Index Home About Blog
From: Steve Harris <>
Subject: Re: Pfizer exec: pharmas charge too much for drugs
Date: 7 Jun 2005 14:47:18 -0700
Message-ID: <>

Boy, what a confused article. It talks about two separate subjects,
intellectual property rights and differential drug pricing, and
completely runs them together.

For one thing, the Europeans DO honor intellectual property rights. A
drug company CAN charge all the market will bear, when it comes to
selling a patented drug. The only thing that happens in the "parallel
trading" is that a company sells at different prices to different
markets, and there are re-distributors that operate by moving a drug
from here to there, to even out the difference. Should this be illegal
to do (as it is in the US currently)?  In my mind, it's a matter of
contract law. If a movie theater sells a ticket at a "senior citizen's
discount" to a senior, should it be illegal for an industry to develop
to buy these tickets from seniors and sell them (at a fraction of the
senior discount) to people of *other* ages?  Why or why not? Of course
this is exactly the same problem, but in a different guise.  One can
apply this to all kinds of other discounted or special market products
which companies use to sell products to limited markets to fill up
their unused capacity. There are empty seats on airliners as well as
movie theaters. There are empty seats in football stadiums. Why aren't
there people in them?

>>"The United States does a lion's share of research in the world for
research and development of drugs," says Carmona. "That's why the
Canadian government sells it cheaper. They don't have the overhead ."


How amusing that Zee should post an article containing this paragraph.

It's perfectly true, of course. So how DO you make people pay their
share of research costs?  What happens when you find you can sell a
drug to a poor country at more than your marginal cost to make more of
it (in the same way you can sell those last seats on a theater or an
airplane), BUT find you cannot sell the drug to the poor country at any
price which will allow it to share in development costs?  This is the
essential problem drug companies are faced with. They solve it now by a
semi-socialist system in which the rich are charged higher prices, and
the poor are given an effective discount. Oddly enough, parallel
trading acts to destroy this system so that it cannot be used. What

>>The surgeon general's task force report agrees with the
pharmaceutical companies -- that if they lower their prices, they'll
spend less on creating new drugs, and research and development.
Rost doesn't buy that argument. He says drug companies won't cut
back on research and development because it's their bread and butter.
They have to develop new drugs or they won't have anything to sell
when the patents on their existing drugs expire  <<


Well, this only shows that Rost is a moron.  Pharmaceutical companies
do NOT need to be in the parmaceutical business.  More specifically,
these companies are owned by INVESTORS who do NOT need to invest their
money in pharmaceutical companies, but rather could just as easily (and
in a matter of minutes) be investing the same $ instead in oil (SWN),
retail stores (WMT), internet search enginees (GOOG), bananas (CQB), or
whatever.  And who all know it. To the extent that profit is removed
from drug development, companies that do drug development for a living,
will simply disappear (sometimes literally overnight) at the expense of
other companies which are allowed by the market to make a profit.  I
have made the point that drug development dollars disappeared from
India and Brazil when these countries removed the profit incentive for
it. There is no intrinsic reason drug development needs to exist
anywhere on Earth, except as people are willing to pay for it. It's
like yacht building or horse breeding.


From: Steve Harris <>
Subject: Re: research spending in Canada
Date: 7 Jun 2005 21:52:52 -0700
Message-ID: <>

>>The NIH money "currently about $25 billion per year, is public money,
is it not? I am not sure how the NIH is funded. <<


It is public money, funded out of the US income tax.

As you can see, US pharm research somewhat outpaces public basic biomed
R&D, even in the US.

Some people have claimed that this means you pay for your medical
treatment twice, and there's a seed of truth in that. NIH does fund
some studies of drug treatment of still on-patent drugs. Too many, I
think. But most of these NIH trials actually compare patented drug A to
patented drug B, in a trial which usually neither the makers of A or B
would ever fund. Makers of one or the other drug benefit from the
results (but not both) and so does the public. Even the non US public.
So who SHOULD pay for such trials?

The NIH and some other government agents also spend 3% of their money
in SBIR grants which go directly to small business to develop
biomedical products. But my own experience is that SBIRs don't come
close to paying for the government differential regulatory burden on
startup biomedical companies, so that's a wash. If the public pays for
it, the taxpayer's representatives also pass laws which make it the
paperwork nightmare that it is.

Most NIH research is basic biomed stuff that has payoffs > 20 years
down the road, and which pharma, left to itself, would NEVER do.
Business simply cannot be that farsighted in the short patent system
the world is saddled with. So the public doesn't pay twice for this
research. They pay once. Or rather, the American taxpayer pays once.
Much of the rest of the world gets a free ride when they read about it
on Medline (a service of MEDLARS at the US National Library of
Medicine, which is a part of the NIH).

If NIH quit funding basic biomed research, would private industry pick
it up?  No, there's no reason to think so. Any more than Canadian
pharma has picked it up because Canadian basic biomed research lags,
not having the great NIH tit to suck on. Instead, Candian drug R&D lags
and Candian basic biomed research lags. And Canadian basic biomed
researchers just move South to where they can get NIH grant money. Then
they publish their research, and Candians read about it on the
internet, after looking it up on Medline. All courtesy of the US
taxpayer. So it goes.


Index Home About Blog