Free Markets

The New York Times Complains of Drug Price Hikes While Raising Its Own Subscription Fees

The freedom to set prices free of government coercion makes for better newspapers and better medicine.

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Truth Revealed 2012/Flickr

Sunday's New York Times editorial faulting pharmaceutical companies for pushing medicine prices "to astronomical heights for no reason other than the desire of drug makers to maximize profits" arrived less than a week after an email from the newspaper notifying me that it would be raising the fee it charges me to receive the paper. That seven-day-a-week home-delivery subscription to The New York Times in Boston, where I live, will now cost $977.60 a year, by my calculation. (The Times prefers to talk about the cost by the week—$18.80 a week—so that it sounds like less money.) To my mind, it is just as "astronomical" as the drug prices the Times is assailing.

At least the drugs can cure headaches, heartburn, or high blood pressure. Reading the Times may put otherwise healthy individuals at risk of those ailments.

Comparing the Times' arguments about medicine prices to my own arguments—and doubtless those of many other customers—about newspaper prices can help point out not only the Times' hypocrisy, but also the flaws in the paper's argument.

Start with the issue of motive. Long-suffering Times shareholders (I was one for a while, but gave up and sold years ago) might wish their own management had a more intense focus on maximizing profit, because there haven't been many profits for Times Company shareholders over the recent stretch. They would have done much better investing in pharmaceutical company stocks.

It may be easy for the Ochs-Sulzbergers to turn up their nose at profits. They inherited vast family wealth, and they are somewhat insulated from market discipline by a two-class share system that vests control of the company in a family trust that is difficult to dissolve. In the part of capitalism where management isn't protected by family trusts—the part that includes much of the drug industry—the responsibility to maximize profits is not so cavalierly dismissed.

The Times editorial complains that "Major drug companies often increase prices 10 percent or more a year, far faster than inflation, straining the health care system." My Times home delivery price is going up 6 percent this year, which is also far faster than inflation, at least as it is measured by the consumer price index fiat currency yardstick that the Times economic coverage usually favors. Over the past four years, it is up 17 percent, by my calculations, also more than inflation. (The Times says it has been raising home-delivery prices by about 5 percent a year and that it's also giving print subscribers more digital access.)

The single-copy newsstand price of a newspaper during the week has also jumped—to $2.50 in 2012 from 60 cents in 1999.

The Times proposes to deal with medicine prices by "allowing the government to negotiate lower prices." Imagine the outcry at the Times if the Trump or Cruz or George W. Bush administration announced that it was going to negotiate sharply lower prices for newspaper subscribers. What's the difference between the government "negotiating" prices and just plain setting or dictating them, as it did under Communism, or the Nixon administration?

A senior vice president of The New York Times, Eileen Murphy, responded to my query on the matter by calling my suggestion of a parallel between drug and newspaper prices "ridiculous."

"You're comparing drug prices—in many cases drugs that are necessary to keep people alive—to the price of a print newspaper (not news, as you say). While newspapers are certainly vital to a democratic system, if someone was unable to afford one, it is highly unlikely that this could lead to a decline in health or death. The same can't be said about the rising price of drugs used to treat heart conditions or cancer," she said. 

Murphy also noted that the price of a single copy of the Times has not increased since 2012, and that the prices of digital subscriptions "have remained unchanged since launch in 2011." 

The point she is making—that companies price different products at different levels—also applies to the pharmaceutical industry. The retail list "price" the Times editorial quotes for the drugs may sound high, but the out-of-pocket cost to a patient is usually much lower. Health insurance companies and pharmacy benefits managers negotiate lower prices. Thanks to President George W. Bush, there is now a prescription drug benefit as part of Medicare. The Medicaid insurance for the poor covers many prescription drug costs.

Even as the Times was raising the price it charges me to $977.60 a year, it was emailing me (at my college alumni address, which ends in .edu), a promotion for a special "academic sales rate" of "four weeks free, then $1 a week." Companies raise prices to maximize profits but they also sometimes lower them.

Anyway, the reason I keep plunking down the nearly $1,000 a year is that to me the Times is pretty much as necessary as medicine. The information—after adjusting for the left-wing tilt—is useful to me. Any substitute—free news or opinions from a computer—is not adequate for my needs. Sure, past a certain price I would stop paying and take the extra time to go read the paper in a library or coffee shop, which, fair enough, one cannot do with medicine.

Here is the key point the Times editorialists and so many others weighing in on the drug price issue seem to have missed. I am glad to live in a country where prices are mostly set freely by willing buyers and sellers in voluntary transactions, rather than one where the prices for necessary goods—medicine or newspapers—are "negotiated" by the government. That freedom makes for better newspapers and better medicine.

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  1. Let’s take the profit out of saving lives.

    What could go wrong?

  2. The most important problem with Murphy’s argument is this who decides what is necessary? A secondary problem with her argument is that it ignores how government interference, especially the FDA, has made it possible for pharmaceuticals to raise their prices so much. If the NYT was a protected class, they could probably charge much more for their newspapers.

  3. But our price increases are justified, reasonable and don’t hurt anyone.

    Not like those evil pharmaceutical companies with their high research costs, stifling regulation, long lead times to market and high liability costs. I mean its just a simple pill, how much could it cost to make?

  4. The average cost to bring a drug to market is now 2.6 billion.
    /drops mic

    1. New York Times: That’s just what Big Pharm wants you to think!

      1. Well, I know at least one company that has spent $2B and has not yet started phase 3 trials on their first drug discovery.

  5. Now only rich white progressives will be able to read the NYT!

  6. I’m an IT contractor currently working for a pharma company. Right now, my primary focus is fixing data imperfections, many required by regulations. The amount of testing, documentation and approvals required for stupid little data corrections is unbelievable. Dozens of people, hundreds of hours, documents up the wazoo.

    And that’s just to fix migration data issues. I can’t imagine the circus involved in research, applications, trials, manufacturing requirements, distribution, sales and on and on.

    I’m not saying all prices are justified. But if the government attempts to force a low price, it just may not be worth it for some companies to jump through the hoops anymore. We’ll be buying all our drugs from off shore.

    1. The free market justifies prices.

      If we’re leaving it up to government, I’ll take my Tesla now please.

  7. So typical of the left. I’ve heard many claim that capitalism is great when it comes to unnecessary products, like TVs and video games. But for some reason, when its something important, you have to throw out capitalism and get the government involved. Why do they believe capitalism only works if the product is not important?

  8. I have to imagine that if the government was so much better than the private sector at drug making, they’d have invented and patented (or, if you prefer, public domain’d) all the medicines long before Pfizer got to it. Since they didn’t, I have to conclude that without those evil corporations we wouldn’t have those particular medicines at all. So the Times and its euphemisms for price controls can screw off.

  9. What would the NYT have to charge for a single edition if they had to get government approval and were only allowed to sell papers a panel had approved after years of testing?

  10. Why don’t you use the academic digital subscription they offered you?

  11. Although many people say they can’t live without the New York times, this is just a rhetorical flourish. On the other hand, many people actually can’t live without their medication. To conflate raising the cost of a newspaper subscription to raising the price of life saving medicine to astronomical heights might be the worst false equivalency I have ever read.

    1. First off not all medication is life saving…that isnt the only type of medication for which prices are rising. So you are engaging in rhetoric that plays to emotion.
      Secondly the point of the article is about getting the government out of price controls by highlighting that it makes for a better product whether times or medicine. It wasnt a false equivalency. Third off i have to wonder why folks expect these drug companies to not want to profit off these medicines…frankly i am grateful and would pay top dollar.

  12. Entitlements. Every product or service will become an entitlement; a basic need for all humans.

    At which point the government will have won comrade. They’ll have succeeded in gaining complete control outside of the black markets that will spring up.

  13. The argument about the price of the Times compared to the average rate of inflation is relevant here only because the Times made the argument first. But in general, I hate that argument. The average rate of inflation is just that, the average of the prices of millions of products. Some products increase by more than the average, some increase by less than the average, and some actually decrease. But the overall average has absolutely nothing to do with what one product’s price should be. Each industry has to deal with the cost of the raw materials it uses – in the case of newspapers it’s things like paper and ink – as well as the cost of labor, which includes things like the cost of health insurance, which for large companies is much higher than the average rate of inflation these days. I’ll admit that I didn’t read the Times article, but I’m guessing it was written in the wake of the Shkreli indictments, which in his case was clearly a case of price gouging rather than legitimate cost increases.

  14. The problem with medicine is that patents are awarded , good for arounf 17 years. That bestows a monopoly on a drug company, and results in a market that is not a free market, where competition sets prices. Drug companies set prices according to what they can get for them, and those prices have absolutely nothing to do with the cost of production or the cost to create the drug, a cost increased by the insane policies of the FDA, I might add.
    For example, the new drug Xarelto,a blood thinner,prices at around $348 for 30 pills , or a month’s worth. Even if you have prescription medicine insurance, you will probably need to cough up $140 per month, in addition to your hefty insurance premiums. The real screamer is that the drug company (Bayer I believe) prices all three sizes (10,15.20MG) at the same exact price. So what moron would ever allow his doctor to prescribe the 10mg pill? He would have him prescribe the 20 mg pill and cut it in half, as any semi-inteligent patient would do. Overseas Bayer doesn’t price Xarelto anyhting like it does here in the US, pricing it for less than half and even lower, depending upon the country. Every pill I have ever researched has a higher price (a much higher price usuallY) outside of the U.S. THE SOLUTION is simple – by law force a drug company selling a pill in the US to sell that pill for the same price worldwide. This provides the drug company with complete freedom in pricing.

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