[abricot]

They can, but that is not what all of them are doing.

They realize that if they only cover marginal cost, and don't allow for development, they will only get the right product for a limited amount of time.

What often happens is that they agree on a more realistic price that will allow for that.

In many cases the company will go low to still be the supplier for a whole country - especially as they can still keep their margins in other countries, like US.

[nickff]

I think we agree on this, but the strategy of bargaining down to near marginal cost is dependent on the US customers paying for the fixed costs. The 'internationals' don't have to worry about doing safety studies or drug development either, so they can just take advantage of US companies doing the expensive work. For their part, the US government seems to know what they are doing too; they know they pay more for the drugs than anyone else, and do so to retain the industry.

I'd compare it to a 'tragedy of the commons' scenario where one farmer keeps paying his son to re-turf the meadow, so the boy can have a job (and thereby feeds everyone else's sheep).

[willvarfar]

Its not in the interests of the monopolist to put their suppliers out of business.

They can set up non-profit-driven suppliers, but it seems probable that normal for-profit suppliers will flourish.

[nickff]

Do you mean the monopsonist? I am not sure that I would define the governments who provide drugs to their citizens as monopsonists or monopolists outside of being monopoly suppliers to their own subjects.

I agree that the 'internationals' who control domestic drug consumption have little incentive to set up their own drug production systems, but if my supposition is correct, they need the US to keep paying higher prices for the same drugs.

[cmdrfred]

The "expensive work" here was 15 percent of GlaxoSmithKline's revenue last year. They spent 40 percent on marketing. When can this myth die?

http://www.bizjournals.com/triangle/news/2016/07/19/where-gs...