It s no secret that the US has been (and still is) facing a life-threatening shortage of common hospital drugs. Much has been written about this frightening problem, including a 2011 op-ed in the New York Post by ACSH s Dr. Josh Bloom entitled Running out of Common Drugs.
But what is going on now in Greece makes our problems seem trivial. And it also serves as a sobering example of the fallout that can arise from poorly conceived policies in this case, price controls on drugs.
Greece s economic collapse has made it impossible for the country to pay its bills, leaving drug companies reluctant to continue supplying the country with little hope of being paid. And compounding this problem is a built-in system of prices controls, which make drug prices in Greece at least 20 percent lower than anywhere else in the EU.
This, in turn has created another problem parallel trade where drugs imported by Greece at an artificially low price are then resold to other countries at higher prices, greatly compounding the shortage.
Dr. Bloom says, Price controls on any commodity will inevitably lead to shortages. This is best illustrated by examining the effect of our own 2005 law that put a price cap on drugs used under Medicare. This made the manufacture of many drugs especially sterile injectables unprofitable, causing generic drug makers to stop making them. The number of drugs in short supply shot up five-fold in the 6 years following the law. This is no coincidence.
Meanwhile, there are panicked lines of people at Greek pharmacies, which have to turn them away because they have nothing to sell. How this is resolved is anyone s guess, but the suffering and certain loss of life should serve as a lesson to all policy makers. The consequences of a bad law will be felt by those most in need.
