Where Have You Gone, Vilfredo?

We’re still talking about the high price of drugs and how to lower them while not decreasing incentives for research and development. There is a mechanism for achieving this that was explored over a hundred years ago by an Italian engineer, statistician and economist named Vilfredo Pareto. Government economic policies often contemplate exchanges of wealthContinue reading “Where Have You Gone, Vilfredo?”

The Problem with Drug Price Regulations

In previous posts I asserted that the Centers for Medicare and Medicaid Services (CMS) pays much less than private insurers for the same healthcare services because price discrimination by healthcare providers is easy to achieve (here and here). In general, price discrimination gets a bad rap in the economic literature and is even illegal inContinue reading “The Problem with Drug Price Regulations”

If the Market for Pharmaceutical Drugs is Sick, then What is the Cure?

Markets, like people, can be either healthy or sick. Healthy markets need no assistance from the government to provide adequate quantities at reasonable prices; however, sick markets do. For a market to be healthy, its price must equal the marginal cost of production. In equation form this is P = MC. Marginal cost (MC) isContinue reading “If the Market for Pharmaceutical Drugs is Sick, then What is the Cure?”

The Lone Economist Does Drugs

The prices of some life-saving drugs are astronomical in the United States with some treatments costing over $100,000 over the course of a year. Unlike its pricing policies for other types of healthcare, Medicare pays roughly the same for prescription drugs as private insurers. This policy has come under attack by several policy-makers and politiciansContinue reading “The Lone Economist Does Drugs”