Tuesday, March 14, 2006

Drug Prices

I like this little rant by Ronald Bailey.

The economically ignorant Times notes, "[P]eople who analyze drug pricing say they see the Mustargen situation as emblematic of an industry trend of basing drug prices on something other than the underlying costs."

Ahem. Prices are not based on costs; they are based on what people are willing to pay for something. Think of it this way.Your parents probably paid less than $25,000 for their first house. Fortunately, let's say they bought in Chevy Chase, Maryland and stayed there all their lives. Now the average home price is $600,000. If one only took inflation from 1960 into account, the house would only be worth $160,000. Unfortunately, your parents were run over by a Presidential motorcade. As their heir, would you be willing to sell their house for the equivalent of what they paid for it? Would that be fair to you?

Of course, the response by many well-meaing people is something like "Drugs are different. Sick people need drugs; how dare someone profit off their misery!" However, there will be few new drugs if you take the profit out of discovering and producing them. Then sick people will simply suffer and die as they always have, but at least no one will have made a dime off of their misery. And while I'm thinking about it; how dare those grocers and homebuilders profit off of people's hunger and need for shelter!


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