CEPR - Center for Economic and Policy Research


En Español

Em Português

Other Languages

Home Publications Blogs Beat the Press Government Granted Monopolies Make Asthma Drugs Expensive, not the Market

Government Granted Monopolies Make Asthma Drugs Expensive, not the Market

Saturday, 12 October 2013 16:06

The New York Times has an excellent piece on the high cost of asthma medicines in the United States. However there is one major error in the piece. It attributes the high prices to the market. In fact the whole piece points to the opposite. It details how government granted monopolies allow drug companies to charge prices that are close to ten times as high as the price in other countries.

Without government intervention the market would lead to much lower prices. The United States is unique in having the government play such a large role in raising prices to consumers. 

Comments (5)Add Comment
Health Care Prices Before Obamacare Tantamount to Slavery
written by Last Mover, October 12, 2013 7:54

Ben Carson, a doctor recently speaking as a paid contributor on Fox News, said Obamacare is the worst thing since slavery.

If anything associated with health care is the worst thing since slavery, it's the prices, like Big Pharma prices. Of course the good doctor is speaking among other things, from the vantage point of extortionists who can charge what they want in a monopoly market free of competition.

And of course that's not economic slavery is it. Extortionists will always point out that no one is being forced to buy the product. And some are so gracious as stated in the NYT article, to give the asthma drug away for free if income is low enough.

That's called perfect price discrimination. It means the pharma company loses not one dollar of monopoly profit in sales while gaining favorable publicity for charity at very low cost.

It will be a very cold day in hell before Fox News and Ben Carson report the slavery in health care from the demand side perspective of monopoly pricing, rather than dwell incessantly on supposed socialist restrictions on the supply side that through Obamacare, actually force insurers, providers and Big Pharma to rescind their market power somewhat and produce more at lower prices than absent Obamacare.

It's not much in terms of reducing the extortionist prices yet because the first objective is to expand coverage while spreading the high cost around to everyone.

But it sure as hell ain't the kind of slavery Ben Carson claims everyone is subjected to under Obamacare, compared to the economic slavery from the private sector they are escaping through Obamacare.
Did you really think that was the conclusion?
written by Jennifer, October 12, 2013 11:05
The piece was quite long. Patents, and their direct role in increasing prices, came up repeatedly. Nearly all of the experts they quoted drew a direct line from the high prices to various aspects of the US health care system, including patents. Even the pharma people quoted didn't really try to justify the prices as set. The piece made it clear the US was unusual in allowing the patent system to be manipulated like it is, and made international comparisons. While the pricing issue came up as well, I think it easily brought up patents and their effects more than any other mainstream article I can think of. It made a good case for patent reform, even if it was not formally stated.
glad sodium bicarbonate has wide uses compared to meadow saffron!
written by watermelonpunch, October 13, 2013 2:35
This is Beat the Press. Dean Baker can't let them get away with anything! It would only be encouraging them.

Though my pick from the article was how it made it sound like government environmental regulation was at fault.
Just because they were no longer allowed detrimental repellents, didn't mean they had to be granted new exclusive patents, edge out generics, or be allowed to raise prices willy-nilly just because they could.
Ridiculously high prices on inhalers was not the inevitable outcome of protecting the environment.

Though, overall it's a pretty good article.

My favourite part was about the repatenting of old drugs, where Dr. Robert Morrow points out that one of those was so old it was found in ancient Egyptian mummies.

And then there was this:
“Our regulatory and approval system seems constructed to achieve high-priced outcomes,” said Dr. Peter Bach, the director of the Center for Health Policy and Outcomes at Memorial Sloan-Kettering Cancer Center.

Replace "seems" with "is".
written by Bart, October 13, 2013 7:38

This is an excellent series of articles on our health care; taken together as good or better than the Brill piece in Time magazine. I hope it gets wide distribution to the rest of the country.
This may clear things up . . .
written by keenan, October 13, 2013 9:04
This is in response to “Jennifer,” who asks Baker, “Did you really think that was the conclusion?”

I assume Jennifer is questioning Baker’s sole criticism of the NYT piece, namely that it “attributes the high prices [of asthma medicine] to the market.”

Probable Explanation: An earlier version of this NYT article included a misleading sub-headline stating that “competition” in the U.S. medical market wasn’t working (implicitly contrasting this with government-controlled pricing in other developed countries). I forget the exact wording of this subhead, but that was the gist of it. Presumably Baker was reacting to this subhead, which was frankly at odds with the spirit of the article and was later edited out of existence.

Write comment

(Only one link allowed per comment)

This content has been locked. You can no longer post any comments.


Support this blog, donate
Combined Federal Campaign #79613

About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.