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Compulsory pharmaceutical licensing is little more than government theft

Compulsory pharmaceutical licensing is little more than government theft
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On July 25, Rep. Lloyd DoggettLloyd Alton DoggettTrump tax story prompts calls to revise estate rules Trump gained millions from questionable tax strategies: New York Times Trump is wrong, Dems are fighting to save Medicare and Social Security MORE (D-Texas) introduced H.R. 6505, The Medicare Negotiation and Competitive Licensing Act. The bill currently has 82 cosponsors, all Democrats. A press release announcing the legislation used Orwellian “1984” word-smithing, calling it “A bold approach to Medicare negotiation that harnesses the government’s purchasing power and relies on market-driven competition to restrain monopoly pricing.”

Nothing could be further from the truth. While the free-market words “negotiate” and “competitive” are in the bill’s title, the legislation adopts the worn-out call for the Secretary of Health and Human Services to “negotiate” drug prices in Medicare Part D. But, there cannot be any such negotiation. If an innovator drug company does not agree to the price the government determines to be “appropriate,” then the bill would allow the secretary to steal the company’s patent through compulsory licensing and allow another manufacturer to make a generic. That is nothing more than government-sanctioned theft.

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Supporters of this misdirected policy always forget to mention that robust private sector negotiation already occurs in Medicare Part D among manufacturers, pharmacy benefit managers, plan sponsors, and pharmacists. In 2005, the Congressional Budget Office estimated that Medicare Part D would cost taxpayers $172 billion by 2015; the price tag was instead $75 billion.

 

In April 2018, the Office of the U.S. Trade Representative (USTR) released its annual Special 301 Report, a review of the state of intellectual property (IP) protection and enforcement in U.S. trading partners around the world. The report noted the resolve of USTR to “call out foreign countries and expose the laws, policies, and practices that fail to provide adequate and effective IP protection and enforcement for U.S. inventors, creators, brands, manufacturers, and service providers.”  Their priority watch list of bad actors is China, India, Indonesia, Columbia, and Chile.  The USTR may have to add dozens of House Democrats to that list. 

A March 2015 Health Affairs study showed that over a decade, compulsory licensing tactics “generally resulted in drug prices that were higher than the prices achieved by peer countries buying from international procurement markets tracked by the WHO or the Global Fund.”

Nonetheless, H.R. 6505 is gaining support. After all, Democratic socialists seem to be expanding their momentum within the party, as they call for free healthcare, free college, free trade school, free housing, a guaranteed job, and ending private ownership of many industries that produce goods that are “necessities.”

According to a June 27 Vox article, Democratic socialists believe that capitalism must be overthrown. That includes forcing owners of businesses to give their workers control of their companies as much as possible and get rid of patriarchal relations. It sounds like the old Soviet Union (now Russia) and Venezuela, once South America’s richest country and now one of the poorest thanks to its failed experiment with socialism.

Any reasonable person knows that nothing is free: someone must always pay. Should H.R. 6505 become law, patients around the world would pay with their lives when there were fewer miracle drugs being researched and developed that cure diseases like Hepatitis C or cancer.

If giving away pharmaceutical intellectual property became commonplace in the United States, no one will be incentivized to risk the billions in capital it takes to invest in a drug, knowing that the government could steal it on a whim. The United States’ global leadership in biopharmaceutical research would disappear, and we would become no better than China, which steals America's intellectual property every day.

Elizabeth Wright is the director of health and science policy at Citizens Against Government Waste (CAGW), a nonprofit group advocating for limited government.