by DEAN BAKER
I haven’t given my diatribe on cheap drugs for a while, but what the hell. It’s a huge deal and no one in a position of power gives a damn (just like the housing bubble), but I’ll keep trying.
Just to remind everyone of where things stand, drugs are cheap. The government makes them expensive with patent monopolies and other forms of protection.
There are all sorts of self-imagined progressive types who see their goal in life as getting the government to rein in the market to end poverty and reduce inequality. In the case of prescription drugs, the problem is the government, not the market.
Drugs are almost invariably cheap to manufacture and distribute. They would sell for $10, $20, or $30 per prescription in a free market. The reason people end up paying tens or even hundreds of thousands of dollars for drugs they need for their health or life is because the government prevents competition that would bring prices down close to the drug’s cost.
We need to pay for the development of drugs, but we don’t need patent monopolies for that. We used to spend over $50 billion a year for biomedical research through the NIH and other government agencies. We would need to spend perhaps three times that amount to replace the research now supported through patent monopolies.
That additional $100 billion sounds like a lot of money, except we would likely save on the order of $550 billion a year on what we spend on drugs. We currently spend over $720 billion a year for drugs that would likely sell for around $150 billion in a free market.
The difference of more than $550 billion a year comes to more than $4,000 per household. It’s more than the tax breaks in Trump’s big bill. This is a huge amount of money that the government is transferring every year from the rest of us to the people in a position to benefit from patent monopolies. But somehow, we are all just supposed to accept that this is the free market.
I was reminded of how corrupt and immoral this system is when I recorded a podcast with Joe Stiglitz, who has written extensively on intellectual property, as well as many other areas. In addition to making drugs expensive or altogether unaffordable for hundreds of millions of people around the world, these monopolies hugely hampered the response to the pandemic.
Rather than trying to get vaccines, tests, and treatments produced and distributed as widely as possible, the international community focused on setting up structures to ensure that the pharmaceutical industry would be adequately compensated. Arguably the structure already existed with the compulsory licensing terms that were put in place in the Doha round of the WTO, but that is really beside the point.
The issue of distribution of vaccines and drugs is completely separable from the question of appropriate compensation for the pharmaceutical industry. Common sense would have dictated that the countries with the necessary technology and expertise do everything possible to maximize production of pandemic related vaccines and treatments immediately.
The debate over appropriate compensation could have proceeded on a separate track and taken as long as necessary. There was no emergency in determining compensation for Pfizer or Moderna. If it took a year or two to iron out a fair level of compensation, that would be no big deal. Getting out the vaccines and treatments was an emergency involving tens of millions of lives.
Some of us had vague hopes that Trump might actually do something to rein in the pharmaceutical industry. In his campaign he complained about high drug prices. Robert F. Kennedy, Jr., his Secretary for Health and Human Services, has made a career complaining about corruption in the industry, so there was some basis for thinking he might look to fundamentally change the industry’s business model
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