How the Government Regulates Our Medicine

Source:: The Comic News

“Institutions are the “rules of the game” that influence choices” 

My research question to help me study the economic principle is “What are the current regulations regarding pharmaceuticals?” 

The article published in the Citizens Against Government Waste titled “Pharmaceutical Price Controls: A Prescription for Disaster” demonstrates this economic principle by showing that the government controls a lot of the pharmaceutical industry, and that these controls have been set in place for many reasons, among them for consumers’ health, but that they are given enough leeway to allow the market to work for itself.
   
First, the article summarizes the recent events that show how the government is slowly taking over the pharmaceutical industry. They write that “Politicians in Washington, D.C., and around the country are calling for a variety of policies to control drug prices, such as restricting how much drug companies spend on research and development; capping out-of-pocket expenses; penalizing an “unjustified” price; allowing the importation of drugs from other countries; utilizing Medicaid-style rebates; and, allowing the secretary of the Department of Health and Human Services (HHS) to “negotiate” prices for Medicare Part D.” All of these referendums have been made by the elected government with the hope of supplying more of America with healthcare and the drugs they need.
 
Second, the article talks about the aspect of how Paternalism affects government policies. They write that lawmakers have tried to prevent the manufacturing of drugs from overseas with tariffs, possibly in order to keep American jobs here. They write that another reason is, “Many drugs sold overseas have different formulations or, worse, the drugs could be adulterated and dangerous.” This shows the regulations that have been put into place for drug companies here in America, and how we have higher standards to keep our people safe. This also factors into the price boom because companies are spending more on cleanliness and worker safety, so they have to increase prices to try and make up for those losses.
 
Lastly, the article speaks to the more Libertarian side of the argument. They write that lawmakers leave leeway for companies to set their own prices. But they also argue that “competition and market forces, not price controls, will drive down drug costs and will do so better than any heavy-handed legislation or regulation.” They are backing the hypothetical that the natural flow of the market, as well as the self-interest of the drug companies will keep prices down over time. I have issue believing this after seeing the increased prices, although I understand the logic behind it.


  In my next blog post I will research the question: How have these trends (of increasing prescription prices) affected patients?