July 12, 2012
Economic theory predicts that when the price of a product substantially exceed its marginal cost that we should expect corruption. Economists usually use this prediction to complain about trade barriers that can the price of protected products by 15-20 percent above their free market price. Somehow they ignore the implication of this prediction when it comes to patent monopolies for prescription drugs that raise prices by many thousand percent above their free market.
This is the basis for the NYT series “Patent Monopolies Lead to Corruption” which documents instances where the market performs as predicted and drug companies or other actors rip off patients, insurers, or the government to maximize their profit from these monopolies. Today’s installment is about how doctors can charge ten times as much for pills dispensed in their office as would be charged by a pharmacy. As with all the other pieces in this series, there is no discussion of the importance of patent monopolies in this story or that we might have more efficient ways to finance development of new drugs.
Comments