One change was a retreat from antitrust enforcement, which eventually led to a much more concentrated industry. started to move away from the policies that had fostered an open market for pharmaceuticals during the wonder drug era. In so doing, the agency broke apart the emerging cartel and ensured a more competitive market for the new and powerful drug.īut beginning in the 1980s, the U.S. ![]() Though the FTC could never prove price-fixing in court, the FTC forced the companies to license out tetracycline at a low price. After the report’s release, the FTC charged five drug companies with blocking new competitors and fixing prices for tetracycline. In 1958, the Federal Trade Commission (FTC) authored a report on the antibiotics industry in which it found that a handful of companies had cornered the market and kept prices high for tetracycline, a broadly useful antibiotic.īut these cartels were rolled back by protracted government countermeasures. The next decade saw industry efforts to drive prices back up through monopoly. This helped drive down Penicillin’s price––from $3,995 a pound in 1945 to $282 a pound in 1950. After the World War II, many companies competed to sell Penicillin, and the market became less and less dominated by any one player. The market for antibiotics illustrates this regulatory regime’s success. Meanwhile, the threat of both civil and criminal antitrust suits kept drug companies from combining or colluding in ways that would significantly reduce competition. In other instances, regulators forced drug companies to license their patents when they gained too much market share. Government policies, for example, fostered competition by limiting the length of patent monopolies. This was also, however, the era in which politicians in both parties first embraced the importance of “trust-busting.” In keeping with the wide, bi-partisan opposition to monopoly that lasted up until the 1960s, policymakers did not allow drug companies to combine or abuse their powers in ways that threatened competition. In one infamous case, the bureau successfully fined Clark Stanley for “falsely and fraudulently” marketing his “snake oil liniment.” Due to these concerns, Congress and President Theodore Roosevelt passed the Food and Drugs Act of 1906, creating the Bureau of Chemistry-the precursor to the Food and Drug Administration. The government’s role in structuring the pharmaceutical marketplace dates to the early 1900s when unproven, deceptively marketed patent medicines harmed public health and eroded consumer confidence. The result is a highly dysfunctional pharmaceutical market that produces high prices and less and less innovation. has since largely abandoned the policies it previously used to foster healthy competition. These policies enforced standards for safety and effectiveness, provided funding for basic research, and critically, limited patent monopolies and mergers between drug-makers.īut the U.S. This was largely the result of government policies that allowed for a comparatively open and efficient pharmaceutical market. How is America managing to get the worst of all worlds when it comes to drugs? Many explanations trace to public policy changes that have led to the monopolization of the drug industry over the last generation.įrom the end of the WWII through the 1960s, Americans benefitted from an unprecedented parade of wonder drugs, from broad-spectrum antibiotics, steroids and antihistamines, to the first chemotherapies, and the oral contraceptive known as “the pill.” Though there were complaints about affordability, most of these wonder drugs were reasonably priced by today’s standards. As a study in the Journal of the American Medical Association found, nearly half of the drugs approved by the Food and Drug Administration between 20 lacked any tangible health benefits, such as prolonging life or relieving symptoms. Moreover, today’s new pills typically have only modest, if any, proven therapeutic value over existing treatments. The drop-off has been particularly steep since 1996, when 54 new drugs came on line, compared to only 30 in recent years. ![]() The average number of new drugs approved each year has declined since the 1960s. In recent years, the prices Americans pay for drugs have only soared higher, even as innovation in the pharmaceutical industry slackens. Yet there is a problem with this argument. If the United States adopted policies to bring its drug prices in line with those in other advanced nations, they warn, drug companies would be forced to cut their spending on research and development, resulting in fewer cancer drugs, treatments for Alzheimer’s, and the like. Americans must pay the highest drug prices in the world because of the high cost of innovation, or so say lobbyists for big pharmaceutical companies.
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