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When was the last time a big Pharma ran a net loss, let alone went bankrupt? If they're in the business of spending money to save lives, that should happen a lot more often.

You obviously know nothing about the business. I happen to be work closely with the drug industry (as a well-connected early-stage investor/VC and by working in a closely-related industry). There are thousands of small bio-techs in the US alone that are driving much of early the innovation that you ultimately see being sold by the big Pharma companies. These companies have a very high rate of failure and they depend very much on patents.

As for the big pharmas themselves, they loose billions of dollars a year on drugs that don't pan out. For instance, Pfizer alone lost an estimated 1 billion dollars this year with the failure of torcetrapib. Please read: http://www.pharmaceutical-business-review.com/arti cle_feature.asp?guid=0B67D169-978B-4A73-9235-6C2DC F754EC2

You may also want to look at how investors have faired in these supposedly highly lucrative businesses. Between 2000 and today Pfizer has lost almost 50% of its market value. Too lucrative? Hardly.

http://finance.yahoo.com/q/bc?s=PFE&t=5y&l=on&z=l& q=l&c=

In any event, the big pharma companies do their best to diversify their risks so that one or even several losses are offset by their gains in other areas (usually with the handful of hit drugs). Arguing that pharma companies should go bankrupt more often is like arguing that insurance companies should go bankrupt more often or that consumers shouldn't be obligated to pay their premiums... It's just plain idiotic.

You're right; the designs are patented, and you're wrong; that doesn't render my argument moot. My argument- that the idea that pharmaceuticals need tremendous margins in orer to stay innovative is bunk - is quite correct. Just like with processors, there is a large enough cost of entry for medicine manufacturing that patent protection is not going to be the prime motivation for innovation. Like both AMD's and Intel's excellent offerings this year, the real incentive comes from getting more revenues by having best processor/medicine/whateverProduct, and patents are (or should be) a sideshow, if present at all.

And this is based on your experience .... where exactly? Do you understand that these drugs are in testing LONG before they even make it to market? Do you understand that many of these generic drug companies with only several million dollars in resources regularly are able to copy most drugs well enough to obtain FDA approval? Do you have any idea what the financial model looks like? Read the damn GAO article at least.... it should become clear that a ~30% margin for ~3 years (or whatever maginal numbers you are envisioning) would be WOEFULLY inadequate given the current or forseeable scientific, clinical, and regulatory environment).

Also, you might want to compare, say, Pfizer's current margins of 24% (volatile and likely to plummet soon) against, say, Redhat's margins of 22%... Yeah, you might argue it's because they're spending it a lot of money on marketing, but these companies are spending to maximize their profits (because they can't generate enough sales to recoup their losses otherwise)....not because they all like to throw that kind money out the window continuously.