Free Pharma Trade

TechCentralStation's posted a transcript of their recent panel on prescription drug reimportation, featuring Milton Friedman, Rep. Gil Gutknecht, Sally Pipes, and Dr. Don McCan.

Comments

[Kevin Carson]

Fairly even-handed, for Friedman. And I'm surprised he was willing to admit that patents are a government-enforced monopoly, rather than treating them as "property." The elephant in the living room, which he studiously ignored, is how much of that $800 million in R&D that Big Pharma supposedly has to recoup comes directly from the government. On average, about half of drug R&D is taxpayer-funded. And some very high-priced drugs were developed entirely at government expense, with the patents given away for free to the drug company.

So here's my proposal:

1) all drugs developed at government expense are immediately and henceforward in the public domain;
2) no more government R&D funding;
3) the FDA testing regime is scaled back (at the very least) to require only proof of safety, and not of efficacy;
4) patents are drastically scaled back or eliminated; and
5) all reimportation controls are ended.

At least, BTW, Friedman didn't propose a "free market" solution involving Pinochet.

[Russ D]

Kevin,

You forgot to mention the doctor (McCan) on the panel who basically defended the FDA as being an agency that does the medical profession's research!

"I think I saw the other day that there are about 500,000 articles published each year in the medical literature. And there is no way a practicing physician can do their own comprehensive research. And it's very valuable to have an agency that does do that research for us to show that these agents are efficacious."

Yes, it's valuable. But why does it have to be the FDA?

[Jason Ligon]

"1) all drugs developed at government expense are immediately and henceforward in the public domain;

Usually not a case of 100% development by the government, but there may be some, in which case I agree.

2) no more government R&D funding;

I agree.

3) the FDA testing regime is scaled back (at the very least) to require only proof of safety, and not of efficacy;

I agree.

4) patents are drastically scaled back or eliminated; and

You have eliminated a source of research funding, and now you are proposing to eliminate the other. Why does anyone voluntarily invest in drugs in this scenario?

5) all reimportation controls are ended."

Agree.

80% agreement with Kevin Carson. There must be something wrong here ...

[Kevin Carson]

Jason,

That last 20% is the most important plank, so don't feel too bad.

But I proposed scaling back ("at least"--I'd rather just abolish the FDA) the research costs imposed by the government, which means there'd be a lot less to recoup.

As for the rest, there would still be the incentive of competing for consumers by developing new products. There would be quasi-rents to the first producer to get a product on the market, until enough competitors entered the market to push costs down.

Besides that, there would be offsetting benefits: a lot of stuff that currently isn't developed because it's not patentable and can't get past the veto power of the FDA or the medical licensing system would be relatively more competitive without the government-Big Pharma cartel.

More fundamentally, I don't believe in public goods. If an activity can't fetch a high enough price to pay for itself on the market, without a government-enforced monopoly to "recoup costs," why should competitors and/or consumers be restrained at gunpoint to render it profitable?

[Baltic]

The Fatal Conceit.

In discussion or writing about prescription drug cost, most pundits, think tanks, politicians and economists completely ignore the easiest method for saving: PILL CUTTING.

Use Zocor, the leading cholesterol drug, for example. It comes in 10, 20, 40, and 80 milligram tablets. The most popular perscription is for the 20 mg. dose. The 20, 40, and 80 cost $4 each! As there's no price difference between the 20 and 80, the patient asks her doctor to prescribe the 80 mg. tab taken 1/4 tab per day. The resulting saving is 75% or over $1,000 per year!

Many drugs have a derivation of this pricing phenomen such that a typical potrfolio of drugs will have a 35% price reduction when pill splitting technique is applied. Capsules may also be divided by twisting the shell and separating the contents.

Many doctors are unaware of this procedure. Drug detail representatives won't mention this procedure. A good place on the Internet to check drug prices is >.

Most politicians, once informed of the savings, refsuse to tell their constituents as it will take away their major populist topic. One exception is Representative Ron Paul who has discussed this in his franked mail.

Any think tank which comes up with a report to disseminate this information widely is sure to gain contributors even if some donations from drug makers are reduced.

[Baltic]

The Fatal Conceit.

In discussion or writing about prescription drug cost, most pundits, think tanks, politicians and economists completely ignore the easiest method for saving: PILL CUTTING.

Use Zocor, the leading cholesterol drug, for example. It comes in 10, 20, 40, and 80 milligram tablets. The most popular perscription is for the 20 mg. dose. The 20, 40, and 80 cost $4 each! As there's no price difference between the 20 and 80, the patient asks her doctor to prescribe the 80 mg. tab taken 1/4 tab per day. The resulting saving is 75% or over $1,000 per year!

Many drugs have a derivation of this pricing phenomen such that a typical potrfolio of drugs will have a 35% price reduction when pill splitting technique is applied. Capsules may also be divided by twisting the shell and separating the contents.

Many doctors are unaware of this procedure. Drug detail representatives won't mention this procedure. A good place on the Internet to check drug prices is >.

Most politicians, once informed of the savings, refsuse to tell their constituents as it will take away their major populist topic. One exception is Representative Ron Paul who has discussed this in his franked mail.

Any think tank which comes up with a report to disseminate this information widely is sure to gain contributors even if some donations from drug makers are reduced.

[Russ]

Kevin,
Your first proposal:

"1) all drugs developed at government expense are immediately and henceforward in the public domain;"

would amount to an ex post facto law. Additionally, Jason raises an excellent point that the degree of federal funding is pretty ambiguous. I'd opt for the imlementation of your second proposal:

"2) no more government R&D funding;"

and letting the existing patents expire on schedule. Trying to retroactively assess which patents were taxpayer subsidized and to what degree would be a total nightmare.

As for number 3: "the FDA testing regime is scaled back (at the very least) to require only proof of safety, and not of efficacy"

I have some concerns with this. Since every drug has negative effects, one can't simply reject drugs based solely on safety risks. It takes a weighing of benefits vs. risks to determine the value of a drug. Giving the FDA only one side of the balance would make a rather significant mess as they would go about banning everything with the slightest risk profile with no regard to benefits (like the Controlled Substances Act). I'd prefer to get rid of the FDA outright.

[just kidding]

Ron Paul uses franked mail? $#@&* statist.

[Jason Ligon]

Kevin:

"That last 20% is the most important plank, so don't feel too bad.'

Lol

I don't think it is public goods that you are attacking here, but the notion of recoupable sunk costs. Patents in theory are used to address situations in which products with extremely high demand can only be produced with extremely high sunk costs, followed by negligible marginal costs.

A no-patent system creates an environment where no product of this type will be produced.

[Kevin Carson]

Jason,

It's what's conventionally called a public good because it (supposedly) wouldn't be accomplished by people willingly spending their own money, without state intervention (patents). Whether the cost reduction from abolishing the FDA would outweigh the revenue reduction from abolishing patents, I don't know. It might well vary from case to case. The majority of product and process innovations outside the drug industry would be developed even without patents, just for the sake of competitiveness. The question is how unique the drug industry is, and how much of that uniqueness results from government-imposed costs.

And as I said before, development costs aren't totally unrecoupable; unless a producer is careless enough to let a new idea get out from the moment of its inception, there'll be a considerable period during which he's the only producer. It will probably be shorter than the duration of a patent; but it won't be entirely negligible.

Russ,

I'm not an expert on constitutional law, but I think an ex post facto law has to involve the positive regulatory or police power of the state. So simply removing a grant of privilege wouldn't meet the standard; there would have to be a criminalization of past activities that wasn't criminal at the time they were performed.

[Russ]

Kevin,

Even if nullifying existing government sponsored patents does meet the strict Constitutional definition of an ex post facto law, it is generally considered "poor form" to employ legislation to reverse actions that have already been taken.

If nothing else, it would amount to "nationalization" of patents, or taking private property for public use without just compensation.

No need to do that when the problem will go away over time as the patents expire. The key would be to stop funding new R&D and not create any more taxpayer funded patents.

[a]

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