You're getting downvoted, but you're right. Currently, the US is implicitly subsidizing other countries in this regard. If we removed the trade barriers for prescription drugs, US prices would fall and other countries would end up paying more.
An alternative scenario might be that drugs would get cheaper in the US, European drug prices stay the same and pharmaceutical companies somehow scrape by with lower (but still positive) profit levels.
Seriously, if drug companies were making a net loss in European and other countries, they'd just stop supplying in those countries and subsequently enjoy higher profits. Unless you're suggesting companies like Pfizer and Merck & Co do it anyway out of the goodness of their hearts. And prices the US pay are in no way related to what other countries pay: it's simply a function of market power and being in a much weaker bargaining position.
Most of these countries have 'single buyers': essentially a panel of medical practitioners and economists who negotiate prices on the basis of cost-benefit ratio on behalf of the entire country. So the lower drug prices in European countries (and other single buyer/universal insurance countries like Britain, Australia, Canada etc.) is simply drug companies supplying the market at the price it will bear. They are price takers in such countries, because those countries are monoponsy markets.
I realise Pfizer (net income: $7.74 billion) and Merck & Co (net income: $4.44 billion) are really doing it tough, but I think they'll be OK if Americans realise it's insane to pay close to double (>15%) the OECD average (7-8%, medical spending as a % of GDP). Although I hear US medical treatment is top notch if you're rich, otherwise statistically (and conservatively) 25% of the time it will send you bankrupt, assuming you make it out of the waiting room alive (compared to, say, the UK where medical costs account for %5 of households that report 'financial difficulty'). [0]
It truly baffles me when I hear Americans talk about this issue, as they always argue it's actually really a good thing that they're getting rogered by most of the private medical industry in their country (hey, they're nice people, we cuddle afterwards). There's some crazy mental gymnastics going on if you truly believe that paying double the 'rich country club' average on health care costs for basically the same outcomes (apart from the much higher bankruptcy rate) is in some way a good thing.
It's almost like some weird form of buyers' remorse: 'Yeah, but we treat cancer better that anyone. USA #1!'
> An alternative scenario might be that drugs would get cheaper in the US, European drug prices stay the same and pharmaceutical companies somehow scrape by with lower (but still positive) profit levels.
You're treating this as if it's a question of "fairness" to the drug companies, and it's not about that at all. If you could drive drug company profits to $0 with no collateral effects, it'd be unambiguously the right thing to do.
The question is, though, what does that do to the market? If you're an investor that has a billion dollars lying around, do you put it into drug development or social media? Both are highly risky, but the former is burdened by a regulatory regime that thinks companies in that sector should just "scrape by," while the latter has unlimited upside.
You're basically sending a signal to the market that the more valuable your business is to society, the less money you're going to make from engaging in it. That's ass backwards.
> Seriously, if drug companies were making a net loss in European and other countries, they'd just stop supplying in those countries and subsequently enjoy higher profits
They continue to sell in European countries because they don't make a marginal loss there. But if their revenue levels in the U.S. were at the level they are in Europe, they absolutely could not justify their enormous fixed costs.
> And prices the US pay are in no way related to what other countries pay: it's simply a function of market power and being in a much weaker bargaining position.
It's true that drug companies are in a much weaker bargaining position in European countries, but only because European governments exercise seller-side market power to artificially drive prices below what they would be in a market with many buyers and many sellers.
> I realise Pfizer (net income: $7.74 billion) and Merck & Co (net income: $4.44 billion)
Fun fact: Facebook's net income is about 30% higher than Pfizer's even though its total revenue is only about half. Obviously Facebook's product is much more valuable to the world and should be incentivized accordingly.
> But if their revenue levels in the U.S. were at the level they are in Europe, they absolutely could not justify their enormous fixed costs.
Maybe the public could help them substantially lower the costs by not allowing to advertise prescription drugs to laypeople?
Agree with the GP. There is some massive Stockholm syndrome going on here.
Some countries have well-functioning health care systems since the 18XX, not just since the feel-good story of "Murica is subsidizing other countries because we are such a great nation" became a thing.
Working health care is not rocket science, but it looks like everything that doesn't fit the American narrative of exceptionalism is conveniently ignored these days.
> Maybe the public could help them substantially lower the costs by not allowing to advertise prescription drugs to laypeople?
That argument, though oft-repeated, is mathematically non-sensical. Unless companies are currently operating irrationally, one less dollar spent on advertising will result in more than one dollar lost in revenue.
Every dollar earned by advertising prescription drugs to the general population is a dollar that shouldn't have been earned in the first place.
See the Opioid epidemic that is still taking lives in the US for more than 20 years. Imagine what an economic benefit it would be for the populace if all those average middle-class Jane and John Does wouldn't have had their life shattered by addiction and instead would be holding down a steady job paying taxes.
Or imagine how much cheaper it would be if the US' reckless abuse of antibiotics in both humans and livestock wouldn't cause such a rise of multi-resistant strains of diseases.
