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Home Publications Blogs Beat the Press The Government's Role in Blocking Access to Health Care

The Government's Role in Blocking Access to Health Care

Monday, 24 March 2014 04:41

The Washington Post had a major piece that discussed the ethics of efforts to use public pressure to force drug companies to make expensive drugs available to patients at affordable prices. Remarkably it never discussed the role of patent monopolies.

In the case that was the immediate focus of the article, a young boy who was suffering from cancer and seemed likely to benefit from a drug that was still in the experimental stage, it does not appear that patent protection was a major factor. However in many cases patients will face exorbitant prices for a life-saving drug that they may not be able to afford because the drug is subject to patent protection.

In such cases it is the patent that creates the moral dilemma raised in this article. If the drug were sold at its free market price it would likely be affordable to most patients. This is one of the perversities of patent financed drug research. While drugs can be expensive to develop, they are generally cheap to manufacture. It would be desirable for drugs to be sold at their free market price if some alternative mechanism (e.g. NIH funding) could be used to finance their development.

It would have been useful if this piece had discussed the way in which the mechanism we use to finance drug research can lead to the sort of ethical dilemmas it discusses. In this context it is probably worth mentioning that the Washington Post gets considerable revenue from drug company advertising.

Note: Typos corrected, thanks Robert Salzberg.

Comments (9)Add Comment
written by dajobr, March 24, 2014 5:40
It is mostly financed by NIH
The Big Pharma Hero Effect: It Pays to Be a Hero
written by Last Mover, March 24, 2014 6:34

A corollary question rarely asked, is what drugs would be produced by Big Pharma if the obscene unnecessary economic rent component driven by patents was stripped out of the price of drugs.

The drugs would not be the same because the focus would shift to saving more lives in total in sharp contrast to targeting drugs for which willingless to pay can be exploited to generate the highest profit by capturing consumer surplus, loaded with a monopoly component of economic rent.

Take aspirin for example. It saves millions of lives by avoiding heart attacks and cancer for pennies a day with a huge consumer surplus (what would have been paid).

Would Big Pharma compete to discover and create aspirin under one of Dean Baker's workable alternatives absent patent protection, then sell it for the very low marginal cost of production and distribution?

Not a chance. It's the same reason vaccinations were dropped as well unless the government paid a ransom to provide them, even though they could still earn a normal competitive profit free of economic rent.

Which raises an obvious question. Why don't sock puppets for Big Pharma ever compare the medical efficacy and economic cost of aspirin that prevents the very things Big Pharma invests in so heavily - lingering chronic and dramatic disease that creates desperate customers who will pay anything to survive it?

Oh wait, there's no hero effect is there, you know, Big Pharma riding it on the white horse to save desperate patients for ... pennies on the dollar. The hell with that you cheap freeloading socialists. What, you think we're supposed to produce drugs in some kind of free market like aspirin is produced now?
Other issues here not mentioned
written by Jennifer, March 24, 2014 8:39
Another issue this article did not answer why wouldn't a drug company want a shot at "proving"that a particular drug works by offering it to people who clearly have no other option (therefore any kind of lawsuit is very unlikely).
The answer to this is that clincal trials and the release of the date from those trials is carefully controlled-to the point that the real use of the drug may be questionable. Just to give a simple example if a drug is only effective 25/100 trials but 50 of those trials are not submitted the drug can go from being 25% effective to 50% effective. This kind of slight of hand with numbers has become so widespread it has become a major campaign to force drug companies to release ALL the data to get a true picture.
Patent Perversion
written by Larry Signor, March 24, 2014 9:30
The current patent scheme drives the increase in cost for prescription medicine and the decreased development of innovative new drugs. Tweaking patent medicine formulations and ever-greening serve to drive net revenue much higher than a market price for the same medicines would. Concentrating resources toward these activities also denies investment in true R&D. This is not simply "moral hazard", it is an immoral and unethical manipulation of the health care system for the benefit of big Pharma (and the 1%) to the detriment of the American public.

pharmaceutical R&D
written by chase, March 24, 2014 11:07
A quick search suggests that R&D for US-traded pharmaceutical companies is on the order of 80-100 billion per year. That's about 4X the entire NIH budget. So: yes, they are extracting rents, and yes, the rents are too high, and yes, for-profit medicine is rife with all kinds of problems. But there is no easy alternative given the scale of the investment.
written by jack, March 24, 2014 11:12
Patents part of that free market meme.
A barrier to entry by any other name would cost the patient as much.
written by Capt. J Parker, March 24, 2014 9:17
You can spot a progressive cherry-picker at a thousand yards by the way he zeros in on patents as the cause of high drug costs and NEVER EVEN HINTS that the FDA is also a factor. The capital cost from discovery through FDA approval can be as high as $2 billion. The process can take over 10 years to complete. Only 3 out of 10 new drugs reach sales levels that enable their approval costs to be recouped. FDA is also on a campaign to ban compounds with sometimes decades long history of clinical use because the compound lacks data from a controlled trial per FDAs standards as they exist today. FDA was also empowered by congress to grant exclusivity on otherwise generic compounds in excahange for big pharma being willing to foot the bill for an approval process that would otherwise be too expensive to justify.
Government caused high drug costs via patent rights.
Government caused high drug costs via an expensive approval process.
Why oh why, really, WHY would anyone with half a brain want to trust government with any more responsibility for drug development? We'd have $45 per tablet asprin.
Bernie blows them away
written by Craig from San Leandro, March 24, 2014 9:22
If Bernie Sanders runs and debates Clinton, the drug prize idea will be a grand slam.
written by ezra abrams, March 25, 2014 6:09
quote It would be desirable for drugs to be sold at their free market price if some alternative mechanism (e.g. NIH funding) could be used to finance their development.unquote

Since we are wishing for unicorns, why not invisible pink unicorns ?
Also, manufacture of the drug product - the bottle, the label and the contents, pill or liquid - is in fact relatively cheap.
not that cheap, but relatively cheap.

However, even if there were not patents, FDA regulations have teh same effect; what then ?

you may, in some fairy tale theoretical liberal world, the coutnerpart to P Ryan's fantasys, be right, but back here, in the real world, I miss the D Baker who does such good work on Soc Sec.
I also have never understood the moral logic of allowing poor countries to spend their precious dollars training medical personale so we can use them; what do you tell the child in Uganda or the Philippines - sorry kid, you parents spent money on taxes to train nurses that we then snapped up, so you don't get even rudimentary health care ???

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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.