Some Questions About the Relevance of Economic Justifications for Pricing Prescription Pharmaceuticals

When goods or services are scarce, they need to be allocated among those who want them. In the perfect version of economics, one function prices serve is to ration goods and services, helping maximizing welfare by sending them to the people who value them most highly. In the perfect version of prescription drugs in medicine, that function becomes unnecessary. Professional expertise maximizes patient welfare with respect to those drugs by determining exactly who should receive them, based on the balance of the patients’ medical needs for the drug and their risks from them. That does not mean that prices are irrelevant in prescription drug markets, but it may be an insight of some value.