Making sense of drug prices

CRITICS OF THE U.S. PHARMACEUTICAL INDUSTRY allege that U.S. consumers are subsidizing the rest of the world because

A related allegation is that in the United States there is cost shifting to cash-paying, retail customers-including many of the elderly-who pay excessive prices because of discounts to managed-care organizations and government purchasers. Then there is the general belief that drug prices are simply "too high"-that the pharmaceutical industry is making excessive profits.

These bits of conventional wisdom may be conventional but they are not wisdom. Facts and logic will lead us to these conclusions:

* Cross-national and domestic price differences are smaller than has been alleged.