[tjbiddle]

Excuse my ignorance of all this:

I'm assuming most drugs are priced high to start due to the R&D costs, and (I hope) they eventually decrease their costs over time as that's recouped.

If Cost Plus comes in and reduces the costs significantly, then the original manufacturer has no incentive to create these medicines to start.

Or is that not at all how this works :-)

[wavesplash]

You’re on the right track, but there’s a big difference between under patent and post-patent expiry drugs. Patents last 20 years, so if you invent a drug, patent it, then go through FDA approval, you can charge whatever price you want to recoup development cost until the patent expires. After the patent expires other firms can make ‘generic’ versions of the drug without having to license it. The goal with generics was traditionally take expensive patent drugs and make them more affordable while still retaining reasonable profit - in theory multiple drug makers would create an efficient market price. However, many generics for critical but low volume drugs have become single sourced, and there has been a move over the last 20 years for single sourced drugs to dramatically raise their prices and bleed insurance companies and the unlucky individuals that aren’t covered by insurance. This is what MCDC are fighting.

[yaur]

That's the first approximation estimate, But drug production requires a significant fixed investment to build the "factory" for the drug in the first place. Drugs with crazy prices tend to be those where a rational actor would choose to invest in a safer investment instead of expanding the supply, because they are being priced by people who are smart enough to make sure that is true.