Is Big Pharma Losing Money by Donating 1,000,000 Pills to the Destitute?

[Loren Booda]

How much money does a pharmaceutical company lose by giving away 1,000,000 pills to the destitute rather than selling them at $10 each to those with insurance?

 

[Pengwuino]

Can't be more than $10,000,000

Should this be in the math forums?

 

[Loren Booda]

I withdraw this thread.

 

[Ygggdrasil]

Actually, it could be quite a bit more. How do you think investors would react to a company reporting that its profits have dropped by millions of dollars? Wouldn't the stock price of the company go down, lowering the value of the company? It seems like the stock market may offer strong incentives not to give away free drugs to the poor.

 

[Andy Resnick]

How much money does a pharmaceutical company lose by giving away 1,000,000 pills to the destitute rather than selling them at $10 each to those with insurance?

Depends if any of those 1,000,000 recipients have a bad reaction and sue the company.

 

[SW VandeCarr]

Actually, it could be quite a bit more. How do you think investors would react to a company reporting that its profits have dropped by millions of dollars? Wouldn't the stock price of the company go down, lowering the value of the company? It seems like the stock market may offer strong incentives not to give away free drugs to the poor.

The stock price is affected by many things, and $10M is not that much when profits are in the hundreds of millions or billions. Even big corporations can be altruistic (and it's good public relations).

EDIT: The big cost is drug development. Once a drug is approved, the manufacturing costs are usually pennies on the dollar. After development costs are recovered, the price per pill is somewhat artificial. Companies can recover the costs of give-aways by raising prices elsewhere if they wish.

 

[SW VandeCarr]

Depends if any of those 1,000,000 recipients have a bad reaction and sue the company.

It's 1 million pills, not recipients. Whatever the size of the treated population, large pharmaceutical companies maintain full-time legal staffs and retainers. Usually the only real extra costs are if they lose a big case, or much worse, if they have to take a drug off the market (like Merck with Vioxx(c)).

 

[Proton Soup]

How much money does a pharmaceutical company lose by giving away 1,000,000 pills to the destitute rather than selling them at $10 each to those with insurance?

if it costs $1 to manufacture 100 pills, then you just spent $10,000 on marketing.

if sales go up because of it, then you profit, and you never would have made a sale to the destitute in the first place (not without government healthcare, at least).

 

[Loren Booda]

The most generous donation of pharmaceuticals I have heard of was by a drug company giving away ~1,000,000,000 doses of a drug used to fight elephantiasis.

http://in.reuters.com/article/idINLDE6271FL20100308?feedType=RSS&feedName=domesticNews"