Price freeze threatens the Venezuelan drug sector

[Bacchus39]

The Venezuelan government's decision to freeze the prices of all drugs threatens the operations of the pharmaceutical industry.

Thirty-five percent of the portfolio of products manufactured or marketed by the pharmaceutical industry is subject to price controls implemented by the government in 2003. However, last month, Venezuelan authorities decided to extend the regulation to all drugs sold in the Venezuelan market.

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This "temporary" suspension of "any price increase" for drugs sparks off uncertainty in the sector. Although the devaluation of the Venezuelan bolivar forced pharmaceutical companies to import raw materials and finished products at the rate of VEB 4.30 per US dollar, instead of the previous exchange rate (VEB 2.60 per US dollar), representatives of the industry do not know for how long the price freeze will be in force.

Last year, the products regulated by the government were those considered as "essential" by the World Health Organization (WHO) and they accounted for 35 percent of the medicines sold in the country, according to industry data.

http://english.eluniversal.com/2011/02/16/en_eco_esp_price-freeze-threate_16A5172091.shtml

[Wilms]

1. The privileged class is upset with Hugo again.

So they'll throw a tantrum and threaten all kinds of stuff and we'll read about that here thanks to you.

If the title was, "Price freeze threatens the US drug sector", you'd post it in GD and there would be 100 recs and twice as many happy emoticons within an hour.

Think about it.

[Bacchus39]

2. well, time for Hugo to nationalize another industry it looks like n/t

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[CJvR]

7. Looks like...

...that is the plan.

It seems to be a fairly standardized operation by now.

[joshcryer]

3. A price freeze in the United States would actually not cause shortages here, but would affect...

...the developing world because their prices would no longer be subsidized by the US citizen.

[social_critic]

5. Freeze aspirin prices and in a few years you won't find aspirin

I'm sure you'll agree that if aspirin prices are frozen, then in a few years aspirin will vanish off the shelves, or we'll have a thriving market for aspirin brought in from abroad by smugglers who'll sell it above the controlled price. Because Venezuela's inflation is so high, and we just had a significant currency devaluation, the process will move a lot faster. I would say in 4 months medicine shortages will be acute, and a thriving black market will evolve. Just like we have a thriving black market for US dollars today, even though it's illegal to trade foreign currency outside of the government controlled channels.

[joshcryer]

6. The US has the highest rate of pharma drug prices in the world.

US pharma makes more profit than any other sector of our economy, particularly because they are allowed to charge outrageous prices.

Good article on it: http://www.citizen.org/congress/article_redirect.cfm?ID=935

Once you have a drug and have a manufacturing base for that drug, it costs almost nothing to make. So once you recoup the R&D of that drug, the profits can be allowed to drop without affecting the overall economy.

IMO a good regulated version of capitalism would make it so that newly invented drugs should drop in price immediately upon R&D recouperation.

The big pharmas spend more in advertizing than they do on R&D, anyway.

[social_critic]

4. The middle class and the poor don't use medicines

Sometimes logic fails to grasp me, or viceversa, if it involves a thought process such as this, which devolves to "the privileged will throw a tantrum" when a medicine shortage looms.

Just to make sure the message gets across:

Venezuela's inflation rate hovers around 30 % per year. A significant devaluation of the controlled currency took place about 1 1/2 months ago. If medicine prices are frozen, the industry lacks the cash flow in bolivars to buy the dollars to buy the medicines, and lacks the bolivars to pay their employees, the electric bill, rents, delivery trucks, and so and so forth, all of which are gradually and inexorably moving higher in this inflationary economy.

For Americans who read this, do try to understand this point again - VENEZUELA'S INFLATION IS ABOUT 30 % PER YEAR. When this point sinks in, then I'm sure you'll understand why freezing medicine prices will cause medicine shortages. Also, I assume you do agree the middle class and the poor do use medicines. They WILL not like it when medicines aren't available.

[joshcryer]

8. Yeah, just to be clear I never contested that this was the case.

I was speaking purely theoretically in this and the other thread.

In theory it doesn't have to.

Venezuela obviously breaks theory. ;)