September 22, 2015
By Avik Roy
Today in Iowa, Democratic presidential candidate Hillary Clinton unveiled a set of policies designed to tackle the high price of branded prescription medicines. Her plan, such as it is, wouldn’t solve the problem of high drug prices; in certain ways, it would make that problem worse. But advocates of the free market are mistaken if they think the pharmaceutical status quo is aligned with their principles. We don’t have a free market for innovative medicines—and it’s about time we enacted reforms that would achieve one.
Branded prescription drugs: a constitutionally sanctioned oligopoly
In a conventional market—say, the market for bananas—various farmers compete on price and quality to sell their bananas to consumers, or to intermediaries like grocery stores. Conventional laws of supply and demand dictate the price of a bunch of bananas.
Innovative medicines are usually accompanied by patents. For example, Gilead’s Sovaldi, a high-priced drug for hepatitis C, can’t be manufactured by anyone without Gilead’s permission, until its core patents expire sometime in the next decade (the precise date may be subject to litigation).
Read the full article at Forbes.com: Hillary Clinton's Drug Price Plan Would Make The Problem Worse -- But That Doesn't Mean We Should Do Nothing