Tiered Prices: A Subsidy?

There is an interesting discussion unfolding on whether tiered prices for pharmaceuticals constitute a subsidy by Americans.Jens Plahte, in the Lancet Infectious Diseases, argued in January 2005 that tiered pricing of vaccines is a win-win-win situation, not a subsidy. But Doug Bandow, a senior fellow at the Cato Institute, argued in the Wall Street Journal Europe on March 16, 2005. that "much of the world has been a free rider on U.S. medical R&D".Tyler Cowen at Marginal Revolution (for blog newcomers: a very popular economics blog) picked this up and said "it is a massive form of implicit foreign aid". Dave, at No Illusions, agreed at first. ParaPundit said something similar. I disagreed, and Dave followed up with a more detailed post here. He quotes, among others, Adrian Towse and Patricia Danzon and points to Danzon's May 2000 article which suggests that prices paid by US consumers are not as much above those in other countries as many consumers think.