Patent Monopolies Lead to Corruption, # 21,508

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Sunday, 20 January 2013 09:08

The NYT has an article on how Amgen managed to get a provision into the budget deal signed at the start of this year which could get it $500 million in additional revenue from Medicare over the course of the decade. The piece reports that this was a victory for Amgen's extensive lobbying network on Capitol Hill.

This sort of corruption is exactly what economic theory predicts when the government gives companies monopolies in certain markets, as it does with patent protected drugs. When a company can sell a drug at prices that are several thousand percent above the marginal cost of production it has enormous incentive to pressure politicians to allow it to sell the drug in contexts where it may not be the best treatment for a disease.