Tyler Cowen: The Hidden Cruelty of Capping Drug Prices

Mostly pretty standard arguments, like this:

Pharma is more complicated, because the additional spending gets us more drugs through the channel of encouraging more research and development. But the basic mechanisms are the same, and there is strong evidence that additional market spending—which so many oppose—does lead to the invention of more new drugs. If a new drug is very profitable, companies will invest more in trying to discover new drugs.

But I'd never heard this put this way, which I think is enlightening:

That’s why trying to artificially force the prices of pharmaceuticals down can raise their prices, albeit in a somewhat invisible manner. Right now, properly understood, the prices of most drugs are infinite. That is, the drugs do not exist. That includes possible drugs for cancer, ALS, Parkinson’s, dementia, and many other maladies. Higher prices mean better incentives for discovery, and over time the prices of these would-be drugs will fall from infinity to something within the realm of human possibility.