In recent years, there have been many accounts of extreme prescription drug prices that have raised issues of equity, price gouging, social conscience, and demands for relief. In part, these prices arise due to the inelastic demand for lifesaving drugs and the patents that create short-term legal monopolies. The economic rationale for patent protection flows from the fact that the investment made by inventors necessarily precedes any financial benefits received from the discovery of new products or more efficient production processes. Patent law prevents copiers from free riding so that innovators can reap the reward of monopoly profits for their innovation. Thus, there is a trade-off between innovation and affordability. Antitrust law cannot be used to disrupt legal monopolies, so the US government has turned to congressional proposals that would mitigate extreme drug pricing. We also review the policies of other countries that are aimed at reducing pharmaceutical drug prices and consider whether such policies would work in the US market.

Continuing the eamination of early Hughes Court decisins dealing with economic regulation that were seen as relevant to its disposition of cases involving New Deal legislation, the Chapter describes the background of Nebbia v. New York, in which the Court upheld an extensive system of price regulation for milk. Justice Roberts’s opinion, his first important one for the Court, offered an expansive idea of “businesses affected with a public interest,” which observers and later commentators see as providing a basis for the Court’s decisions after 1937 allowing extensive economic regulation.