Aderall Or Nothing: Anatomy of the Great Amphetamine Drought

Of course, we all know that there is no free market for drugs in this country. If you think there is, just rent some floor space and machinery, hire some chemists, and get to work manufacturing the drug. Oh wait, there's now months (if not years) of forms, inspections, permits, etc. you need before you can get started. I won't pretend that I disagree with these. I'm simply stating that the market isn't free to move as it otherwise would.

Similarly, the pharma patents (and patents in general) are another restriction on a truly free market. Do you think it likely that existing giants like Eli Lilly or Phizer are likely to re-tool to create a cheap generic drug while a free, government-enforced monopoly (and its associated high profit margins) is available on other drugs they produce? Of course not. Again, it seems that temporary monopolies are necessary in this space simply to encourage massive R&D spend by these companies. Still, artificial monopolies don't exist in a free market.

But what about the companies that already thrive providing cheap, generic pharma products. Why aren't they filling the gap? The answer seems simple (I'm just reasoning below - no citations available as I don't sit on the boards of these companies).
1. Companies already producing the drug haven't ramped up production because they know that a) there is a high barrier to entry to new drug production and b)contraction in supply is likely to increase price, thus increasing their margin - at least in the short term.

2. Existing companies won't re-tool to produce the drug right now because the cost of re-tooling and crossing the approval hurdles for production is too high to justify the effort. They can make more money selling the same generic drugs they do today. Of course, these companies will respond when the price of the drug in question rises to the level where it makes sense for these companies to go through the effort to re-tool and seek approval.
Bottom line here is that there is a significant barrier to entry that keeps free market forces at bay.

So, the reason free market forces aren't at work here is because the free market doesn't exist in this space. That's good for a lot of reasons (I, for one, appreciate that I can assume my pharma products are safe), but bad for the reason you see above.

Source: http://rss.slashdot.org/~r/Slashdot/slashdotScience/~3/FxEcTkYgKlU/aderall-or-nothing-anatomy-of-the-great-amphetamine-drought

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