All Commentary
Tuesday, March 13, 2018

Dr. Ron Paul: Unleash the Market to Lower Drug Prices

By lowering barriers to market entry for generic drugs, all drug prices go down.

Whenever politicians say they’ll “do something” about high drug prices, disastrous discussion of price controls isn’t very far behind. It makes no sense because price controls lead to shortages and rationing which, in the case of pharmaceuticals, could cost lives.

Proponents of price controls pretend that high drug prices are a result of a free market in pharmaceuticals. This is the exact opposite of the truth. The real reason pharmaceutical prices are so high is government policies that allow big pharmaceutical companies to exclude their competitors from the marketplace. Therefore, an effective way to bring down the price of pharmaceuticals and increase access to the drugs is to reform by changing government policies that stifle the development of a competitive market in prescription drugs.


What we need is legislation that would inject needed competition into the drug industry, and we have that in the CREATES Act (H.R.2212;/S. .974). The CREATES Act creates a way to lower drug prices. It does so by making it much easier for drugs with expired patents to be sold in less expensive, generic brands.

Support for the bill crosses party and ideological lines. Liberal Democrats such as Dianne Feinstein and Richard Durbin and very conservative Republicans including my son Rand and my Senator Ted Cruz support this bill. Also included in the coalition are organizations as far afield as my Campaign for Liberty and the AARP.

The CREATES Act takes a step toward creating a competitive marketplace.

This bill is broadly popular because it reforms government policies that allow big drug companies to obtain long-term monopoly protection by keeping their generic competitors out of the marketplace. This is key. Patents grant makers of new drugs temporary monopolies only, so they can recoup huge investments in research and development and use some of their profits to chase other cures. Once a patent has expired, other drug manufacturers are supposed to be able to reproduce a “generic” but effectively identical version of that drug so that consumers may purchase quality medicines at lower prices.

Whatever you think of this system (and there are good libertarians on all sides of this debate) most agree the current system is not working the way Congress intended. This is because too many drug companies exploit the complexity of the post-patent rules to make it very time-consuming and costly for competitors to enter the marketplace. They can even withhold supplies of their drugs from companies that—under Food and Drug Administration (FDA) rules—must obtain them to make sure they’re copying them correctly. The result is the big drug companies are able to extend their de facto monopolies well beyond the intent of Congress, thus keeping the supply of the drugs artificially low and prices artificially high.

In one case that will not go away, drug maker Turing refused to sell its off-patent drug Daraprim to would-be competitors. That might not have been so bad but for the fact that the same company then turned around and hiked its prices from $14 a pill to $750. That they could get away with that with off-patent medicine is a sign that something needs to change.

The long-term solution is to reduce the power of the FDA and create a true free market in pharmaceuticals. The CREATES Act takes a step toward creating a competitive marketplace by ensuring generic drug companies can obtain the necessary samples to get FDA approval for their products and thus allow consumers to benefit from lower prices.

  • Ron Paul is an American author, physician, and former politician. He served on the board of trustees of the Foundation for Economic Education.