“Market Should Should Set Drug Prices”

February 1, 2012

Oh, I forgot the first half of the headline: “Rick Santorum Tells Sick Kid.”

I came up with my own headline: Media prefers politicians to lie to sick kids.  After all, lying to sick people is perfectly acceptable.

This is so biased a headline I think liberals would agree with conservatives that this is slanted against Santorum.  The story is strongly framed against Santorum, and despite the allowance to explain himself in the article, the frame in which his words are quoted is so strong that it hardly makes a difference what Santorum says, he can’t win an uphill battle.

Overall, I agree with Rick Santorum.  The market does, on the whole a good job pricing millions of products so that scarce resources in the world are allocated to the greatest consumer satisfaction.  That’s how the free market works, and the profit-motive–“greed“–is an overpowering incentive to innovate and create goods others want to use.  To restate this specifically, the desire to be well off causes men and women to spend countless hours in the library lonesomely poring through books as the youthful years of their lives go by so that they may learn things like chemistry and biology so they can one day work on developing medicines and drugs that will help people later on.  The desire to be financially successful in life causes people to invest in companies that need to offer pay with adequate incentives for these chemists and need to buy materials for medicines and also need to cover the costs of risks that thousands of drugs fail to make it to market to get payed for.

When stated that way, the “obscene” profits don’t seem as bad.  I am very thankful that someone decided to become a chemist and someone decided to risk money to fund medicinal research.  They don’t do those things for free, either.  The prices they charge are, for the most part, due to supply and demand, the basic principles of economics.  I’m fine with a sick kid learning some economic truths because his mom wanted to use him as a sympathy prop.  What kind of mother drags her sick son to show him off to a presidential candidate just to score sympathy points???

To speak to her problem with high medicine prices, is it necessary for the government to intervene with bringing down medicine prices?  A quick mentioning of other possibilities will show that some people are refusing to think about problems in different ways–which is really the main source of bad problem-solving.  For instance, charities and churches can help defray costs of medicine in individual circumstances–alas, some people don’t want to be religious at all, or accept charity (unless other people are forced to give to the charity–government).  People can volunteer with trial treatments that companies are still experimenting with before release.  And over time prices of goods generally fall in real terms: microwaves can cost as little as three hours of labor today, unlike during the ’80s when they a moderately larger percentage of daily income.  As products become more demanded, the incentive for producing them lures companies into supplying the products which increases competition which decreases prices.

There’s more than one way to skin a cat: the government is just the easiest, thoughtless way to do skin it, though.


2 Responses to ““Market Should Should Set Drug Prices””

  1. Simon Grey Says:

    Don’t forget, though, that one reason why drug companies can get away with charging such high prices is that the government gives them a monopoly on production through patent. If there were no patents, prices would be lower. There would also be fewer drugs for more obscure or less readily curable diseases, which means that capital could be more efficiently elsewhere.

  2. Certainly government distorts the market. Another instance of distortion occurs with insurance companies: if an individual pays for a doctor up-front, he is often charged less than what an insurance company is charged. Distortions occur too often, but Santorum is essentially right in saying the market should set the prices and the government should not intervene–it’s current intervention hasn’t helped much.

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