Between 1989 and 2020, Spending on Prescription Drugs Rose from 0.6 Percent of GDP to 2.4 Percent of GDP

10/21/2021 12:00am

That simple point might have been worth mentioning in an article reporting on efforts by Democrats to rein in prescription drug costs since 1989. The current level of spending of roughly $500 billion a year comes to more than $1,500 for every person in the country. Annual spending on prescription drugs is roughly one and a half times as much as the proposed spending in President Biden’s Build Back Better proposal.

It’s also worth noting that this piece repeatedly refers to Democrats’ efforts to “control” drug prices. This is inaccurate. The government already controls drug prices by granting companies patent monopolies and related protections. As a result, drug companies can charge prices that are often several thousand percent above the free market price. In the absence of these protections, we would likely be spending less than $100 billion a year on drugs, for a saving of $400 billion annually.

The point is that it is not necessary to have the government intervene to bring prices down. We could have the government not intervene, or intervene less, to avoid allowing drug companies to charge such high prices.

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