How do subsidies affect pharmaceuticals?

Subsidies in the pharmaceutical sector can have mixed impacts, both positive and negative. According to experts Russ Roberts and Tyler Cowen on the EconTalk, subsidies have been beneficial in certain contexts, such as during the COVID-19 pandemic when they facilitated the rapid development of vaccines. However, these subsidies can also lead to inefficiencies and high costs for drugs that provide only marginal benefits. This system encourages the production and sale of expensive pharmaceuticals while neglecting less profitable but essential healthcare services, such as home care for patients 1.

Dr. Vinay Prasad further highlights that subsidies are often directed towards high-cost drugs rather than labor-intensive care services, like nursing and home assistance. This allocation likely enriches shareholders rather than providing comprehensive care. The societal money is funneled in ways that may not align with the actual needs and preferences of patients, as they might prefer more holistic care solutions rather than expensive medications with limited benefits 2.