June 06, 2017
A Washington Post editorial praised Ohio’s decision to sue pharmaceutical companies for promoting opioid pain medication. The claim being made in the suit is that the companies minimized the risk of addiction in order to increase their market.
Incredibly, the piece does not mention the protectionism that gives these drug companies the incentive to push their drugs for improper uses. Government-granted patent monopolies allow the companies to sell their drugs for twenty, thirty, or forty times the free market price. When a government granted monopoly allows a drug company to raise its price by a factor of forty over the free market price it has the same distortionary effects as a trade tariff of 4,000 percent.
While the Post would be very quick to condemn anyone who proposed placing a 10 or 20 percent tariffs on shoes or steel to protect the domestic industry, it is apparently unconcerned about the much larger distortions that result from market barriers that are hundreds of times larger in the case of prescription drugs.
As a result of this protectionism, the country will spend more than $440 billion (around $1,300 per person) for drugs that would likely sell for less than $80 billion in a free market. In addition, this protectionism gives drug companies incentive to lie about the effectiveness and safety of their drugs, as we clearly see in the case of opiod painkillers.
Unfortunately, the Post is so committed to protectionism in this case that it does not want to even talk about the root cause of the problem.
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