Gladwell hits on something that I’ve been puzzling over lately as it relates to the online advertising world: Why everyone is so focused on more cheaper things instead of fewer expensive ones.
As Gladwell puts it:
In the pharmaceutical world, what’s more, companies have chosen to use the potential of new technology to do something very different from their counterparts in Silicon Valley. They’ve been trying to find a way to serve smaller and smaller markets—to create medicines tailored to very specific subpopulations and strains of diseases—and smaller markets often mean higher prices. The biotechnology company Genzyme spent five hundred million dollars developing the drug Myozyme, which is intended for a condition, Pompe disease, that afflicts fewer than ten thousand people worldwide. That’s the quintessential modern drug: a high-tech, targeted remedy that took a very long and costly path to market. Myozyme is priced at three hundred thousand dollars a year. Genzyme isn’t a mining company: its real assets are intellectual property—information, not stuff. But, in this case, information does not want to be free. It wants to be really, really expensive.
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More Targeted Equals More Expensive // NoahBrier.com
Rafer sez (crossposting/enhancing from comment on my NoahBrier.com):
Drug information doesn’t want to be expensive. It wants to be highly regulated. How much of the $500M was development and how much was testing, both in terms of hard costs and the time value of money?
As long as one is building products in an unregulated market, particularly when releasing and distributing the product doesn’t require government oversight, information wants to be free. That’s why mobile has historically been such a mess.
And finally, information outside of regulation wants to be free because goods eventually are priced at the marginal cost of producing them. We in the Valley pursue free because it’s the most efficient way to cause the most pain for the market incumbents who we’re trying to topply
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ivan sez: rafer is so correct here. I might add that Gladwell is being intellectually dishonest by not mentioning generics. You could probably fabricate Myozyme at close to zero marginal cost. Again, government regulation (in this case, IP regulation), prevents the price from approaching the marginal cost.
