Too Many Regulations Harm Drug Industry, Opinion Piece States
- Wednesday, January 3, 2007, 21:22
- Pharma Industry
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Critics of the pharmaceutical industry “are absolutely wrong to portray the nation’s big drug companies as heartless, avaricious behemoths that act in whatever manner they choose and always get their way,” Richard Epstein, a professor of law at the University of Chicago and a senior fellow at the Hoover Institution, writes in a Los Angeles Times opinion piece. According to Epstein, who has consulted for the pharmaceutical industry, the industry’s “big problem today is not that it’s free to run roughshod over the needs of consumers, but that it operates in a hostile and excessive regulatory environment that frustrates sound business decision-making and keeps down pharmaceutical company share prices in the stock market.” Stricter requirements for clinical drug trials “have reduced the flow of new drugs to market,” Epstein writes, adding that “regulatory attacks on the industry’s pricing model,” including proposals to allow the federal government to negotiation prices for the Medicare prescription drug benefit, “threaten its revenue stream.” According to Epstein, “Because of its high-fixed, low-variable cost structure, the drug industry will never reach perfect competitive equilibrium.” Expanding the drug “supply by avoiding regulation and encouraging the entry of new companies into the business” would lead “to greater innovation today and greater choices tomorrow,” Epstein writes. He adds that an attempt to “hold down prices by direct controls” would result in “low prices today but systematic shortages tomorrow.” Epstein concludes, “We must be careful not to mistake price controls for a cure when they are in fact a disease. Let our new reformist Congress beware” (Epstein, Los Angeles Times, 12/22).
“Reprinted with permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation . © 2005 Advisory Board Company and Kaiser Family Foundation. All rights reserved.
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