The most frequently cited reason for those price increases is that the U.S. government doesn't control prices the way other governments do either through hard bargaining with drug companies (e.g., Norway) or imposing price controls (e.g., Canada).
Don't be fooled!
- Intellectual Property: Comparing the prices for other goods and services which are the fruit of intellectual property, even though the markets are substantively the same in Canada and the U.S, Canadian prices are significantly discounted (~25% on average). The market sets the price in both nations.
- Non-Intellectual Property: The prices of goods which do not contain a lot of intellectual property (e.g., groceries, gasoline, clothing) are significantly lower in the U.S. than other countries, but not because the government drives a hard bargain or imposes price controls. In the U.S., the lower prices are the result of very competitive markets.
What's this mean for prescription drugs?
The argument that "drug prices in the U.S. are shrouded in mystery, obscured by confidential rebates, multiple middlemen and the strict guarding of trade secrets" and this conspiracy drives up their prices thus necessitating government intervention is patently false.
Graham makes the following comparison:
[The] prices of all these items, even a simple can of soda pop, "are shrouded in mystery, obscured by confidential rebates, multiple middlemen and the strict guarding of trade secrets"....I am referring, of course, to items like Coke® or Pepsi®, which nobody argues are expensive. The difference in market structure between soft drinks and prescription drugs is that consumers spend their own money directly on the former, instead of through insurers and government. Nor does it take 12 to 15 years to get a new soft drink on the market to compete with incumbent suppliers, like it does for prescription drugs.
Doing that would get rid of all of those confidential rebates to senators and members of congress as well as those multiple middlemen like lobbyists who drive up the price of prescripton drugs to consumers as well as to Medicare and Medicaid (meaning "the 48% of those who pay federal taxes in the U.S.).
The Motley Monk can hear the big government crowd crying out: "Oh but what about the poor? What about the elderly? They don't have the money to pay for their drugs. Are you so heartless that you're going to throw them to the wolves to be devoured?"
Nope. Let the federal government purchase prescription drugs for Medicare and Medicaid. It'd be a whole lot cheaper and far more transparent.
Let the discussion begin...
To access the sources cited in this post, click on the following links: