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Home Publications Blogs Beat the Press Patent Monopolies Lead to Corruption: #43,261

Patent Monopolies Lead to Corruption: #43,261

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Sunday, 08 December 2013 08:57

The Washington Post had a major article on how the drug company Genentech has managed to create a substantial market for its drug Lucentis, at a price of $2,000 per injection, even though it manufactures another drug Aventis, which is just as effective and sells for $50 an injection. Both are used to prevent blindness. A number of studies have shown them to be equally effective. The article explains how Genentech has been able to maintain a market for a drug that costs 40 times as much as its equivalent competitor, most importantly by not seeking approval from the Food and Drug Administration for the use of Aventis as a treatment to prevent blindness.

While the article is fascinating, it would have been helpful to include the views of an economist who could have pointed out that this is exactly the sort of corruption that economic theory predicts would result from the granting of patent monopolies by the government. Government granted monopolies would lead to distortions in any case, but they are likely to be especially large with a product like prescription drugs, where there are enormous asymmetries of information. The drug companies know much more about their drugs than patients or even their doctors.

It would be reasonable to discuss more efficient mechanisms for financing prescription drug research, such as direct public funding (we already spend $30 billion a year on biomedical research through the National Institutes of Health). Unfortunately the drug companies so completely dominate the political process news outlets like the Post never even mention alternatives to patent monopolies. However, they do occasionally document some of the predictable corruption, as is the case here.

Comments (6)Add Comment
...
written by Last Mover, December 08, 2013 11:13

Blindness? Apparently the POTUS and every single member of SCOTUS, the Congress and Senate who have not seen the economic light of day since 2008, have been denied access to this drug.

Big Pharma priced them out of the political market long ago as representatives of We the People who could have seen the light, and blinded them into representatives of We the Predators, to see no evil, hear no evil and speak no evil.

You want to see America? What's it worth? Pay up or go blind. Two grand is a bargain when an extortionist sets the price.
"asymmetries of information" - NOT
written by Paul Mathis, December 08, 2013 12:42
The article pointed out that all the doctors, pharmacists, etc. knew perfectly well that the $2000 medicine was no better than the $50 medicine, but they all conspired to cheat Medicare because they were all getting excess profits or kick-backs from the manufacturer to use the $2000 medicine.

The real economic story here is that cheating Medicare is the national pastime of the health care community and these guys need to go to jail, but they won't.
...
written by AlanInAZ, December 08, 2013 1:28
Aventis is the name of a former French drug company that merged with Sanofi. Avastin is the cancer drug used for wet macular degeneration.
...
written by AlanInAZ, December 08, 2013 1:40
Kevin Drum adds some back story missing from the WaPo piece.

http://www.motherjones.com/kev...ensive-way
How much of this is spent on congress and dem/rep committees...
written by pete, December 08, 2013 3:17
A good share of these rents are likely gobbled by the respective committees. This is no different than the banking rents, much of it going to Frand and Dodd and Obama during the fraudulent 2000s. You scratch my back, I scratch yours. Surprising that the insurance companies play along. But then they just up the premiums.
committee?
written by Squeezed Turnip, December 08, 2013 11:37
How much of this is spent on congress and dem/rep committees...
written by pete, December 08, 2013 3:17
A good share of these rents are likely gobbled by the respective committees. This is no different than the banking rents, much of it going to Frand and Dodd and Obama during the fraudulent 2000s. You scratch my back, I scratch yours. Surprising that the insurance companies play along.


C'mon, pete, are you that much of a rube? Who do you think gets elected anyway? Insurance executives, say from HealthSouth, for example. The only ones getting a cut of the giant Medicaid fraud being perpetuated on the US public are pharma and healthcare jocks posing as elected representatives, and their stooges. And guess what? They're more GOP than Dem, at this stage in the game. It started shifting back when Obama won.

So, no, it's really not surprising the insurers play along and up the premiums. They're gonna charge you a fee for charging you a fee, see?

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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.

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