DRUG PRICES DOWN DUE TO FREE MARKET COMPETITION

For single-payer advocates, it is axiomatic that the market doesn’t function properly where health care is concerned. But if it seems implausible that one industry would be somehow immune to the economic forces that shape every other field of human endeavor, listen to your instincts.

Robert Goldberg, of the Center for Medicine in the Public Interest, has a piece in the Seattle Post-Inteligencer that outlines the astonishing effects of free market competition on the price of prescription drugs.

The Labor Department recently reported that the inflation rate for prescription drugs dropped to 1 percent over the past year. That’s a 30-year low, well below inflation, and a salve for consumers used to price increases.

And what wrought this miracle?

Two big things changed in prescription drugs last year. One is a surge in the use of generics. The other is a fierce retail war among Wal-Mart, Publix and other retail-pharmacy giants, each seeking a bigger share of the market.

In other words, we have a textbook example of free market competition benefiting consumers.

The price suppression that results from the surge in generic usage and the “Wal-Mart effect? is the natural product of a functioning market. Better yet, neither of the catalysts of lower prices shows signs of abating.

So, once again, the advocates of government-run health care have been made to look ridiculous by the real world. Their assertions that “the market doesn’t work for health care? are the intellectual equivalent of saying “gravity doesn’t work in Detroit.?

It’s time to stop listening to these people and allow the market to work for the rest of the health care industry.

[via NCPA]

Comments 7

  1. Nick Kasoff wrote:

    Here in St. Louis, a local grocery chain just announced that they are giving away more than 50 different antibiotics for free. These are generic versions of older, but widely used products. There hope is that the cost will be offset by increased store traffic. Competition is a wonderful thing.

    Posted 29 Oct 2007 at 8:37 am
  2. Marc Brown wrote:

    As the item you link to says, the savings are coming from patent expiry. Nothing to do with the ‘free market’.

    Posted 29 Oct 2007 at 4:35 pm
  3. Brian Thacker wrote:

    I disagree with your assessment that this ‘proves’ that market forces work with regard to prescription drugs. The reason the increase was so little this year (still increased) is that they went up so much in the past couple of years. Prices went up in no small part BECAUSE OF the Medicare prescription program.

    Pharma has a monopoly because of their patents. They get federal dollars for R&D and discover drugs that they patent and overprice. The same drug in Canada and Mexico costs less than it does in America. In a free market system that would affect prices, but the pharma company and the FDA would hate that.

    I agree that socialized medicine is a bad idea. But prescription drugs is no model of ‘free market forces’ in America. It is the opposite. Allow generics sooner and you’ll see ‘free market forces’, and the cost of health care will drop.

    Posted 29 Oct 2007 at 11:16 pm
  4. spike wrote:

    Also, allow Medicare to reject drugs from the formulary due to price, and you’ll see free market.

    In some ways, a free market would be a vast improvement over what we have, which is a quasi-free market rigged by all of the powerful players in the market. Corporate welfare is not a free market.

    Posted 31 Oct 2007 at 7:21 pm
  5. The Impatient Intern wrote:

    I love most of your blog, and wholeheartedly agree with it, but I’m surprised at how few pharmacists apparently read it. When you discuss Big Pharma and the cost of prescription drugs (just like when you discuss Medicaid and the cost of breast cancer surgery as in an earlier post, etc.) you have to consider the pharmacy reimbursement. Now, I love free market competition and we need much more of it. However, it cannot come from big box pharmacies – The Angry Pharmacist said it better than I ever could here: http://www.theangrypharmacist.com/archives/2007/10/shooting_oursel.html

    Posted 15 Nov 2007 at 7:13 pm
  6. Catron wrote:

    I love free market competition and we need much more of it. However, it cannot come from big box pharmacies.

    Ah, but it can (and it is). The Angry Pharmacist is like those Mom & Pop stores that always whine when Walmart comes to town. They don’t want the competition because they want to keep charging above-equilibrium prices for their goods and services. Competition is brutal, and some businesses bite the dust, but the customer doesn’t give a damn. She wants her $4 prescription. And she’s going to get it.

    Posted 15 Nov 2007 at 9:44 pm
  7. The Impatient Intern wrote:

    What you’re missing here, Catron, is that pharmacists are not clerks. They are health care professionals. Do you see doctors doing the same? Pharmacists and doctors work together in order to keep folks healthy. It is inappropriate to liken the profession of pharmacy to any other market. Pharmacists are here to keep you alive. Did you recently watch 20/20 about pharmacy errors? Can you simultaneously hold the opinion that pharmacists need to keep a close eye on health…and that pharmacies need to be placed in such a financial position? When’s the last time you have been counseled by a pharmacist? Why is that? These are things we need to think about when we consider big box pharmacies. As Jim Plagakis says – the problem is not with the profession. It’s with the job.

    Posted 15 Nov 2007 at 11:52 pm

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