Drugs are cheap. There are few drugs that would sell for more than $5-$10 a prescription in a free market. However, many drugs in the United States sell for hundreds of dollars per prescription and sometimes several thousand dollars per prescription. There is a simple reason for this fact: government-granted patent monopolies.
The government gives patent monopolies to provide an incentive for drug companies to carry through research. This is an incredibly backward and inefficient way to pay for research. It leaves us paying huge amounts of money for cheap drugs. It also often leads to bad medicine.
We can do better and Senator Bernie Sanders has proposed a way. He has introduced a bill to create a prize fund that would buy up patents, so that drugs could then be sold at their free market price. Sanders' bill would appropriate 0.55 percent of GDP (about $80 billion a year, with the economy's current size) for buying up patents, which would then be placed in the public domain so that any manufacturer could use them at no cost.
This money would come from a tax on public and private insurers. The savings from lower-cost drugs would immediately repay more than 100 percent of the tax.
The country is projected to spend almost $300 billion on prescription drugs this year. Prices would fall to roughly one-tenth this amount in the absence of patent monopolies, leading to savings of more than $250 billion. The savings on lower drug prices should easily exceed the size of the tax, leaving a substantial net reduction in costs to the government and private insurers.
The Sanders prize fund bill would go far toward eliminating the problems that pervade the drug industry. First, it would end the nonsense around getting insurers or the government to pay for drugs. If drugs cost $5-$10 per prescription, there would be no big issues about who pays for drugs. This would eliminate the need for the paperwork and the bureaucracy that the insurance industry has created to contain its drug payments.
We would also end the phony moral dilemmas we create for ourselves with drug patents. Should Medicare pay $100,000 a year for a drug to treat a rare cancer in an otherwise healthy 80-year-old? This dilemma becomes a quick no-brainer when the drug is available for $200 a year in the free market with no patent protection.
The Sanders prize fund could also put an end to many of the deceptive marketing practices that the industry now employs to push their drugs, overstating the benefits of their drugs and concealing potentially harmful side effects. It is rare that a month goes by when there is not a scandal along these lines. If the drug companies no longer stood to get billions in profits from such deceptive marketing, they wouldn't do it.
It would also likely reduce much of the waste in the current research process. Drug companies often spend large sums developing copycat drugs that are of little medical value, but can allow them to get a portion of a competitor's patent rents.
The Sanders prize fund is not the only possible alternative to patents for supporting research on prescription drugs. We could also go the route of direct upfront government funding where the government would contract for the research in advance. We already spend more than $30 billion a year on such research through the National Institutes of Health. This is widely viewed by health experts as money very well spent.
It would be possible to ramp up this funding by a factor of two or three with the intent of replacing patent-supported research. This direct funding would have the advantage that all results would be fully available to researchers and the general public, since that would be a condition of the funding. Representative Dennis Kucinich introduced a bill along these lines a few years ago.
At this point we don't have to decide the best alternative to patent-supported research for prescription drugs. What we have to do is to get the debate started. The Centers for Medicare and Medicaid Research project that we will spend almost $4 trillion on prescription drugs over the next decade. This is almost $10,000 for every man, woman and child in the country. It's long past time that we did some serious thinking to ensure that we are getting good value for this money. The Sanders prize fund bill is an important step in this direction.
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Dean Baker: Bernie Sanders Advocates a Free Market in AIDS Drugs
The article says:
"The country is projected to spend almost $300 billion on prescription drugs this year. Prices would fall to roughly one-tenth this amount in the absence of patent monopolies, leading to savings of more than $250 billion."
But that assumes that 0% of the drugs sold are generic, and thus are not achievable !
http://www.themedica.com/articles/2009/04/the-us-generic-drugs-industry.html
says:
"Today, close to 69% of all prescriptions in the US include generics."
More real world information:
"While prospects for the US market are better than originally anticipated, the loss of nearly $137 billion in revenues in 2013— because of patent expiry of blockbuster products—coupled with fewer new drug approvals are the factors that will limit the growth of the global pharmaceutical market to single digits through 2013 and likely beyond. Some of the drugs slated to lose patent protection by 2013 include Lipitor (atorvastatin) by Pfizer, Plavix (clopidogrel) by Sanofi-Aventis and Bristol-Myers Squibb and Seretide/Advair (salmeterol and fluticasone) by GlaxoSmithKline. Lipitor, Plavix and Seretide were the number one-, two- and fourth best-selling drugs in 2008 with global sales of $13.7 billion, $8.6 billion and $7.7 billion respectively."
http://www.biojobblog.com/2010/02/articles/biobusiness/why-generic-drug-companies-will-dominate-future-pharmaceutical-markets/
Using these sources of information, one can estimate that 2,128,243,000 individuals have some sort of cancer. Now multiply that ponderously large number by $100,000 or another such gruesome fee for cancer treatment or medicine that treats (not cures) the pain and discomfort of this or that cancer.
That kind of unfathomable, annual profit is surely enough incentive to for Health Industry moguls to deny the world of any hope of a cure, for doing so would be killing the goose that lays this golden egg in their back pockets.
It’s enough profit to buy-off politicians, governors, polling workers, Supreme Court justices and their wives, and also enough profit to bus family, friends and employees of the Health Care Industry anywhere to in the US, to any town hall meeting where they can cry government interference, or socialism.
So I’m with Bernie's prize fund and the PUBLIC OPTION.
The new priority should be "people first, profits second." Yeah, the government will have to set ground rules to initiate this new market wherein corps can participate competitively for profit. Currently the benefits to people are incidental to the profit motive. Of course Pharma won't want to change! If I can charge you $20 for a glass of water, why change? Plus, I can spend 19.99 anyway I choose and say I'm doing it for your own good.
I suspect that this is the real, if unstated, goal of Bernie Sanders' proposal. Keep in mind that when you put the private pharma out of business, you also eliminate the country's capacity to develop new, safe drugs. NIH and public university researchers do important fundamental research, but they do not bring drugs through the long, extremely expensive (10-15 years ) process of development, refinement, tox studies, clinical trials, FDA approval, and creation of new manufacturing processes. There is a huge gap between saying that a prescription should only cost $5 to make, and actually putting it on the shelf at your local drugstore.
So let's put the pharma industry out of business and never develop another new drug? I'm not surprised that Bernie Sanders would come up with a half-baked idea like this, but I'm amazed that an economist like Dean Baker seems so ignorant of how the real world works.
How does the Sanders prize scheme value the patents, would it have matched earnings for Zoloft or Zantac? Is there a cut for NIH to better fund the university infrastructure for drug discovery?
I accept your point that there should be a saving on marketing, but the total cost of buying the patents would surely be very close to the total profit on selling the non-generic products.
of course the drug companies lobbied hard and got the bill changed --resulting in about a billion dollars per year in increased costs to canadians-----now they have 20 monopolies with easy extensions with minor ingredient changes --ie lifetime monopolies
Bernie is the best, and I get to vote for him every time he runs!
Almost to the day GHWB arrived at the White House , Veterans drug benefits vanished and the prices Big Pharma charges has continued to rise enormously . Thanks to Congress . Many of who just happens to also be involved in the pharmaceutical business .
There are members of Congress that have been there for more than a generation and have helped to pave the way for legitimate gouging of the American public . Not only in the drug business but the list is long . When the people hired to represent the people make secret laws , like a ban on purchasing medicine from across our borders , it is obvious they are not doing the job they were hired to do .
And if some members of Congress are doing these things and other members are silent or do not prevent these activities (filibuster) : isn't that aiding and abetting ?
When a US Senator was campaigning for the Presidency he made the remark "these guys are crooks" , not knowing his mike was still on . Instead of the media digging to validate his remark they brought out their ridicule machinery and assaulted the messenger .