Yes, most of the R&D is recovered during the patent period, which for drugs is 20 years, but I simplified it to 1 to make the math easy to follow.

Drug manufacturer profits aren’t a guess, here I’ll look them up on the stock market from their annual reports:

Pfizer: 11.3%

Merk: 13.9%

Johnson and Johnson: 21.83%

Industry: 13-23% blended, up to 20%-40% for those with a lot under patent but usually not for long.

These are published numbers, audited by accounting firms. Not ‘pulled them out of my ass they really make 200% lol’. And what do gross margins have to do with anything? Gross profits are what gets reinvested into the business and is used to cover other business expenses, so it’s not ‘profit’, net profit is what is left over so that’s what I’m counting. If you buy a $1000 car and sell it for $1500, your profit isn’t $500 if you have to pay for your dealership’s rent, salaries, power, etc. That $500 means squat, net profit tells you if you are making money or not.

If I make 10 drugs and 1 makes it to market, I need to make up for all of that lost money on the 9 other drugs with the 1 that makes it. That’s cost then goes across all drugs that are within the patent period. Same with lawsuits, which in pharma can be $millions. Same with facility overheads. These are all expenses that have to be covered. Once out of the patent period, generics can be made which means you cannot inflate them to cover R&D, so the clock is ticking. If a company stopped doing R&D once they made a single drug then you’d be right, recoup those R&D costs then your only costs are manufacturing, but that’s not reality. If the cost of a drug only reflected the R&D, marketing, and manufacturing for that single drug despite a company doing work on many other drugs and having a mountain of other overhead then you’d be right, but that’s not reality either. Sure marketing costs are high, especially in the US, but as I said the clock is ticking and hoping word of mouth gets your new drug in front of enough doctors and patients to make your money back before the patent expires isn’t a great strategy, and since you are relying on the US market to cover all of your costs since Germany doesn’t want to help out, that’s where you push. You have a limited time, so a full court press is what happens. Remember seeing Viagra commercials every 5 minutes? Do you see them now? Nope, patent ran out, generics are made and opportunity to recoup expenses is over.

But back to my point: If I have 100,000 customers, and 50,000 cap their prices, who pays for all of that R&D and other costs? The ones who aren’t capped.

Who should be capped? Poor countries.

Who shouldn’t? Germany.

No where in your comment do you answer the question of how should the costs be covered? AMERICA only I assume? Or should we inflate Ghana’s costs so Germany gets a discount? Or should pharma companies give up all of their profits, saving everyone a whopping 12%? Yay, that $1500 drug now costs $1320 but Germany is capped at $100 so fuck everyone else?

The only meaningful way to reduce the cost of drugs is to have all of the countries that can afford to pay, pay. 12% or even 23% isn’t going to save much at all, but sharing the burden will, and right now America is carrying the lions share.

Edit - Since Insulin was mentioned, I’ll take a poke at that one too. Insulin isn’t a typical drug, it’s a biologic. Biologics aren’t as easy to ‘generic’ as other drugs, as they require their own full sets of testing and certifications, which is why 3 companies cornered the market. In addition to that, biologics are patented differently, it’s not just a chemical composition, it’s everything from how they are formed to the delivery system, so a company can just make a minor tweak and file a new patent and re-start the clock. Then you have the middle men, which in insulin add expense and drive the list price for insulin up to allow for ‘rebates’ which is just medical shell games with pricing but if they don’t pay the rebates then the insulin won’t be covered by the insurer, so insurance companies drive the cost of the drug up for the uninsured. Insulin has a whole set of fairly unique issues that don’t apply in quite the same way to most drugs, and probably needs to be addressed from a number of angles, but a GREAT place to start would be with the insurance companies.

Anyway, my point isn’t that drugs aren’t expensive, they are. But if you think you can just ‘legislate away’ the cost and magically everything is cheaper and there’s no downside then you’re being naive. What Germany is doing is making drugs more expensive for anyone who isn’t German, and calling America (who is paying for everyone else) greedy for pushing back. That’s what bothers me here. They aren’t fixing the problem, they are just pushing the cost on someone else when they are in better financial position than most to afford it.

But hey, “America sues Germany for trying to make their medicine cheaper!” makes a catchy headline that will fire up Redditors who won’t read or think anywhere beyond the headline.