Originally published by The Daily Caller on July 16, 2018.
The “rule of law” — the notion of restricting the arbitrary exercise of power with well-defined (and well-respected) written rules — is arguably the single most foundational element of modern society. But now, in this season of the 28-year-old Alexandria Ocasio-Cortez’s and 76-year-old Bernie Sanders’ traveling socialist road show, Democrats propose eviscerating thousands of years of intellectual property law and tradition, taking rule from the stability of laws and putting it back in the capricious hands of man.
A new bill introduced by Rep. Lloyd Dogget (D-Texas) proposes for the government to “negotiate” the price of drugs purchased by Social Security and Medicare, an idea long sought by the left less for its budgetary efficacy (the CBO estimates negligible savings) and more for its use as a demagogic sound byte and stepping stone to single-payer and full government-run healthcare.
But Doggett’s bill adds an appalling twist to this already lamentable proposal: granting the secretary of Health and Human Services the power to unilaterally and arbitrarily wipe out the intellectual property of the drug’s inventors if “negotiations” fail.
“In the case that the secretary is unable to successfully negotiate an appropriate price … the secretary shall authorize the use of any patent, clinical trial data, or other exclusivity” to other companies for use in manufacturing the drug, the bill says.
The cost to bring a new medicine to market is approximately $3 billion. Does Doggett believe there are already enough medicines in the world? No need to invent anymore? He’d better, because no private company would bear the risk and expense of developing new ones if a single bureaucrat can wipe it out arbitrarily — and with no legal recourse to the company.
Nor is innovation likely to take place elsewhere, as foreign price controls have left the U.S. the last remaining market capable of sustaining the costs of drug research and development.
“Negotiation,” in its more common forms, would accomplish nothing because there’s little reason to believe government officials possess better knowledge or cost-saving incentives than those bearing financial risk in the private sector, hence the CBO’s score of no savings. Without the chilling reality of the government deciding which life-saving medicines are “worth it,” no purchasing discussions will have even a remote impact on the price compared to the already powerful forces of supply and demand setting existing market rates.
Doggett claims his plan “relies on market-driven competition to restrain monopoly pricing.” Alas, when the government acts as a monopsony (where a single buyer dominates a market), the outcome can be just as detrimental for competitive markets as a monopoly.
Even if the government’s idea of “negotiation” made a difference, in other words, the bill by its own logic offers a solution as bad as the problem it aims to solve, just with the detrimental effects faced by consumers transferred from high costs to shortages of existing drugs and an unlikelihood of new ones ever again being introduced.
Voters certainly believe that most drug prices are too high. In the sense that there are government several distortions operating in the market, from a slow FDA approval process to the tax and various other incentives for a third-party payer system that obscure prices from consumers, they are probably right.
But more government involvement, whether it be price negotiation or confiscation of intellectual property rights, is not the “market-driven” answer to those problems. The latter, in fact, is particularly horrifying because undermining property rights puts far more than the drug industry in peril.
It’s election season, and politicians think the drug companies are useful foils. But at some point, hopefully, before Democrats are licking their chops with a new congressional majority, the adults should notice the danger of these proposals.
