Cold-blooded solutions I: Denatured Drugs

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There's been a lot of pressure from HIV/AIDS activism groups for anti-HIV drug manufacturers to waive their patents (or to nationalize them) thus enabling the production of cheap generics for the Third World market. [*] [*].

The manufacturers, of course, are against it, not because they're evil, but because they're greedy. People in the Third World aren't a big market now, so it's not like the availability of cheap generics there would cut into the drug company's profits. What the manufacturers are primarily concerned about is the generics cutting into the current Western market, either through standards creep (what's the poorest country where you should be able to buy cheap generics?) or illegal diversion and reimportation.

What the manufacturers want to do, of course, is segment the market so that people in rich countries buy the expensive drugs rather than the cheap generics. In the current regime, they do this legally by patent and customs enforcement, but that's not the only kind of price discrimination. If the manufacturer can find a property that divides the poor and the rich, they can engage in Third Degree price discrimination. In this case, the property is simple: willingness to pay for health.

So, here's the modest (and, admittedly, pretty cold-blooded) proposal: dope the generics with some low-grade carcinogen. The idea is to choose a dosage that only modestly increases the risk of cancer, say by order 1%. This is a pretty small additional risk to bear if your alternative is to die of AIDS. On the other hand, if your alternative is to pay full price for your drugs, the additional cancer risk starts to look markedly less attractive, thus neatly separating the classes of customer based on willingness to pay.

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4 Comments

Remember that Libertarian candidate for Governor in Montana that turned blue after taking too many zinc supplements?

Perhaps drug companies could use that as a safer side-effect to prevent unauthorized usage.

Or the drug companies could just send out vigilante killers to take out those using the generics. If the vigilantes have a quota (only kill up to 0.1% of the generic users), the result is pretty much the same.

The drugs will still be re-imported and sold in the rich countries. Customers won't know that they're buying the cancer version.

The drug companies can use standard tamper-resistant validation/authentication technologies to make it easy for customers to detect the difference between the pure and denatured versions. The key idea is to give the customers an incentive to choose the pure drugs. Actually, there's no problem with distributing properly labelled denatured drugs in the rich countries as welll, since the sorting effect works just as well there.

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