Thomas Sowell does a much job explaining why price controls don't work, especially in regards to pharmaceuticals. Among other things, he mentions that while Canada may have cheaper drugs than us do government intereference, they might not have nearly as many drugs if the huge profits made by US drug companies weren't then being funneled into R&D, which is ridiculously expensive. Sure, we could have price controls here in the U.S., but then there would be no incentive for drug companies to make new drugs.
I had to read an article on innovation for a class last night, and one thign that was mentioned was taking advantage of incongruities. For years the process of removing cataracts had been nearly automated, except for one step, cutting the ligament. Eye doctors had to do that the old fashioned way. Alcon noticed this anachronism, realized there was money to be made, and they developed an enzyme that dissolves the ligament, making them a load of money, and making the cataract removal less risky. Both sides won. What if Alcon had to deal with price controls to the point where they would make no profit on this enzyme? They wouldn't have developed it in the first place.
2 Comments:
Sure, price controls are garbage. That is why there were gas lines in the '70s. However, why is it the job of American taxpayers to subsidize drug cost for the whole world?
From stafford grants and NIH funding in universities to law prohibiting government agencies (Medicare) from bargaining for price, the US taxpayer is enjoying a hugely expensive and protected drug marketplace. Your employer's health plan can bargain for drugs, keep them off the formulary, refuse to pay more than X dollars, etc. Why shouldn't the largest insurance company -- Medicare -- have the same right?
It's not America's job to subsidize the rest of the world in anything, much less drugs, yet people hardly hesitate to send billions of that some taxpayer money to the Palestinians for absolutely nothing in return. We already subsidize the rest of the world in so many ways. Remember the internet? Though there were some major contributions from non-Americans, the internet would probably not exist at all if not for the U.S., and now the world wants to take control away from us. More subsidization, because we can do things that everyone else cannot.
I'm not educated enough on the drug issue to make an opinion on how we can stop using our money to pay for things for other countries, but I'm sure there's something we can do. National health care and price controls are not the answer, however. What the drug companies could do is say, "Fine, you [other country] want price controls on your drugs? Well we just won't sell any there at that price, but if you try to cheat on our patents, we will sue the living hell out of you, and we WILL win." But I haven't put much thought in to that, so I'm sure that plan has plenty of problems.
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