The Nigh Seen Creeder

Vermont Senator-elect Bernie Sanders, the only avowed socialist in the U.S. Congress, says the gov'ment should consider utilizing "cost controls," meaning price controls, to bring down the price of prescription drugs; and he seems to be equally in favor of enacting the silly plan to re-import drugs from Canada, which was supported by various Democrats during this year's congressional campaign. Sen.-elect Sanders' sentiments are no doubt shared by many a member of the voting public these days; however, such thinking is borne out of a disturbing ignorance of basic economic principles.

Ever since the cost of prescription drugs became a catch-phrase political issue, liberals (and a few Republicans who should know better) have been peddling the canard that rising drug prices are due to "greed" in the pharmaceutical industry. To say that prices result from greed implies that companies can set prices where they wish, that prices are not determined by supply and demand.

Economists tell us that prices rise when demand exceeds output. Demand for new drugs has increased dramatically in recent years; it was inevitable that drug prices would follow suit. It's also important to remember that developing a new drug often costs in excess of $500 million. Millions of dollars are also spent on drugs that never reach the market. Thus, an enormous amount of capital is invested in drugs BEFORE they ever fill the pill bottles of consumers. In our free market system, drug companies are just as entitled to a return on their investment as anyone. (Those who suggest that drug companies - nay any companies, for that matter - are "too profitable" are simply repeating outdated socialist nostrums.)

Canadian consumers pay lower prices for prescription drugs because Canada's government-run health care system employs price controls. When they introduce drugs into the Canadian market, U.S. drug companies can charge just enough to cover manufacturing costs. Most of the burden of paying for research, development, and distribution falls on American consumers. Those people who think that they're doing an end-around on the drug companies by running to Canada for prescriptions are only deluding themselves. Every American consumer who has purchased prescription drugs has already helped to subsidize those low prices. Indeed, the only reason Canadian price controls "work" is because the true cost of pharmaceuticals shipped into Canada has been shifted to U.S. consumers.

So, what's the easiest way to lower drug prices in the United States? The answer is not price controls, as Sen.-elect Sanders suggests. Price controls will only create shortages (look back at the history of price controls for the past, oh, 2,000 years). U.S. drug companies should follow GlaxoSmithKline's lead and threaten to withhold drugs from Canada and Europe until they allow prices to rise to more sensible levels. We will all enjoy cheaper drugs if Canadians and Europeans are forced to pay free-market prices.