Trump RX: The Merger of Pharma Corruption and Trump Crazy

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.

Patent monopolies don’t just lead to high prices; they also provide an enormous incentive for corruption. When a drug company can sell a drug that costs $10 to manufacture, for $2,000 a prescription, they have incentive to push sales as widely as possible, even if it means lying about the drug’s safety and effectiveness.

The most prominent case of such misrepresentations was the opioid crisis where manufacturers allegedly concealed evidence of the addictiveness of the new generation of opioids in order to push their sales. This led to hundreds of thousands of deaths and millions of ruined lives. This is an extreme case, but these sorts of abuses occur all the time, as would be predicted given the incentives created by patent monopoly profits.

Unfortunately, it turns out RFK Jr. had no real interest in eliminating corruption in the pharmaceutical industry. He apparently sees his job as promoting half-baked conspiracies, most with no evidence whatsoever, challenging the safety of long-proven vaccines and now Tylenol.

Rather than having any real interest in bringing drug prices down, Trump has actually moved to make patent monopolies stronger. He has weakened the inter partes review process, which allowed dubious patents to be challenged without an expensive court suit. Weakening this process will allow the pharmaceutical industry to secure more and longer patent protection by filing bogus patent applications. That means higher drug prices.

The one dubious victory Trump got for those interested in lower drug prices was the creation of Trump RX, which will offer drugs at discounted prices for drugs not covered by an insurance plan. This is a small subset of the population and it’s not clear these discounts will be larger than ones that were already available, but they allow Trump to get his name on something.

It is too bad that we can’t have a serious debate on patent monopoly financed research. The benefits from funding research upfront instead of relying on these monopolies would be immense. In addition to the money saved, the research could all be open source so that researchers all over the world would quickly benefit from new breakthroughs and be warned away from dead ends.

This would also eliminate tens of billions of dollars wasted on duplicative research, where drug companies look to develop a drug to gain a portion of the patent rents of a breakthrough drug, even if their product provides no substantial new benefit. And cheap drugs would mean that doctors could freely prescribe the drug they consider best for a patient without the concern that insurance wouldn’t cover it or they wouldn’t be able to afford it.

But as the old saying goes; intellectuals have a hard time dealing with new ideas. And paying for drug development with upfront funding, instead of government-granted patent monopolies, is a new idea for most people involved in policy debates. And it also upsets a very powerful industry. It’s going to be a while before it can get anywhere.

This first appeared on Dean Baker’s Beat the Press blog.

The post Trump RX: The Merger of Pharma Corruption and Trump Crazy appeared first on CounterPunch.org.