The One Where I Defend Big Pharma

For those of you interested in the controversy surrounding pharmaceutical companies and the price of drugs, Megan McArdle has a series of good posts in here blog. Good reading, particularly for those who hold negative feelings about "big pharma". I'll just list them, in order:

Supply Meet Demand
Prophets of Profit
Why Can't We Just Fund R&D From Advertising Budgets
Pharmaceuticals: Understanding Your Solution Set
Fantasy Pharma

It's a neat, brief little education for the economically illiterate. I enjoy Megan's writing because she's always very good about illustrating how and why markets work. and she doesn't shut her eyes to problems. As she points out, yes, it does hurt US consumers when foreign countries negotiate lower drug prices. But as she also points out, there's no good political solution to that problem- Price controls in other countries may result in costs being passed on to consumers, but price controls here would devastate the industry and severely reduce the flow of new drugs.

Of course, you're free to disagree with the idea that price controls would quash innovation, but as Megan points out several times, most of the evidence is not in your favor. But I suppose that's the difference between those who appreciate the free market and those who do not- Free market appreciators appreciate the benefits of the free market, but understand that it's not perfect and doesn't have the solution to all problems. Free market doubters look to government, because they'd like to think the government can solve any and all problems.

Updated 1/31/07 @ 9:35 AM : How Profitable Is Pharma?