If You Have A Government Shortage, It’s A Good Bet That The Government Is Causing It

“It is not from the benevolence of the butcher, the brewer or the: baker, that we expect our dinner, but from their regard to their own interest.”
— Adam Smith

In a prosperous country like America, you shouldn’t see any long term shortages: of a product. You might not be able to afford a product or it might sell out and be: temporarily unavailable because it’s sold, but if you’re willing to pay, somebody: will be willing to sell – unless government gets in the way.

If you want to know how this principle works in action, look to Oregon,: where: paramedics are using expired drugs because of shortages.

When paramedics ran out of a critical drug used to treat irregular: heartbeats, the Bend Fire Department in Central Oregon dug into its stash of: expired medications, loaded up the trucks and kept treating patients.

Paramedics reported asking some of those facing medical emergencies: “Is it OK if: we use this expired drug?”

Emergency responders in various jurisdictions have reported turning to last: resort practices as they struggle to deal with a shortage of drug supplies created: by manufacturing delays and industry changes. Some are injecting expired: medications or substituting alternatives. Others are simply going without.

As the drug crisis mounted for the Bend Fire Department earlier this year, the: agency had 11 medications in its drug kits that were expired, despite risks that the: pharmaceuticals might not work as intended in life-or-death situations. The crisis: has eased a bit, but the agency still carries expired doses of two drugs in serving a: city of 80,000 people.

“We’ve never (before) had to go diving back into the bin to try to retrieve expired: boxes of drugs,” said Tom Wright, emergency medical services coordinator for: the Bend Fire Department, which has been administering outdated medicines for: about a year. “We had the backing of our insurance company that giving expired: drugs is better than giving no drugs at all.”

At first glance, this situation seems to be utterly bizarre. Oregon isn’t some Third: World country that has to beg its neighbors for Aspirin and bandages. Oregon: can afford to buy drugs. So, how can there be a shortage? Why aren’t the drug: companies capable of stepping up to the plate?

Well, the ultimate answer is that the drug companies are capable of producing: the drugs, but: Congress has put: price controls in place that has made it uneconomical to do so.

If the laws of supply and demand were working properly, a drug: shortage would cause a price rise that would induce other manufacturers to fill: the gap. But such laws do not really apply to cancer drugs.

The underlying reason for this is that cancer patients do not buy chemotherapy: drugs from their local pharmacies the way they buy asthma inhalers or insulin.: Instead, it is their oncologists who buy the drugs, administer them and then bill: Medicare and insurance companies for the costs.

Historically, this “buy and bill” system was quite lucrative; drug companies: charged Medicare and insurance companies inflated, essentially made-up “average wholesale prices.” The Medicare Prescription Drug, Improvement: and Modernization Act of 2003, signed by President George W. Bush, put an end: to this arrangement. It required Medicare to pay the physicians who prescribed: the drugs based on a drug’s actual average selling price, plus 6 percent for: handling. And indirectly – because of the time it takes drug companies to: compile actual sales data and the government to revise the average selling price: – it restricted the price from increasing by more than 6 percent every six months.

The act had an unintended consequence. In the first two or three years after a cancer drug goes generic, its price can drop by as much as 90 percent as: manufacturers compete for market share. But if a shortage develops, the drug’s: price should be able to increase again to attract more manufacturers. Because the: 2003 act effectively limits drug price increases, it prevents this from happening.: The low profit margins mean that manufacturers face a hard choice: lose money: producing a lifesaving drug or switch limited production capacity to a more: lucrative drug.

The result is clear: in 2004 there were 58 new drug shortages, but by 2010 the: number had steadily increased to 211. (These numbers include noncancer drugs: as well.)

Don’t get mad at the “evil” drug companies putting “profit before people;” get: angry at the politicians in Washington D.C. They’re the ones who created the drug: shortages all across the country by trying to get a free lunch at the expense of the: drug companies. Now, the rest of us are paying the price because D.C. wanted to: get something for nothing.

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