Pharmaceutical Companies Will Suffer Under Health Care "Reform"

by Pejman Yousefzadeh on November 22, 2009

Behold the proof:

In an attempt to illustrate the real world consequences of reform’s taxes, Senate Republicans are pointing out a provision that would tax the makers of swine flu vaccines and drugs. The provision raises $2.3 billion annually from drug makers who sell their products through government programs.

Of course, this means that the makers of the swine flu vaccine will have less incentive in the future to manufacture the vaccine, in the event that the tax in question goes through. And needless to say, the disincentives that will come about as a result of this and other taxes/attacks on the pharmaceutical industry will hamper the manufacture of other drugs as well. R&D costs for pharmaceutical companies are onerous, to say the least, so these companies don’t have much margin for profit to begin with. When that margin gets reduced still further, fewer drugs come down the pipeline, sick patients get sicker, and many of them end up dying.

This isn’t difficult to understand. But apparently, a good segment of Washington is bent on ignoring this observation.

  • davidzem

    Friend, everything you say is true but your comment on pharma's small margin for profit is off. Pharma has one of the largest profit margins in all of business. Their margins have to be high for such a business since there's such a large risk of losing capitol in failed late-stage trials and overall R&D. But compared to medical device companies and other healthcare related industries, pharma in undoubtedly at the top of the totem pole. While many small start-ups that typically create/research individual molecules will have to close, the majority of pharma will be fine and will pass the costs onto distributors, providers, and ultimately, consumers. More so, with expansion of care, the increase of 30-odd million new customers will probably off set the tax.

  • davidzem

    Friend, everything you say is true but your comment on pharma's small margin for profit is off. Pharma has one of the largest profit margins in all of business. Their margins have to be high for such a business since there's such a large risk of losing capitol in failed late-stage trials and overall R&D. But compared to medical device companies and other healthcare related industries, pharma in undoubtedly at the top of the totem pole. While many small start-ups that typically create/research individual molecules will have to close, the majority of pharma will be fine and will pass the costs onto distributors, providers, and ultimately, consumers. More so, with expansion of care, the increase of 30-odd million new customers will probably off set the tax.

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