The U.S. Pharmaceuticals Industry -- a sign of America's decline

[idlisambar]

As India and China begin to emerge in the IT sector, it is clear that the period of U.S. dominance cannot last forever, the draining has begun. Outsourcing accelerates the process by transfering knowhow and valuable experience abroad, but in the long run with or without outsourcing protections, the U.S. will only get relatively less competitive than those developing producers that have an ample supply of educated, low-wage labor such as India.

Seeing this, a lot of commentators have begun looking for the next big thing, and biotech is often at the top of the list. With higher barriers to entry than IT/software, biotech industries do seem to have a lot of potential, but if we look at the biotech golden boy, pharmaceuticals, we are squandering even this hope.

Despite the fact that U.S. based pharmaceutical companies have a dominant worldwide market share, the U.S. actually has a ~$10 billion trade deficit in pharmaceuticals. This means that even though Americans pay the highest prices for drugs in the industrialized world, and support the industry to the tune of at least $~20 billion a year by funding most of the basic drug research, the industry does not even break even in the balance of payments.

In other words the model industry of the future, massively supported by the American consumer and taxpayer, is actually contributing to our massive trade deficits. If there is any better example than this of the decline of U.S. industry, I would love to hear it.

[brokensymmetry]

1. Ouch.

That isn't a good sign.

[leftyandproud]

2. the reason US drugs are so cheap in Africa & other countries...

is because the US is the richest country in the world, and we subsidize the cost for them...by charging the USA more, they can sell the drugs cheaper to countries that aren't able to pay normal prices.

[jwcomer]

3. doesn't mean anything

I assume what you mean by deficit is that American's purchase 10BB more from foreign pharmas than foreignors purchase from domestics pharmas. So what!

1) The US pharma industry does over 200BB in sales each year, basically half of worldwide sales.
2) US patients pay more for drugs than do patients in other countries. Therefore all else being equal it is perfectly natural to see a negative "balance of payments".
3) And most importantly, medicines are not finite resources so thinking in terms of a zero sum game with balances of payments just isn't relevent to anything aside monetary policy issues.

cheers,
Walton

[idlisambar]

4. sure it does

I assume what you mean by deficit is that American's purchase 10BB more from foreign pharmas than foreignors purchase from domestics pharmas. So what!


We currently have a historically unprecedented $550 billion dollar trade deficit in goods. What the trade figures for pharmaceuticals show is that the industry is not in a position to help reduce this deficit despite the fact that the U.S. is the center of innovation in this growing industry.

The US pharma industry does over 200BB in sales each year, basically half of worldwide sales.

What the trade figures imply is that that much of these sales are generated from development and production by U.S. based Pharmas operating abroad.

US patients pay more for drugs than do patients in other countries. Therefore all else being equal it is perfectly natural to see a negative "balance of payments".

Perfectly natural, sure, the high prices that Americans pay is a big factor in these numbers, but is this a good state of affairs? Is it good that Americans should pay more for the same drugs that were developed using their own investment?

And most importantly, medicines are not finite resources so thinking in terms of a zero sum game with balances of payments just isn't relevent to anything aside monetary policy issues.

You don't have to be a mercantilist to care about the balance of payments -- it can often be a revealing picture of the structure of industries. Yes, it is not a zero-sum game, it is true that the U.S. benefits from the development of useful drugs, but the trade figures help show that we benefit less than the rest of the world at large because we pay more, in tax and price and the relative decline of the dollar, for the same drugs.