Roche announced today that it is stopping US wholesale shipments of Tamiflu to prevent “hoarding”. Hoarding is exactly what they are doing. The move will shock wholesalers while people buying in advance of avian flu like me are shocking some retailers. Distributers are the last link in the chain. As they process this news, all retailers will begin to restrict access to Tamiflu. Rationing at a below market price results in the drug not going to people who value it most.

Higher prices put Tamiflu out of range of the bulk of the market. The only way they benefit from the higher prices is indirectly through the higher tax revenues from higher profits in the supply chain or increasingly as shareholders. Rationing benefits people who get the ration cards or whatever. There is an ubounded loss in efficiency when some people who want the drug are turned away because they have money, but do not qualify for a ration. An optimal policy might be a tax on emergency use that is distributed to everyone in the country equally. Don’t expect politicians to adopt that one.

Doctors, pharmacists and drug companies clearly know best exactly how much to provide becaue they are so good at economics. And they are prescribing, dispensing and producing Tamiflu for the good of the country. Perhaps I know better how many doctors, pharmacists and drug companies the country should have. I think there should be a medallion system like taxis.

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