The Washington Post had a major piece that discussed the ethics of efforts to use public pressure to force drug companies to make expensive drugs available to patients at affordable prices. Remarkably it never discussed the role of patent monopolies.

In the case that was the immediate focus of the article, a young boy who was suffering from cancer and seemed likely to benefit from a drug that was still in the experimental stage, it does not appear that patent protection was a major factor. However in many cases patients will face exorbitant prices for a life-saving drug that they may not be able to afford because the drug is subject to patent protection.

In such cases it is the patent that creates the moral dilemma raised in this article. If the drug were sold at its free market price it would likely be affordable to most patients. This is one of the perversities of patent financed drug research. While drugs can be expensive to develop, they are generally cheap to manufacture. It would be desirable for drugs to be sold at their free market price if some alternative mechanism (e.g. NIH funding) could be used to finance their development.

It would have been useful if this piece had discussed the way in which the mechanism we use to finance drug research can lead to the sort of ethical dilemmas it discusses. In this context it is probably worth mentioning that the Washington Post gets considerable revenue from drug company advertising.

The Big Pharma Hero Effect: It Pays to Be a Hero

A corollary question rarely asked, is what drugs would be produced by Big Pharma if the obscene unnecessary economic rent component driven by patents was stripped out of the price of drugs.

The drugs would not be the same because the focus would shift to saving more lives in total in sharp contrast to targeting drugs for which willingless to pay can be exploited to generate the highest profit by capturing consumer surplus, loaded with a monopoly component of economic rent.

Take aspirin for example. It saves millions of lives by avoiding heart attacks and cancer for pennies a day with a huge consumer surplus (what would have been paid).

Would Big Pharma compete to discover and create aspirin under one of Dean Baker’s workable alternatives absent patent protection, then sell it for the very low marginal cost of production and distribution?

Not a chance. It’s the same reason vaccinations were dropped as well unless the government paid a ransom to provide them, even though they could still earn a normal competitive profit free of economic rent.

Which raises an obvious question. Why don’t sock puppets for Big Pharma ever compare the medical efficacy and economic cost of aspirin that prevents the very things Big Pharma invests in so heavily – lingering chronic and dramatic disease that creates desperate customers who will pay anything to survive it?

Oh wait, there’s no hero effect is there, you know, Big Pharma riding it on the white horse to save desperate patients for … pennies on the dollar. The hell with that you cheap freeloading socialists. What, you think we’re supposed to produce drugs in some kind of free market like aspirin is produced now?

Published by Center for Economic and Policy Research (CEPR), March 24, 2014.

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