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August 23, 2016


Thanks Kevin. As Mr. Spock would say, fascinating. Although I can't say that I find these results counter-intuitive: even before seeing these results, I assumed that drug innovators, being rational economic actors, launch in those countries where they can make money. That necessarily means that countries with strong patent regimes will be more likely to see drug launches than countries with weak patent regimes, and countries with fewer price controls more likely to see launches than countries with more or more stringent price controls.

What I find more interesting is the apparent observation - correct me if I misunderstood something - that in countries where innovators are unlikely to launch in the first place (weak patent protection, strict price controls), generic drug manufacturers are unlikely to take up the slack. So much for the claim that patents hamper access to medicines. It sounds like the more correct description would be akin to Field of Dreams: if you make it attractive to the innovators, the generics will eventually follow.


Following that field of dreams does not get to a problem with the aspect of "sunk costs" to begin with: that is, geographical pricing STILL means that here in the States, my medical costs subsidize the "lower profits" for Big Pharma when they do not charge a consistent price in the different markets.

So on top of the "pre-loaded" R&D recoupment (being ignored), we have the problem of higher costs here to supplement the profits "not available" in other markets.

Lower pricing in less developed markets does not necessarily increase pricing in the United States or other developed economies. Marginal costs of many (but certainly not all) new drugs may be covered by the pricing in less developed markets where the option of pricing at the level accepted in developed markets is not an option available to the drug companies. In that scenario, although the less-developed markets are not paying "their share" (whatever that might mean) of the fixed costs, consumers in the developed markets are not paying more than they would have paid if the drug company withheld the drug from the less-developed market. So this does not have all of the unhappy aspects often associated with a subsidy.
I would be interested to see these authors extend their inquiry to the issue of whether health outcomes are affected by the different patent and price regulation scenarios. From a policy perspective, that is the interesting question, yes? I wonder whether it is easy to confirm the implicit "intuition" that faster adoption rates for new drugs are good for health outcomes.

I'm looking forward to the article on Mylan's wonderful pricing schemes for its epipen.

Skeptical, I agree that the USA is still subsidizing drug development for the rest of the world. But that's not what the study addressed. It addressed how national patent regimes and drug price controls affect drug availability. The study gives the lie to the claims of some third world economists who write in the NY Times, see http://www.nytimes.com/2016/06/17/opinion/mr-modi-dont-patent-cow-urine.html?_r=0.

Did this study take into account regulatory exclusivity periods? Would seem to be another major factor in profitability for the drug launch. How common is regulatory exclusivity in countries outside US?

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