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Comment by rayiner | Hacker News Reader

Yes and no--patents create a time-limited monopoly that turns the drug into commodity once the patent expires. So it's not necessarily "fair" to have a monopsony driving down prices during the patent period. Medical technology doesn't advance so fast that a 20-year patent term is all that unreasonable. If the FDA process for generics worked better, we'd have an ample supply of generics for anything that was state-of-the-art in 1999. Also note that while drug companies are profitable, they're on the same order of profitability as companies like Google and Apple. So even during the "monopoly" period, we're not talking about profits that are out of line with other industries that require similar capital- and talent-intensive R&D.

But now, we're deep into talking about trade-offs--exactly the thing journalists don't want you to talk about.

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I think there's a valid discussion around how do we compensate pharmaceutical companies. But bringing in terms like fair and market price into a discussion around a industry that doesn't even come close to resembling a market seems strange.

If market prices are too low than we have an inefficiency where we're not properly incentivizing drug research but if prices are too high then for twenty years we have a situation where some people are not getting a beneficial medication that could be provided at a very low marginal cost which is also a market inefficiency.

It seems like one solution is a bounty system where the government in addition to paying low unit prices writes giant checks based on the value of the medication. With larger checks for medications that work through new pathways and generate higher quality adjusted life year gains.

We need to also address the cost of FDA approval which is a very large portion of research costs.

time limits are being gamed to infinity

Not really: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2050696 ("Debunking the Evergreening Patents Myth").

> "Evergreening" is a pejorative term used to refer to the practice of extending the length of patent protection beyond the statutory term of 20 years, most often used in the context of pharmaceutical patents. Although drug companies do engage in creative strategies to maintain sales levels for as long as possible, criticisms of evergreening are largely overstated. In fact (with relatively reasonable exceptions), patents generally cannot be renewed or extended. In the vast majority of cases, so-called "evergreening" will only be a successful strategy to the extent that consumers can be persuaded to purchase the newer, pricier, patented version of a product rather than the older, cheaper, unpatented one.

(The author is on the faculty at Harvard medical school.)

> to the extent that consumers can be persuaded to purchase

Subtlety here: the consumers aren't making the choice, it's the insurers or medicare. We can't simultaneously accept the arguments "medicare will ruin drug development because it's the only consumer" and "consumers are choosing to purchase newer drugs making evergreening effective".

That paper makes a good case against its own conclusion, and little case for it. Some choice quotes:

"there are endless examples of this type of “evergreening"

"With a surprisingly large number of expensive “evergreened” drugs, one need look no further than the person in the mirror (and his or her doctor) if one wishes to avoid paying a much higher price for essentially the same medicine."

"Pharmaceutical companies, it seems, have been very successful in convincing consumers and doctors that the newer version is worth the extra cost."

The author is suggesting that there's no problem because consumers can in theory avoid the problem, but as he points out, they don't. Evergreening is a very prevalent and effective strategy to separate patients from their money.

> to the extent that consumers can be persuaded to purchase the newer, pricier, patented version of a product rather than the older, cheaper, unpatented one.

they have machinery in place to "persuade" consumers and medical staff that prescribe

> time limits are being gamed to infinity

Let's say you're right. Then shouldn't we solve that instead of jumping straight to price controls?

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