November 27, 2023
Like many self-imagined “free-traders,” the Washington Post editorial board cannot even conceive of free trade when it comes to prescription drugs. They demonstrated this fact yet again in discussing ways to deal with the high price of effective weight-loss drugs like Wegovy. These drugs carry price tags of more than $1,000 a month, making them costly for insurers, governments, or individuals who have to pick up the tab themselves.
The Post throws out a couple of ideas that could allow for a lower price, but never considers the fact that these drugs would be cheap without the government-granted patent monopolies that prevent generic manufacturers from entering the market. The monopolies are of course to provide an incentive to undertake the research, but there are other mechanisms for providing incentives, like paying people.
We did this when we wanted Moderna to develop a Covid vaccine, paying the company almost a billion dollars to develop and then test the vaccine. In the standard for our government, we then gave Moderna control over the vaccine, creating at least five Moderna billionaires. (Tell me again how conservatives want less government.) If we adopted the policy of only paying for research once, we would have both had the vaccine and low prices, since it likely could be manufactured and distributed for around $4 or $5 a shot.
In the case of Wegovy and other weight loss drugs, it’s likely the case that we would be talking about a cost of $20 or $30 a month in the absence of the patent monopoly. In this case, the monopoly is raising the price by a factor of 30 or 40, the equivalent of a tariff of 3,000 or 4,000 percent.
While the WaPo would usually go on the warpath over a tariff of 10 or 25 percent, it is apparently just fine with this much larger tariff that keeps drug prices high. Needless to say, we would not be debating how to cover the cost if Wegovy was selling for $30 for a month’s dosage.
We should also recognize this is real money. We will spend over $600 billion this year (almost $5,000 per family) on drugs that would likely cost less than $100 billion in a free market. This dwarfs the money at stake in tariffs on items like cars or steel, but it goes unmentioned at the Washington Post and in polite circles more generally.
In addition to lower prices, there is a second very important reason we should want free trade in prescription drugs. As the Post mentions, there are serious questions about the long-term side effects of Wegovy and other weight-loss drugs.
It would be good to have honest assessments of these side effects. While the researchers doing studies of these side effects may all be doing credible research, it is likely that there will be some ambiguities in the results. The billions of dollars on the table, in the form of prospective profits, puts a very big thumb on the scale towards minimizing negative side effects.
We would likely get a more honest scientific debate, and better outcomes for patients, if there wasn’t so much money on one side of this issue. For that reason also, we should want to see a free market for weight-loss drugs and drugs more generally.