Drug Price Discrimination?
By Arnold Kling
Derek Lowe compares the fact that prescription drugs cost less outside the U.S. to the phenomenon of price discrimination by airlines.
Most consumers [of pharmaceuticals] in the US don’t realize that they’re subsidizing the lower prices for everyone else, whereas I think most high-fare airline passengers have internalized it. They at least wouldn’t be as surprised by it if it were brought to their attention, and there’s no move afoot to force the airlines to lower all seats to the price of a coach ticket.
In the case of airline tickets, a business traveler who buys a ticket for a convenient flight a few days before departure presumably has a high willingness to pay. In the case of pharmaceuticals, it is different governments, notably Canada, that protect their citizens from having to bear the research costs of pharmaceuticals. The price discrimination in the airline industry represents the choices made by the producers. Not so with pharmaceuticals.
For Discussion. If drug manufacturers were to engage in price discrimination, what sort of approaches would be profitable and sustainable?