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.