The Economics of Drug Price Controls

Ben Zycher has a nice piece in today's Investor's Business Daily.

Lower prices on drugs sound great, and if the Beltway can take credit for such goodies, so much the better. So Congress has passed an amendment to the Food and Drug Revitalization Act allowing the importation of medicines from a number of countries in which governments "negotiate" — that is, impose — prices.

If implemented, this law will yield fewer new medicines, less safety and a weakened system of intellectual property protection.

Those foreign prices are far lower than those paid by Americans, even in economies approximately as wealthy as ours. Thus do the Europeans and others use their pricing policies to obtain free rides on the massive investments — about $1 billion per drug — needed to bring new medicines to market. . . . .

So many people think that they can get something for free. These rules would effectively impose price controls.