This article does a pretty good job of grappling with the fact that you can't have your cake and eat it too. On one hand the article acknowledges that treatments for orphan diseases have been successful, and many more have come out since the Orphan Drug Act was passed, as compared to before when these diseases were largely ignored. At the same time, it notes that clearly this is a lot of money to spend on one patient.
There is a tendency to believe that the normal dynamics of markets should be suspended when the product is "really important." Of course, that's backward. When the product is really important, the worst thing you can do is turn it into a low-profit economic ghetto by reducing incentives to invest. At the same time, when the government takes over the role of the market by granting a temporary monopoly, there clearly has to be some backstop at work.
The interesting thing to note that the company in the article, Alexion, is not even an unusually lucrative company. In 2015 its operating income was $536 million on 2.6 billion of revenue, or about a 20% operating profit margin. For comparison, Alphabet's operating margin is over 25%. Google also does much better in terms of return on equity and revenue per employee metrics.
There is a tendency to believe that the normal dynamics of markets should be suspended when the product is "really important." Of course, that's backward. When the product is really important, the worst thing you can do is turn it into a low-profit economic ghetto by reducing incentives to invest. At the same time, when the government takes over the role of the market by granting a temporary monopoly, there clearly has to be some backstop at work.
The interesting thing to note that the company in the article, Alexion, is not even an unusually lucrative company. In 2015 its operating income was $536 million on 2.6 billion of revenue, or about a 20% operating profit margin. For comparison, Alphabet's operating margin is over 25%. Google also does much better in terms of return on equity and revenue per employee metrics.