Assessing Demand-Side Explanations

Government intervention in setting prices might have some impact on drugmakers’ willingness to produce generic injectable drugs. The evidence is not convincing, however, especially considering the episodic nature of the shortages. If government intervention in pricing were the dominant cause, we would expect to see suppliers quit the market for good, not just clean up their manufacturing and re-enter.

Nevertheless, this conclusion must be tempered with the observation that neither the FDA nor the American Society of Health-System Pharmacists has reported shortages of Botox®, the most well-known generic sterile injectable drug. Most Botox is paid for directly by patients  and free of government intervention in price-setting.