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Answering Pharma

No Link — a 20% price control is optimal, increasing access without decreasing profits. 

Moshe Levy , business professors, Hebrew University, 2014, [School of Business, The Hebrew University, Jerusalem, Israel;]

We find that mild price regulation can substantially increase consumer surplus and the number of patients using the drug, while having only a second-order effect of the revenues of the pharmaceutical companies. For example, setting the price cap at 20% lower than the optimal monopolistic price increases the consumer surplus by about 10%, and increases the number of patients using the drug by about 23%. This increase in the number of users almost completely offsets the adverse effect of the price regulation from the perspective of the pharmaceutical company – its revenues decrease by only about 1 percent

And this evidence only assumes the demand created by a lower drug price, it doesn’t even account for the increased demand created by more coverage

And their evidence is just speculative and written by hacks. Empirical evidence proves no long-term decline.  A study by highly qualified authors and published in a peer reviewed journal in July explains, [Mujaheed Shaikh, Pietro Del Giudice & Dimitrios Kourouklis, Hertie School, Friedrichstraße 180, 10117, Berlin, Germany Mujaheed Shaikh Vienna University of Economics and Business, Welthandelspl. 1, 1020, Vienna, Austria Pietro Del Giudice Centre D’économie Industrielle (CERNA), MINES ParisTech, PSL University, i3 UMR CNRS, 60 Bd St Michel, 75006, Paris, France Dimitrios Kourouklis Office of Health Economics, 7th Floor, 105 Victoria St, Westminster, London, SW1E 6QT, UK Dimitrios Kourouklis,

While exposure to price regulation (measured by relative market share in EU/USA) is related negatively to R&D intensity, and this result is driven by price regulation being negatively related to cash flow and profitability, the results were not significant when firm fixed effects were added to the regression models. Modeling firm dynamics showed that cash flow and profitability of European- and US-based firms responded differently to exposure to price regulation. Thus, firm specific effects play an important role in explaining the negative relationship between price regulation and R&D intensity. These results were robust to the inclusion of different time-varying firm level variables. Conclusiob The findings suggest that investment decisions of firms are most likely driven by long-run inter-firm differences, and that firm effects strongly determine firm strategies in terms of R&D investment.

No Link – The main costs for pharmaceutical companies do not come from research and development. The Institute for Health and Social Policy reports, In 2015, out of the top 100 pharmaceutical companies by sales, 64 spent twice as much on M&S than on R&D, 58 spent three times, 43 spent five times as much and 27 spent 10 times the amount.

[M&S=Marketing & Sales]

Frank of Health Affairs explains in 2017, At some point, perhaps already reached, the yield from additional resources…no longer justifies what society is paying in the form of higher prices to support this…the current magnitude of innovation in pharmaceuticals is already too high in the sense that resources going into it might be better used for infrastructure, education, housing and other priorities.

No Link – other countries disprove this.  Light of Health Affairs explains in 2017, In fact, other countries such as Canada and the United Kingdom are keen to attract pharmaceutical research and development investments. Prices in these nations are set to enable companies to recover all research and development, manufacturing, marketing, and overhead costs, and to make a reasonable profit. UK prices, among the lowest in Europe, have long been set to pay for all these costs plus a profit.

TURN: PHARMA CONCERN FOR PROFIT HINDERS DEVELOPMENT AND DISTRIBUTION OF LIFESAVING VACCINES AS POSNER WRITES IN 2020 Gerald. NEW YORK TIMES. March 2. “Big Pharma May Pose an Obstacle to Vaccine Development”. Mr. Posner is the author of the forthcoming “Pharma: Greed, Lies and the Poisoning of America.”

At this critical juncture with coronavirus, no health expert would publicly criticize drug companies, but privately they complain that pharma is a major speed bump in developing lifesaving vaccines. Pharmaceutical industry concerns about profits, as well as potential liability for adverse reactions to the inoculation, often keep them from moving quickly enough to develop or distribute effective vaccines when there emerges a novel virus, like the one that has set off the Covid-19 outbreak.


A monopoly system that was intended to produce high levels of innovation has mostly produced unfairly high prices instead. Legislation and purchasing policies that limit price increases and peg the price of a new drug to its value would not stifle innovation. To the contrary, they would force drug manufacturers that wish to earn extraordinary profit to achieve higher levels of innovation. It is no longer reasonable for political leaders to hide behind the fiction that high drug prices are necessary to cover the cost of research to develop new drugs.

No way pharma will collapse. The US government will prop it up with billions of dollars and cover vaccine costs. Tallib wrote on August 14th that

Matt Taibbi, August 14, 2020, Rolling Stone, Big Pharma’s Covid-19 Profiteers,

Soon enough, the infected and uninfected alike will pay any price to try to stave off illness through vaccines and cocktails of expensive treatments. It is an unprecedented profiteering opportunity, because most everyone on Earth is destined to become a customer of some kind — in fact, the United States is already a massive buyer of Covid-19 treatments despite no evidence of efficacy. “We’re in the extraordinary position of spending billions on vaccines before we know if they work,” says Doggett….The central role of the United States, whose dystopia of a medical bureaucracy is God’s gift to pharmaceutical companies. Every other country in the world has a three-stage process for approving and pricing prescription drugs. Governments first ask if the drug is safe. I… If the medical condition is serious enough and the drug has no effective analog, companies can dictate their price. As a result, we end up with situations like the 2014 Sovaldi episode, in which Medicaid spent $3 billion in a single year just on the one drug, and was still forced to severely ration the medicine, giving it to just 2.4 percent of hepatitis-C patients. Gill notes that only 37 percent of Americans are treated for hepatitis C even now, in part because of the high price of the drug. The business model for Big Pharma is brilliant. A substantial portion of research and development for new drugs is funded by the state, which then punts its intellectual work to private companies, who are then allowed to extract maximum profits back from the same government, which has over decades formalized an elaborate process of negotiating against itself in these matters. How big are these giveaways? Since the 1930s, the NIH has spent about $930 billion in research. Between 2010 and 2016, every single drug that won approval from the FDA — 210 different pharmaceuticals — grew at least in part out of research funded by the NIH. …“These problems existed before Covid-19, and now the U.S. is pumping billions of taxpayer funds into these companies, in most cases with no strings attached.” …The casual follower of this story is probably best served understanding the Covid-19 crisis less as a historic boondoggle (that’s more likely to be found in the financial bailouts) and more as an all-out war by industry lobbyists to retain a system that is already sociopathic and grotesquely anti-competitive in the face of intense public pressure during the pandemic. To be sure, companies like AstraZeneca and Pfizer will end up making a giant pile of money from vaccines and therapies. This is particularly the case because of the somewhat eccentric nature of the diseas . “We might need several vaccines,” says

It only costs pennies to make the drug once know how to do it  and drug companies have many other incentives to keep giving out the pills

Wharton Business School Knowledge,  2001,

(T)hese countries are too poor to pay what Americans are charged, anyway. And the companies needed a public relations boost, as it became clearer that their high prices meant millions were denied treatment. The American companies also faced serious competitive threats. Cipla, a generic drug maker in India, had asked the South African government for permission to sell cheap copies of eight AIDS drugs, including those on which Merck holds patents. A

Bipartisan support for price controls, they’re inevitable

Michelle Mello, June 2018, Professor of Law, Stanford Law School, and Professor of Health Research and Policy, Department of Health Research and Policy, Stanford University School of Medicine; Ph.D., University of North Carolina at Chapel Hill; J.D., Yale Law School; M.Phil., University of Oxford; A.B., Stanford University., Minnesota Law Review, ARTICLE: What Makes Ensuring Access to Affordable Prescription Drugs the Hardest Problem in Health Policy?, p. 2278

Though it is difficult to find any issue today on which there is bipartisan agreement in Washington, even persons who cannot agree on whether or not the planet is warming agree that the problem of prescription drug costs requires action.  

More pressure to innovate triggers mergers

Roerich Bansal, Ruth De Backer, and Vikram Ranade, McKinsey & Company, xx-xx-xxxx, [“What’s behind the pharmaceutical sector’s M&A push”, -behind-the-pharmaceutical-sectors-m-and-a-push, 11-26-2018]jzl Large pharmaceutical companies have used M&A to bolster their innovation for a long time, and that isn’t likely to change any time soon.