Alleged price-fixing

[Nik]

Generic drugs shouldn't be very expensive, as they mostly use expired patents to produce replicas when the protection is over. Not that much of R&D costs. Yet, some dudes allege in a lawsuit some drug manufacturers don't exactly compete: https://edition.cnn.com/2019/05/13/he.... Really, they don't want to bring the cheapest cure to the customer and thus win his/her heart forever? How can it be? Even alleging something like this is unbelievable, as a competition is supposedly the backbone of the capitalist system. What is this communist 'fair share' division of the market? -:)
The time will tell whether the allegations are grounded, unless of course there will be a settlement "without acknowledging any wrongdoing".
We know OPEC cartel in place to keep the oil prices high. However, maybe some others exist announced, nicely pretending a fierce competition.
How big is the real dimension of the 'price-fixing' or 'cartels' in your opinion? Can entire "industries" be "fixed"?

[Philip]

Pharma companies are not interested in cures they are interested in prolonging life as long as possible with a daily dose of a prescriptive drug. For the a variable amount of time the drug company has a monopoly on its use, but even after this the companies only want you addicted to prescribed the drug forever. They are disinterested in cures. The cartel nature adds to the problem with companies not competing on production of a chemical formula sometimes claiming patent but mostly to allow cosy free runs on new wonder drugs

[Ian]

The idea that free capitalism leads to minimum prices through competition is almost laughable. The condition for this to occur is that the entry or removal of any player makes no discernible difference, and new entrants can enter reasonably effortlessly. Thus it works for something like say, a plumber, or restaurants. You have to gain some skill but after that there is nothing to stop you entering, or anyone else, so the market shakes out those that don't succeed. Pharmaceuticals is somewhat different. The link mentions 20 main players, which sounds competitive, but the trouble is there is a huge range of different products, and none make the lot. A generic maker might make just a few, and may lower the price a little, in fact as little as he can get away with. The big company, rather than compete, will move on to the next big thing. The generic maker might find himself the only player in a small market. An example here was Martin Shkreli, who bought up this company that was the only company making a pill required for some obscure disease. The market was not that big, and everyone else had given up. So our Martin raised the price from $13.5 per pill to $750. That is the free market in action, as it is designed to operate. You have a captive market - the victims either buy or die, there is no competition, at least for a while, so cream it. Similarly, if there are three suppliers, say, for a generic drug, it pays to somehow run into each other and agree not to rock the boat. Like Opec in the 70s, it works. Governments can make that illegal, but hey, that would introduce signs of the dreaded socialism.

If you want to limit prices and make them competitive, the simplest answer is the single buyer. NZ has such a system (as do other countries) and I know this was one of the biggest irritants to the US corporations during the transpacific trade partnership negotiations, which Trump eventually walked away from. The net result is that drugs are far cheaper, although there is the negative that the very latest take somewhat longer to arrive.

Finally, it should be noted that Big Pharma keeps stating that the costs of research make prices so high. This is a crock. They spend something like an order of magnitude more on marketing than research. Also, they are concentrating research on where they think they can make more money, and not on need. There is a big problem coming regarding antibiotic resistance and very little research is being carried out by the big boys. The reason: if they find a new antibiotic, it will be put in the reserve cupboard, for helping those who most need it.

[Scout]

Ian said: " Also, they are concentrating research on where they think they can make more money, and not on need. There is a big problem coming regarding antibiotic resistance and very little research is being carried out by the big boys. The reason: if they find a new antibiotic, it will be put in the reserve cupboard, for helping those who most need it."

People seeking power and corporations in power - the motivation is always money. Don't you just get sick of it? They're only able to get away with it because we don't find a way to stop them.

[Ian]

The way to stop it comes from government intervention. As I said above, the single buyer helps. Imagine that in the US - if you get good prices on a market of something approaching 5 million people here, imagine the pencil sharpening for a market of 300 million. Actually, you would probably split the country a little to make things easier but you would get much better prices.

[Scout]

Getting the govt to do the right thing ain't that easy. What do you suggest?

[Ian]

I know. Getting politicians to actually do something when there isn't such a fuss that they might be voted out is very difficult. I am afraid you have to make the threat of their being unemployed to sharpen their minds. I know that isn't much help to you right now

[Nik]

Ian wrote: "Governments can make that illegal, but hey, that would introduce signs of the dreaded socialism...."

It is illegal in most jurisdictions, however the enforcement may not be sufficient: https://en.wikipedia.org/wiki/Price_f...
Price-fixing - is socialist, support of never-ending competition should be deemed capitalist -:)

Ian wrote: "Big Pharma keeps stating that the costs of research make prices so high. This is a crock...."

This should be especially true in the context of generics, which core business is based on producing replicas of existing drugs which patent's protection has expired.

[Ian]

Price fixing socialist? Depends on who is fixing the prices I guess. I tho0ught we were discussing the "players" fixing prices. If the govt fixes prices, then yes, we have become very socialist - sorry, Nik. I was using the term "socialist" to describe government intervention :-)

As for generics, it is fair to state that chemical production is very much different from mechanical production. You cannot just take a recipe and hope it works! There are all sorts of tricks that you won't find in the patents, and the tricks vary between compounds. Accordingly, a generic manufacturer will still usually limit himself to a very few products, and the overall competition is not as strong as you might think. In a different area, Monsanto still is the major producer of Roundup.

[Nik]

Ian wrote: "I tho0ught we were discussing the "players" fixing prices.."

It's funny how most 'players' hate competition and would eliminate it where possible by hook or by crook

[Ian]

With pharmaceuticals, it is easy for the big players. There are a limited number of companies, and most have one or two flagship products, together with some moderate ones, and there is little overlap with the flagship ones. With the moderate ones, they will be competing in another's flagship area, and they probably have a moderate one in yours. Simple maths suggests that you compete more on marketing with your moderates, simply because if you make a big move on a price war, everyone else will do the same to you, and you lose big on your flagship products. It is not necessarily an illegal cartel, but just watching what your opposition does and trying not to rock the boat in a big way ends up with a similar effect. If you get out of line, the rest, fearing sooner or later you will pick on them, will take concerted preemptive action. So it ends up like a sort of club, where there are unwritten rules, but it is set so all the big boys prosper.

[Scout]

Does campaign finance by pharmaceutical companies influence how politicians approach this issue? I know I keep harping on it, but the Supreme Court botched it and has left the public holding the bag on so many fronts.

[Ian]

I am not so sure that you should blame the Supreme Court on this. They are supposed to interpret the law, not make it. I think Congress/White House are the villains here. They could make a law any time they like.

[Scout]

I do blame the Supreme Court.

Here's the decision: The United States Supreme Court held (5–4) on January 21, 2010, that the free speech clause of the First Amendment to the Constitution prohibits the government from restricting independent expenditures for communications by corporations (including nonprofit corporations), labor unions, and other associations.

By a one vote margin, the Supreme Court decided that free speech includes unlimited spending by corporations, labor unions, etc. Tacitly giving big money carte blanche to buy politicians.