RICHARD EPSTEIN writes on the myth of the big bad drug companies:

Nonetheless, critics like Angell and Kassirer are absolutely wrong to portray the nation’s big drug companies as heartless, avaricious behemoths that act in whatever manner they choose and always get their way. The truth is, the pharmaceutical industry is too heavily regulated. Its big problem today is not that it’s free to run roughshod over the needs of consumers, but that it operates in a hostile and excessive regulatory environment that frustrates sound business decision-making and keeps down pharmaceutical company share prices in the stock market. . . .Because of its high-fixed, low-variable cost structure, the drug industry will never reach perfect competitive equilibrium. But in our second-best world, ponder carefully the different consequences of two strategies. The first seeks to expand supply by avoiding regulation and encouraging the entry of new companies into the business. The second seeks to hold down prices by direct controls.

The second approach leads to low prices today but systematic shortages tomorrow, while the first leads to greater innovation today and greater choice tomorrow. We must be careful not to mistake price controls for a cure when they are in fact a disease. Let our new reformist Congress beware.

Read the whole thing.