Daily Archives: August 17, 2004

DRUG FINGERPRINTING FOR PRICE DISCRIMINATION?

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Lynne Kiesling

Here’s a potentially mischievous idea for solving the problem Mike posed — using fingerprinting technology when you sell the drug, say, for example, an RFID tag in each pill’s section of a blister pack that will render it null if opened by someone other than the buyer.

Loads of problems with this idea — what about nurses and caretakers giving medicine to people? What about the ability to manipulate the technology tag? And so on.

But the essential point is that to sustain the kind of price discrimination that creates the producer surplus that funds investment and research in such industries, the ability to prevent resale is crucial.

DRUG FINGERPRINTING FOR PRICE DISCRIMINATION?

Posted on by

Lynne Kiesling

Here’s a potentially mischievous idea for solving the problem Mike posed — using fingerprinting technology when you sell the drug, say, for example, an RFID tag in each pill’s section of a blister pack that will render it null if opened by someone other than the buyer.

Loads of problems with this idea — what about nurses and caretakers giving medicine to people? What about the ability to manipulate the technology tag? And so on.

But the essential point is that to sustain the kind of price discrimination that creates the producer surplus that funds investment and research in such industries, the ability to prevent resale is crucial.

PRICE DISCRIMINATION OR TOURNAMENTS OR WHAT? HOW CAN DRUG RESEARCH BE FUNDED

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Michael Giberson

Over at Economic Principals, David Warsh writes about current debates in drug pricing, and raises some excellent questions for researchers interested in economic systems design.

About half of Warsh’s column concerns differential pricing, and half concerns alternative ways to organize and pay for research.

The problem with differential pricing, what economists typically call price discrimination, is that it can be difficult to sustain. Drug research has been funded in part by changing high margins on sales to customers with a high ability to pay; drug companies also make money by selling at lower margins to customers with less ability to pay. Free flow of information about drug prices, political and private interests in reducing health care costs, and ready transportability of drugs have made sustaining price discrimination difficult. A traditional source of the profits that drive drug R&D is going away.

Perhaps some clever researchers can find a way to shore up price discrimination mechanisms in drug markets. The alternative research agenda is to come up with another approach to funding drug research, the topic of the second half of Warsh’s “Push me, Pull you.”

Alex Tabarrok has had a number of interesting posts on drug prices and R&D over at Marginal Revolution.

COTC FOR THIS WEEK

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Lynne Kiesling

This week’s Carnival of the Capitalists is at The Frozen North. I’ve been a bad citizen this summer, what with work and house and all, and have not been contributing and advertising as much as I should be.

Not surprisingly, I particularly liked Tim Worstall’s post on oil prices. Tim also gives a nice plug for KP in the comments there — thanks! One of the commenters asks about the role of domestic refinery capacity. Big role, and it’s a mess. The last refinery built in the U.S. was built in Louisiana in 1976. Since then, refiners have had to work within their existing footprints to squeeze more capactiy out of existing assets. Thankfully, technology has enabled that to happen, but we now routinely run at about 98% capacity in a lot of refineries for more of the year than they were engineered to run.

SPEAKING OF WORDS

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Lynne Kiesling

The OED website has a feature that is dangerous for linguaphiles like myself — an email subscription word of the day.

I already subscribe to A Word A Day, which I love both for the words and for the epigrams that Anu Garg picks to illustrate usage. But I’m often so crazy busy that I don’t read my word. So two words might be too much!

Today’s word is near and dear to my heart; almost as good as the day he did “monopsony”:

ceteris paribus (KAY-tuhr-uhs PAR-uh-buhs, SET-uhr-is) adverb

Other factors remaining the same.

[From Latin, literally, other things the same.]

This is a favorite term of economists. It’s used to indicate the effect of change in a variable, assuming other variables are held constant in a system.

Today’s word in Visual Thesaurus.

“Ceteris paribus, I stand by my avoid recommendation.” William Lewis; Forget the Big Spend; Sunday Times (London, UK); Apr 11, 2004.

“But since, ceteris paribus, no poet can afford to dispense with anything that may advance his design, it but remains to be seen whether there is, in extent, any advantage to counterbalance the loss of unity which attends it.” Edgar Allan Poe; The Philosophy of Composition; 1850.

This week’s theme: Latin expressions.

FUTUREPUNDIT ON THIN-FILM FUEL CELLS

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Lynne Kiesling

OK, I said we were about more than electricity here, but this is cool: Randall Parker’s post on thin-film superconductor technology that may, in time, make large-scale centeral fossil-fuel generation of electric power obsolete. I also think he’s right, that nuclear would still continue to be able to compete (although there’s a large debate about the economics of nuclear, and if it’s really so cheap than why so many government subsidies?).

And here’s an interesting sidebar (interesting to me, at least) … I was getting all geared up to rib Randall gently about using “obsolesce”, which I was convinced is not a word. So I consulted the Oracle, The Oxford English Dictionary, which informed me that obsolesce is indeed a verb, and has been so in English usage since 1873. The form “to obsolete”, meaning the same thing, has a longer pedigree (1640). But I must admit, I’m not fond of either one. Pedant? Me? Naaaah.

UPDATE: Tim Worstall has a post on solid oxide fuel cells inspired by Randall’s post. Check it out!