If you are reading this, you’re probably taking some type of prescription medication or have done so at some time in your life. We Americans love the products the big bad pharmaceutical companies make, but feel less favorable towards the companies themselves because we feel we’re being ripped off by high prices.
You think price controls and government regulation is the answer? The truth is, drug companies have been a real engine of innovation. If we destroy their profitability through price controls and government rationing, the costs would be very real. The recent slow-down in the introduction of new blockbuster drugs is in part the delayed result of underinvestment in the 1990s — the last time the political class (read Bill and Hillary) toyed with national health insurance.
Drug companies are looking to merge to save costs and diversify both geographically and into biotechnology. Yet neither one is all that safe a haven. The U.S. is the last major pharmaceutical market without universal price controls, and as such has been the world’s main financier of new drug discoveries. In a world of government-run and -priced health care, biotech innovation will also be as much at risk as traditional drug development. The biggest price we may pay for a health-care system run from Washington are the therapies we never get as a result.
For investors and the economy, the recent rout in health stocks is a case of wealth destruction. For the rest of us, it’s also a sign of the health destruction that will result if Washington’s current policy trajectory becomes law.
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