D.C. Drug Price Controls Overturned

Ronald Bailey | December 23, 2005

Ealier this year, the city council of our nation's capital, imposed price caps on pharmaceuticals sold in the District of Columbia. Drug companies were not allowed to sell their pills and injections at prices more than 30 percent higher than they sell them wholesale in Germany, Britain, Canada, and Australia. If the companies charged more, they would be subject to civil fines.

U.S. District Court Judge Judge Richard J. Leon ruled yesterday that the price caps violate constitutional protections of interstate commerce and goes against the will of Congress. Judge Leon wrote:

"Punishing the holders of pharmaceutical patents in this manner flies directly in the face of a system of rewards calculated by Congress to insure the continued strength of an industry vital to our national interests."

The Washington Post article cites pharmaceutical industry representatives who argued that "European drug prices are set artificially low and that the District's law would reduce revenue and profits needed to develop drugs.The effects of drug price controls would be harmful to patients." Of course, that's a self-serving statement, but they also happen to be right.

For example, according to a study by the U.S. Department of Commerce, European price controls are already reducing global R&D for new drugs by as much as 16% below what it would otherwise be if market conditions similar to those in the United States prevailed worldwide. The study estimates that imposing these price controls means that three to four fewer new drugs are developed annually.

A National Bureau of Economic Research study estimates that "cutting prices by 40 to 50 percent in the United States will lead to between 30 and 60 percent fewer R and D projects being undertaken in the early stage of developing a new drug."

No one likes paying high prices for vital medicines, but if we don't, the medicines that we'll one day need may not be there.

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|12.23.05 @ 12:06PM|#

Drug companies were not allowed to sell their pills and injections at prices more than 30 higher

Thirty dollars? Thirty times? Thirty percent? I think there's a word missing here.

|12.23.05 @ 12:14PM|#

I'll go with "percent" FTW

Warren|12.23.05 @ 12:17PM|#

This whole fricking mess, just dries up and blows away with drug reimportation.

|12.23.05 @ 12:19PM|#

Jennifer: 30 percent--thanks for catching the omission. Fixed now

|12.23.05 @ 12:22PM|#

I do freelance copyediting on the side. My rates are quite reasonable.

Ghost Of Consumer Choice Past|12.23.05 @ 12:23PM|#

This really is the thread where I should be explaining to you that enormously increased "investment" in medicine has yielded pretty marginal health improvements over the past 40 years or so. That what is really going on is mostly consolidation and its resultant rentseeking (in the US anyway). That we need to bring things back to the way they were in the past when the medicine market was decentralized and operated in accordance with the principles of capitalism as laid out by Smith and defended by Sherman. But not today. Stiil hungover.

|12.23.05 @ 12:25PM|#

Warren: You may want to hold off on those "reimported" drugs. See below:

FDA Operation Reveals Many Drugs Promoted As "Canadian" Products Really Originate From Other Countries

A recent FDA operation found that nearly half of the imported drugs intercepted from four selected countries were shipped to fill orders that consumers believed they were placing with "Canadian" pharmacies. Of the drugs being promoted as "Canadian," based on accompanying documentation, 85 percent actually came from 27 countries around the globe. A number of these products also were found to be counterfeit.

"This operation suggests that drugs ordered from so-called 'Canadian' Internet sites are not drugs of known safety and efficacy," said Dr. Andrew von Eschenbach, Acting FDA Commissioner. "These results make clear there are Internet sites that claim to be "Canadian" that, in fact, are peddling drugs of dubious origin, safety, and efficacy. We believe that these 'bait and switch' tactics-offering patients one thing and then giving them something else- are misleading to patients and potentially harmful to the public health."

Whole thing here.

|12.23.05 @ 12:35PM|#

"U.S. District Court Judge Judge Richard J. Leon ruled yesterday that the price caps violate constitutional protections of interstate commerce"

But does this mean Sinincincinnati could legalize "interstate commerce" for a few months, anyway, and get away with it?

|12.23.05 @ 12:39PM|#

Denver seems to be doing ok so far

Are there any other industries we have a duty to overpay for, in the hope that they'll spend the money on R&D for solving important problems?

And how about those evil hospitals, negotiating some of the drug companies' profits away? Bastards.

God I love the government: "Let's just use price controls instead of doing away with costly and ineffective FDA testing".

What's next? Issuing food stamps while inflating food prices with agriculture subsidies? Oh wait...

|12.23.05 @ 12:41PM|#

"Duty to overpay"? Shit, joe, you don't have to pay for any drugs that you think are overpriced - at least in my book! Taste the freedom.

Warren|12.23.05 @ 12:44PM|#

Are there any other industries we have a duty to overpay for, in the hope that they'll spend the money on R&D for solving important problems?

Yes, all of them.

Ed|12.23.05 @ 12:51PM|#

That's ok. We'll never miss the drugs that never existed. Suffering makes us human. So sayeth the lord. Merry Christmas.

Timothy|12.23.05 @ 12:56PM|#

Yes there have been exactly no health improvements since 1965. None. Not one.

Dave W.|12.23.05 @ 1:06PM|#

Not true Timothy. Life expectancy in the US has gine up 8 years. The questions are: what fraction of our GDP was used to pay for this 8 year gain? What would the life expectancy be now, if we had somehow held healthcare spending, as a fraction of GDP, down at 1965 levels?

Now you can see why this stuff gives the poor ghost such a headache!

|12.23.05 @ 1:11PM|#

Dave W., didn't you once say that I erred in seeking medical help with a chronic infection that was causing me to miss at least two days or work per month?

So, what would I have done about my problem if I adhered to your ideas on the proper use of medicine? (Besides avoiding corn syrup, of course.)

Razzleberry Dressing|12.23.05 @ 1:20PM|#

So, what would I have done about my problem if I adhered to your ideas on the proper use of medicine? (Besides avoiding corn syrup, of course.)

If I ever get the time to finish my story, the imaginery T. who lives in my head and one of the ghosts (probably Consumer Choice Future) are going to have a talk about exactly that in the story. I hope I can find this thread again later because it is easier for me when you help write the dialogue. It makes the imaginery T. parts more like what the real T. would think and say.

Ya know the other day I couldn't even find the threads where Akira's dad wuz mean, let alone the threads where the 'Kira discussed evolution. Once I said that GOOGLE remembers, but GOOGLE's memory ain't as great as I thought it was.

The short answer is that the Scrooge sacrifices so that Tiny Tim gets his crutches.

|12.23.05 @ 1:23PM|#

The short answer, then, is that I forgo a short appointment with a general practicioner, a few routine tests, and a common medication, and accept chronic viral infections.

Yeah, nothing improves public health like not treating contagious but easily controlled diseases.

Got it.

chris joseph|12.23.05 @ 1:36PM|#

Their selling them at a lower cost elsewhere seems to be the main sticking point. I'm assuming it's so these countries aren't tempted to ingnore their patents and manufacture them on their own?

Wouldn't it make more sense to license the manufacture of these drugs instead?

Dave W.|12.23.05 @ 1:40PM|#

Yeah, nothing improves public health like not treating contagious but easily controlled diseases.

Well, your comfort as a well-heeled dude is a valid concern, T. But there are other valid concerns out there, too. That is what Dickens was trying to say all those years ago and what needs to be updated now. Cause Christmas and stuf.

|12.23.05 @ 1:45PM|#

Are there any other industries we have a duty to overpay for, in the hope that they'll spend the money on R&D for solving important problems?

Comment by: joe at December 23, 2005 12:39 PM

Yes, all of them.

Comment by: Warren at December 23, 2005 12:44 PM

Warren, if you are the same Warren who advocates repealing copyright law, do you feel the same way about patent law? Do you consider items covered by copyright to be not solving important problems?

Just curious. Thanks in advance for any answers.

Well, your comfort as a well-heeled dude is a valid concern, T. But there are other valid concerns out there, too. That is what Dickens was trying to say all those years ago and what needs to be updated now. Cause Christmas and stuf.

I don't know exactly what you and Thoreau are arguing about here, Dave. . . are you saying it is selfish of him to take medication to treat an illness? A potentially contagious illness, at that?

|12.23.05 @ 2:00PM|#

Question for you people smarter than me (which would be all of you).

Canada sells drugs cheaper than the US. Does the Canadian Government buy them from the drug companies cheaper than the US can, or do Canadian taxpayers subsidize the difference of a full-price purchase to make them cheaper to the end user?

Ron Hardin|12.23.05 @ 2:03PM|#

On the other hand 3rd party payers means that drugs are developed that nobody would pay for in a free market.

The option of just dying if it happens you need one, or not, if you don't, is not unattractive. It means that you also get to keep what you work for instead of having it taxed away.

|12.23.05 @ 2:06PM|#

I love how companies (pharma or otherwise) lambast the laws cut into their profits (like price caps) and promote ones that prevent profit loss (like re-importation).

If we had fully open economic borders, drugs, cars, clothing and more would be sold based on the global market price, not just a local one. If a phrama company wants me to pay the "fair market value" then let me pick the market.

Just to be clear, I am not beating up on business, I am advocating the government stay out of it, both on the business end and the consumer end.

|12.23.05 @ 2:07PM|#

Jennifer-

For about 4 years I kept getting the same damn virus at least once per month. It wasn't bird flu or anything that bad, but it knocked me down for a couple days, at least once per month. I was spreading it to others. For a while the doctors thought that I had allergies or a weak immune system. Eventually they found out that I had another problem, fortunately minor and treatable. But it took some tests to prove that.

I'm on a fairly routine medication, I haven't been sick since, I haven't infected anybody else.

Dave W. thinks that by treating my problem I'm making health care more expensive for everybody else. I'd say that getting the same disease over and over, at least 2 days per month, and usually more, and infecting others as well, is a legitimate reason to get treatment.

|12.23.05 @ 2:10PM|#

Dave W. thinks that by treating my problem I'm making health care more expensive for everybody else.

Perhaps you can redeem yourself by guzzling corn syrup until you puke.

Timothy|12.23.05 @ 2:16PM|#

The short answer is that the Scrooge sacrifices so that Tiny Tim gets his crutches.

I'm 5'10", thanks, and my legs work :-).

Canada sells drugs cheaper than the US. Does the Canadian Government buy them from the drug companies cheaper than the US can, or do Canadian taxpayers subsidize the difference of a full-price purchase to make them cheaper to the end user?

Canada has price controls. Companies are allowed to export into Canada, but cannot sell above whatever the price cap is. This is subsidized by higher prices in places without such controls, namely the US.

|12.23.05 @ 2:25PM|#

Cars, for example. Is the owner of a Ford dealership starving Ford's R&D operation of capital that could be used to design a better air bag if he negotiates the price of the cars he buys?

|12.23.05 @ 2:29PM|#

Canada has price controls. Companies are allowed to export into Canada, but cannot sell above whatever the price cap is. This is subsidized by higher prices in places without such controls, namely the US.

In some sense, but the problem isn't that drug companies are selling pills at a marginal loss in Canada. In fact, each pill sold in either the Canada or the US is almost pure profit. It's the rents that drug companies are allowed to seek that give incentives for investing in a certain level of R&D.

The upshot is, if Canada didn't use its bargaining power to negotiate cheap drug prices and, say, prices doubled in Canada, there would be no "lifting" of the subsidy by US consumers, since the pharma companies are simply charging what their monopolized market will bear. So subsidy is probably the wrong word.

|12.23.05 @ 2:37PM|#

Interesting legal question presented here totally aside from the drugs.

The only way this could get overturned is through the Dormant Commerce Clause. Certainly not the normal clause, which as all libertarians know, is about as tight as a Tijiuana hooker after a busy night.

But D.C. is ruled by the federal government. So my question is how the dormant commerce clause applies in this specific instance? Is it just that the city council did it? Or are the feds treated as state when they try economic discrimination to favor their state-like entity. Interesting question.

Timothy|12.23.05 @ 2:44PM|#

NB: You're right that the pills are produced at almost no marginal cost, but that doesn't take into acount the fixed costs of supply. So each pill sold does exceed its own marginal cost, but it's certainly a long way from "pure profit": you've got to cover the $800,000,000+ it takes just to bring a drug to market in the first place.

If Canadian prices rose, that would change the profit-maximizing option for the oligopolists during their patent term. The company is going to look at its margin as a whole, meaning that their profit-maximizing US price point may well be lower than it is currently were Canadian prices to double (those higher prices would cover more of their costs).

|12.23.05 @ 2:49PM|#

N.B.:

I'm sure you realize that patents are government granted monopolies. The idea behind patents is that they are bribes to inventors to disclose to the rest of us how they make their inventions. This is so that other people can benefit from their knowledge and go on to use that knowledge to build even better inventions for us.

Patents get us out of the previous zero-sum world of trade secrets in which guilds and families kept their knowledge to themselves. Trade secrets used to be the only way an inventor could be sure of profiting from his discoveries/creations. As Abe Lincoln once said of patents: "They add the fuel of interest to the fire of genius."

Patents are not perfect, but the last 2 centuries of invention have depended on them and the concept of peer-reviewed science (also a disclosure method in which scientists get credit and fame [and today maybe grants] for being the first to announce their new knowledge.)

|12.23.05 @ 2:56PM|#

Do NOT confuse health care costs with pharmaceutical costs. Even after drastic increases, drugs are still only 10% of our total spend. The real expenses are medical procedures conducted in the last 6 months of life. Drugs are very, very cost effective.

An ounce of prevention and all that.

The Canadian government does not regulate drugs imported THROUGH Canada. Canadians get safe drugs, but the stuff that just has a layover in Toronto between India and the US is not their problem.

If we are mad that we are subsidizing the pharmaceutical consumption in Europe, then DC's solution isn't bad. They still let the industry set the price. It just requires them to charge the same price in Europe, Canada and the US. On the flip side, we need to be willing to protect US Intellectual Property. When France threatens to break patents in order to get cheaper drugs and prop up their welfare state, we threaten to break a few of their buildings and steal their cheese.

Disclosure: I work in the Pharmaceutical industry.

VM|12.23.05 @ 2:56PM|#

alright NB: put up with some links here.
"... since the pharma companies are simply charging what their monopolized market will bear."

since the price is simply what the market will bear, i'd like to see some facts to work through your post. (bonus points for bringing in Lerner)

"each pill sold in either the Canada or the US is almost pure profit"

it is? show that.

what rent seeking activities are done by pharma in canada?

Monsieur Bertrand would really love this, no? :)
(since we're not talking about homogeneous output here, he'd have a say on this oligopoly instead of cournot, heh)

Rich Ard|12.23.05 @ 2:57PM|#

Is the owner of a Ford dealership starving Ford's R&D operation of capital that could be used to design a better air bag if he negotiates the price of the cars he buys?

Who's the owner negotiating with? Is your new job keeping you so busy that your ability to metaphor has completely fizzled?

For someone who calls "strawman!" so often, your examples have been just terrible of late.

|12.23.05 @ 3:02PM|#

Calling a pill "pure profit" presumably refers to the actual manufacturing costs, once the drug has been discovered, tested, and approved. I suspect that the cost of rolling more more pill out of the factory is only a tiny fraction of the total price.

joe-

As far as cars go, my understanding is that the marginal cost of producing a car (once the designs have been laid out) is a much bigger fraction of the car's total sale price than the marginal cost of producing another pill. Yes, both the auto and pharmaceutical industries have R&D costs, and both have marketing costs, but the balance between production and R&D is different in the two industries.

|12.23.05 @ 3:06PM|#

Rich Ard,

The dealer's negotiating with Ford, thereby reducing Ford's profits. Is that clear enough?

thoreau, perhaps I'm slow today, but how is that relevant to my question?

|12.23.05 @ 3:10PM|#

joe-

R&D costs aren't as significant for Ford as they are for pharmaceutical firms.

Rich Ard|12.23.05 @ 3:19PM|#

Joe,

It's clear, and sorry, I should have been more direct - your metaphor fails because there the "dealer" did not negotiate with the producer, it imposed a cap.

Rich Ard|12.23.05 @ 3:21PM|#

I don't mean to play "gang up on the dissenter!", but you often raise good points and seem to have lately been taking contrarian stances without bothering to come up with arguments.

|12.23.05 @ 3:24PM|#

Yes, Richard, and the "non-voluntary, statist" critique is noted.

But Bailey raises a second issue in his post - that the reduction in profits from these laws is not just unfair to Pharma in the anti-statist sense, but creates an objectively bad outcome by stifling research.

So I'm wondering, how many more victims of Erectile Dysfunction would have woodies if the darned hospitals didn't negotiate to cut the price of the drugs they buy? Astra-Zeneca would surely have more money to spend on R&D if the hospitals paid full price. Do you want new and better drugs, or not?

Warren|12.23.05 @ 3:34PM|#

Warren, if you are the same Warren who advocates repealing copyright law, do you feel the same way about patent law? Do you consider items covered by copyright to be not solving important problems?

One and the same. I'm not prepared to advocate repealing patent law. The fact that I'm an electrical engineer has absolutely no bearing on my position. The pharmaceutical industry is what gives me greatest pause. I don't thing there would be drug development without patent. OTOH, I do think that patent law is due for an overhaul, Like copyright, it has gotten way out of hand.

I still believe that we should do away with copyright altogether. It would suck for some writers, but not for readers, there's plenty of great literature that�s written for free. I think all the important problems would still get solved without copyright protection. I would leave trademark law alone, it's working fine.

Rich Ard|12.23.05 @ 3:37PM|#

Do you want new and better drugs, or not?

That's just it - bulk purchasers can negotiate lower prices, and pass those prices on, allowing the producer to adjust how far they're willing to cut wholesale prices by what their projected R&D costs (and executive vacations for all I know) will cost them.

So I guess I don't know what formulas pharmeceutical companies use to price their drugs, and I'll venutre a guess that the council doesn't either - not their job to decide value.

|12.23.05 @ 3:46PM|#

Look, no matter how prices are set (markets, regulation, bulk purchasers negotiating, individuals negotiating, etc.), there will always be a tradeoff between immediate consumer well-being (low prices mean easy access) vs. long-term consumer well-being (higher prices fueling more R&D). Trade-offs don't always mean zero sum, but they do mean that there are consequences to every action.

My only point about R&D costs is that we can't take price disparities as evidence of something rotten. When marginal costs (producing a pill at the factory) are substantial lower than average costs per unit (which include R&D costs), a producer has two strategies at his disposal:

1) Sell to everybody at a price that exceeds per-unit average costs. Profit is earned, R&D continues.

2) Charge different prices to different customers: Every customer will still be paying more than the marginal cost (otherwise the company won't sell), but some will pay only slightly more while others will pay a lot more.

The second strategy could be adopted because some customers have more bargaining power, or it could be adopted because some customers are more cost conscious, or it could be adopted because different customers live in countries with different regulatory environments.

Whatever the reason for adopting the second strategy, you have to be careful what conclusions you draw from observing it. The company may be turning a profit while charging some customers a lower price than they charge you. That doesn't mean they'd continue to turn a profit (and hence stay in business and sell you medicine) if they charged everybody that same price.

|12.23.05 @ 5:00PM|#

Well, your comfort as a well-heeled dude is a valid concern, T. But there are other valid concerns out there, too. That is what Dickens was trying to say all those years ago and what needs to be updated now. Cause Christmas and stuf.

Thoreau, did Tiny Tim become crippled because you beat him up and took his medication for yourself? If so, then you are a complete fucking bastard and I hope you rot in hell. If not, then I really wish Dave could tell me who exactly you harmed when you took your medicine, and more importantly, HOW you harmed them, and how they'd be better off had you not medicated yourself.

I would also like to know if I harmed anybody the last time I took prescription medication for an [airborne-contagious] illness. It was back in late 2002 or early 2003, if I remember correctly. What horrible events from then can be traced to my prescription-drug use?

|12.23.05 @ 5:10PM|#

I would also like to know if I harmed anybody the last time I took prescription medication for an [airborne-contagious] illness

If you used insurance then you obviously drove up the cost of insurance premiums. Even if you didn't, just by going to the doctor and buying the medicine you increased demand thereby affected the price of the doctor's services. By inflating the price of his services you made it impossible for a poor family to afford the doctor.

The world would be better off if I were sick a couple days per month and passing around an airborne contagion. That would be better than the status quo, where I haven't been sick (or contagious) since August.

Seriously though, I won't pretend that my disease was life-threatening. But when you got knocked out by something for 2-4 days per month, and pass it around, that's worth seeing a doctor over. Most adults don't get sick nearly that often. I did, so it was worth treating.

|12.23.05 @ 5:16PM|#

Seriously though, I won't pretend that my disease was life-threatening

Mine probably wasn't, either. But I hope Dave wouldn't try to say that only life-threatening diseases can be treated without accusing the patient of being selfish.

|12.23.05 @ 5:25PM|#

Thanks for the response, Warren. I agree that the patent system needs some serious overhauling, especially when considering the ridiculous number of software-only patents out there (I'm a computer programmer, so they directly affect my livelihood.)

|12.23.05 @ 5:35PM|#

Thoreau,

"If you used insurance then you obviously drove up the cost of insurance premiums. Even if you didn't, just by going to the doctor and buying the medicine you increased demand thereby affected the price of the doctor's services. By inflating the price of his services you made it impossible for a poor family to afford the doctor."

But if nobody used insurance, then less people would buy insurance (why pay for something you know you won't use?), thus putting insurance companies and their employees out of business. The same holds for the doctor: If nobody sees her, she'll find a different job.

|12.23.05 @ 6:19PM|#

"I still believe that we should do away with copyright altogether. It would suck for some writers, but not for readers, there's plenty of great literature that?s written for free. I think all the important problems would still get solved without copyright protection. I would leave trademark law alone, it's working fine."

How copyrighted software, or music, etc? Why should patents be OK, but copyrights not?

|12.23.05 @ 6:41PM|#

Are there any other industries we have a duty to overpay for, in the hope that they'll spend the money on R&D for solving important problems?

City planning, apparently.

|12.23.05 @ 6:50PM|#

|12.23.05 @ 6:58PM|#

I agree, robot.

|12.23.05 @ 7:41PM|#

I don't know where I'm going with this, so flame away if I sound even more incoherent than usual.

Whatever the cause, the public basically expects the FDA to ensure that they only approve drugs with a 100% guarantee not to cause you to be more ill. I'm thinking Vioxx right now... I can't remember the result of the appeal process, but the pharma was liable for a huge sum of money after the intial court case. Was the FDA found liable at all?

Seems to me that for a variety of reasons we're requiring the FDA to approve drugs only after excessive trials, the concept of "reasonable quality assurance" seems to be gone now. That comes at a real cost.

Perhaps I'm naiive, but I think most drug companies would want to limit their liability should a drug cause severe adverse conditions. Testing the products and having an independent oversight bureau give a go/no-go to each drug seems like a useful way to accomplish that limit of liability. Consumers can still sue for damages should an approved drug turn out to be the cause of a death, but at some point isn't the FDA responsible for approving a product that shouldn't have been approved? It's not like any pharmas have the option of putting a non-approved drug on the market and letting the consumers sue for damages should the QA of the faulty product turn out to be lax. The FDA positions themselves as the gatekeeper but takes no responsbility for their own slip-ups.

http://www.reason.com/9505/SASHA.may.shtml

|12.23.05 @ 11:35PM|#

I missed the part where Dave wants everyone to climb into a hole and die at the first sign of illness.

If that is what Dave said, Dave is a tool. No one should feel guilty for getting medical treatment to solve a medical problem, even if it is minor, non-infectious, etc... That's peachy keen.

Now, maybe getting your insurance to pay for 300,000 in purely cosmetic surgery, Dave would have a point.

In any case, something like 80% of your lifetime medical costs come during your final illness.

My grandmother racked up $250,000+ in her last weeks.

The problem is, in that instance, that no one wants the moral responsibility of saying "S/he is done for. Send them home to die in peace." If we socialize medicine, that is precisely what will happen, in one form or another. They might not send you home. They might just send you to die in a room full of 20 dying strangers while a semi-literate Mexican woman changes your diapers. The only way socialized medicine can work, especially in a generational crunch like the west is in today, is by rationing care. There is no other way, in reality. You can already see the effects of DMV-like care and infantcide in some socialized countries. If we don't socialize medicine, I suppose young people will get sick b/c they cannot afford the premiums caused by and endless cohort of old people who are clinging to life at mind boggling expense.

It's not pretty either way. Ultimately we're going to have to figure out how to deal with death in a way that both respects human life and avoids the 'rage rage against the dying of the light' syndrome. Until that is accomplished, I suspect its all going to be sticking fingers in dykes, especially as our capacity to spend $15,000 a day to keep a terminal patient alive doubles or triples.

Interesting conundrum.

|12.23.05 @ 11:52PM|#

Toxic-

He didn't say it explicitly in this thread. It's a continuation of a tangent from another thread.

|12.24.05 @ 7:34AM|#

If people used auto insurance in the same way they use medical insurance, just about every clogged air filter, flat tire, and parking lot fender-bender would result in an insurance claim. And of course, you'd need a presciption from a mechanic to purchase a new air filter, tire, or bumper.

The US medical industry is really a wonderful, world-class scam, isn't it? The best part of the scam is the fact that a lot of people think it's for their own good.

|12.24.05 @ 7:47AM|#

Too me there is a little too much complication in something that should be simple. I think that this means some one is getting a kickback due to government regulation.

It seems simple to me. Drug companies charge whatever the hell they want. I they sell drugs for so much cheaper in Canada, they you buy your drugs from Canada. Sooner or later the price will equalize, because people wont be willing to pay high prices for drugs in the US when they can buy cheaper eslwhere.

A free market solves sooo much. And yet people still look to government regulation to solve problems.

|12.24.05 @ 9:16AM|#

Actually, Ron, the "scientific" (scare quotes because it is a social science, which I think I've made my feelings known about) studies on the subject have shown absolutely no correlation between legally enforced IP property and innovation. In fact, CA has some of the weakest IP protection in terms of restrictive covenants (they're nearly per se invalid in CA) and still has Silicon Valley.

For more on the topic, you can see Posner's Economic Structure of IP Law, the Chapter on patents, where even the king of the Chicago school admits that there is no evidence to support the assertion that patents spur innovation in any meaningful way, and therefore tries to explain a different possible justification for them (and, IMHO, fails badly).

I think you can make a libertarian case for copyright law, and some basic trade secret law, but patent law is purely about rent-seeking, and is totally anti-libertarian.

Back to the topic, pharmaceuticals are so intertwined with the government that looking at any single area is counter-productive. You need to step back and look at the whole picture, from how the FDA increases costs and creates barriers to entry, to how patent law increases costs, to how the FDA in conjunction with patent law creates all sorts of perverse incentives in order to pursue rent-seeking.

|12.24.05 @ 9:22AM|#

Oh, meant to add this:

The "public disclosure" rationale is supremely inapplicable to pharmaceuticals, where no competent doctor (or for that matter, consumer) would prescribe or take something which he had no idea what was in it, or how it worked.

And as someone who worked in the generic industry, I can tell you that the patents for drug products are so vague that they really disclose nothing. (They always describe the most important step in the process in these terms: "by a process well known by those in the art..." - which is almost 100% of the time untrue). That's why they're regularly busted by generic suits that last many years and cost millions in legal fees.

|12.24.05 @ 12:37PM|#

"I think you can make a libertarian case for copyright law, and some basic trade secret law, but patent law is purely about rent-seeking, and is totally anti-libertarian."

How is it "anti-libertarian" to expect others to pay for the use of one's property regardless of whether said property is real or intellectual? Since when is it libertarian to NOT support property rights?

|12.24.05 @ 3:46PM|#

The feds need to step in and impoe price controls, but of course neither the GOP or most of the Dems have much interest on improving the life of Americans if it would hurt the massive corporate profits of their friends and masters.

Happy holidays to my "libertarian" friends who continue to shill for the corporate facsist state America has become.

|12.24.05 @ 4:17PM|#

the problem is much of hte profit doesnt go into r and d, but rather advertising. and most people on ssri's and anti anxiety meds dont need it or dont benefit from it.

|12.24.05 @ 5:28PM|#

Russ 2000 makes some interesting points.

Toxic, we already ration medical care. We just ration it by ability to pay, rather than merit.

|12.24.05 @ 7:30PM|#

A little off topic but a question about patents?
They only extend to inventions right? Then how can one patent natural "discoveries" (Usually knowledge that primitive peoples already have.) such as plants and DNA? That sounds like nonsense to me.

|12.24.05 @ 7:36PM|#

In a libertarian society wouldn't individuals be reponsible for protecting their inventions and ideas?

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