They will certainly come under pressure to dispense the drug, for free, across the continent of Africa and various other poor countries struggling with AIDS. National drug buyers in richer companies will surely demand bulk rates. Citizen groups in the US will surely demand the right to re-import the cheap foreign versions of the drug. Politicians will surely reimport drugs and dispense them at cheap prices. All of these will reduce the profitability of the drug by limiting the drug company's ability to price.
And remember -- they can only price high until the patent wears off and competitors enter the market. At that point competition will reduce the price to marginal cost (or close to it) and the profit is gone.
Winterspeak also left out an important disincentive in the AIDS vaccine game when discussing Paul Krugman’s recent piece on healthcare – disrespect for IP rights. India, Brazil and others have shown that they are more than willing to ignore patents and property rights if they don't get the [almost] free medicines that they want.
Why would a company spend hundreds of millions of dollars to develop a drug that it can be reasonable sure it will never be compensated for? Good will? I’m reasonably sure that isn’t going to be enough unless the CEO and every member of the board (and most of the investors) are infected with the disease and are desperate for the cure.
The simple fact is that governments do not provide the proper incentives to innovate and if we left the decisions to government on what research to fund we would have endless debates in Congress about whether or not AIDS was a gay disease or whether diabetes research was more important than impotence research. I don’t know about you, but I don’t want asshole congressmen deciding which diseases are important enough to cure, because I already know the answer, it is going to be the disease that his mother has.
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