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Price Controls and Cancer Drugs November 12, 2012 9:00 AM | Tagged as Price Controls
WSJ 11/11/12 A17 -- Not Enough Cancer Drugs, Too Many Price Controls by Cassidy and Cobb
There is an immutable law of economics that is not well understood by the general public. Based on the laws of supply and demand, a free market will settle to a point that is both acceptable to the suppliers and to the demanders. This is called the market clearing price. Also, the market has a market clearing quantity. However, anytime a government imposes a price below the market clearing price, shortages appear. The opposite is also true. When a government imposes a price above the market clearing price, surpluses appear. For either condition, the shortages or the surpluses appear quickly. Depending on the responsiveness of the market, the shortage can appear in a few hours, as in gasoline shortages.
In the referenced article, we now have yet another example of market manipulation by government. Cassidy and Cobb, both doctors (and one a Congressman) relate the market for certain cancer drugs have been manipulated by lawmakers’ well intentioned price controls. These generic “sterile injectabiles” were the focus of a 2003 Bush era legislation to reduce costs. This initiated the problem. The authors predict ObamaCare will exacerbate it.
Since the 2003 legislation there have been almost five times as many shortages of key cancer generic drugs as there were before the legislation. And it is forecasted to get worse. People will pay exorbitant prices for previously low cost injectables…that is, if the drug is available at all. Do we really want to treat cancer patients, particularly those under Medicare that way?
This is just one more example of price controls and the law of unintended consequences. Please, politicians, markets work just fine without your well intended help.
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