WATCH: Where Do Expensive Drug Prices Come From? Obamacare and Other Government Insanity

Expensive drug prices are the result of corporate greed, you are right, but only to the extent that politicians and bureaucrats are involved.

Expensive drug prices have been in the news recently, especially because of the EpiPen scandal.

Watch this discussion of EpiPen and Obamacare on Fox Business News.

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In the case of EpiPen, there’s a lot of government insanity besides Obamacare that takes money from the taxpayer and gives it to corporations. But there is a key point mentioned: that when Obamacare costs skyrocket year after year, the Administration always defends the program saying that consumers get subsidies.

In other words, the government is pouring money into insurance companies.

Some insurance companies are still not making a profit, but the drug manufacturers are raking it in. Mike Shedlock explains that the fear of “death panels” (which is entirely rational, in my opinion) gives them leverage to keep draining money out of the economy through the government. He quotes from the New York Times:

Why? Drug manufacturers blame high prices on the complexity of biology, government regulations and shareholder expectations for high profit margins. In other words, they say, they are hamstrung. But there’s a simpler explanation.

Companies are taking advantage of a mix of laws that force insurers to include essentially all expensive drugs in their policies, and a philosophy that demands that every new health care product be available to everyone, no matter how little it helps or how much it costs. Anything else and we’re talking death panels.

Examples of companies exploiting these fault lines abound. An article in The New England Journal of Medicine last fall focused on how companies buy up the rights to old, inexpensive generic drugs, lock out competitors and raise prices. For instance, albendazole, a drug for certain kinds of parasitic infection, was approved back in 1996. As recently as 2010, its average wholesale cost was $5.92 per day. By 2013, it had risen to $119.58.

The article gives other examples.

Can you imagine a world where the cost of a laptop or mobile phone increased to over twenty times it’s original price in four years? Yet the tech industry still functions and delivers product to consumers. And prices drop rather than rise.

That’s the normal working of the marketplace. Expensive drug prices come from the government. They aren’t helping consumers; they are giving loot to corporations. “Shareholder expectations for high profit margins” are nurtured by the government.

Shedlock writes:

If Medicare and insurance companies came flat out and stated “the most we will pay for any drug is $500” an month, guess what would happen?

In case you do not know the answer here it is: No drug would cost more than $500 a month.

Such a rule does not demand drug manufacturers provide drugs, it simply states what government would pay. Might some people die as a result?

Perhaps. But perhaps not.

Would the manufacturers rather get $500 a month or nothing? Perhaps to make a point, drug manufacturers would rather get nothing, but that would make the pharmaceutical company the death panel, not the government.

I’m not saying $500 is the magic number. I just provided an example.

Case for Zero

  • Why should government guarantee any payment for drugs?
  • Why should government demand insurers provide coverage for every drug?
  • Why shouldn’t we allow drug imports from Canada and Mexico?
  • Why not try a free market and see what happens?

If Obamacare did not force insurers to provide coverage for every drug, and if Medicare put a cap on costs, prescription drug prices would crash.


Instead of fixing Obamacare, or even replacing Obamacare, let’s just trash it.

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