The NYT reported today that the German pharmaceutical company Bayer A.G. concealed a study from the F.D.A. that showed a drug used in heart surgery might increase the risks of strokes and death. Of course, economic theory predicts that government granted patent monopolies will create incentives for exactly this sort of behavior.
Economists should be focusing a large portion of their research to developing more efficient alternatives for financing pharmaceutical research. Unfortunately, they spend much more of their time calculating the gains from eliminating 5 percent tariffs on pants. As a result, tens of millions of people cannot afford drugs that would be sold at very low prices in a competitive (i.e. patent free) market, and drug regulators get lies about the safety of the drugs they evaluate.