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April 30, 2012


Reverse payment is part of doing to business and one of the ways companies try to maximize their profits by taking challengers in their wings. All costs are passed on to the customers as they need the medicine to get well and extend their life. Monopoly extends profits.

On the other side of the coin if the companies are successful in their challenge then after six months we have multiple players producing the same drug. Their manufacturing processes are inefficient as their processes are inefficient and have no economies of scale. Yes their product is sold at lower price than the patented product but is sold at much higher price than what could be if the product could be produced using efficient technologies. Technology and competition is necessary to lower prices.

We have to recognize that even at the highest level of competition, every company’s charter is to maximize their profits.

Customers and physicians do not know the manufacturing cost of the single dose. A 10% reduction is satisfactory for them. The cost reduction opportunities are much higher. However charter of each company is to maximize their profits even under the strongest competitive conditions. Drug prices are sold on the sentiment “they get you well and extend life as no one wants to die”, thus priced at the highest level customer can afford.

I agree that the tug of war between the companies and FTC (or similar government agencies) is going to go on but a dark horse can upset the apple cart. I have echoed my perspective in “Pharmaceutical Reverse Payments and Lower Drug Costs: An Interesting Dilemma!” http://pharmachemicalscoatings.blogspot.com/2010/07/pharmaceutical-reverse-payments-and.html.

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