Newt's Very Bad Idea | Citizens Against Government Waste

Newt's Very Bad Idea

The WasteWatcher

Former House Speaker Newt Gingrich often comes up with ideas to change how the government works.  One of his most recent suggestions has made a lot of people who care about property rights scratch their head.

At a December 2, 2014 meeting of Academy of Managed Care Pharmacy executives, Speaker Gingrich was asked about the high costs of certain biopharmaceutical drugs, such as Gilead Science’s hepatitis drugs Sovaldi and Harvoni.  According to the December 4, 2014 edition of Inside Health Policy, he said, “I think there are some drugs where it may either lead the government to buy the patent rights to figure out some way to make it a public commodity, because it is so expensive if it stays at a monopoly level.”  He went on to say that the policy should apply only to drugs that are “very life-changing.”

Alarmingly, this concept aligns him with Public Citizen, a left-of-center group that has long called for single-payer or government-run healthcare.  According to Inside Health Policy, the group’s president, Robert Weissman, advocated for a similar solution with respect to pharmaceuticals before a December 4, 2014 Senate Veterans Affairs Committee.

If the U.S. government wanted to forcibly purchase a patented drug, it would be equivalent to the taking of personal property by eminent domain.  If the company refused to turn over the patent for the offered price, the government would simply confiscate it.  This is no better than countries like China, India, or Russia, which steal intellectual property on a routine basis.  Such policies should never be deployed in the U.S.

Furthermore, getting the government involved in “purchasing” certain drug patents would kill innovation in the U.S. pharmaceutical industry.   Why would companies and investors want to risk developing a life-saving drug only to have it confiscated?  No longer would the U.S. produce approximately 52 percent of the world’s biotechnology and pharmaceutical patents.  Perhaps the U.S. would precipitously drop to the patent production level of other countries that utilize pharmaceutical price controls, such as Japan, which produces about 10 percent; or the entire European Union, which provides around 20 percent of the world’s biotech and pharmaceutical patents.

The way to drive down the cost of drugs simply should be encouraging competition.  For example, Citizens Against Government Waste (CAGW) has urged the Food and Drug Administration to finalize its work on designing the shortened regulatory pathway to bring biosimilars, the “generic” version of biologic drugs, to the marketplace.

Removing barriers within pharmacy networks is another way to cut costs.  Drug benefit plans constantly seek ways to lower the price of pharmaceuticals, such as creating preferred pharmacy networks, increasing efficiency by utilizing mail-order pharmacies, and developing formularies.  But groups such as community pharmacists lobby Congress, state legislatures, and government bureaucracies to write laws and regulations to force the drug benefit plans to accept “any willing pharmacy” to participate in their network, or bar plans from offering lower prices for drugs via mail order.  Such policies reduce a plan’s bargaining power and drive up costs for patients.

Perhaps Speaker Gingrich should stop promoting the potential theft of IP and read CAGW’s new book “Intellectual Property: Making it Personal.”  The last paragraph in the book says it best:

Everyone benefits from IP.  If the Founding Fathers had not recognized its importance, the light bulb, the telephone, the cell phone, and the microchip might never have been invented.  Strong IP protection is fundamental to keeping the engine of ingenuity on track for generations to come.

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