Markets in Everything

Due to the sliding value of the pound sterling, British pharmacies are finding the export market for certain drugs more profitable than the price-controlled domestic market:

A “shopping list” from would-be buyers sent to UK pharmacies and wholesalers and seen by the Observer reveals they are being encouraged to sell on some medicines for up to 30% more than they would get from the NHS.

Pharmacies are being offered £930 for a course of Humira, a medicine for rheumatoid arthritis that they normally buy for £715, giving them an instant profit of 30%. Those involved in the trade – believed to be a handful of rogue pharmacies and wholesalers – are offering £76.50 for a month’s course of Femara, a drug used to treat breast cancer patients, which UK pharmacies can buy for £60.85, earning them a 25% profit.

Of course, the most basic of economic principles says that price controls create shortages. Which, not surprisingly, is what is happening in the UK:

According to the Department of Health’s pharmaceutical services negotiating committee, 41 medicines including Zyprexa, which is used to treat people with schizophrenia, Actonel, for osteoporosis sufferers, and Cipralex, an antidepressant, are in short supply in some areas of the country.

And what is the reaction from the government? Is it to allow prices to float, so that the market can find an equilibrium that allows for drugs to be allocated to those who need them in Britain? Of course not, the government instead bans the export of the drugs. It would be interesting to see a follow-up story on the export market after the ban has been in place for a while.

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