May 08, 2005

Letter to the Paper ILV

John Cole decides that normal economics doesn't apply when it's all about the evil drug companies. I'm not particularly happy with using fascist economics to counteract communist economics but it's somewhat better than the "Atlas Shrugged" alternatives of just letting the companies go down the tubes.

To say "without the current drug companies, there would be new drug companies" is nonsense. That's functionally saying that without the current railroad companies, we'd just have new ones. We proved the latter wrong at the creation of Amtrack because there were no private companies left to take over the bankrupt ones. The prior century's idiotic railroad regulation made sure of that.

Drug companies are the creation of bright inventors combined with capitalists who think that, globally, they can achieve at least an average return. Globally, they have to accept a below average return in most markets.

The US is the last major holdout in free market pricing and the one reason keeping the capitalists from withdrawing their capital and redeploying it elsewhere. For the green eyeshade types that invest the bulk of money everywhere, they go to jail if they purposefully deploy capital at lower returns for non-financial reasons. This is called fiduciary duty. It's not reasonable to expect somebody to go to jail just because your particular disease hasn't got a cure yet.

If you have globally above average returns, you attract new capital and you get new companies entering into the market. If you have below average returns or government mandated losses, people won't invest and you won't have new company formation.

Generic producers aren't affected by this reasoning. They make their money off of production, not new pills. We won't lose our current crop of cures. What we will lose is the financing to push forward our new ones. That is likely to cut down the introduction of new drugs by about 50% (public research will still be around).

We can only hope that our neverending race against the drug resistance is winnable with the remaining 50%. If it's not, you can add advocating mass casualties in a pandemic to the current sin of bad economics.

Posted by TMLutas at May 8, 2005 08:24 AM