Why are there prescription drug shortages? - San Diego, California Talk Radio Station - 760 KFMB AM - 760kfmb

Why are there prescription drug shortages?

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The president signed an Executive Order trying to limit the number of prescription drug shortages. But, as usual, no one has bothered to ask...WHY are there prescription drug shortages?

Wouldn't you need to ask that question before you come up with a solution? We know the president didn't ask the right question because their "solution" to the problem is to hire more FDA and Department of Justice bureaucrats to manage and sue drug companies. Brilliant.

So why are there drug shortages? Because the 2003 MEdicare Prescription Drug Act limits the price increase of a generic drug by 6% every 6 months. In a free market, when there is a shortage (high demand, low supply), the price will increase. This price sends a signal to producers to make more of the product. When the government prevents the price from increasing, the signal is never sent and the shortage continues.

This is why compared to 2004, there are 4 times as many drug shortages today.

Once you know WHY there are drug shortages, it becomes abundantly clear that more government will not solve the problem.

We went over more details at 6:00 this morning:

http://media.worldnow.com/kfmbam/podcast/the_mike_slater_show_5850.mp3

 

 

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