If the story about drug prices and price controls is correct (that price controls are bad because the limiting factor for drug development is returns on capital, which this reduces), then we must rethink the political economy of drug development.
Basically, we would expect if that to be the case that the sectoral return rates of biotech to match the risk adjusted rate , but drug development is both risky and skewed, effecting costs of capital.
Most of drug prices are capital costs, and so interventions that lower the capital costs of pharmaceutical companies might produce more drugs.
Most of those capital costs from the total raise required, which is effected basically by the costs of pharmaceutical research (which is probably mostly the labor of expensive professionals).
The expected rate of return is dominated by the risks of pharmaceutical companies.
Drug prices are what the market will bear/monopoly for a time, then drop to a very low level once a compound is generic.
There is a big problem here with out of patent molecules, since if a drug is covered by a patent and stalls 20 years, there is not the return to push it through the process, which means that there might be zombie drugs around from companies that fell apart and did a bad job of selling that asset (so it did not finish the process and did not fail the process).
There seems to be space for the various approvals to become more IP like (so that all drugs have the same exclusivity, regardless of how long they took to prove out).
The ecosystem (econo-system?) of drug regulation and approval is the primary cost/required-investment for much of this. The tension of protecting the profits and making sure all agencies and participants get their cut against selling the system as protecting the public is really hard to break.
In short, it seems like the current system unfairly kills drugs that take a long time to develop and do not have a patentable change in the last few years of that cycle.
If the story about drug prices and price controls is correct (that price controls are bad because the limiting factor for drug development is returns on capital, which this reduces), then we must rethink the political economy of drug development.
Basically, we would expect if that to be the case that the sectoral return rates of biotech to match the risk adjusted rate , but drug development is both risky and skewed, effecting costs of capital.
Most of drug prices are capital costs, and so interventions that lower the capital costs of pharmaceutical companies might produce more drugs.
Most of those capital costs from the total raise required, which is effected basically by the costs of pharmaceutical research (which is probably mostly the labor of expensive professionals).
The expected rate of return is dominated by the risks of pharmaceutical companies.
Drug prices are what the market will bear/monopoly for a time, then drop to a very low level once a compound is generic.
There is a big problem here with out of patent molecules, since if a drug is covered by a patent and stalls 20 years, there is not the return to push it through the process, which means that there might be zombie drugs around from companies that fell apart and did a bad job of selling that asset (so it did not finish the process and did not fail the process).
There seems to be space for the various approvals to become more IP like (so that all drugs have the same exclusivity, regardless of how long they took to prove out).
The ecosystem (econo-system?) of drug regulation and approval is the primary cost/required-investment for much of this. The tension of protecting the profits and making sure all agencies and participants get their cut against selling the system as protecting the public is really hard to break.
In short, it seems like the current system unfairly kills drugs that take a long time to develop and do not have a patentable change in the last few years of that cycle.