Ah, Ok, interesting; thanks. I’ve heard of all kinds of mergers, including ones where the purchasing company took the name of the company being purchased, but I don’t think I’ve ever heard of a company buying the intellectual property of a defunct, bankrupt company just to adopt its more recognizable name.
Apparently these are managers who like to shop at the “bargains, seconds, closeouts” part of Wall Street. Not the top dollar full retail part of Wall Street. ![]()
Haha, good one ![]()
The technical term for this is ‘price discrimination’, and it’s a good thing. It makes markets more efficient.
It all comes down to the utility of money and how it varies for people of different means. A additional dollar is worth more to a poor person than a rich person, so their willingness to pay a specific price for a product is very different.
Getting away from the complexities of international trade for a moment, consider carmakers that have ‘luxury’ brand. GM has Cadillac. Honda has Acura, etc. Why do they do that?
Well, imagine you work for a car manufacturer and are trying to price a car for market. Your job is to maximize profit. Your car is pretty nice, and rich people will buy it. But if you mark the car up enough to extract maximum revenue from the rich, you lose poor people who will not tolerate the markup. Price it so that the poor people will buy it, and you leave rich person money on the table.
The answer is to build a car for the masses, then take the same car, add a few extra things to it, and sell it for a much higher price to the rich. Now you can maximize profit in both demographics.
Inside a country you generally can’t sell the same product at different prices to different people Not for long, anyway. So instead, we get a proliferation of brands targeted at different groups, with the actual products often coming out of the same factory, or even off the same assembly line.
Now let’s talk about Pharma. Pharma is the ultimate ‘economies of scale’ product. It can cost billions to develop a drug, but once developed a pill may cost pennies.
Pharma companies have to recoup their investment. So they need to make billions before the patent expires and generics flood the market. But in selling to a global markeplace, they can engage in price discrimination. If people in a poor country can only afford $1 per pill, the pharma company can sell it to them at a profit (but not R&D recovery). But they can only do that because they charge maybe $100 per pill in Europe, and $200 in the US, with each price representing whatever the market can bear. Or put another way, the drug company is extracting the same utility from everyone, and that represents a different dollar amoun depending on how rich each country is.
So what would happen if we forced Big Pharma to sell the pills a the price they sell them to in, say Ghana? The answer is that hte company would stpp selling pills to Ghana below US cost. And people in Ghana would not get the drug at all, drug company profits would go down, and they would be forced to raise the price IN AMERICA.
How about drug reimportation? Shouldn’t we be able to buy the drugs from Ghana and save all that money? Well, the drug company’s obvious response would be to simply stop selling to Ghana at all. Okay, but we could make that illegal. Then The drug companies will simply stop making drugs. If they can’t recoup the billions in profits from the rich people of the world (and even lower middle class Americans are rich by world standards), they won’t make the drugs at all.
I should mention one more way the Pharma industry engages in price discrimination: Insurance companies. It’s supposed to be illegal, but they will try to charge you a lot more for the same product if you are insured than if you are not. Where this practice is strictly illegal they have tricks for getting around it. For example, ‘compassionate’ programs that give cheap or free drugs to the poor certainly help the poor, bu they also have the effect of being able to price the drug even higher for everyone else.