There Is No Single, Best Policy for Drug Prices

The following originally appeared on The Upshot (copyright 2019, The New York Times Company). It also appeared on page B6 of the print edition on July 17, 2019.

A majority of Americans prefer greater regulation of prescription drug prices, meaning government intervention to lower them.

But don’t count on a single policy to address a nuanced problem.

“All low-priced drugs are alike; all high-priced drugs are high priced in their own way,” Craig Garthwaite, a health economist from Northwestern University’s Kellogg School of Management, wrote with a colleague.

Outside of a few government programs — like Medicaid and the Veterans Health Administration — low-priced drugs are alike in that competition is the sole source of downward pressure on prices. When many generic versions of a brand-name drug enter the market, competition can push their prices 80 percent below the brand price, or sometimes even more.

In contrast, high-priced drugs lack competition for various reasons, “not all of which imply our goal should be to reduce prices,” Mr. Garthwaite said.

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