Free markets work, not price controls

The American Press

When there are price fluctuations in the free market system, government is sometimes tempted to step in and control prices. But government control of prices is a simplistic solution to a complex problem that history tells us rarely works economically.

A recent example of the turmoil government price controls cause is the state of Maryland imposing price controls to drive down drug costs.

Maryland legislators based their law on ambiguous terms such as “price gouging,” “excessive” and “not justified.” However, The Association for Accessible Medicines (AAM), which is a trade group for generic drug manufacturers, challenged the law and recently the U.S. 4th Circuit Court of Appeals ruled that the Maryland law is unconstitutional because it violates the Commerce Clause of the U.S. Constitution.

The court noted that the law is triggered by conduct that occurs outside of Maryland, and it gives the state attorney general the power to substitute his  judgment for the free market. And if similar laws were passed by other states, it would impose a significant burden on interstate commerce. The government reform group, Citizens Against Government Waste, hailed the decision as “prudent” and a “strong message to other state legislatures across the country not to pursue similar legislation.”

The CAGW pointed out, “Another important lesson about this law is that price  controls are never the answer to lowering costs. Anyone who was in their late teens or older in the 1970s felt the repercussions of the Nixon administration’s efforts to control inflation by instituting price controls. Americans experienced higher prices in grocery stores, long lines at gas pumps, market distortions, and shortages across a spectrum of products.”

The generic drug industry is already bringing prices down on many drugs through free market competition. But government intervention tends to make their efforts more difficult. CAGW also recommends that Congress continue to make the Federal Drum Administration reduce its backlog of 4,158 abbreviated new drug applications (ANDAs) by generic manufacturers.

Our third president, Thomas Jefferson, spoke wisely when he said, “That government is best which governs least.” In this case, the Maryland legislators should let the free market work, as it usually does, by driving the prices down through competition.

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