If you have a Facebook account, or even if you don’t, you no doubt have seen the story about the guy who bought the AIDS drug and jacked up the price 5000%, to $750 a tablet.
Judging by social media, Martin Shkreli, the 32-year-old chief executive of Turing Pharmaceuticals, may be the most hated man in America right now.
He’s been called a “morally bankrupt sociopath”, a “scumbag” a “garbage monster” and “everything that is wrong with capitalism.” And those are some of the tamer comments.
So how did a rap music-loving, former hedge fund manager suddenly become the target of online ridicule and even death threats?
His company recently acquired the rights to Daraprim. Developed in the 1950s, the drug is the best treatment for a relatively rare parasitic infection called toxoplasmosis. People with weakened immune systems, such as Aids patients, have come to rely on the drug, which until recently cost about $13.50 (£8.80) a dose.
But Mr Shkreli announced he was raising the price to $750 a pill. The more than 5,000% increase and his brash defence of the decision has made him a pariah among patients-rights groups, politicians and hundreds of Twitter users.
The evil of capitalism shows its ugly face yet again! Except, as Joe Carter explains, not so much:
Some people believe this incident is an example of the failures of free market capitalism, and claim this is why we need more government intervention. But the exact opposite is true: This is an example of government failure which the free market could solve.
The price system is one of God’s most under-appreciated creational norms. Prices provide an ingenious way for humans to distribute both knowledge and resources in a way that, on the whole, tends to increase human flourishing. This is why, generally speaking, we want to avoid distortions in the price system that come with government intervention. In a free market that is free of distortions, the prices of products and services will shift as people clarify what values and priorities should take precedence in distributing resources.
But Daraprim is not sold in a free market. The pharmaceutical industry is largely a non-contestable market where a few large firms exist because of high barriers to entry, such as onerous government regulation. Added to this is the fact that Shkreli has a coercive monopoly on Daraprim, not because of patents (the patent on Daraprim expired long ago) but because few other firms want to make the drug since the government-imposed costs make it less than profitable.
What this means is that the prices of pharmaceuticals like Daraprim are not set by the free market. The free market isn’t the reason Shkreli was able to raise the price. In fact, if he had to sell his product in a truly free market environment the price would likely remain low. And even now, if he continued to keep the price high, some enterprising pharmaceutical company would start making Daraprim themselves, increasing the supply and lowering the cost.
(Ever wonder why LASIK prices keep going down and quality keeps going up? Lack of government intervention. The same health care system that gives us skyrocketing prices can do better, when government gets out of the way.)
Government will no doubt cite the episode of the super-expensive AIDS pill as an example of why we need government control over health care. This is what they do: cause problems and then offer you solutions to the problems they created — solutions that involve putting them in charge.