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Another Problem of Drug Patents

Friday, 26 August 2011 04:04

The NYT has been reporting on the occasional shortages of important generic drugs that arise. It discusses possible answers today, but doesn't discuss the extent to which drug patents are a part of the problem. Because patents allow pharmaceutical companies to sell drugs at prices that are far above their competitive market price, there is relatively little interest among manufacturers in producing drugs that have come off patents. In many cases, the barriers created by the patent holders (e.g. the potential of legal harassment) means that they maintain an effective monopoly long after their patents have expired.

As a practical matter, it would be almost costless for the government to establish a stockpile of key off patent drugs. (They could contract it with a private firm.) If they bought up a million doses of each of 200 drugs, this would cost around $800 million. The drugs could be sold at prices that cover the cost of the purchase, storage, and wastage. It is difficult to see a good argument for not taking a costless measure that could ensure people's health while saving money.

Comments (2)Add Comment
what happened with Indian drug manufacturers?
written by frankenduf, August 26, 2011 9:14
well, if history is any indication, the drug industry would likely sue the government to block such a program- an analogy happened here in philly- an initiative to create a public wireless network (making a citywide 'hotspot') led to verizon suing the city of philadelphia to block it!- the corrupt arrogance of these powerful corporations knows no bounds
I'm not an opponent of "big government" but
written by Bill H, August 26, 2011 10:32
When industry is failing to perform in the market, the proper place of government is not to replace private enterprise, but rather to create incentives which will improve the performance of private enterprise. If selling drugs at low prices and low roifit and high risk of lawsuit after patent expires is unattractive, then write laws which reduce the risk of lawsuits arising from expired patents.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.