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June 2011, Week 1

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Mon, 6 Jun 2011 02:28:26 -0400
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Bernie Sanders Tries Some Clear Thinking on Prescription
Drugs
by Dean Baker
May 31, 2011
The Guardian
http://www.guardian.co.uk/commentisfree/cifamerica/2011/may/31/healthcare-pharmaceuticals-industry

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 dollar 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 [
http://keionline.org/node/1147] 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 [
http://www.cepr.net/index.php/publications/reports/financing-drug-research-what-are-the-issues/]
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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