
While the Democrats and President Trump have expressed support for reducing the cost of pharmaceuticals, Senate Majority Leader Mitch McConnell has made it clear that he will oppose efforts to impose price controls, saying that “Socialist price controls will do a lot of left-wing damage to the healthcare system.” This does not, of course, entail that McConnel would oppose all efforts to reduce the cost of drugs, but it does seem to express a general opposition to the state engaging in efforts to control prices. This view is typically defended on free market grounds: the market should set the prices for products rather than the state. The stock moral argument, going back to the beginning of capitalism, is that everyone will be better off this way.
One obvious problem with defending drug pricing on free market grounds is that the pharmaceutical industry is largely based on the state enforcing drug patents—that is, the state uses its coercive power to ensure that the market is restricted rather than free. While it is reasonable to debate what regulations, if any, should exist the fact that this sort of regulation is accepted does open the door to additional regulation. To use an analogy, if someone says that they will oppose all efforts for their family to have a pet on the grounds of the principle of the pet-free house and yet they already have a dog, then the door would thus seem to be open to more pets. After all, the principle has already been violated. This does not preclude debating about whether to get another pet but justifying not getting another pet by appealing to the no-pet policy would be absurd. As such, the free-market argument is rather problematic—unless companies are willing to fully embrace the free market. This does not provide a positive argument for price control, at best it takes away an argument against it. I now turn to an argument for price control of certain drugs.
My adopted state of Florida is routinely ravaged by hurricanes and other disasters. In the past, free-marketeers used these disasters as opportunities to use the law of supply and demand to the fullest: they charged people exorbitant prices for goods and services that were in demand because of the disaster. Detractors of this free-market approach labeled this entrepreneurship “price-gouging” and Florida responded by protecting consumers. The gist is that it is unlawful during a state of emergency to charge prices that are unconscionable. From a moral standpoint, the justification for this protection is that is morally wrong to use an emergency to coerce people into paying excessive prices. This is clearly a limit on how the free market sets prices and would seem to set a moral and legal precedent for taking an analogous approach to drug pricing.
As noted, what makes price gouging in an emergency unethical is using basic needs in a disaster as a means of coercing people into paying higher prices. The same principle would apply by analogy to drug pricing for medically necessary drugs. To use medical necessity to coerce people into paying higher prices would thus be at least as wrong as using an emergency to coerce people into playing more for important goods and services.
It could be objected that charging high prices for drugs is not gouging when the high price is the normal price. To use an analogy, charging a high price for generators during a disaster would not be gouging if that was the normal price for the generators. The counter to this is to point out that the price can be compared to the prices paid in other countries (adjusting for relevant factors) for the same drug. So, if Americans are paying exorbitant sums for the same medication that is available in Canada for far less, then Americans are being gouged. Gouging an also occur when the price is increased-such as is the case with insulin. Intuitively, price gouging can also take place even when the “normal” price is high—this is because gouging is a matter of coercion and not just a matter of comparing prices.
Given the above, it is morally and legally acceptable for the state to limit price gouging during emergencies, then it is also legally and morally acceptable for the state to do the same for medically necessary drugs. This is based on the principle that using legitimate needs to coerce people into paying excessive prices is morally unacceptable.