Patently absurd

Dean Baker at MaxSpeak argues that patent monopolies on drugs are not only costly and inefficient, but that they could end up killing millions.

Those of you who like to prepare for potential crises in advance, rather than waiting until after the fact (i.e. not FEMA), may have been following the debate over dealing with a potential outbreak of the Avian Flu, also known as the Bird Flu, since it is spread by poultry. One of the key issues is whether the government should be stockpiling large quantities of Tamiflu, the drug deemed most effective in combating Avian Flu.

The major obstacle to large-scale stockpiling is that the drug is under patent by Roche, the Swiss pharmaceutical company. Roche has limited manufacturing capacity for Tamiflu, and would charge a high price in any case. Roche has been pressured to license the manufacture of Tamiflu to other companies, but has thus far resisted this pressure. Roche, with the support of the pharmaceutical industry, has claimed that forcing it to license Tamiflu would reduce incentives to develop new drugs. It has also claimed that the manufacturing process is so complex that it would take 2 years for other companies to get facilities up and running in any case.

It turns out that the claim on manufacturing complexity is not accurate. The Indian drug manufacturer, Cipla, determined how to reverse engineer the drug in two weeks and is now prepared to begin making a generic version of the drug available in January. (For those not familiar with Cipla, it is one of the world’s largest producers of generic drugs and its products routinely meet the highest safety standards.) So, we are left with the prospect that millions of people in the United States could risk death because our government does not want to infringe on Roche’s patent monopoly.
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Just for the record, the U.S. government already spends $30 billion a year on biomedical research, primarily through the National Institutes of Health. Everyone (including the pharmaceutical industry) claims that this is money very well spent and the appropriation always enjoys deep bi-partisan support. Why shouldn’t we believe that if we doubled this appropriation, to replace the $25 billion that the drug industry claims to spend on drug research (two-thirds of which goes to research copycat drugs) that we would end up with at least as good progress in developing drugs as what we have at present?

And, if the research funding all took place upfront, then the patents could be placed in the public domain. This would allow all drugs to be sold as generics. It would reduce drug prices by approximately 70 percent, saving approximately $150 billion a year. Half of these savings would go to the government (mostly through paying less for the Medicare prescription drug benefit), which would more than recoup its additional spending on drug research.

That's just the highlights. Baker explains the concept in detail.