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Home Publications Blogs Beat the Press Government Granted Patent Monopolies Lead to Corruption #42,347

Government Granted Patent Monopolies Lead to Corruption #42,347

Saturday, 27 April 2013 17:12

When the government grants drug companies patent monopolies that allow them to sell drugs at hundreds or even thousands of times the free market price it gives them an enormous incentive to do things like pay off doctors to prescribe drugs. Everyone who has ever taken an intro economics class understands that fact.

Unfortunately our leading economists do not seem aware of how protectionism in the prescription drug industry leads to corruption that can both raise costs and jeopardize the public's health. That's probably because they are too busy finding reasons why we can't take steps to bring the economy back to full employment.

Comments (5)Add Comment
Like Beauty, Waste and Inefficiency is in the Eye of the Beholder
written by Last Mover, April 27, 2013 6:48
It's obviously the government monopoly of single payer Medicare and Medicaid that gives rise to the kickback incentive, not the patent monopoly, as stated in the article:

They said this led to the Medicare and Medicaid programs paying millions of dollars in reimbursements based on kickback-tainted claims for medication such as hypertension drugs Lotrel and Valturna and the diabetes drug Starlix.

Those economists too busy avoiding reasons to reduce high unemployment already know this but for some reason never bring it up.

When government spends millions for overpriced unnecessary drugs that crowd out effective health care those economists look the other way.

When government spends millions to reduce unemployment in a slack economy with zero opportunity cost the same economists crow about waste and inefficiency that suppresses private sector recovery either by crowding it out directly or indirectly with debt.

Waste and inefficiency can be a beautiful thing to those who rake it in privately to line their pockets while berating it in public.
It's not just the money
written by Jennifer, April 27, 2013 9:15
This particular case is a little extreme but the practices described are the norm. What is more disturbing is the real disregard for health that the pharmaceutical industry exhibits. It is well known among health professions-but not so much in the general population-that MDs get almost all their knowledge from drug reps, who have a obvious incentive to push the product. A recent study found-surprise!--they usually leave out the potential serious side effects.
written by bmz, April 28, 2013 7:06
Last Mover-- were you a Bush speech writer?
written by Philip F., April 28, 2013 9:04
There's a form of patent arbitrage that is practiced by the drug companies, and it serves to drive up profits from otherwise non-patent-worthy activity -- at least from a pharmaceutical perspective, I suppose. Overall, it makes the cost of healthcare much more expensive. It also should be pointed out that much of the breakthrough research done in the development of these drugs is funded by the federal government.
Drug Rep Doctors
written by FoonTheElder, April 29, 2013 12:14
Most of today's American doctors are little more than extensions of drug company representatives.

Now that doctors get most of their continuing education, plus prescribing bonuses from drug companies, they might as well just let the drug company send their reps in the exam room.

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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.