Insulin is the major drug used by people to deal with diabetes and given the prevalence of the disease, it is very profitable for the drug companies that manufacture them. Many companies do and so one would think that competition among them for market share would lead to price benefits for consumers. And yet, the prices are so high in the US that people in need of the drugs organize trips to Canada where they can some of buy them for one-tenth the price.
Kevin Drum analyzes the way the companies have raised prices in the US seemingly in lockstep for all manner of insulin products and says that a government investigation of price fixing is long overdue.
U500 is a highly concentrated form of insulin for insulin-resistant patients. Between 2010-2014, it suddenly skyrocked in price from $12 to $59. That’s a 400 percent increase in five years.
There are multiple suppliers of insulin, but as you can see from the top chart, they all increased their prices in lockstep. There appears to be not a single pharmaceutical company with any interest in lowering their price in order to win a bigger market share. It is a mystery to me how these companies continue to avoid an antitrust action from the federal government.
The drug companies are merciless in the way that they squeeze money out of people with various ailments, and then use those high profits to pay high salaries and benefits for their executives and stockholder dividends.
¥€$, it’s a mystery.
America, the land of freedom to gouge anyone who isn’t filthy rich.
Not surprising.
People toss around the phrase “free-market capitalism” as if it is single thing, like it means something. Completely oblivious that capitalism and free markets are two separate and distinct, often contradictory, ideas. The free market ideal is competition and choice with producers competing on price, quality, and service. Businessmen love to act like they enjoy competition. Fact is they loath competition. Competition is hard. What with having to constantly improve the product, its delivery, and lower the costs of production. The up side of competition is that the consumer gets better products at lower prices. There is no real benefit for the business.
On the other side is capitalism. The ideal of capitalism is monopoly. it is technically illegal but businessmen love that. It can be a hard path to become the sole producer of a product and, here again, the business owners really don’t want to work that hard, but at least it is for a chance to really start rolling in the money by having a a monopoly.
Of course there is a shortcut to a monopoly. You can either divide the territory, or consumer base up. Or you can collude on price. Either way you can avoid the bloodbath of active, cutthroat, competition. Adam Smith said that, paraphrasing here, ‘that any time two competitors speak to each other it is the peril of the consumer’. The number of trade associations and business organization tells you where competition is in the USA.
There are other methods of taking the hard edge off direct competition: conglomeration and cross-investment. Conglomeration allows for consumers to assume competition and choice when, in fact, there is little or none to be had. Cross-investment is when a corporation buys stock in a potential competitor. If Ford owns 25% of Honda are they still competing? Those cross investments are hard to find out about, but they, as far as I can tell, are not illegal.
Remember: business hates to compete. Competition drives down profits and makes them work harder for ever slimmer profits. Consumers benefit but business loses. So business will take every opportunity to avoid any competition they can’t win quickly and easily. All the while presenting themselves as warriors, ninjas, wild animals in a cutthroat fight for survival and overjoyed to be in the competition to better serve their customers in every possible way. This is pure BS. Generally it is only government regulation that forces businesses to compete.
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” -- Adam Smith
Duns@#4: Well done. I love that line but can never remember the wording or where to find it. I hope I did it justice.