Thursday, October 14, 2004

The needle and the damage done

I'm hoping the unfortunate shortage of flu vaccine this winter will have one silver lining: it could bring attention to the problems with regulation in the market for vaccines. Check out this excellent post by Alex Tabarrok at Marginal Revolution on the topic. One quote:

Note that even if the prices are high enough to earn the company a modest profit the point is that they are not high enough to make it worthwhile to make a surplus of vaccine that can be sold in the event of a contamination problem, as has happened this year. If the firms can't price high during a shortage then there is no incentive to plan for a shortage. Even without legal price caps there are significant disincentives to high prices. Here is a CDC spokesperson (link to audio file) on recent price increases:

Shame on the people who are price gouging. This is a reprehensible thing to be doing. I think an immoral thing.

Is it any wonder that firms don't want in on this market?

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