatives and you don't have an infinite supply of investment in production capabilities. This argument looks pretty unappealing either way, though: "the problem with vital drugs is that they're too affordable to too many people who need them". Good luck with that political platform.

radicalace 3y ago
what? you said perfect markets reduce margins and cause people to make less of something… so the concept of a market is invalid in your opinion? this is completely incorrect. supply doesnt wink out of existence in the presence of demand just because margins got thinner and thinner. sometimes supply will disappear for various reasons, or maybe margins were super thin and some huge player made an irresponsible bet, but the market restores supply immediately in these cases just like all other cases. what you are saying is complete nonsense.
- nradov 3y ago
  What you are saying is complete nonsense in the case of prescription drugs. It is impossible to restore supply immediately. The reality is that even for generic drugs it usually takes years to get high volume production running with full regulatory approval.
  - radicalace 3y ago
    wrong. when i said immediately i considered including the phrase “as quickly as logistics etc allows” but i thought it was way too obvious. do you think i meant it would happen instantaneously in front of our eyes like a f*ing magic trick?
    - nradov 3y ago
      It's pretty clear that you don't understand the first thing about how this industry actually works.
bigfishrunning 3y ago
> cause reduced investment in new supply ...which would cause the supply to be reduce, a slide down the demand curve, prices increase, and suddenly the margins aren't so thin, and everything bounces back. The market heals.
- majormajor 3y ago
  You and the sibling seem to be working with a model where you can just ramp up production by snapping your fingers, and there aren't alternatives to playing in the perfectly competitive market. Why would anyone invest $$$$ to ramp up production of old generic drugs instead of new fancy drugs - especially when "new fancy" is sometimes small tweaks to get a new patent? There's no evidence provided here that the problem is in fact that "these generics are legally prohibited from being sold for a higher price" or that too much of their sales are to government-set/negotiated-rate health-plans. There's nobody quoted here saying "if it cost 1.25x,2x,3x,10x, that would justify investment, but we can't charge more." So if you look at what drug companies charge for patented drugs, "focus on the expensive stuff, and don't dedicate many resources to the generic pipelines" is a perfectly incentive market-based capitalistic decision for industry players to make. Government intervention to boost supply and add redundancies to supply chains looks like a great option.
- nradov 3y ago
  That is an unrealistic, idealized model which only works when producers can actually react to price signals. Here in the real world, it takes years and a huge capital investment to set up a new drug manufacturing line which operates reliably and has full regulatory approval. And once running, it has to be kept running continuously near full capacity in order to be profitable. Pharmaceutical companies will only make that investment when long term steady demand is pretty much guaranteed. They aren't going to build up excess backup capacity unless someone specifically pays them to do so.

ben_w 3y ago

Regulation is only the opposite of laissez-faire capitalism and anarcho-capitalism, but nobody really does those things anymore anyway and there are plenty of other variations of capitalism in the world today. Public ownership and subsidies to support production of things critical to national interests are fairly common, and I think that would be the most appropriate in this case.

Buttons840 3y ago

So where do we start? Eliminating patents? (One point I'm hinting at is some regulations benefit the wealthy, but they are often the last things we think of as "regulation".) Since you believe this problem is caused be existing regulation, what regulations would you propose eliminating as a start?

radicalace 3y ago

why is this comment grey? clearly the price is determined by the market and if the price is too high it can only be caused by something interfering with the market, a monopoly, corruption or malformed regulation. either advocate for fixing this market or advocate for socialized medicine. there is no inbetween.

nradov 3y ago
How do we know when the price is too high? What is the correct price?
- radicalace 3y ago
  you can know when a price is too high by adding up the cost of each part of a good or service. if capital detects arbitrage then it enters the market. making this cycle of renewal as frictionless as possible makes markets healthier and prices lower. corruption and poorly designed regulation increase friction. not just that. discerning and intelligent consumers are key to healthy markets as well.
  - nradov 3y ago
    So you can quote an Econ 101 textbook. Now how do things actually work in the real world?
hayst4ck 3y ago
Because OP is not critically thinking. They have a very simple idea of market mechanics with very simple ideas of market manipulation. If our market isn't working, it's just not "pure" enough, right? https://en.wikipedia.org/wiki/Anti-competitive_practices https://en.wikipedia.org/wiki/Anti-competitive_practices https://en.wikipedia.org/wiki/History_of_competition_law https://en.wikipedia.org/wiki/History_of_competition_law https://en.wikipedia.org/wiki/Natural_monopoly https://en.wikipedia.org/wiki/Natural_monopoly https://en.wikipedia.org/wiki/Tacit_collusion https://en.wikipedia.org/wiki/Tacit_collusion https://en.wikipedia.org/wiki/Regulatory_capture https://en.wikipedia.org/wiki/Regulatory_capture https://en.wikipedia.org/wiki/Tragedy_of_the_commons https://en.wikipedia.org/wiki/Tragedy_of_the_commons I don't think OP has read very many books and I would be surprised if they have a bachelors degree. OP reminds me of myself during Ron Paul's "the free market solves all problems" period on Reddit. Ron Paul presented a very simple idea of how things work, but once you start to think about how those ideas don't work, it's obvious that ignorance is being taken advantage of. Alternatively he did not respond to the best most charitable interpretation of the post. Simply put: OP's ideas wouldn't last (and aren't lasting) long outside of an ideological echo chamber. I think a strong obvious argument against a "less regulation" panacea is that we couldn't make our own masks because the free market sent all the production to China. Sending all of our manufacturing to China because they offered the best deal gives china incredible leverage over us. Clearly the "free market" must be analyzed not just in terms of supply and demand, but also in terms of power and coercion. There is no supply/demand curve for power.

hayst4ck 3y ago

> In a purely capitalist economy a lack of supply would cause prices to go increase and the market would respond accordingly. In a purely capitalist economy, those with capital would have the easiest time getting more capital, as they get more capital they get more and more influence and exist farther and farther from consequences. Then it's trivial to get things like citizens united, stock trading congress members, and regulatory capture. As ruling institutions weaken so to do the systems that enforce "pure capitalism." Thus "pure" capitalism plants the seeds of it's own destruction. "The free market solves all problems" is 2000's Ron Paul era thought, and it is clearly very wrong. The right results from a "free market" are not inevitable. The results, right or wrong, are a summation of the actions of it's individual participants. Culture is the first line of defense, and when culture fails, you must rely on regulation, and when regulation fails, you must rely on force. > The fix for to much regulation is less regulation, not more. The fix for the wrong regulation is the right regulation. Analyzing for less and more is intellectually bankrupt and shows lack of critical thinking. Less regulation used for regulatory capture is good, less regulation used for legitimate consumer protection is bad. More regulation that stifles innovation is bad, more regulation that prevents robber barrons and bullying of small business is good. You need to do more reading on "the tragedy of the commons." https://en.wikipedia.org/wiki/Tragedy_of_the_commons https://en.wikipedia.org/wiki/Tragedy_of_the_commons