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An “Underground Railroad” for Patented Drugs?


Robert Naiman

September

18th was the 150th anniversary of an infamous Act. In 1850, Congress passed the

Fugitive Slave Act, making the federal government responsible for tracking down

escaped slaves in the North and sending them back to slavery. The Act galvanized

anti-slavery opinion and contributed to the development of the "Underground

Railroad" to assist passage to safety in Canada. In turn, the Underground

Railroad emboldened the Abolitionist movement, strengthening the belief that

slavery could be imminently destroyed.

In

a "lame duck" session after the November 1994 election, Congress

passed legislation creating the World Trade Organization, including the

controversial "TRIPS" Agreement that extended the length of U.S.

patents to 20 years and made this an international standard. This made the

federal government responsible for tracking down countries that promote generic

drugs and punishing them. Just as the Southern slaveholders insisted that

Congress extend their "property rights" to the North, so the

pharmaceutical companies demanded that the U.S. government act to guarantee them

monopoly profits overseas.

In

each case Congress acted to strengthen the legal protection for a "property

right." In each case the "property right" was one which public

opinion justifiably held to be fundamentally immoral, and contrary to the

fundamental human right to life and liberty.

Al

Gore and George Bush have plans for extending insurance coverage for

prescription drugs. Neither plan directly addresses the fundamental problem: the

price gouging by pharmaceutical companies enabled by our current system of

granting long patents – monopolies – to pharmaceutical companies for life-

saving drugs.

Gore’s

plan comes much closer, and that’s why the pharmaceutical companies are against

it. They fear that if a prescription drug benefit were added directly to

Medicare, Medicare could use its bargaining power to force down the prices paid

for prescription drugs.

The

Washington Post reports that the Office of Personnel Management cancelled a

project for providing prescription drugs at discount prices to federal law

enforcement officers after Merck and Pfizer refused to participate. Merck and

Pfizer say the health plan for law enforcement officers is not a federal

government agency so they should not have to give it the same discounts as it

gives the federal government. The OPM notes that prescription drug costs make up

more than 25 percent of the cost of health care in the Federal Employees Health

Benefits Program.

Bush

says he’s against the prescription benefit for Medicare because it would

increase "Big Government" and people should be "free to

choose" by getting tax subsidies to help them purchase coverage in the

market. But what he really opposes is the government using its market power to

drive down prices for consumers.

Bush’s

rhetoric is hollow when one considers how the federal government is already

intervening in the market. The federal government pays for the research that

develops many drugs, it gives the drugs to pharmaceutical companies, then allows

them to patent the drugs, giving the companies a monopoly and protecting them

from competition.

So

it’s fine, according to Bush, if Big Government intervenes in the market to

subsidize pharmaceutical companies through federally funded research; it’s fine

if Big Government intervenes in the market again through patents to protect drug

companies from competition from generics, thus driving up prices and industry

profits, but if the government intervenes to drive down prices with its

purchasing power it’s Big Brother.

In

the case of the anti-ovarian cancer drug Taxol, the U.S. spent millions of

dollars on research, gave exclusive marketing rights to Bristol-Myers Squibb,

and then on behalf of BMS threatened South Africa with trade sanctions under the

WTO for licensing a generic competitor to Taxol.

Patent

abuse is not only a problem with prescription drugs. In a case going before the

Supreme Court, UNOCAL was granted a patent for a "process" which was

basically the writing down of a government regulation for cleaner gasoline. This

absurd patent has driven up gas prices.

However,

because access to essential medicines, particularly in poor countries in Africa

and elsewhere, is a life-and-death issue, this would be a good place to start

reforming our patent law. While Congress kowtows to the pharmaceutical industry,

let us consider an "Underground Railroad" for the international and

domestic distribution of patented drugs.

Robert

Naiman Senior Policy Analyst Center for Economic and Policy Research

 

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