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A free market held hostage

Melvin B. Miller

Opponents of the Affordable Care Act insist that health care is a personal matter and the government ought not be involved. They also object to using public funds raised by taxes to finance a health program. They insist that private enterprise and the free market will meet everyone’s needs. However, there has not been much of an objection from this group in opposition to the current price gouging by some pharmaceutical firms.

It appears that conservatives are not quick to protect the free and open market when financiers are able to demand unreasonably high prices for patented drugs. Economics 101 establishes that monopolies disrupt the open market. When a patented drug is the only medication for a specific fatal illness, there is no competition. In that case the patient pays the price or dies. Supply and demand has not operated freely.

This monopolistic market disruption is permitted in order to allow drug companies to recover their investment in the development of a drug. Most major pharmaceutical companies spend 15-20 percent of their sales revenue on research. That process is very risky because the company might not find the cure they seek, or the Food and Drug Administration might not approve their product. Research for new drugs is a long, expensive and risky process.

Some drug companies now avoid that risk by buying approved drugs and simply raising the price. For example, the drug Glumetza for diabetes formerly sold for $896 for 90 tablets. Then the drug was acquired by Valeant Pharmaceuticals and the price for the same quantity of Glumetza rose to $10,020, an increase of 1,118 percent, according to reports.

A statement from Valeant stated that it “prices its treatments based on a range of factors, including clinical benefits and the value they bring to patients, physicians, payers and society.” Nonetheless, Elijah Cummings, the leading Democratic member of the House Committee on Oversight and Government Reform, is investigating the pricing practices of Valeant and other drug companies. Congress has jurisdiction because of the adverse effect of rising drug prices on health insurance expenses.

Conservatives opposed Obamacare that provides health insurance for the indigent on the basis of preserving economic “free market” theories. Now they are no longer interested in opposing monopolistic pricing that flouts those principles. One has to conclude that the conservatives have little interest in the welfare of those who are less affluent than they.