Catfish and Cod
Tuesday, September 02, 2003
Checks and balances -- it's not just for government anymore.
(Link path: Asymmetrical Information, The Economist)
Jane Galt doesn't like it that patents are being brok -- ahem, licensed in a mandatory fashion. She, as a libertarian economist, considers it an invasion of the economic sphere by government (which it is) and undesirable (which it is not).
Big Pharma is indispensible for R & D of new drugs, and for this they should get a profit. But that right to profit (or loss) is subject to a check by the government, who see to it that drugs are without contamination, available in a free market, acheive the results advertised, etc. Jane complains that Congressional criticism against "price gouging" led to the revocation of low prices in the Third World by Big Pharma. Once that occurred, the "mandatory licensing" scheme approved by the WTO was inevitable. It is therefore true that the blame for lost profits, if lost profits there be, reside with the U.S. Congress.
But is that bad? After all, the purpose of capitalism is to ensure the best result for consumers, not producers. So said Adam Smith. Big Pharma only has problems if it becomes unable to raise additional capital or to turn a profit. There are no signs that Big Pharma's lifeblood is threatened by IP "theft" the way Hollywood and Big Music are. And if that becomes the case, Big Pharma can shout to the rooftops (and rightly so) that they are being squeezed by unfair Congressional regulation. Rising drug costs and company failures would then pressure Congress to act --
--thus, the Medicare prescription drug benefit, a guaranteed contract and thus a windfall for Big Pharma.
Jane, if you want to complain at Congress, complain about how their reaction to a market hiccup during a budget crisis is to further increase spending. Don't complain about how they structure the market -- that's a check and balance on Big Pharma, so that they concentrate on producing better drugs and not on reaping meaningless windfalls such as "Nexium" and "Clarinex" (both metabolites of previous drugs, and thus nearly sure bets to pass Stage III clnical trials).