What makes price controls on medicine work is the other side of the equation: Massive subsidies to supply. How expensive is it to become a doctor in Europe? How many are trained every year? Who builds the hospitals? Ultimately it's not a matter of price controls, but turning a large percentage of the whole thing into a public service. And even then, it's not hard to find some issues, it just works better, in most ways, that the US' bad mix of public and private incentives and regulation.
When we discuss price controls, we tend to be talking about situations where the supply of goods is provided by the private sector. Then price controls often lead to supply shortfalls and black markets. It's easy to understand if we make labor to be the good with a price ceiling. Many american companies would love programmers at $20/hr, but they can't find any. Imagine that the government caps said salaries at $20: We'd see fewer people going into the field vs something easier, or that just was allowed to pay more. The companies that still get $200+ worth of value for programmers would still want to pay more, but without the supply, they'd try to skirt regulations by becoming more competitive in indirect ways. Maybe your benefit package would include a mansion, and an expensive company car, and a live-in staff. Keeping prices down when demand vastly exceeds supply is very hard.
There is such thing as excessively high prices though, via monopolies and regulations that force waste. I think that's a bigger reason for the US' healthcare pricing problems than the magic of government healthcare. What socialized medicine does is make sure that even the poorest can afford it, which can be seen as a valid objective onto itself.
Pharmaceutical companies will continue to develop new drugs so long as Americans are willing to spend infinite money on them. If they can make a marginal profit on selling some to a European country, that's a nice bonus. If the US also implemented price controls, companies would have little incentive to fund the development of new drugs.
> If the US also implemented price controls, companies would have little incentive to fund the development of new drugs.
Your comment is correct except this sentence. In reality, if the US implemented price controls, it would simply reduce the negotiating power of European countries. Prices in the US would go down, and prices elsewhere would increase. The pharmaceutical profits would decrease on net, but there would still be plenty of incentive for R&D (much of which is already derisked by the massive amounts of public money spent on it with zero expectation of return).
Whatever is the least "cozy" rhetorically, that is associated with good feelings, mother and apple pie style bullcrap, gets to be the designated scapegoat.
Offsetting R&D costs and directing R&D are a policy problem, and a completely different beast. The antibiotic resistance crisis is in front of us, yet the big returns are in cancer, with the additional wrinkle being that what is needed is new antibiotics of last resort. That's a problem of a kind that the market cannot solve.
Also: generic shortages. Generics are a low-margin business with maybe 6 suppliers workdwide. If one facility goes off-line for this or that reason there's going to be a shortage, and slack capacity is punished by the market. Right now the cisplatin shortage is in the news, and again the market is no help.
Generics may be a low-margin business for manufacturers, but they are emphatically not so for retailers. The likes of CVS make a lot of profit from generics, which makes it surprising that this hasn’t spurred pressure from on the manufacturers to amp up supply.
It's a constrained market - people aren't going to buy more cisplatin or cephalosporin just because it's cheaper. (Yes, people do shop around for a butt enlargement or Lasik but these things are strictly optional and can wait until the next month, however when you need a prescription drug you really need it.)
That's because the government is a monopoly on buying those services from the service providers (Don't get me wrong I am fully in support). If there is less than Monopoly control by the government price controls don't work.
