RedY2KS2k

I think everyone understands that development, advertising, testing, etc. costs are tax deductible. Assuming a 50% corporate tax rate, that means they get to spend $2 today on research to save $1 next April (or whenever they file). Lets see, $2 out of pocket today to get $1 back in April; now there's a sure fire formula for getting rich quick.

RC - Ryder

In reality isn't that a dollar for dollar write-off plus outyear depreciations on equipment, etc, and then what's left over (profit) - if any - is taxed?

RedY2KS2k

I apologize to you.

Yes, it's a dollar for dollar write off against a less than 100% tax rate. All businesses pay taxes on profit after expenses. The drug companies are certainly getting treated no better than real estate investors who deduct "depreciation" against "appreciating" assets.

Why do people feel that people should invest in (or work on) drug research for chump change, but house flippers and restaurant owners should make great returns on their time and money?

RC - Ryder

Just consider drug costs to be a moderate slice of the total health care pie - which it is.

cordycord

No one's disputing that drugs are just one part of the health care fiasco.

mikegarrison

Well, that restaurant owner has to deal with the fact that somebody could open a restaurant next door, in competition. So the free market is pretty obviously working in that case.

The drug companies are protected by patent law. Now I know this is the whole purpose of patent law (to allow inventors to make monopoly profits for a limited time in order to encourage innovation). But still, people resent it.

When the one thing that is going to keep them alive is priced for some company to make a huge profit, they feel like a milk cow. (If presented with the alternative of just "death -- because the drug was never invented", then maybe their attitude on the matter would be different. But that assumes people are rational, which we know they are not.)

cordycord

I don't think people resent patents as much as they resent "profit". Profit, which drives our economy, is a nasty, distasteful word to some.

And yet it's what allows companies like Merck to keeps thousands of scientists on the payroll. And advertising execs, and all the other people that dlq mentioned.

mikegarrison

People resent unfairly earned profit much more than they resent profit itself. There is a definite lack of transparency behind the drug industry and medicine in general. People have a pretty good idea of what the market price is for a steak or a house. But medical treatment? Drugs? Less well known to most.

Chris Stack

Yawn.

I've posted the statistics before, and if I remember them correctly, it is $500-750mm per drug for R&D/trials/testing, and 8 out of 10 drugs don't ever make it through the testing stage. Oh, and all those countries that refuse to pay more than their socialized medicine will authorize? That cost is built into America's drug prices as well.


You want to blame someone, blame the insurance companies. All that advertising, drug rep perks, etc etc that you guys are complaining about is peanuts compared to the HUGE R&D costs for drug companies, and adds a very negligible cost to the price you/your insurance pays for drugs.

RedY2KS2k

OK, so patent law that protects intellectual property for 17 years is wrong; then how do we justify protecting intellectual property that is copyrighted forever? Shouldn't an artist, composer, filmmaker lose his or her monopoly rights after 17 years?

And there is no bar to competing drugs: companies create drugs that compete with other patented drugs before the expiration of the patent all the time.