After Martin Shkreli raised the price of Daraprim, which costs one dollar to produce, from $13.50 per pill to $750 per pill, the public and media roundly panned the Turing Pharmaceuticals CEO for gouging patients in need of life-saving medicine.
While Shkreli’s move may have been extremely ostentatious, and drawn the public’s attention, the issue of overpriced drugs in America is one that is not confined to Shkreli and Turing Pharmaceuticals.
Drug prices in the U.S. have been skyrocketing for years. The latest data indicates that drug prices in the United States are often up to 10 times more expensive than in almost all other developed countries.
While some contend that this is a problem with the market itself, they are incorrect. It’s the government, not the market that is to blame for this situation.
The main reason why this situation exists is because of patents and intellectual property rights, a government granted monopoly privilege that has allowed these companies to claim a monopoly over a recipe for a particular medication.
In a truly free market someone like him may be able to develop a product and gouge the price, but his competitors would be free to reverse engineer and replicate that product, and offer it for a lower price.
Currently, the government is standing in the way of that happening, not just in the pharmaceutical industry, but across the economy as a whole. Often those who benefit most from the privilege of monopoly are individuals who are capable of buying the rights to a product, essentially forcing those with less resources out of the marketplace.
While Shkreli and Turing Pharmaceutical caved to public pressure and have stated that they will lower the price of Daraprim, the overall problem continues unabated. It’s important to point out that even in this controlled economic environment, it was not rules and regulations that ultimately forced him to lower the price again. It was public pressure and the threat of boycott, both of which are entirely acceptable in a free market scenario.
The reality is that Americans are being price gouged for healthcare compared to the rest of the industrialized world. The reason for the exponentially high price of healthcare in the U.S. has little to do with capitalism and free markets, and everything to do with government interference in the marketplace.