NCPA - National Center for Policy Analysis

High Drug Prices Due to Bad Regulation, Not Market Forces

October 5, 2015

Although Mrs. Clinton concludes that the high prices of pharmaceutical drugs are the result of "price gouging," her solution of price regulation will not fix the real problem -- poor pharmaceutical regulation.

  • Filing an "Abbreviated New Drug Application," required for new generic drug approval, with the FDA can cost as much as $20 million which limits competition.
  • On average a generic drug applicant will need to resubmit an application four times before gaining approval, which is on average about 4 years.

Regulating pharmaceutical drugs to a certain extent is important to prevent dangerous medicines from being released on the market, yet the current amount of regulation is stifling competition.  The FDA has increased the security on the manufacturing process and as a result several U.S. drug plants have closed their doors. The time intensive process of approval and the recent shutdown of plants is creating drug shortages and monopolies, causing the prices of drugs to skyrocket.

  • The cost of drugs amounts to about 10 percent of health-care spending
  • The amount of health-care spending used on drugs has not changed in 50 years.

Although it is currently popular to illuminate flaws in ObamaCare, the high costs of specialty drugs is a result of the combination of high deductibles, large co-pays and overregulation leading to extensive application process and manufacturing plant closures.

Source: Scott Gottlieb, "A Clintonian Misdirection on Drug Prices," Wall Street Journal, September 29, 2015.

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