> An alternative scenario might be that drugs would get cheaper in the US, European drug prices stay the same and pharmaceutical companies somehow scrape by with lower (but still positive) profit levels.
You're treating this as if it's a question of "fairness" to the drug companies, and it's not about that at all. If you could drive drug company profits to $0 with no collateral effects, it'd be unambiguously the right thing to do.
The question is, though, what does that do to the market? If you're an investor that has a billion dollars lying around, do you put it into drug development or social media? Both are highly risky, but the former is burdened by a regulatory regime that thinks companies in that sector should just "scrape by," while the latter has unlimited upside.
You're basically sending a signal to the market that the more valuable your business is to society, the less money you're going to make from engaging in it. That's ass backwards.
> Seriously, if drug companies were making a net loss in European and other countries, they'd just stop supplying in those countries and subsequently enjoy higher profits
They continue to sell in European countries because they don't make a marginal loss there. But if their revenue levels in the U.S. were at the level they are in Europe, they absolutely could not justify their enormous fixed costs.
> And prices the US pay are in no way related to what other countries pay: it's simply a function of market power and being in a much weaker bargaining position.
It's true that drug companies are in a much weaker bargaining position in European countries, but only because European governments exercise seller-side market power to artificially drive prices below what they would be in a market with many buyers and many sellers.
> I realise Pfizer (net income: $7.74 billion) and Merck & Co (net income: $4.44 billion)
Fun fact: Facebook's net income is about 30% higher than Pfizer's even though its total revenue is only about half. Obviously Facebook's product is much more valuable to the world and should be incentivized accordingly.
You're treating this as if it's a question of "fairness" to the drug companies, and it's not about that at all. If you could drive drug company profits to $0 with no collateral effects, it'd be unambiguously the right thing to do.
The question is, though, what does that do to the market? If you're an investor that has a billion dollars lying around, do you put it into drug development or social media? Both are highly risky, but the former is burdened by a regulatory regime that thinks companies in that sector should just "scrape by," while the latter has unlimited upside.
You're basically sending a signal to the market that the more valuable your business is to society, the less money you're going to make from engaging in it. That's ass backwards.
> Seriously, if drug companies were making a net loss in European and other countries, they'd just stop supplying in those countries and subsequently enjoy higher profits
They continue to sell in European countries because they don't make a marginal loss there. But if their revenue levels in the U.S. were at the level they are in Europe, they absolutely could not justify their enormous fixed costs.
> And prices the US pay are in no way related to what other countries pay: it's simply a function of market power and being in a much weaker bargaining position.
It's true that drug companies are in a much weaker bargaining position in European countries, but only because European governments exercise seller-side market power to artificially drive prices below what they would be in a market with many buyers and many sellers.
> I realise Pfizer (net income: $7.74 billion) and Merck & Co (net income: $4.44 billion)
Fun fact: Facebook's net income is about 30% higher than Pfizer's even though its total revenue is only about half. Obviously Facebook's product is much more valuable to the world and should be incentivized accordingly.