Wow, I should not post when I'm tired, maybe someday I'll learn. Sorry, the above numbers are... off. I can't go back and edit now.
The rest of the point stands however. We pay higher prices because countries like China and India steal the drug patents and produce low cost
generics for their citizens, the profit from which does not flow back to the company that actually developed the drug. Even countries like England,
Canada, and Mexico get in on it but with lower populations they don't have as big of an impact. If our drugs were selling in those countries, the
price per pill for everyone would be reduced. As it is we're subsidizing their healthcare.
I'll try again with proper numbers. It costs 5 billion to produce a drug according to
. The profit margin averages to about 12.2% according to
. Thus a drug that costs $5 billion needs to
generate 5.61 billion in revenue. The typical drug patent is good for 11 years of on the shelf sales according to
. So the drug needs to generate $510 million in revenue per year.
That means that $1,397,260 needs to be earned in sales per day. If the typical drug treats an illness with lets say 31,000 people suffering per year
(1 in 10,000 in the US) that means each pill needs to cost $45.08 in order to hit the goal.
The ways to lower that price are to either expand the market by selling in other countries. We currently do this, but different countries have
different rules on generics and it's not a true 1:1 return. Because the drug company is competing with generics nearly from day 1 they only get back
a small part of the cost. If a pill costs $3 to produce and sells for $45 in the US but only $5 in another country they need to sell 22 pills to make
up the money that just 1 pill sells for in the US. Overall this means that we don't get to lower drug costs much through a global market unless other
countries accept our patents and are willing to lower the quality of life for their citizens.
The other way to lower the price is to subsidize the research. If a drug costs $5 billion to produce but the taxpayers pay 2.5 billion of that, the
cost of the drug will be 50% lower when it's sold. The problem here is that everyone gets upset at paying for other peoples illnesses, it corrupts
the free market, and eventually puts the government in total control of the development of medicines. Plus, free money has the effect of just
increasing prices in the long term (look at what free money for housing did to the housing market or what free education is currently doing to
edit on 25-7-2014 by Aazadan because: (no reason given)