Why Some Pharmaceuticals Are So Expensive

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Mises

Why Some Pharmaceuticals Are So Expensive

12 HOURS AGO Gilbert Berdine

Enter “outrageous drug prices” into Google and you will receive plenty of examples. As reported here, Marathon Pharmaceuticals planned to charge $89,000 per year for its Emflaza brand of the corticosteroid deflazacort. Deflazacort was introduced in 1969 and is available outside the U.S. for less than $2 per tablet. US patients with muscular dystrophy have been obtaining the drug for around $1,500 per year from foreign sources.

This pricing behavior cannot occur in a free market. In a free or unhampered market, if Marathon tried to charge $89,000 for a year’s supply of deflazacort, they would realize zero sales. There are at least 169 generic manufacturers of at least 300 brands of deflazacort. One or more competitors of Marathon would gladly supply the drug for a lower price. In a situation with robust competition, the price will move toward the minimal cost of production plus transport over time. Marathon can make its pricing decision, and expect to realize sales, because a government agency gave Marathon monopoly privilege to sell deflazacort in the United States.