U.Sis facing rapidly increasing cases of drug shortages. The recentstatistics from University f Utah’s Drug Information Science showthat the number of drugs that are shortage has increased by 74% overthe past five years. Among the main causes of the drug shortage arethe Medicare and Private-Insurance Reimbursement System for drugs.The system prohibits an increase in drug prices.
TheMedicare pricing system for outpatient drugs is a major contributorof the drug shortage. Before the Medicare Modernization Act of 2013,the drug prices were based on the drugs’ average wholesale price.However, after the enactment of the act, the drug price controls wereset. The U.S government should not impose price controls on thedrugs. According to FDA report, quality manufacturing issues accountfor 37% of the shortage while capacity and delay each account for27%. The poor quality is as a result of price controls [CITATION Jos15 p 1 l 1033 ].
Thegovernment price controls affect significantly the profitabilitymargin of the drug companies. The cost of maintaining a health-caresuch as staffing and equipping a surgery room remains the sameregardless of the drug prices. A low drugs price will imply areduction in profitability.
Governmentdetermined pricing creates an “artificial monopoly” which limitscompetition. The economic benefit of competition is the equilibriumbetween demand and supply. The market forces of demand and supplywill determine the optimal drug price. The government price controlslead to an increase in demand and a reduction in the supply of thedrugs. The low drug price will increase demand from the consumerswhile the manufacturers’ will not be willing to supply at theprevailing set price [CITATION Pet151 p 11 l 1033 ].
Governmentcontrol prices on drugs will result to the manufacturing ofsub-standardized drugs. The majority of the medicines that are inshortage are the injectable drugs that are costly to manufacture. Thedesired outcome for the price controls was to increase the drugsaffordability. However, the outcome was a shortage and poor dugsquality. The price regulations would be effective in a situationwhere the drugs under consideration are homogenous, and there are fewmanufacturers. In the healthcare industry, the drugs areheterogeneous, and there are many manufacturers. Hence, thegovernment should not impose price regulations on drugs [CITATION Chr p 1-16 l 1033 ].
Christopher M. Pope, PhD. "Legislating Low Prices: Cutting Costs or Care?" Backgrounder No 2834: August 9, 2013 (2013): 1-16.
Loftus, Peter. "U.S. Drug Shortages Frustrate Doctors, Patients." 31 May 2015. The Wall Street Journal. 11 November 2015 <http://www.wsj.com/articles/u-s-drug-shortages-frustrate-doctors-patients-1433125793>.
Walker, Joseph. "High Prices for Drugs Attacked at Meeting." Wall Street Journal (2015): 1.