Monday, March 27, 2017

So, Now That We're Stuck With Obamacare, It's Time to Look at Prescription Drugs

Sen. Bernie Sanders attracted voters by supporting drug importation. At first glance, it sounds like a way to increase competition and thereby reduce prices.

Alas, when can you count on a socialist to get free market reforms right?

A recent letter to congress from a coalition of conservative and free market think tanks and advocacy groups lays out some of the problems with allowing the importation of prescription drugs into this country:

  • R&D funds will be decreased, and thus discourage innovation. 
  • lack of FDA oversight would raise safety concerns -- the imported drugs could even be counterfeit.
  • this is not really an issue of free trade, because the drugs that would be imported are subject to artificial price barriers in the countries from which they'd be imported. To the contrary, it's the opposite of free trade.
  • the way to safely lower prescription drug costs for Americans is to cut regulations and increase competition here. 


Tim Wohlford said...

Yes, the safety concerns are certainly worth considering. Heck, I had a tough time finding a "real" battery for my mobile phone last week -- the first one was probably a knock-off!

Having said that, let me explain some problems with free-market mechanisms in the health care field:

1. When you or a loved one is suffering / dying, there is no amount of money you won't spend on fixing that. And no amount of money that the gov't can spend will be sufficient either. So the demand is almost unlimited, and almost perfectly inelastic.

2. Medical care is a Veblen Good. Akin to steaks, fine wines, college education, etc, the demand seems to rise with the cost of the good. In fact most patients demand the most expensive drugs (the ones advertised heavily on TV), treatment centers, etc. It will take a ton of education to convince people that cheap drugs often work just as well as the new, expensive alternatives.

3. In a free market system, we normally accept that some won't buy a good because they simply cannot afford it. This is something that works if we're talking about the price of beef, but not something we'd accept (nor do we accept) for food as a whole. There is a serious moral question to be made when we say that we refuse treatments because they cost too much.

Bridget M. Bush said...

Thanks for a interesting comment. I agree of you with respect to your first point -- we'd all find the money, as Walter White well illustrated.

But for more pedestrian drugs, I think high deductibles have made the allure of TV advertising for drugs less effective. It seems to me that a significant difference in price could well offset the cachet of advertising for maintenance drugs like statins.

You are right that there is a moral component that must be addressed as well.