Peter W. Huber provides an excellent defense of the Drug Manufacturers (Source article obtained through Greg Mankiv). It makes the poor Drug companies seem picked upon. Let Us examine the Issue a little further before We make up our minds. We must first remember Pharma utilizes a Accounting methodology which comes straight from Santa Claus. Their average In-Year Costs rarely translate into an Expenditure of Development Cost greater than one-quarter of the amount claimed; there being in-house Profit-taking, Bonuses for Project segment completion, and Our old friend, Stock Options, for the Executives all-around. Second, any Drug developed is produced in vast quantity for it's Debut, sufficient to saturate the Market that their expenditure on advertising (much disguised as Research Cost) when the Drug is cleared for Sale by the FDA. The American Taxpayers and Government are expected to fund the Research by lack of taxation on the Profits actually generated; did I forget the high Price of Drugs to fund those Profits?
My Primery GP and his Confederates get a Free Lunch every Workday, granted daily by Representatives of Drug companies, obstentially to discuss new Drug capabilities. Do Doctors have to be reminded of what Drugs can do that often? Regardless, I am sure the Expenses for such Conferencing are deducted as either Advertising (unlikely), or as Research (such Expense may not be deductible as Advertising, if the Product is not yet on the Market). My Primary Question, though, is how many GPs are there in the Country, and how many Drug Representatives does it take to supply them all with Lunch five days a Week?
It is obvious Drug Company Representatives must have some level of education, like they can tell the difference between an Aspirin and a Suppository. It is also necessary they be in possession of a Vehicle and Fuel to go get the Take-Out food; another miserily Expense paid by either Expense account or Salary. I suggest most Doctors can attend a Seminar, all Expenses paid at their choice of Vacationing, about 4 times a Year if not monthly; oh yes, Someone does discuss the Drug use at the Seminar--if any actually make to the Conference floor.
We live in the Land of the Corporations, praise be to George W., Our current Corporate political leadership; who fires Tax Accountants who were looking into Estate and Gift Tax fraud Cases for the IRS. Some Economists mention rudely there remains a shortfall between Federal liabilities and Frederal revenues at current Tax rates of some $60 trillion over the longrun; but the Wealthy and Connected get a freebee past wasteful Tax provisions which might force them to pay Taxes. Is there something wrong with this Picture? lgl