One of my complaints about drug costs in the US is that the US subsidizes the rest of the world's drug costs.

I never knew that people actually favored this. I just thought they didn't pay attention to the fact.

Basically, I find a cure for pinky itch and figure that I need to make $200 Million to cover development costs. So I look around the world and think I can sell 20 Million during the life of the patent. So, I decide to sell them for $10 a piece. Simple economics.

Well, Canada and France and a bunch of other countries say they will only pay $6 a pill. Since the production costs of each pill is basically $0 then I figure that selling them at $6 a pill is better than not selling it. Unfortunately, those countries are half the world demand.

So, instead of getting $100 Million from international sales, I will only get $60 million. That means I need $140 million from the US. Unfortunately, I won't get 10 million sales at $14 a piece. I might only get 9 million. Anyway, I finally decide that I will make the most money charging $20 a pill and get only 7 million sales.

This means that the US is giving a $40 million subsidy to the rest of the first world and that 3 million US customers are not getting their pills.

I love Japan, Canada and Europe but I don't feel the need to subsidize them. Why should we?

http://meganmcardle.theatlantic.com/archives/2009/08/what_does_it_mean_t...