“What did Lipitor cost in 1970? What did Plavix cost then? Would you like to guess?”
>>No idea but I bet you will say they cost more.
No, on the contrary...Drug costs have come way down since 1970. Infinity dollars could not have bought one Lipitor or Plavix capsule in 1970, since these drugs did not exist then.
Marketing does not drive up costs. Again, the contrary is the case. Marketing minimizes the marginal cost per unit sold. This is why firms do marketing.
I don’t agree when it comes to drugs.
For example, say with 10MM marketing, Merck could charge $25 for X drug and net $3/pill.
With 30MM marketing they could net $4 per pill and sell far more but would have to charge $35/pill do defray advertising costs. Because insurance pays the vast majority and to the extent it doesn’t people need it anyway (i.e. increased cost won’t hurt sales), they will of course choose the second option.