Mises Wire

Yet Another Way the Government Drives Up Pharmaceutical Prices

Social media exploded with outrage this week after American investor Martin Shkreli purchased the rights to sell the drug Daraprim and raised the price %5,000 percent from $13.50 to$750.

Shkreli was able to do this because federal law bans the importation of the drug. According to the International Business Times, a generic version of the drug is available in India at a price of 10 cents.

So what to do? Well, as you might guess, simply allowing free trade and free importation of a drug that is already widely used would be far too simple. No, the correct solution is, of course, more government regulation and control. Hillary Clinton declared Shkreli’s move to be “price gouging,” implying that the solution would lie in price controls.

Slate’s senior economics writer Jordan Weissmann opined that really the only that can be done is to give the FDA more power to punish drug companies that attempt to raise prices too much. Weissmann acknowledges that the problem could be solved by giving the FDA less power to prevent the importation of inexpensive drugs, that that sort of thing is just too crazy, wacky, and impractical to even be taken seriously.

More reasonable people than Weissmann, though, are forced to freely admit that in cases like this free importation is the obvious solution:

Amir Attaran, an expert on pharmaceutical access issues at the University of Ottawa, said it would have made much more sense to just import the drug from abroad, rather than have it produced in America for so few patients at such high cost.

Mr. Hasler said this was probably not done because foreign manufacturers were not willing to bear the expense of applying for regulatory approval in the United States.

In other words, there is exactly one thing that stands between patients and access to inexpensive drugs: the federal government.

But this inconvenient fact will be no obstacle to the usual opponents of laissez-faire. They’ll indignantly ask “how would the free market solve this problem?” as if it is an unanswerable trump card and as  if the free market had anything to do with this prohibition on trade.

And it’s a violent prohibition, mind you. Anyone who actually attempts to import the drug would face stiff penalties, and probably years in prison. There’s nothing about this that’s a mere misunderstanding or an oversight. It is, plain and simple, a use of government power to keep affordable medical care out of the hands of patients who don’t want to pay the monopoly price imposed by federal regulators.

Martin Shkreli knows all of this, of course, and is happy to profit from it. Instead of doing things the old fashioned way and having private thugs break the knee caps of potential competitors, Shkreli merely lets the feds do his dirty work for him. And make no mistake: In this endeavor, Shkreli is no entrepreneur. He is not a capitalist or captain of industry. He is a rent seeker who profits from government power.

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