And yet, reportedly US pharmaceuticals spend more money on marketing and promotion (i.e. coddling up to the doctors who prescribe their products) than R&D.
First off, that's not sales and marketing expense. It's what accountants called "sales and general administration" which yes, marketing falls into, but so do a number of other items. It's not 100% marketing.
Second, the only reason why a company would spend money on promotion is if the return is >100%. So, if drug companies were to stop all promotion, their profit would actually fall, not go up. So it's not going to reduce the cost of drugs.
Third, I've talked to a number of physicians would appreciate the marketing that drug companies do. They don't have time to keep up on the latest, so a 15 minute chat with a drug rep might save them a lot of time. Of course, they know the marketing is biased, but it at least gives them a sense as to what's out there.
> Second, the only reason why a company would spend money on promotion is if the return is >100%. So, if drug companies were to stop all promotion, their profit would actually fall, not go up. So it's not going to reduce the cost of drugs.
Not necessarily. Advertising is often a negative-sum game. To give a simplified, quasi-hypothetical example, if neither Coke nor Pepsi advertised, they would still have very similar market shares and revenues. But then Pepsi realizes they can spend $1MM advertising to swing $1.25MM of revenue from Coke, and Coke spends $1MM to swing $1.25MM revenue back, and now both companies are $1MM in the hole for no gain. In this case, everyone—Coke, Pepsi, and the consumer—is better off if the government just banned soda advertising. Well, maybe not the ad agencies, TV networks, and celebrity sponsors, but there’s still a net economic loss to society.
Lots of drug advertising is of this useless, competitive type. If no one advertised erection drugs, people would just go to the doctor and take whatever was prescribed to them. But if Cialis blankets the airwaves, they can swing market share from Viagra.
Except your example doesnt work. If coke and pepsi didn't advertise, more people would drink RC Cola and Faygo and fruit juice. Drinks are not a duopoly.
It’s a simplified example, but there is a point where cola-wars advertising turns into a negative sum game while still remaining the optimal strategy for each individual player. Coke and Pepsi can beat the smaller brands through distribution alone anyway.
The blockbuster hepatitis C drug will cost about $900 (around Rs 54,000) in India for a 12-week course of treatment. That would be a fraction of the $84,000 (over Rs 50 lakh) price tag for the same treatment in US.
I'm sure that they wouldn't be that profitable if USA paid $900 for that drug, especially the first few years.
Given the lower labor costs and people consider drugs to be so profitable, I don't know why other countries don't do as much research and drug development. Just a few countries carry the lion share of this effort.
That would be my response. If someone else can improve R&D and lower the cost of drugs, they are more than welcome to. Interestingly, I haven't seen any takers.
I'm South African, antiretrovirals are free.*
Almost got it right: Drugs elsewhere are cheaper and largely subsidized by USA citizens.
Those drugs cost a fortune to make and the companies make their money in USA https://www.reuters.com/article/us-pharmaceuticals-usa-compa...