Will Obama Make the Drug Shortages Worse?
Shortages have more than tripled since 2005, according to the University of Utah’s Drug Information Service, and by the end of the year more than 300 products are likely to be back-ordered, in short supply or totally unavailable. Some are anesthetics and pain therapies, others emergency room “crash cart” drugs. But most—about 70% in 2010—belong to the class of drugs known as “sterile injectables” that are mainstays of the chemotherapy arsenal, such as paclitaxel or cytarabine…
Most sterile injectables have been off-patent for decades, but unlike other cheap generic drugs with low profit margins, production is complex and requires special facilities. Nonetheless, George W. Bush and the Republican majority decided that Medicare was “overpaying” for these cancer drugs and included a 6% cap on price increases every six months in the 2003 prescription drug bill. These new price controls (which apply to the providers that purchase the drugs) took effect in 2005, when the shortages began….
Mr. Obama’s executive order … tells the Justice Department to crack down on the “grey markets” that have sprung up to deliver supplies to doctors and hospitals, albeit with the inevitable markups. So rather than allow price signals to govern supply and demand, Mr. Obama wants to suppress them further.
See full Wall Street Journal editorial.
Given the shortages, no administration has any business shutting down grey markets. This is an example of bureaucrats who want to control everything at their worst.
Yet another evidence that price controls should not be encouraged.
This is a real no-brainer. Remove the price caps and the manufacurers will again find a profit/incentive in producing these short-supply drugs. The prices will go up and, as the supply returns to normal, the prices will again become competitive. When will we learn that artificial market controls lead to unintended disasters?
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