drug companies at it again...or the market is at it again?

The WSJ reported on 2.21.2008 that a number of drug companies were raising their prices on many of their name brand drugs because their drug patents were nearing expiration. The WSJ highlighted two strategies to why a drug company would raise the drug price prior to the patent expiring and consequently opening the door to alternative generic drugs flooding the market eroding their profit margins: a) maximize their financial gain with what remains in their patent safe heaven and b) influence their consumers to move to drugs that they also produce but are slightly different in chemical makeup, deliver similar results, are currently cheaper, and have longer time horizons on their patents. The development of life saving/ life changing drugs is a complex process and requires literally rocket scientist types to complete; therefore, the delicate balance of providing the incentives for the private sector to continue to develop new drugs (doing well by doing good, patent protection etc) and allowing market forces to bring the most efficient price to the consumer is a difficult proposition. Government price controls are not the answer; unless, you only want access to drugs that do not fall under these programs ie erection and hair pills. Never ending patent time horizons would potentially create drug monopolies, which would create their own unique problems. The question I would like to propose is how does a system allow private companies to do financial well by doing good and still have competitive pricing forces in the formula? This question might be one of the harder questions to wrestle with when it comes to our health care climate in this country due to the fact that drug development is not a marketplace that lends itself to a commodity marketplace like some politicians would like for you to believe. In my next post I will try to present some solutions but in the mean time I would like to hear some ideas.