Rational Drug Pricing
Jeffrey SachsEarth Institute at Columbia University
Drug pricing has taken center stage in U.S. politics, and it's high time that it should. The soaring prices for drugs like Sovaldi ($1,000 a pill) and the recent hike of Deraprim from $13.50 to $750 a pill after the supplier was bought by a shady hedge-fund manager, have caused white-hot fury in the public. Corporate lobbyists and their friends in the media spout free-market platitudes about why the sky-high prices are necessary to promote innovation. It's time for a serious understanding of the policy issues.
Drug pricing is not like the pricing of apples and oranges, clothing, or furniture that well and good should be left to the marketplace. There are two major reasons. First, the main cost of drug production is not the cost of manufacturing the tablet but the cost of producing the knowledge embedded in the tablet. Second, there is often a life-and-death stake in access to the drug, so society should take steps to ensure that the drug is affordable and accessible.
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