That’s the awkward argument the Wall Street Journal makes about drug pricing.
The Wall Street Journal argues against giving Medicare the power to negotiate prescription drug prices for that very reason.
“Except in rare cases, pharmaceutical companies develop drugs for the U.S. market. For drugs that make it in America, potential sales in Europe, Japan, Canada, China and elsewhere are gravy. Drugs that can’t make it in the U.S. are scuttled. Probable success in America is a necessary and sufficient condition for the development of new drugs.”
The Wall Street Journal argues then that Americans have to subsidize the world. “That huge cost must be spread out over a small fraction of the world’s population during a limited period of marketing exclusivity. Without wealthy American consumers and insurers who pay retail or close to it for brand-name drugs, some drugs won’t be developed at all. While it’s true that foreign governments mostly free-ride on the enormous investments in R&D made by the U.S., it’s also true that somebody has to pay. If nobody pays, many treatments that would improve and extend people’s lives won’t exist.”
Someone has to pay somehow always somehow becomes Americans have to pay.
People should be able to buy medications in a competitive market without government restrictions. They should for that matter be able to obtain them without a prescription except in the case of some addictive drugs.
But we already do have a massive socialized medicine infrastructure. And arguing that it shouldn’t be allowed to negotiate with the manufacturers because then they won’t make enough money to provide those medications to the whole world is a broken argument.
There is a sane middle ground here and this isn’t it.
Taxpayers are on the hook for massive costs due to the socialized medicine we already have. And many of those medication costs aren’t for cutting-edge lifesaving drugs that were developed with billions in R&D last year, but for some medications that have been around since the 60s. Generics help, but they can also be a double-edged sword in terms of market consolidation and efficacy.
The larger question goes beyond medication. We keep getting these free-market arguments that require us to sacrifice our prosperity and our economy for the sake of countries that have no problem with subsidizing their economies, forcing price controls and otherwise rigging the game. There needs to be a better answer for that than Americans shouldering the burden.
Yes, the answer is to require the rest of the world to pay the real price for drugs, i.e including the cost for R&D, as a condition for free trade agreement with the US. Getting the US government into the price-fixing scam like the rest of the world is not a solution.
Daniel Greenfield says
certainly as a starting point, we should not be allowing free rides
Algorithmic Analyst says
Good economic analysis.