Chapter 3: He Who Can't Pay Dies
AIDs Epidemic 0 Engulfed Africa at end of 20th century o 33 million people a ected worldwide : 23 million were in Africa drugs developed cost $10,000 - $15,000 for a year's dosage : many in need could not a ord :10x manufacturing cost : re ected companies' patent rights Pharmaceu cal Markets o Time spent on developing rela vely useless drugs while li le research occurred for vaccines to awful diseases o Aim to maximize pro t o Search for new drugs directed at cosme cs of the rich rather than fatal illnesses of the poor Example: Drug that cured sleeping sickness and essen ally "resurrected people in comas" stopped being made because it was unpro table. Produc on resumed when they found an ingredient could be used to prevent facial hair growth on women. o More is spent on marke ng than research o Pharmaceu cal companies neglec ng certain diseases and se ng high prices on drugs is a reac on to the incen ves of the marketplace : Companies' responsibility to act in shareholders' interests o Successfully developed drugs must be priced well above manufacturing cost to cover the cost of research Global Pharmaceu cal Market o Result of countries' poverty rather than companies' policies o Richer countries are healthier countries o No alterna ve system that would do a be er job in pharmaceu cal innova on and delivery Social value of a new vaccine exceeds what could be earned from selling it: incen ves that come from the market insu cient o Market incen ves prompted inven on of drugs that cure diseases Alterna ves to Pharmaceu cal Market System No other economic system has succeeded in major pharmaceu cal innova ons Examples could be provision by interna onal agencies or the state : Far less successful than drug companies Drug Companies and the Marketplace o Drug companies ac vely shape rules set by the market o Money spent on lobbying indicates entanglement of state and market o Governments essen al in maintaining pharmaceu cal markets
o Market incen ves necessary in pharmaceu cal innova on Public Goods o Public health - preven ng epidemics and the spread of disease, protec ng against environmental hazards, promo ng healthy behaviors, responding to disasters control of diseases brings wide spread gains o Scien c Knowledge Research funded by government because markets induce li le basic research Governments have a role in rethinking market design and rules governing intellectual property Produc vity of pharmaceu cal research rests on state funding o Market Incen ves Necessary to push ideas past science and into usable applica ons Patents Compromise solu on to a problem that admits no ideal solu on O cially sanc oned monopoly, powerful incen ve to innovate Downside: overpricing of outputs rewards innovator but harms consumers Successfully generate inven ons while inhibi ng their use Inelas c demand: pro t-maximizing monopolist prices far above produc on cost : Buye