State vs Private Sector

An interesting article on the idea to have state run drugstores.

" “We will do everything possible to establish the necessary state-run network of drugstores in Ukraine. We are studying this question at the moment,” Prime Minister Yulia Tymoshenko said."

http://day.kiev.ua/283143/

I don't see how having state run drugstores will solve shortages of medicines... They would make it easier for the government to control prices (see also the recent attempts to regulate/fix prices of medecines).

As an alternative the government might want to study how to make the market more competitive - that too should keep prices in check. Indeed, regulation often keeps prices higher than they should be:

From some open ed I once wrote but never published:

"Several studies have shown that in many cases, deregulation does not only make doing business easier, it also decreases prices because it stimulates competition. In Finland, regulations not only used to limit the sales of nicotine replacement products to pharmacies, regulation also fixed the prices and retail mark-ups of these products. Liberalization in 2006 led to a 15% decrease in the average price. Another nice example of how deregulation can lower prices can be found in the airline sector, where deregulation, allowed a low cost airline, Southwest, which initially was only allowed to fly in Texas, to start operating in other US states. A study on the effect of the entrance of Southwest on the US market estimated passengers’ savings, because of Southwest cheaper tickets, to be about 3.4 billion $. An additional 9.5 billion $ savings for passengers was realized because the competitors of Southwest decreased their prices as Southwest entered the market. Similar savings are likely to occur in Ukraine - the entry of the low-cost airline Wizz Air will not only offer the Ukrainian consumer low Wizz Air tickets, it will also force Wizz Air’s rivals to lower their own prices."