The economics of prescription drugs

Prescription drugs
currently account for well under 20 percent of the health-care budget. Within a
generation or two, they will undoubtedly account for most of it–which will be
another good thing. 
Pharma’s biochemical cures always
end up far cheaper than the people-centered services they ultimately displace.
Moreover, while much hands-on care only drags things out or soothes, the best
medicines really cure. It is true that, early on in the pharmacological assault
on a grave disease, drugs also stretch things out and can fail to beat the
disease, so we often end up buying more drug and more doctor, too. But
eventually drugs improve to the point where they beat the disease and thus lay off
both doctor and hospital.

The Commentary article is excellent, the pointer is from Craig Newmark.

Comments

"lay off both doctor and hospital"
Not entirely, diagnosis and progress tracking would still be very important.

How many of your grad students appreciate how important this is??

How long will Americans continue to fund most of the research here and let the Europeans free ride with their price-controlled drugs?

Heh, sounds like an economist who has a very poor background in medicine and biology. I'm always surprised at how poor an understanding of biology economists who write on health have. Devices (stents?), diagnostics (genetics, imaging), etc? Many people think we've hit many of the easy drug targets already. Anyway, I don't think any future doctor should take any economists predictions seriously.

We don't and they'll break the patents.

Matthew says:
"Then why do we get so many drugs with a nearly zero cost / benefit ratio, such as the statins, whose overall effect on health is close to zero and whose economic cost is huge?"

Doesn't a zero cost/benefit ratio mean that the overal effect on health is close
to infinity and the relative economic cost close to zero? :P

Anyway, I agree with BadLiberal: economic problems aren't medical problems.
Isn't it the case that health care in the future is increasingly going to be taylored to the genetic makeup of the individual? This means that health care will be more labour and knowlegde cq human capital intensive than nowadays.

This doesn't completely solve the problem brought up here, but it helps.
Drugs are so expensive, but I've discovered a drugstore that charges
less than everybody else. The drugstore is called
SmartChoiceDrugstore.com. It's an online drug store so they don't have
any of the costs of maintaining a physical pharmacy. Instead of
keeping those savings to themselves, they just charge less for their
drugs. You should check it out.

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