Be thankful for free markets

Written by Derek Monson

November 20, 2020

As we approach Thanksgiving, during a spiking pandemic, Americans still have much to be grateful for in the arena of their health. One of those things is the U.S. prescription drug market, which is driving innovation that promises to ultimately end the COVID-19 pandemic and make prescription drugs more affordable.

You may have recently read in the news that the initial results from the final round of testing for two different COVID-19 vaccines showed that both were 95% effective at preventing infection. These are only initial results – they need to be peer-reviewed and the test extended to determine how long immunity from a COVID vaccine is likely to last. But they are significant and rigorous enough that some Americans – starting with front-line healthcare workers in hospitals and long-term care facilities – will likely begin to receive vaccination soon against infection from COVID-19.

It is important to note a few of the things that made this possible. One is that the pharmaceutical sector – private and public – has been able to quickly shift billions of dollars and thousands of people into research and development of a COVID vaccine. Another reason is an innovative new vaccine technology. These are either traits (quickly shifting investment and human resources) or outcomes (new technology) of a functioning prescription drug market like that of the U.S.

It was also recently announced that online retail giant Amazon will be opening an online pharmacy. Patients will be able purchase their prescriptions from Amazon and have them delivered to their homes within a few days. 

Amazon has a history of disrupting markets in ways that lead to lower prices (think of the impact Amazon had on prices for books). Only time will tell whether and how it may be able to replicate such price-lowering innovation in the prescription drug market. But the sheer number of people who shop on Amazon suggests the possibility is there. Those numbers could allow Amazon to use bulk purchasing to gain significant discounts on prescription drugs, and then pass some (hopefully all) of those savings onto patients.

Of course, there are sectors of the prescription drug market that Amazon’s online pharmacy will not impact, or which it will simply have to adjust to. But the fact that the U.S. prescription drug system is market-based is the reason that Amazon can enter the market and attempt to increase the affordability and accessibility of prescription drugs.

While there are flaws in the U.S. prescription drug market, it remains highly functional. Strong incentives push investment in new and better medications, entrepreneurial opportunities entice market disruptions that make medicines more affordable, and competitive pressures force market players to innovate and better serve their customers.

These market forces translate to prescription drugs that are higher quality over time, and lower cost as generic versions of brand-name medications are brought to market. The freedom that makes this possible is something to be grateful for.

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