Publications

This Desktop Reference will help state legislators identify effective actions that may save the states money without reducing access to needed medicines.

Of all the recent criticisms leveled at the prescription drug industry, the one that has resonated most is that drug companies are gaming the patent system. However, the Hatch-Waxman Act that governs the role between generics and brand name drugs is very complicated, and it has ultimately weakened intellectual property protections. It is naive to assume that branded companies are sidestepping the rules while generics always play fair.

The telecom industry has changed in ways not anticipated by the Telecom Act of 1996. A variety of innovative technologies such as voice over IP, e-mail, instant messaging, and wireless are competing with traditional telecom providers. These technologies are now commonly being substituted for traditional voice telephony, ensuring an abundance of competition in the telecom sector today and into the future, and making prior methods of measuring competition obsolete.

The pharmaceutical industry is under political attack for being “too profitable,” for drug prices that are “too high,” for paying their CEOs “too much,” and for “profiting from pain.” Yet, when compared to other industries, it becomes clear that the pharmaceutical industry makes a compelling, socially-beneficial product, and performs within reason for an industry that takes enormous financial risks.

Almost every sector of the economy advertises as a way of getting critical product information to customers. The utility of advertising is widely recognized—except in the case of pharmaceutical advertising, which is blamed for increasing health care costs, intruding on the doctor’s authority, and misleading consumers. But after examining these charges, it is clear that prescription drug advertising isn’t the problem—it’s the solution.

By making a product available at several price points, differential pricing allows many more consumers access to the product—especially lower-income consumers. Requiring producers and vendors to sell their products, such as prescription drugs, at a single global price. (i.e., price controls) would not make drugs available at low prices; it would drive the price higher and deprive low-income consumers and nations of access to those products.

Some forms of monopoly power are not the products of corporate giants trying to eliminate competition, but are granted by the federal government to achieve a social good for society as a whole. That is the case with patents, under which the federal government grants to inventors an exclusive right to make and sell a product or process as a reward to induce and encourage their creative efforts.

The pharmaceutical industry cites studies that suggest it costs more than $800 million to move a new drug through the 10-to-12 year discovery, development and approval process. However, critics claim those estimates are artificially inflated and that the actual costs are much lower. For example, Ralph Nader’s Public Citizen released a study last year claiming that the cost of creating a new drug is only about $110 million (in 2000 dollars). And that includes the cost of failures.

The government can take countless steps to reduce the costs of health care. However, confiscation by a hair-trigger statute of limitations and onerous registration provisions should not be among them.

Although people often can get free use of someone’s intellectual property, that doesn’t make it right—or legal. Does it really hurt anyone? Is intellectual property really all that important?