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Home Publications Blogs Beat the Press Can You Say "Patent Monopolies?"

Can You Say "Patent Monopolies?"

Sunday, 06 April 2014 07:37

It's hard to believe that patent protection was not mentioned in this useful NYT piece on the high cost of treating chronic diseases like diabetes. The prices of new drugs and devices are high because the government grants companies patent monopolies. It will arrest and imprison potential competitors.

As every intro econ textbook shows, the monopoly profits also provide enormous incentives for corruption. As a result companies routinely misrepresent the safety and effectiveness of their products and lobby politicians to get the government to pay for their products. We would be debating alternative mechanisms for financing drug research if the industry were not so powerful and the economic profession so corrupt.



Sorry folks, I should have been clearer. I meant that the issue of patent-supported research was never raised. There are some folks, like Joe Stiglitz, who is a Nobel prize winning economist, who have suggested alternatives to patent protection as a way to finance research into prescription drugs or medical equipment. So the idea that alternatives exist should not be viewed as crazy-talk. And, if you don't bring up alternative to patent-supported research in an article like this one -- which is a careful and thoughtful piece -- where is the issue going to be raised? 

Comments (9)Add Comment
Patent Monopolies
written by Allan L, April 06, 2014 8:27
It is truly hard to believe that the NY Times printed this article without mentioning patent monopolies. It is hard to believe in part because it is not so. Patent monopolies and other anticompetitive practices feature prominently in the article.
but they do
written by Jennifer, April 06, 2014 9:07
"...insulin, which has been produced with genetic engineering and protected by patents, so that a medicine that cost a few dollars when Ms. Hayley was a child now often sells for more than $200 a vial, meaning some patients must pay more than $4,000 a year."

What the Times does not do, which no mainstream media outlet does, is does, is suggest alternatives to the current system. Instead, kind of like poverty coverage, the personal story (of individuals) is emphasized over systemic issues.

But while I am all for patent reform that does not appear to be the largest issue here-the emphasis is on the "stuff"-the pumps that cost so much. Although I am sure the pumps are patented as well it's not hard to design a pump. this is more a story of business and "competition" (that is there isn't really, for a variety of reasons) in the health care system.
Really what this article points is the need for more aggressive government management which is how other countries do it. Also, the article pointed out how the US pays for the world market-i.e. companies can charge more here then they can in other countries, so they do. While this was in reference to supplies, it's true for drugs as well.
written by Anonymous, April 06, 2014 9:08
[bThat does not even include insulin, which has been produced with genetic engineering and protected by patents, so that a medicine that cost a few dollars when Ms. Hayley was a child now often sells for more than $200 a vial, meaning some patients must pay more than $4,000 a year. Other refinements have benefited a minority of patients but raised prices for all. There are no generics in the United States.]

The above quote is from the article. It may not focus as strenuously on the issue as you would like Dr. Baker but it does mention this.
With all due respect sir, you are one of my favorite reads, the first every morning in fact but you have become increasingly shrill. Your recent criticism of Piketty entirely missed the irony and you stubbornly doubled down even though a full reading in context showed that Piketty was clearly being sarcastic.
Your insights are the best in the business but everyone needs to take a breath once in awhile.
You Always Have a Choice America: Stop Whining and Exercise It
written by Last Mover, April 06, 2014 9:14

The message here is the cost of chronic care has greatly exceeded the cost of acute care, the latter already regarded as the standard of extreme cost.

Well hey America, that's how free choice and free markets work don't they. Now you can start lining up at the emergency room to get that diabetes insulin pump and chemotherapy at a steep discount compared to going prices from the usual sources.

And for even faster service and convenience at the same low price, just call 911 and have an ambulance deliver it to your doorstep.
As Allan L pointed out, patents, and the consequences of patents, are mentioned.
written by John Wright, April 06, 2014 9:53
The article has:

"That does not even include insulin, which has been produced with genetic engineering and protected by patents, so that a medicine that cost a few dollars when Ms. Hayley was a child now often sells for more than $200 a vial"

"When Ms. Hayley left Memphis for Colorado College in 1996, she was using a tiny meter ..and human insulin made with gene-splicing technology. All were covered by patents."

"Since the companies owned the cell lines, it is nearly impossible for other companies to make exact copies or even similar versions that would be cheaper, even once the patents expire. And the pharmaceutical companies defend the patents ferociously."

The article also discussed that foreign governments negotiate better prices with the USA companies.

I found the article well-balanced, with the focus on marginal health improvements coming at a high marginal cost, and still producing higher complication rates (for diabetes) in the USA.

And the article mentioned the disappearance of less expensive alternatives as the companies focus on the higher profits of new treatments.

The loss of less expensive alternatives "planned obsolescence as mentioned in the article" is THE core problem as if these treatments/drugs were still available, the cost of the new patented treatments should be pulled lower and perhaps better overall health for the entire population would result.

It seems to me that other companies, perhaps in other countries, would enter the market to backfill the missing older less expensive alternative market.

Perhaps if the TPP passes, it may backfire on the sponsors, the enforcement of monopoly prices on foreign countries may have the unintended consequence of inpiring foreign companies/governments to expand the alternative, lower cost, treatment market.
patent options
written by Squeezed Turnip, April 06, 2014 10:06
Yes, yes, patent protections are mentioned. But no alternatives are given (as Last Mover suggests). It's like telling a consumer that the markup on a car taken by a dealer is extortionary but not telling them they can negotiate the price and what IS reasonable. Like it, except nobody's gonna die or have a health complication if they don't buy a heavily-marked up car that the dealer is unwilling to negotiate on.

I say, give Dean a f*cking break and take that energy and write all of your congressmen, go to your local political party's meetings and raise the consciousness that this has gotten out of hand and it's time to consider more rational options, not handing over ransoms to what are no better than highwaymen.
written by Kat, April 06, 2014 10:24
Yes, they do mention patents a few times. The good of this was offset by pulling out the old trope that the US is subsidizing the rest of the world when it comes to drug development.
Still, this is a good article in so far as it would be useful reading for those who cry about the cost of diabetes. This is why those costs are so high and limiting the size of a soft drink does nothing to change this.
A relative was (rightly) complaining about the runaround she was given by her insurance company in seeking reimbursement for her diabetes medication. A one month supply was over 600 dollars. She didn't seem to grasp that this was as much a problem as the insurer's slowness in reimbursing.
written by skeptonomist, April 06, 2014 1:13
One link that should be made is with the declining level of federal funding for health research. The NIH appropriation has been declining for over 10 years (in real money). Cutting government research leaves it up to the pharmaceutical companies, which costs much more money in the end. This link could be made in articles on the budget as well. At least the Times, which is supposed to be a liberal paper, could bring this up in editorials.
Eliminating competition is about more than just selling price implications.
written by Perplexed, April 06, 2014 2:13
"The prices of new drugs and devices are high because the government grants companies patent monopolies. It will arrest and imprison potential competitors."

Thanks for your tireless efforts at getting and keeping this issue out in front Dean! But why not mention, in addition to the price and jail time implications, what the effect of these monopoly gifts have on the purchasing side of the monopolists' costs structures? What are the implications of this lack of competition on the market for chemists who specialize in these areas and have no choices of alternative employers? Do they really have any choice but to "fork over" their rights to new discoveries in return for employment? How much of the share of the "profits" would be going to them instead of shareholders in a competitive environment? What is the effect of this on their incentives to pursue innovative approaches? There are many hidden costs to eliminating competition in favor of giving welfare to shareholders. Who's job is it to account for and report on these hidden taxes so the public knows what this hoax is really costing them?

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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.