Tuesday, March 21, 2017

Why Drug Prices Are Different Internationally: My Comment To WSJ Commentary

From The Wall Street Journal, Opinion, Commentary, "How ‘Price Discrimination’ Helps Less-Affluent Countries: The Supreme Court takes up a patent-law case with repercussions far beyond U.S. borders." by Daniel Hemel and Lisa Larrimore Ouellette:
If this case were only about printer cartridges, we might not be worried about the outcome. Yet the Supreme Court’s decision will also apply to pharmaceutical products now sold for a discount in less developed countries. And it will apply to educational products like the low-cost XO tablets manufactured by Sakar International and distributed to schoolchildren world-wide.

If the patent laws cannot be used to prevent such products from being resold in the U.S., then you can bet that prices elsewhere will begin to rise toward U.S. levels. In countries where people live on a fraction of what Americans do, consumers might soon be required to pay ever greater shares of their income for medicine, for example. Even worse: Since pharmaceutical companies are subject to price controls in many countries, they might respond by pulling their drugs from some overseas markets.
My too short, due to WSJ character count limitations, posted comment to the above WSJ Commentary:
The article misunderstands how all companies price products internationally. US companies in non-US markets price products based on local competitive conditions, local consumer preferences and willingness to pay. Even software companies discount their software in foreign markets, in a very similar manner as drugs are discounted. Quickbooks regularly sells its online US Quickbooks Plus for Small Business at $40 per month, now on sale for $28 per month. Quickbooks UK website sells the same accounting software for 25 British Pounds, on sale now for 10 British Pounds. 25 Pounds is US $31.14, a 22 percent discount from the $40 US price. 10 Pounds is US $12.50, a 55 percent discount from the US sales price. Profit maximization is occurring and not charity. If importation is allowed, new domestic and international prices will be reset to maximize profits, based on local factors. That new price is dependent on local customer price sensitivity. The direction and amount of change is a guess.


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