by Mitch Kokai
Senior Political Analyst, John Locke Foundation
For more than 50 years, federal and state lawmakers have been fighting “price gouging” in the prescription-drug industry. This slippery term is best defined as “prices higher than my poor, sick constituents can afford to pay, and higher than my taxpayers want to pay to give the drugs to them as welfare.” Both political parties can find cause for outrage in drug shortages and dramatic price increases.
Creators’ monopolies—patents and copyrights for limited terms—are guaranteed in the Constitution, which explains that the purpose is to “promote the progress of science and the useful arts.”
To some, that’s price gouging with a constitutional passport. …
… The consequences of price fixing may be unintended, but they shouldn’t be unexpected; history is littered with consequences of governmental price fixing and with official denials of responsibility.
It’s easy for legislators and their constituents to understand that a corporation using a monopoly on production to raise prices to the stratosphere has abused its customers.
But it seems almost impossible to convince politicians and their voters that a government abuses its citizens by holding prices below what a free market would set. The unintended consequences of such misgovernance include shortages and a loss of new investment in innovative technologies.
Thanks in large part to heavy government regulation, the prescription-drug market is complex and sluggish already; fighting price gouging with price fixing could easily make it worse.