US Healthcare: Price Controls Results to Shortages in Cancer Drugs

Bush-Obama price controls have led to a shortage in cancer drugs.

That’s according to the Wall Street Journal editorial

Shortages have more than tripled since 2005, according to the University of Utah's Drug Information Service, and by the end of the year more than 300 products are likely to be back-ordered, in short supply or totally unavailable. Some are anesthetics and pain therapies, others emergency room "crash cart" drugs. But most—about 70% in 2010—belong to the class of drugs known as "sterile injectables" that are mainstays of the chemotherapy arsenal, such as paclitaxel or cytarabine.

The result is that more and more patients are receiving substandard care—relying on less effective or more expensive substitutes or else forced to postpone treatment. In oncology, delays of weeks or even days can be fatal.

Most sterile injectables have been off-patent for decades, but unlike other cheap generic drugs with low profit margins, production is complex and requires special facilities. Nonetheless, George W. Bush and the Republican majority decided that Medicare was "overpaying" for these cancer drugs and included a 6% cap on price increases every six months in the 2003 prescription drug bill. These new price controls (which apply to the providers that purchase the drugs) took effect in 2005, when the shortages began.

In a rational market, sterile injectable prices would now be rising to encourage more supply, since the demand for cancer drugs is inelastic. The old reimbursement system, called "buy and bill," was imperfect, but at least it allowed prices to float and wasn't producing the scarcity that central planning always does. The sterile injectables that are in short supply currently sell for $37.88 a dose on average, and modest price increases could make the market economic.

The problem is compounded because Food and Drug Administration rules cause pointless delays. It takes as long as two and a half years to receive FDA manufacturing approval for a generic, so other drug makers can't ramp up production if a company cancels a product line due to these disincentives or even if the fragile supply chain for sterile injectables is contaminated and manufacture is delayed.

This should serve as another evidence of the economic infeasibility of political policies cloaked with noble intentions that eventually succumbs to the laws of unintended consequences.

And another important lesson exhibited from the above is that the whims of politicians via edicts or by fiat cannot and will not ever subvert the laws of economics.

In short, the political therapy is worse than the misdiagnosed disease.

Failed repeated attempts to politicize economics has posed as a vicious cycle that had been experimented for the last 40,000 years (Professor Thomas DiLorenzo has a synopsis here).

This means that people have never learned from history. And that people simply get mesmerized and tolerate political insanity or doing the same things over and over again yet expecting different results.

I’d say that political insanity seems far worst in many aspects in the Philippines but maybe not as much as in the healthcare sector yet.