Texas considers itself to be one of the last safe havens of the free market model. As other states have imposed regulations and taxes, Texas likes to brag that its model of self-reliance and its faith in free markets has led to exponential growth in recent years, and the migration of Californians to Texas has often been cited as evidence. But what happens when the free markets fail – when the laws of supply and demand don’t seem to be working?

A commonly-prescribed asthma medication, a preventative called Flovent, is a little inhaler used daily by millions. The retail price for one of these puffers is $524, but if you’re insured, you’re only paying a small deductible, something like $35 for each refill.

It sounds like a deal, except someone’s paying full price – supposedly the insurer. Unless, of course, the insurer isn’t paying full price either, because the company has a deal with the manufacturer.

In this supposed free marketplace, people aren’t shopping around for the best prices – most don’t know what the prices actually are. And if, in fact, insurers are paying enormous prices for prescriptions, then the prices for insurance are inevitably going to remain well out of reach for many Americans who need those medications. That’s classic market failure.

Next week, President Donald Trump is set to make a speech about the high prices of prescription drugs. Sarah Karlin-Smith, a health care reporter for Politico, says the president’s speech is expected to promote ideas he rolled out in his February budget request.

“There were maybe a dozen suggestions there of ways to tackle drug pricing, which might include looking at changes to Medicare programs for seniors,” she says. “It might also include changes to state Medicaid programs.”

She says not to expect any immediate action, though.

“I don’t think this administration is going to move towards price controls,” Karlin-Smith says. “Since he’s actually been in office, despite his rhetoric, [Trump] has tended to favor, and his Health and Human Services Department has tended to favor, market-based solutions to the crisis.”

HHS Secretary Alex Azar has dismissed the idea of government intervention, Karlin-Smith says.

“You have to kind of look a little bit deeper from his rhetoric to his actual actions,” Karlin-Smith says. “And much of the stuff they’ve actually proposed, or the ideas they’ve proposed, have actually been very favorable to the pharmaceutical industry in general.”

Written by Jen Rice.

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