4 ms·

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? I

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.

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.