Earlier quoted context omitted.
Thanks for the link. Actually, I've been watching a finance class given by the infamous Martin Shkreli (I came across it in an other HN comment recently). https://www.youtube.com/watch?v=ARrNYyJEnFI and I've been pondering this efficiency hypothesis. Basically, he explains how to pick stocks by fundamental analysis. Very entertaining to watch how this type of investors works. However, I can't help thinking that despi…
You misspelled that asshole's name. Find another teacher.
A pharmaceutical company makes a drug which they priced when they acquired it a long time ago, they're the only company which makes a drug for that specific condition.
The drug is priced at $13.50 per pill, which is sold in bottles of 80 pills and is covered by insurance, with a co-pay of $20. Most bottles actually cost only $1, which is a federally mandated amount for a prescription for those on medicaid.
The company (which only has margins of 8%, which is a very low amount) realises that the costs of their only successful drug are going to put them out of business and that they need to raise the price of the drug or stop selling it. This would mean no longer selling the only cure to toxoplasmosis.
They decide that raising the cost by 50x would allow them to continue R&D in to other rare diseases, so they could make other pills.
When they raise the costs to $750 per pill, everyone can still get their pills. The insurance co-pay of $20 per bottle is still exactly the same. The medicaid prescription cost of $1 per bottle is still exactly the same.
Nothing changes for the end user, it costs the exact same, the insurance company picks up the extra tab for the pills and the 2,000 people yearly who need this drug are able to survive.
You should really investigate the situation fully before blindly believing the story the media has sold to you.