Why Is There So Little Price Competition among Prescription Drugs? Call It " Erectile Pricing. "

The latestarticle in the Kaiser Health News/NPR “Bill of the Month” series tells the story of Shereese Hickson, a 39-year-old disabled Medicare Advantage enrollee whose hospital charged $123,019 for two infusions of a multiple sclerosis drug:Even in a world of soaring drug prices, multiple sclerosis medicines stand out. Over two decades ending in 2013, costs for MS medicines rose at annual rates five to seven times higher than those for prescription drugs generally, found a  study by researchers at Oregon Health& Science University.“There was no competition on price that was occurring,” said Daniel Hartung, the OHSU and Oregon State University professor who led the study. “It appeared to be the opposite. As newer drugs were brought to market, it promoted increased escalation in drug prices.”That ’s not how it’s supposed to work. New market entrants should bring more competition on price. Drug manufacturers have an incentive to capture market share by reducing their prices. But that seems to be the exception, not the rule. In the new Cato Institute book  Overcharged: Why Americans Pay Too Much for Health Care, law professors Charles Silver and David Hyman (M.D.) show that this phenomenon occurs because government interference has eliminated incentives for pharmaceutal companies to compete on price:Why does competition exert less influence in drug markets than it does elsewhere? One likely explanation is “parallel pricing,” which occurs when supposed co...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs