[tryingagainbro]

Drugs are cheaper and largely subsidized by governments with high incidence of HIV.

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...

[FabHK]

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.

https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p...

https://www.sciencedaily.com/releases/2008/01/080105140107.h...

[refurb]

God I wish this myth would die.

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.

[philwelch]

> 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.

[brianwawok]

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.

[philwelch]

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.

[tertius]

> Almost got it right: Drugs elsewhere are cheaper and largely subsidized by USA citizens.

* Correction, by U.S. government (through law).

> Those drugs cost a fortune to make and the companies make their money in USA.

Yes R&D is expensive, but pharma is extremely profitable. Here in the U.S. and abroad.

[tryingagainbro]

The difference in pricing is STAGGERING. http://timesofindia.indiatimes.com/india/New-Hepatitis-C-dru...

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.

https://www.nytimes.com/2015/02/04/business/sales-of-sovaldi... 140,000 patients in USA and going to 250,000

[tertius]

Drugs are cheapest in India. Let's normalize. I.e. far end of the pricing bell curve.

But the answer is still, yes, there is profitability. Just not as much as with the hyper inflated prices in the US.

In short: Does the extreme cost for drugs in the US cause groundbreaking research to benefit the whole world?

No, same results could be had with way less profit. Money to fund moonshot research is still important though.

[pkaye]

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.

[refurb]

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.

[tertius]

This is constantly done... Find some new discoveries in basic science. Get finding. Develop a drug. Test and redevelop. Market. Profit.

[tertius]

Drug development is expensive.

[refurb]

pharma is extremely profitable

That's survivorship bias. Yes, the successful pharma companies are quite profitable, but there are 10 failed companies for every successful one.

I remember reading a paper that said the overall returns for the industry are either single digit or negative.

[tertius]

This is business in general.

The big ones buy up the small generic producers and single new drug companies and get slightly bigger.

The ones who can't pass trials fail. That's business, especially in R&D.