Blame Government for High Drug Prices

Drugs cost a lot because of regulations, not capitalism.

Hillary Clinton is using a story about a hedge fund manager chargingoutrageously marked up prices for an AIDS drug as a springboard for her plans impose a new set of mandates on insurance and pharmaceutical companies. The story is upsetting, no doubt, but as usual, progressives miss the root of the problem, and try to treat symptoms rather than curing the disease.

Here is what happened in brief: the drug Daraprim is used for treating parasitic infections that are especially dangerous to people with immune deficiencies, such as those caused by AIDS. The drug has been around for 62 years, but has only recently emerged into the spotlight. While the drug formerly sold for as little as $1 a pill, the rights to the drug have been passed around from company to company, increasing in price with each sale. The latest development, and the one that Clinton has been highlighting, is the purchase by Martin Shkreli, the chief executive of Turing Pharmaceuticals, of the rights to Daraprim for $55 million and promptly jacked up the price to $750 a pill.

It’s easy to see why people are upset by this, and why capitalism will get the blame. Both Hillary Clinton and Bernie Sanders are happy to use the story as an indictment of free markets and an excuse for more regulation. But in fact, excessive regulations are what permit Shkreli and his ilk to get away with such extreme markups in the first place. In a true free market for health care, this sort of thing just wouldn’t happen.

To see why, let’s start with the FDA – the agency responsible for drug approval in the United States