Price Gouging Allegations on Cancer Drugs

Michael Giberson

If you think political interference in gasoline markets is excessive, try reading about drug pricing for a while. From the Los Angeles Times: “Shortage of cancer drugs tied to simple economics, experts say.”

And by “simple economics” they mean the perverse incentives created by government regulation that induce oncologists to prefer prescribing more expensive cancer drugs. Most drugs must be purchased through pharmacists, but government rules allow oncologists to sell cancer drugs directly to patients. These days the  sales amount to about half of oncologist’s income. Government reimbursements through Medicare will only pay 6% over wholesale for these drugs. On this point the Times quotes from a column in the New England Journal of Medicine, “Why use paclitaxel (and receive 6% of $312) when you can use Abraxane (for 6% of $5,824)?”

Last week the President ordered an investigation “to gather information from drugmakers about potential shortages so the government can respond before patients’ lives are threatened and help prosecutors head off ‘price gouging.’ ” If you are like me, you laughed at the phrase “so the government can respond before…” The problem has been created by earlier government responses to earlier perceived problems. Good luck to those who think the problem will be solved by layering on another government response.

In unrelated price hike news: peanut butter prices not so sticky.

One thought on “Price Gouging Allegations on Cancer Drugs

  1. Drug companies are regularly hauled into court for their pricing practices, particularly in the convoluted pricing they use to give discounts to pharmacists while charging inflated prices to government Medicaid and Medicare programs.

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