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PHARMA: The Motley Fool on drug costs, here and there

The Motley Fool, which is a site for individual investors, has noticed that over the long hauldrug costs are likely to be compressed over time.

    If current trends continue, it’s not hard to imagine some form of caps. Of course, the U.S. could try to convince Canada, Japan, and Europe to eliminate price controls by arguing that unfettered markets will lower costs for everyone. Europe is currently wrestling with its own drug importation issues, because, although most governments employ controls, prices vary widely from country to country. Given European governments’ lack of progress in reforming their welfare states, though, a total rollback seems highly unlikely. A more probable outcome is that the U.S. would adopt a compromise position between its current system and those of other developed countries. Still, any governmental reform would probably involve some erosion in profit margins.

In other words we’re eventually going to end up with lower pricing relative to Europe over time. But from the investors perspective they also believe that:

    The pharmaceutical industry almost certainly will never turn into a low-margin business like consumer electronics.

This is pretty obvious and is another rebuttal to the argument that any attempt to prevent pharma companies price gouging will of necessity stop all pharma R&D. I think their opinion is about right, but then I’ve said that at length before.

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