Jan Bouten

Interesting question. Pharmaceutical companies, of course, claim this is true: Somebody has to pay those astronomical development costs, and I guess the U.S. just drew the short straw. This argument of course does not wash at all for the many older drugs that are getting their prices jacked up.

But we don’t know those companies true development costs, or whether they could be streamlined and made less costly. Comparison with companies like Sun in India suggest that there is a lot of cost that can be trimmed even in development for companies that are under serious market pressure to provide lower-cost pharmaceticals and devices.

Most companies report their profit by regions. They don’t go into these various markets around the world out of charity. They do it because they can make a profit there, even at much lower prices. Maybe they are attrributing all of their development costs to the U.S. market, I don’t know. But if you sit down and discuss with the CEO of a device manufacturer in the U.S., for instance, about how they develop and price a new product, they don’t start with the question of how to make the best and least expensive product to hit the market at the right price point. They start with the question: What’s the reimbursement? What higher reimbursement could we get if we made it fancier? They they work back to a design that would meet that reimbursement level. It’s the reimbursement that drives the market, all the way back to development and capital investment, not the other way around.

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