Economics of Big Pharma

Kalen Johnson

The lifespan of drugs like Zantac and Fen-Phen provides a stunning showcase of regulatory capture, moral hazard, and deadweight loss resulting in a market failure in the Pharmaceutical Industry. These drugs highlight the dangers of regulatory capture because the FDA approved both drugs, which allowed the drugs to be marketed directly-to-consumers (DTC), subsequently being pulled due to Zantac causing cancer and Fen-Phen causing cardiac fibrosis (heart damage) with both leading to deaths. Pharmaceutical Companies treat the cost of lawsuits and settlements due to their harmful drugs as the cost of doing business. The wasteful allocation of resources, mentality of profits over people, and full scope of costs from their damaged brand to the loss of life results in a market failure.

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