Just to throw something out there, maybe for important cures to diseases, the government should just pay a one time purchase of the patent and make it public domain (or something like that). I imagine the price of the patent would be extremely high, but it might be a simpler way of dealing with things than regulating the price. And given the direct and indirect costs of regulation (such as lobbying, counter-lobbying, etc.), it might be worthwhile.
But how, and when, will the price be negotiated? I think it's important for pharmaceutical companies (or any company at all, really), that they know they can sell their product for its intended price. Otherwise they can't calculate whether the operation will be profitable or not (unless they know the maximum price beforehand).
But how do you set a sensible maximum price on a drug before it is developed?
You have a point. Pharmasset (where the drug was discovered) was bought by Gilead for $11B a couple years ago. The gov't could have been a bidder, purchased the company and sold the drug at cost. It certainly would have ended up much less expensive for them.
Well, any company could have done that. That's investing. The question is what effects it will have on the market if the government starts acting as an investor.
I'm sure the government's investment department would be visited by a lot of lobbyists, for example.
The government (via the FDA) approves drugs for use. The government being able to approve drugs and own drug companies (while still competing with the private sector) seems like a conflict of interest.
The government tends not to buy companies because it has an unfair advantage: the government can just print an extra $11B and acquire companies for basically nothing.
But once you start doing buying private companies, you have to actually RUN those companies. The government isn't really very good at that.
But the US government is also very bad at negotiating pharmaceutical pricing. The flip side is that most other developed countries in Europe are good at it. So in order to keep their margins and meet financial targets, pharma companies just raise prices on their US customers to subsidize the thinner margins that European governments pay for drugs. It's hard to reform this because the pharma lobby is quite powerful and makes a lot of money off the status quo.
