Patent Suicide
by Joseph Rowlands
There's been a lot of talk about passing medicare prescription Drug benefits. Politicians of all stripes are coming out in favor of it. The big disagreement seems to be over how far down the path of nationalized healthcare we should jump. Assuming an altruistic ethic, the supporters of this proposal talk about the elderly, and how there will be bodies lining the streets without it. Of course, we don't exactly have a corpse problem right now, but that's beside the point.
So the conventional wisdom seems to be that this is a massive government handout to the poor and elderly, two groups that politicians all agree deserve other people's money. But there's another group of people with their hands out begging for this. The pharmaceutical companies.
You can do a quick google search to verify that many companies are standing up in favor of this proposal. There are press releases from the actual companies, and from organizations that speak for them. One organization, called PhRMA, provides a typical opinion on the topic. They describe themselves as follows:
"The Pharmaceutical Research and Manufacturers of America (PhRMA) represents the country's leading research-based pharmaceutical and biotechnology companies, which are devoted to inventing medicines that allow patients to live longer, healthier, and more productive lives."
They provide the following opinion:
"The Senate Finance Committee took an important step forward last night on behalf of America's 40 million Medicare beneficiaries. Prescription medicines are playing an increasingly important role in helping patients lead healthier, more active lives. Seniors and people with disabilities under Medicare often face a particular need for medicines to treat serious diseases and conditions. While important issues remain to be resolved, we are pleased the Senate and House are moving forward to give Medicare beneficiaries a meaningful prescription drug benefit, and we urge them to act quickly to complete this important work."
Imagine that. Pharmaceutical companies support government funded prescription drug benefits. So compassionate. Always looking out for the little guy. Of course, the massive increase in prescription drug use that will inevitably occur if the government decides to foot the bill might not have anything to do with it. A huge increase in their revenue is probably not what they're interested in at all.
So you've got the perfect package for politicians. You get a major voting block (the elderly), you get to pretend you're being altruistic, and you probably get lots of "lobbying" from companies with vast wealth interested in looting the public. There might even be donations to certain political funds. That explains the principled opposition.
Before you throw all your money into pharmaceutical company stock, there's a downside to this. Turns out, the pharmaceutical companies are not exactly in a love/love relationship with the federal government. There are actually some politicians who think they can get more loot by removing legal protections for patents. If they allowed generic copies to come into the market immediately, the cost of drugs would decline considerably. This could buy a lot of votes.
Naturally the companies don't like that. Pharmaceutical companies invest heavily in research and development. They manage to pay for that by charging above the cost of production during the lifespan of the patent. With the additional profit, they cover the heavy upfront costs. Removing the patent protection could make it economically impossible to spend money on research. If competitors can copy the drug immediately, there couldn't be an incentive to provide new drugs.
Another quote:
"Our patent laws and regulations provide a key incentive for continued innovation in medicines," Kuhlik said. "Better treatments and new cures can come only from pharmaceutical research companies, and only if patent incentives are maintained."
So the pharmaceutical companies have a problem. Greedy politicians, bent on looting the industry for their own gains are effectively giving them two choices. Either the government pays for the drugs directly, or it lowers the cost by canceling patent protection. Not hard to see which one looks better for the drug companies. Better to loot than to be looted, perhaps.
There's only one problem. If government decides to foot the bill, it won't take long for the costs to skyrocket. This means either raising taxes (usually unpopular), or cutting costs in some other form. It won't take long at all before some politicians starts screaming "price-gouging", and the political winds change again.
I believe it's inevitable that if prescription drugs are paid for with tax-payers money, patent laws will be the first casualty. Drug research will be the second. And countless lives that won't benefit from new drugs will follow.
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