Government Granted Monopolies are Good for Business

Few markets in the United States are as ripe with corruption as the medical market:

A drug that treats a variety of white blood cell cancers typically costs about $148,000 a year, and doctors can customize and quickly adjust doses by adjusting how many small-dose pills of it patients should take each day—generally up to four pills. At least, that was the case until now.

Last year, doctors presented results from a small pilot trial hinting that smaller doses could work just as well as the larger dose—dropping patients down from three pills a day to just one. Taking just one pill a day could dramatically reduce costs to around $50,000 a year. And it could lessen unpleasant side-effects, such as diarrhea, muscle and bone pain, and tiredness. But just as doctors were gearing up for more trials on the lower dosages, the makers of the drug revealed plans that torpedoed the doctors’ efforts: they were tripling the price of the drug and changing pill dosages.

Before some socialist reads this and thinks that they're going to be oh so clever by posting, "See? This is what happens under capitalism," let me explain how this kind of behavior is enabled by government.

In a market unrestrained by government interference, news stories like this would result in competitors making cheaper alternatives to the drug in question. However, in this case the manufacturer has a patent, a government sanctioned monopoly, on the chemical makeup of the drug, which makes it illegal for other manufacturers, at least in countries that recognize the patent, to make a product using that same chemical makeup. If a drug manufacturer wants to triple the price of their patented products, there's nothing to stop them because no competition exists.

If you look at drugs that are no longer patented, there are usually several generic alternatives to the name brand drug. These generics have the same chemical makeup and therefore do the same thing but they usually cost a fraction of the cost of the name brand version. Once a generic is on the market the original manufacturer can either keep their prices absurdly high and lose a bunch of business or bring their prices down to a more reasonable level in an attempt to compete.

Unfortunately, so long as manufacturers can patent chemistry, they can set their prices as high as they want.