Congress could soon vote on legislation that would gut America’s intellectual property laws.
The bill isn’t just bad news for big pharmaceutical companies that hold lucrative patents. It’s terrible news for patients — medical research spending would dry up without strong patent protections. Americans could lose out on cures for cancer, heart disease, and other deadly chronic conditions.
The proposed law would target patented drugs sold through Medicare’s Part D prescription drug program. Right now, private insurance companies design Part D plans and sell them to seniors. The government provides some regulatory oversight and also subsidizes the plans to ensure seniors can afford their medicines. But for the most part, the government doesn’t interfere with insurers’ administrative decisions.
Insurers decide which drugs to include in each plan and how much to charge. Insurers also negotiate directly with drug companies for discounts.
The Medicare Negotiation and Competitive Licensing Act would give the government more control over Part D plans. The bill would require government officials, rather than insurers, to negotiate prices with pharmaceutical companies. If the government couldn’t obtain the price it wanted through one-side “negotiations,” the bill would allow the feds to seize a drug company’s patent. The government would then license the patent to another firm, which could manufacture a cheaper generic version of the medicine.
This extortionary behavior would cripple the entire medical research industry.
Pharmaceutical research is both risky and expensive. Accounting for the high failure rate of experimental drugs, it takes $2.6 billion to create a single new drug, on average. Only 12 percent of medicines tested in clinical trials ultimately make it to patients. Success is the exception, not the rule.
Patent protections give drug companies a reason to make these risky investments. Patents prevent rival firms from manufacturing a generic until the initial drug has been on the market for a while. Drug companies invest in R&D because this window gives them a chance to recoup their investment.
The United States’ strong patent laws explain why we lead the world in drug development. Research and development investment in the United States spiked from just over $15 billion in 1995 to $65.5 billion in 2016. American startups attract three-quarters of the world’s biopharmaceutical venture-capital investments. By comparison, companies in the European Union attract just 14 percent of that funding.
Patients are living longer, healthier lives as a result of this investment. Since the 1990s, pharmaceutical advancements have contributed to a 26 percent decline in cancer deaths and an 88 percent drop in HIV/AIDS mortality rates. Cardiovascular deaths have been cut in half.
America’s economy is stronger for it, too. The biopharmaceutical industry supports more than 4.7 million jobs across the U.S. economy and adds $1.3 trillion to the economy.
Historically, lawmakers have recognized the importance of strong patent protections for these very reasons. They’ve condemned foreign governments — particularly the leaders of China, India, Brazil, and Thailand — for helping local firms steal American patents and unfairly freeload off of our research investment.
If Congress passes the Medicare Negotiation and Competitive Licensing Act, all of this will have been for naught. The federal government would have free reign to override patent protections. Investors will redirect their dollars to industries with higher profit margins and less uncertainty.
When R&D funding dwindles, so too will patients’ hopes for next-generation cures. The jobs associated with this research will be lost and the countless patients who might have been cured will be out of luck.
Gutting patents will stall medicine progress
Wayne Winegarden
Congress could soon vote on legislation that would gut America’s intellectual property laws.
The bill isn’t just bad news for big pharmaceutical companies that hold lucrative patents. It’s terrible news for patients — medical research spending would dry up without strong patent protections. Americans could lose out on cures for cancer, heart disease, and other deadly chronic conditions.
The proposed law would target patented drugs sold through Medicare’s Part D prescription drug program. Right now, private insurance companies design Part D plans and sell them to seniors. The government provides some regulatory oversight and also subsidizes the plans to ensure seniors can afford their medicines. But for the most part, the government doesn’t interfere with insurers’ administrative decisions.
Insurers decide which drugs to include in each plan and how much to charge. Insurers also negotiate directly with drug companies for discounts.
The Medicare Negotiation and Competitive Licensing Act would give the government more control over Part D plans. The bill would require government officials, rather than insurers, to negotiate prices with pharmaceutical companies. If the government couldn’t obtain the price it wanted through one-side “negotiations,” the bill would allow the feds to seize a drug company’s patent. The government would then license the patent to another firm, which could manufacture a cheaper generic version of the medicine.
This extortionary behavior would cripple the entire medical research industry.
Pharmaceutical research is both risky and expensive. Accounting for the high failure rate of experimental drugs, it takes $2.6 billion to create a single new drug, on average. Only 12 percent of medicines tested in clinical trials ultimately make it to patients. Success is the exception, not the rule.
Patent protections give drug companies a reason to make these risky investments. Patents prevent rival firms from manufacturing a generic until the initial drug has been on the market for a while. Drug companies invest in R&D because this window gives them a chance to recoup their investment.
The United States’ strong patent laws explain why we lead the world in drug development. Research and development investment in the United States spiked from just over $15 billion in 1995 to $65.5 billion in 2016. American startups attract three-quarters of the world’s biopharmaceutical venture-capital investments. By comparison, companies in the European Union attract just 14 percent of that funding.
Patients are living longer, healthier lives as a result of this investment. Since the 1990s, pharmaceutical advancements have contributed to a 26 percent decline in cancer deaths and an 88 percent drop in HIV/AIDS mortality rates. Cardiovascular deaths have been cut in half.
America’s economy is stronger for it, too. The biopharmaceutical industry supports more than 4.7 million jobs across the U.S. economy and adds $1.3 trillion to the economy.
Historically, lawmakers have recognized the importance of strong patent protections for these very reasons. They’ve condemned foreign governments — particularly the leaders of China, India, Brazil, and Thailand — for helping local firms steal American patents and unfairly freeload off of our research investment.
If Congress passes the Medicare Negotiation and Competitive Licensing Act, all of this will have been for naught. The federal government would have free reign to override patent protections. Investors will redirect their dollars to industries with higher profit margins and less uncertainty.
When R&D funding dwindles, so too will patients’ hopes for next-generation cures. The jobs associated with this research will be lost and the countless patients who might have been cured will be out of luck.
Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.