Drug Prices and Protectionism

Dean\’s half right here:

If the NYT ever let a real free trader write a column, they would probably also report on the enormous costs imposed on both the economies of the United States and developing countries through copyright protection and patent protection on prescription drugs. The latter raises drug prices in the United States by close to $200 billion a year (@ $670 per person) over their competitive market price. Free traders would be concerned about such costs.

Assume that those figures are correct. Free traders would indeed be concerned about that. Indeed are. And free traders like me look at that and go, well, OK, Americans are paying $200 billion a year more for their drugs than they would in a free market, unencumbered by such copyright and patent protection. Hmm, so, well, who benefits?

The answer is all of those foreigners who get to enjoy the drugs that the Americans have kindly subsidised the development of. For the purpose of the patent monopolies is to enable the pharma companies to recoup their $800 million per drug development costs. And to the joy of everyone else on the planet, it\’s the septics who are actually footing that bill. Everyone else is paying much closer to marginal cost than they are.

And, of course, this appeals to the (modern) liberal mindset too, or at least should do. It is, after all, or at least so we are told, righteous that the rich should subsidise the health care of the poor. The Americans are the richest (large) nation on the planet and they are indeed subsidising the health care of everyone else.

Something of a result then, don\’t you agree?

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