Patents, Legal Monopolies, and the High Prices for Drugs
Currently, 63 percent of American adults are on prescription drugs, according to a 2021 survey. Of this 63 percent of Americans, 26 percent say they have difficulty affording their prescriptions. Despite the prices of prescription drugs falling in recent years, an increasing number of Americans are concerned about high drug costs and demanding action be taken, 88 percent saying they want it to be easier for generic drugs to enter the market. The same percentage demand price controls to limit the maximum cost of drugs.
President Joe Biden recently tweeted that we should cap insulin prices at $35, and his Build Back Better Act includes provisions for the state to lower the description drug prices through “negotiations” and limits annual drug price increases.
Mark Cuban of Shark Tank fame recently launched the Cost Plus Drug Company. The goal of Cost Plus is to offer medications at the cheapest prices possible, charging only a 15 percent markup and pharmacist fee.
Gleevec generics are listed for $17.10, over $2,485 lower than the typical retail price of $2,502. Cuban’s business model might be successful if the authorities permit it to operate. Cuban’s business comes at an important time, when the looming threat of drug price controls is at our doorstep.
Cuban’s venture has received predictable yet disappointing attacks from progressives such as the Young Turks for the terrible crime of offering market solutions for common problems. These types of progressive also believe in using price controls as a weapon against high drug prices.
The Consequences of Price Controls
Advocating price controls to lower drug prices seems initially intuitive to some people; however, these policies don’t hold up under the slightest scrutiny. Henry Hazlitt points out in chapter 17 of Economics in One Lesson:
When prices are arbitrarily held down by government compulsion, demand is chronically in excess of supply. We have seen that if the government attempts to prevent a shortage of a commodity by reducing also the prices of th
Article from Mises Wire
