The authors fail to consider what seems to me to be the obvious response firms would make.
Their policy is basically a tax on global sales for pharmaceutical companies, imposed by the US, which they would pay because of the threat of being excluded from the US market (roughly half of sales). The rational response is to sell off the rights to sell the international marketing rights to your drugs, either to a new international company or to an existing one. These sales are then protected from the US scheme, and the fall in the denominator of the ratio (by ~50%) should ensure the industry is compliant, without any need to alter their behaviour in other ways.
As a simple example, instead of Amgen selling Enbrel in the US and internationally, you would have AmgenUS, with the right to sell Enbrel in the US and paying the tax, and AmgenInternational, with the right to sell Enbrel internationally and does not pay the tax. These sorts of geographic splitting of marketing rights are moderately common in the industry anyway, and don’t seem to significantly increase overhead.
There are of course ways around this problem, but I think this shows the general problem with all such regulations—that the designers never consider all the unintended consequences, and so mis-estimate the effects of their policies.
The authors fail to consider what seems to me to be the obvious response firms would make.
Their policy is basically a tax on global sales for pharmaceutical companies, imposed by the US, which they would pay because of the threat of being excluded from the US market (roughly half of sales). The rational response is to sell off the rights to sell the international marketing rights to your drugs, either to a new international company or to an existing one. These sales are then protected from the US scheme, and the fall in the denominator of the ratio (by ~50%) should ensure the industry is compliant, without any need to alter their behaviour in other ways.
As a simple example, instead of Amgen selling Enbrel in the US and internationally, you would have AmgenUS, with the right to sell Enbrel in the US and paying the tax, and AmgenInternational, with the right to sell Enbrel internationally and does not pay the tax. These sorts of geographic splitting of marketing rights are moderately common in the industry anyway, and don’t seem to significantly increase overhead.
There are of course ways around this problem, but I think this shows the general problem with all such regulations—that the designers never consider all the unintended consequences, and so mis-estimate the effects of their policies.