How on earth can this be reconciled with free trade? What of the regulatory costs of trying to prevent trading from low cost to high cost countries. Or perhaps De Long et al would say that this should be allowed since it would increase the utility of poorer countries! After all if the justification for differential pricing is the increased utility for poorer countries why shouldnt this trade from low to high cost countries be encouraged. Surely it couldnt be because this would impact on pharmas profits.
CHeers, Ken Hanly' ----- Original Message ----- From: "Eugene Coyle" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Sunday, September 28, 2003 5:03 PM Subject: Re: Blessed are the gouged > This FDA idea is not out of the Onion but rather direct from two of the > most esteemed economists in the USA: Larry Summers and Brad DeLong. > > DeLong and Summers, in a piece designed to protect drug patents and > intellectual property rights, advocate that "... rich country customers > could pay the fixed costs while poor country customers paid close to > marginal cost, has the potential to create an enormous addition to world > welfare." > > Now McClellan, commisioner of the FDA, also trying to protect Big > Pharma, wants Europe to raise drug prices -- while trying to stop cheap > drugs from slipping in from Canada. If Europe raised drug prices it > wouldn't help lower drug prices here -- but it would raise profits for > Big Pharma: > > Here's a slice from DeLong and Summers, paper at Jackson Hole, August > 2001, where they laid out the apology for the high and mighty. > > Gene Coyle > > > Moreover, the demand-side consequences of the “new economy” for > > distribution promise to be as important as the supply-side consequences > > for the value of education. For most of the past century, price > > discrimination—charging one price to one set of consumers and a very > > different price for a nearly identical product to another set of > > consumers— > > has been viewed by most as an unmixed evil. It has been > > seen as a way that those with monopoly power can further increase > > their monopoly profits. But price discrimination has another face as > > well: It is a way that businesses can extend their market and make their > > product of more value to consumers. An information good-providing > > firm that successfully engages in price discrimination can still make a > > profit by charging high prices to its relatively well-off core market, > > and can add to that profit and greatly increase the social utility of its > > product by charging low prices to those who are relatively poor. It may > > well be that in the information age, our attitude toward price > > discrimination > > should shift. > > There are many cases—of which the provision of pharmaceuticals to > > people living in poor countries is only the most critical and obvious— > > in which good public policy should focus on making it easier for companies > > to charge wildly different prices to different groups of consumers. > > The reason that pharmaceutical companies charge high rather > > than low prices to customers in poor countries is relatively small: > > Their major fear is that of the reimportation of low-priced drugs into > > the rich first world. The loss in profits they suffer from charging an > > inappropriately high price to customers in poor countries is small > > change relative to the gray-market reimportation risks that they > > believe they face. Yet, the cost in lost lives in poor countries is > > unacceptably > > high. Effective ways of segmenting the market more completely, > > so that rich country customers could pay the fixed costs while > > poor country customers paid close to marginal cost, has the potential > > to create an enormous addition to world welfare. > > > > Michael Pollak wrote: > > >[This is really something out of the Onion. This is guy is saying that > >the fact that US consumers are gouged by drug companies to a greater > >extent than anyone else in the world is a measure of how virtuous our > >system is -- and that he's sick and tired of other countries not pulling > >their share, and refusing allow their citizens to be gouged, and letting > >us carry the entire gouging burden by ourselves. It's unconscionable!] > > > >Financial Times; Sep 26, 2003 > > > >WORLD NEWS: US attack on European drug price controls > > > >By Christopher Bowe in New York > > > >The chief US medicine regulator yesterday attacked European prescription > >drug price controls, saying rich nations should pay more of the > >development cost for drugs that is now increasingly being covered by > >Americans. > > > >Mark McClellan, commissioner of the Food and Drug Administration, called > >for an international compromise solution for the rising "global crisis" of > >widening national disparities in drug pricing. > > > >The discovery of new treatments and genetic disease cures could slow > >significantly, potentially to a halt, he said, when the US could no longer > >sustain the increasing research and development costs that price controls > >have pushed on it. > > > >"The United States is now covering most of these costs of developing a new > >drug to the point where it can be used by the population of the world," Mr > >McClellan said. > > > >Suggesting new "international discussions", he proposed an adjustment of > >worldwide drug prices to reflect each nation's income. > > > >He said too many rich nations paid too little, citing that the US used a > >fraction of prescriptions worldwide but paid about half of all global > >pharmaceutical spending, while Germany, the world's third-largest economy, > >paid less than 5 per cent. Both France and German on average had lower > >drug prices than poorer Poland, he said. > > > >Speaking to pharmaceutical executives in Cancún, Mexico, site of the > >recently disappointing world trade talks, Mr McClellan's speech reflected > >a political, even trade issue, tone. > > > >It comes as the Bush administration and the FDA is besieged from all > >directions on the issue of rising drug prices in the US. Senior citizens > >want drug coverage to come under the federal plan Medicare, drug companies > >want to protect their uncontrolled US market, and increasingly rebellious > >state governments want to save creaking budgets by importing cheaper drugs > >from price-controlled Canada. > > > >This week governors from Iowa and Minnesota joined Illinois in asking the > >FDA to allow them to import drugs from Canada. Congress is also > >considering allowing such a move. > > > >The FDA has said it would not allow Canadian imports, because it could not > >guarantee the safety of the drugs. > > > >Mr McClellan rejected notions that US prices were higher because of > >consumer advertising, having too many drugs approved for similar > >treatments and litigation costs. He also said countries should spend more > >on health research, based on their gross domestic product. > > > >About 20 per cent of pharmaceutical costs came from research and > >development, he said. > > > > > > >
