If you haven’t already heard incessantly from your friend who wants socialized medicine, the price of EpiPens has gone up from $100 for a package of two to $600 for the same product. Many have weighed in, from various political viewpoints. This includes our favorite hypocrite socialist: Bernie Sanders, who took to Twitter with a highly articulate, factual, and eloquent argument for his approach to the issue. Just kidding, that will never happen. Here’s what he actually said:
Yeah, you can say that Mylan’s shareholders have rational self-interest, but what is that? Self-interest is a human emotion, right? Knowing that rational self-interest is a part of human nature, we shouldn’t fool ourselves into thinking we can set up a society without it. Instead, we should try and use that interest to accomplish positive things. This is an empirical function of free markets. What will Mylan do with their profits? They will re-invest in experimental drugs, and next thing we know there will be a new drug millions of people used to die without, and people will start complaining because it costs too much. Markets turn the self-interest of Mylan’s shareholders into new drugs that save lives.
Still not with me on this? Consider my argument through the facts of this situation. Survival Technology Inc. was a biotechnology company that made big, fat, juicy profits in the 1960s and 1970s. This desire for more profit led to them hiring a man named Sheldon Kaplan. Then, Kaplan, with this private corporation’s resources, developed the EpiPen. While he may have had good intentions to create this, if It wasn’t for a desire for profits, EpiPen couldn’t exist. You have to make money to eat, right?
If you think it’s wrong that Mylan doesn’t have any competition today in the Epinephrine injection market, that’s a valid conversation. Why don’t they have any competition? The government, that’s why. There was a generic version on its way to compete: where is it now? Shot down by the FDA, after 10 years. On average, it takes 12 years for a drug to be processed by the FDA. Mylan also happens to have several former employees in the FDA.
Somehow or another, in 50 years, no multi-billion-dollar biotech company has managed to develop an EpiPen that got past FDA approval. There are 38 corporations in the US alone that develop new drugs that are worth 2 billion dollars or more. Any one of them has the resources to make a new EpiPen. Does that sound like a free market to you? Tell me that’s not Mylan and their lobbyists working in Washington to make their profits secure.
This is the real source of fundamental economic pain in any country: the government granting protection for certain companies from competition. This is diametrically opposite of free markets, diametrically opposite of freedom, and diametrically opposite to what freedom-loving people want for their country.
If after reading all that, you still think that the Government should swoop in to set a better price for EpiPens, consider this: who has more influence over the government, Mylan or its customers? The answer is obviously Mylan, so how could you trust the government to be a ‘fair’ price setter? Furthermore, what is a price? The Economics textbook answer is: “the amount of money that has to be paid to acquire a given product”. The Economist Thomas Sowell gives us much greater insight:
“Prices are not just ways of transferring money. Their primary role is to provide incentives to affect behavior in the use of resources and their resulting products. Prices not only guide consumers, they guide producers as well. When all is said and done, producers cannot possibly know what millions of different consumers want.”
What sort of incentives does an exorbitant price hike give? For the customers, it’s a disincentive to buy, which is of course where the controversy of the situation lies. What about for producers? For other producers, it’s similar to Mylan telling them, “hey guys! I’m making tons of money with this product, come compete with me!”; It has the same effect. Invariably, if the government doesn’t prevent it from happening, the price of EpiPens will go down. Naturally, markets without government intervention, such as price controls, push prices down and quality up.