O
Oscarthecat
Guest
So, Vern, the truth finally comes out-
you obviously don’t care about people with prostate cancer.
- Status
you obviously don’t care about people with prostate cancer.
V
vern_humphrey
Guest
Yes – but don’t let it get out.
P
pathia
Guest
HIV drugs will never be profitable, there’s less incentive to research them privately. The biggest use they will ever have is in Africa, where even $1 a day for a pill is a fortune.
Also, I’m pretty sure AIDS drugs do NOT get the majority share of R&D. Jesse Helms said that decades ago, it wasn’t true then, and I don’t think it is now, either.
Getting some numbers. Aids funding (not just R&D) ALL funding is 22.8B as of 2005ish. And total R&D for the government is about 285B as of 2002. This is just through some random googling.
V
vern_humphrey
Guest
Give us some cites.
O
Oscarthecat
Guest
the question at hand is not the amount of funding, but whether the research and development is in proportion to the prevalence of the particular disease compared to all other diseases.
The point is not whether anything is being funded properly right now, but rather that tying healthcare to politics makes getting proper treatment a political endeavor.
incidentally, aids research is an excellent example of the free market and charitable giving at work- aids foundations raise money by the boatload.
V
vern_humphrey
Guest
Followup to previous post:
From iavi.net/viewpage.cfm?orderby=publishdate&aid=1382&groupbyflavor=0
And we know who pays the lion’s share of that.
From iavi.net/viewpage.cfm?orderby=publishdate&aid=1382&groupbyflavor=0
In other words, in 2006, public funds to the tune of $774 Billion were spend on AIDS vaccine R&D alone.
And we know who pays the lion’s share of that.
O
Oscarthecat
Guest
is that million or billion?Followup to previous post:
From iavi.net/viewpage.cfm?orderby=publishdate&aid=1382&groupbyflavor=0
In other words, in 2006, public funds to the tune of $774 Billion were spend on AIDS vaccine R&D alone.
And we know who pays the lion’s share of that.
V
vern_humphrey
Guest
My mistake – that’s millions. Note that’s for vaccine research, only.
P
pathia
Guest
findarticles.com/p/articles/mi_m4PRN/is_2003_Jan_2/ai_n27580702
Total R&D is listed over 300 BILLION in that article
whitehouse.gov/omb/budget/fy2006/compassion.html
And about 17B for domestic AIDS issues there, only a fraction of which is R&D for the disease.
So, total R&D is $300B. AIDS R&D is $774 million. That makes it less than 1%.
Total R&D is listed over 300 BILLION in that article
whitehouse.gov/omb/budget/fy2006/compassion.html
And about 17B for domestic AIDS issues there, only a fraction of which is R&D for the disease.
So, total R&D is $300B. AIDS R&D is $774 million. That makes it less than 1%.
V
vern_humphrey
Guest
No, that’s only AIDS vaccine. That’s not total AIDS R&D. And not total AIDS spending – which obviously has to come from somewhere.
S
stinkcat_14
Guest
Ok so the Canadian government has the upper hand in its bargaining position. If Canada has this better bargaining position, why shouldn’t they use it?
Yes, I am. And I see you need an economics lesson.
The R and D costs are sunk costs, so they are irrelevant when the drug companies are determining the price of existing drugs. If Pfizer spends $100 million getting a drug approved, the price of the drug is not affected by these sunk costs, but by the price that the consumer is willing to pay and the marginal cost of production. Canada is able to negotiate a lower price, and of course that is good for them.
You see, the value of a thing is determined by what a willing buyer and a willing seller agree to pay. If Canada agrees to pay $1 for a pill and the drug company agrees, then they both have agreed that $1 is a fair price for the drug.
Now of course, if Americans are willing to pay $10 for the same drug, then of course, that $10 is a fair price too.
Now if we all paid a $1, the drug companies would have less of an incentive to do more drug research. But from Canada’s point of view, that loss may be small relative to the gain they get in lower drug prices.
V
vern_humphrey
Guest
Because it:
A. Has killed their own R&D, and
B. Throws the whole R&D costs onto the US consumer. And,
C. If the US adopts the same system, drug R&D world-wide will essentially die.
Given what you wrote above, I don’t think there’s anyone here qualified to give me one.
You’re kidding!!
You don’t understand that those “sunk costs” must be recouped?
If they are not recouped, how will the drug company be able to continue it’s R&D?
Canada didn’t “negotiate” anything – they set the cost by fiat, and then confiscate the patents if the drug companies don’t agree.
No, because the seller is under coersion – if he doesn’t agree, he loses his patent in Canada.
Now you’re beginning to understand. And from Canada’s point of view, they get both cheap drugs and new drugs – by throwing the whole R&D cost onto the American consumer.
If we followed Canada’s lead, we’d kill R&D. Don’t you hope that when the doctor tells you that you have a fatal condition, he will also be able to say, “But we have a drug to treat that nowadays?”
P
pathia
Guest
Exactly, and I posted a number for total AIDS spending alltogether too.
S
stinkcat_14
Guest
A. A small problem because they had a small amount of R and D relative to the rest of the world.
B. Why is this a concern of Canada?
C. Why is this a concern of Canada?
I am not arguing that the US should necessarily do the same thing, but that the Canadians clearly do benefit from this policy.
Given what you wrote above, I don’t think there’s anyone here qualified to give me one.
Not on every drug and not in every situation. The sunk costs are not relevant to the Canadian government when they buy drugs. If Pfizer and Merck both spend $100 million developing a similar drug, competition may for the price lower which means that they will not be able to recover all of their sunk costs, but even if they recover some of the sunk costs, that is better than setting the price at such a level to recover all the sunk costs and then not selling anything.
If they don’t make the required return on their investment, they will stop doing R and D, this is true. But of course, Canada has been paying lower drug prices for years and this hasn’t happened yet. So, if you were the Prime Minister of Canada, why would you want to stop using your bargaining power to get lower prices?
But the drug companies are clearly better off selling to Canada than not selling, since Canada doesn’t send its army down here to force the companies to ship their products to Canada, so the drug companies are clearly better off.
If Canada can get away with it, why shouldn’t they?
I never said we should do the same thing, but what incentive does Canada have to change their behavior?
O
Oscarthecat
Guest
I’m sure you didn’t mean that-
Sunk costs are not just disregarded. If a drug cost 1billion to research, the company is going to want to earn more than 1bil on the sale of that drug.
You might be referring to the fact that existing drugs are essentially funding the research and development of future drugs, and the a portion of the proceeds from sales of the resulting drugs will be spent on more R&D, etc.
But if companies start losing money because they are spending more on R&D than they are making in sales, they don’t just shrug and say “well, those are sunk costs, so we have nothing to worry about.”
They either jack up the prices of their drugs, they cut back on R&D, or they get one of their buddies in the government to give them a big fat tax break or a grant.
V
vern_humphrey
Guest
Made smaller by their policy.
Why is cheating a concern to a cheater?
Why is cheating a concern to a cheater?
Just as I would benefit if I robbed or cheated my neighbor.
Knock, knock! They are relevant to the drug companies – and to us if we don’t want to kill R&D.
And how is that relevant?
As an economist, you must know that “sunk costs” like R&D must be recouped eventually – if not by drug A, then by drug B. And if they aren’t, either the company stops R&D or goes broke.
Bingo – and you and I may well die from a disease that could have been cured if R&D had gone on apace.
Only because the American consumer pays the R&D costs.
Knock, knock!
I’m not the Prime Minister of Canada, nor am I a politician out for self-gain. I – and you – am a consumer. We pay the cost of Canada’s "cheap drugs."a
And Canada does not “negotiate” – they confiscate patents. The drug companies sell under coersion in Canada.
Strawman.
Drugs are patented. The patents are public and must be registered in each country where the inventor claims priority. The Canadians offer the inventors (the American drug companies) a choice – “Sell at our price, or we confiscate your patent.”
If I can get away with cheating and stealing, why shouldn’t I?
Other than morality and a sense of fairness? They don’t – but the US should make that a trade issue.
S
stinkcat_14
Guest
Absolutely, I meant every bit of it. To learn more about sunk costs, see here:
=“http://en.wikipedia.org/wiki/Sunk_cost”
Sunk cost - Wikipedia
Now they want to earn back their $1 billion, but if they can’t it is not a relevant cost.
It’s not that they have nothing to worry about, it is what they can get in the market. If drug research is not profitable, they will stop doing it. But once the research is done, they will sell to Canada cheaply, because recouping some of their investment is better than recouping none. From Canada’s point of view, this works out well for them.
O
Oscarthecat
Guest
To put it simply, Canada is eating the Golden Goose. They benefit, but to the detriment of other countries that are footing the whole bill. Canada would be in for a rude awakening if we started playing that same game because the research and development companies would start to push back against their market.
And don’t say that Canada is holding their patents over their heads- Canada may have existing patents for drugs that are being produced right now. But drug companies could very easily stop registering patents for new drugs in Canada.
Canada would have to either
(1)reverse engineer drugs-which is time consuming and costly,
(2) steal the patents from other countries-which is not really Canada’s forte
or (3) have no more access to new drugs.
Oh, I forgot 4- they could also pay an equitable price for the drugs they buy. But they’d have to raise taxes to do that, which would increase their cost per patient ratios, and end up revealing that they are not really the superior healthcare provider.
S
stinkcat_14
Guest
In other words, using your monopoly power is immoral? Is this just immoral for governments or for people and companies as well?
O
Oscarthecat
Guest
Are you sure? Because losses in R&D generally lead to cutbacks in R&D…but maybe you already know thatAbsolutely, I meant every bit of it. To learn more about sunk costs, see here:
=“http://en.wikipedia.org/wiki/Sunk_cost”
Sunk cost - Wikipedia
en.wikipedia.org
Now they want to earn back their $1 billion, but if they can’t it is not a relevant cost.
Looks like we’re on the same page, then- that shorting the drug companies does matter after all…unless R&D isn’t valuable.
and at the same time, they will stop producing new drugs, because the costs outweigh the benefit. That sounds super.
Rather short sighted of Canada, don’t you think?
- Status