Last month, America was shocked by the case of Turing Pharmaceuticals. Turing, in a blatant show of monopoly muscle, purchased the rights to toxoplasmosis drug Daraprim, only to raise its price from $13.50/pill to $750/pill. For those of you keeping track, that’s a 5,000% price increase.
I say “monopoly muscle” because despite the patent for Daraprim technically having expired, no company has yet developed a generic version, according to Techdirt. In other words, Turing has only a functional monopoly on the drug.
Perversely, this is good news. The situation would be much, much worse if Daraprim’s patent were still active. And even though Turing’s particular abuse is the one that’s hit the news, the fact is that its abuse is one that goes not only tolerated, but enabled by our dysfunctional patent system on a regular basis.
Worse, as the Left’s rapid railing about Daraprim shows, that patent system is a boon to the supporters of socialized medicine, because it gives them an ever-increasing cost of care to rail against with zero opposition from Big Pharma so long as they leave the patent system intact. If you doubt that, look at Obamacare, which brought the drug industry $35 billion in profits despite ostensibly being about controlling the cost of care.
Let’s be clear: contrary to what the nearest Berniebro will tell you, Big Pharma is the classic case of big business being anti-free market. And the medical patent system is Exhibit A for this fact. Big Pharma’s defenders try to paint a picture of the legal monopoly granted by medical patents as a just reward for years of research and development. This defense is deeply disingenuous.
Firstly, as the case of Turing shows, big pharmaceutical companies can easily purchase the rights to existing drugs. And unlike in the case of Turing, those drugs may still be under patent, meaning that a company that did zero research into a drug still gets a monopoly on it. This is the business equivalent of paying the smart kid to do your homework so you can get an A on it. And make no mistake, while Turing might not have gotten patent exclusivity, it definitely went out of its way to secure some legal protection against competition, specifically in the marketing department. Techdirt reports:
In this case, any research and marketing costs have long since been recouped (or at least amortized). The patents behind the drug — all granted between 1951 and 1954 — should be dead. Conveniently for Turing (and other rights holders before it), no company is offering a generic version.
Every time the drug has changed hands (and it’s done it more than once), the price has gone up. But no other company has increased the price quite as much as Turing Pharmaceuticals has. Perhaps that’s because Turing spent a significant amount of money to acquire an exclusive marketing license, but with none of the attendant patent exclusivity.
Secondly, even when the situation isn’t as egregious as Turing, what medical companies mean when they say “research and development” often looks more like the work of Walter White than Marie Curie. Consider the case of Purdue Pharma, which tested the highly addictive drug Oxycontin on children purely to get six more months of patent protection. That’s hardly the sort of thing that a legal institution designed to promote “science and the useful arts” should be countenancing, let alone subsidizing.
Yet because of the perverse incentives created by a patent system that grants ten years of exclusive rights to price gouge drugs on the flimsiest pretexts, that is exactly what American taxpayers are subsidizing, particularly with the money they spend on Obamacare-approved insurance plans. And given that Big Pharma’s business model revolves around making sky high profits for as long as it can on legally monopolized drugs, it’s no surprise that it is fighting patent reform as hard as it can. In a sense, then, patent troll defenders like Seton Motley have a highly ironic point when they compare patent reform to Obamacare: the difference is that unlike Obamacare, patent reform actually would bring down medical costs and hit the big pharmaceutical companies where it hurts. Unlike Obamacare, it would do so through the greatest price lowering device in human history: the free market.
In short, Turing Pharmaceuticals held up a gruesome mirror to the world we live in now, where drug companies can gouge prices for drugs they never invested a cent to develop simply to pad their bottom line. But it doesn’t have to be that way, and if patent reform can get past the obstacles created by anticapitalist big business, it won’t.