Sanders' Proposal Sets a Dangerous Precedent

Last week, presidential candidate Senator Bernie Sanders joined 11 other members of Congress in sending a letter to the National Institute of Health (NIH), urging the agency to cut costs for the prostate cancer drug, Xtandi, by employing its “march-in rights.” These rights, which have never before been utilized by the NIH, were established in 1980 under the Bayh-Dole Act, which gives federal agencies the authority to license a patent when action is deemed necessary, primarily as an emergency tactic. Using this provision as their justification, lawmakers are requesting that NIH override Xtandi’s patent protection, which guarantees its manufacturers exclusive sales, in an effort to reduce the costs of the drug.

This request represents an enormous overreach by the government into U.S business and a major threat to the drug development process as a whole. However, Senator Sanders’ proposal doesn’t just have the potential to undermine the drug development system, it also poses a serious danger to the patent system by allowing the government to intervene in the protection of intellectual property.

The Constitution gives Congress the power to grant patents under Article I, Section 8, Clause 8. The establishment of patents is a key constitutional right and critical to fostering American innovation and growth for well over two centuries. Like the property rights our founding fathers valued in the highest degree, the protection of intellectual property has been key to America’s success, responsible for establishing us as a global leader across many industries. Undermining the patent system, even for just one patent in one industry, would call into question our nation’s entire system for protecting intellectual property and undercut a core American value that sets us apart from other nations.

Encouraging NIH to utilize their “march-in rights” threatens all of this and although Senator Sanders’ letter focuses on the biopharmaceutical industry, it’s not just one industry that should be concerned. Having federal agencies intervene in patents, as Senator Sanders would like, sets a dangerous precedent of government overreach into the free market. Furthermore, what he is suggesting is a complete re-interpretation of legislation. The Bayh-Doyle Act was adopted to assist in the manufacturing of products to meet need during health or other public emergencies. In 35 years, these rights have yet to be deemed necessary by the NIH.

Patents are critical for any industry (or innovator) that takes risks to develop better products that move us forward and the biopharmaceutical industry is no exception. Biopharmaceutical companies operate under a complex business model-balancing the needs of patients, the demands of investors, and the hefty regulations imposed by the government. In order to encourage the development of innovative drugs (like Xtandi), the industry relies on patent protections to justify their investments. Allowing the government to step in and alter this system would most certainly have dire consequences-namely, new drugs might not be developed.

In their letter, lawmakers requested NIH hold a public hearing to override Xtandi’s patent, which they believe would lower the cost of the medication. What they fail to realize, however, is that in their attempt to improve access to life-saving medications like Xtandi they are actually threatening the future of innovative medicines. If investors know that patents are no longer protected and returns will be limited, the incentive to fund critical research and develop new treatments will plummet. If we want to continue to see progress in medicine, or in any industry for that matter, we can’t let the government interfere in patent protections.

Attacks like this on individual drugs and their manufacturers won’t fix the systematic problem of rising healthcare costs in our country, in which insurers, hospitals, and healthcare providers all play a role. Targeting Xtandi individually and asking for more government intervention is not only a clear political move by Senator Sanders that won’t actually improve access to medicines for Americans, but a play that will also dismantle the entire patent system that protects U.S. innovation and specifically the development of effective treatments. With innovators on the cusp of major advances in disease areas like cancer, diabetes, and Alzheimer’s we need to be looking towards reforms that encourage drug development and accessibility, not misguided proposals that propel unnecessary and unwarranted government overreach in the healthcare market and everywhere else.

"Cause Harm?" Let's unpack that, using your example.

Number two; the argument 'I can do what I want with my property' is simply unreal as no legal system allows an owner to harm others with his property. I build a dam on my property that bursts and floods your land destroying your house, crops and animals, am I therefore free of any responsibility by interposing the idiot argument; 'it's my land and I can do what I please.'

That's an obvious case of causing harm, and a p!ss poor straw man argument. Those downstream would suffer harm to life, liberty, property, and the fruits of their labors, which are theirs by right...through the ACTIONS of others. That's the purpose and justification for government. No reasonable person would dispute that.

Taking away property rights, however, to a drug patent...your economic "discourse" is lacking. If one wishes to have drugs which, by definition, do not exist today...the price of resultant, successful drugs must include:

---Actual cost to develop the drug

---Actual cost to produce, market and distribute the drug

---A proportional share of overhead

---Unrecovered costs of unsuccessful drugs

---A realistic rate of return

---A risk premium to cover uncertainty...including risk of well meaning, entitled ignorami who presume to decide for others their 'appropriate' reward...those who would eat the seed corn today, then blame others when there's no corn tomorrow.

Yours is the morality of gangsters and should be shunned. Those who object to paying the true costs of innovation suffer no harm...unless one holds that health care is a "right." Is that your position?

Is it your position someone who shares or sells their property on their terms causes harm to others? If someone 'needs' my chain saw, and I decline to offer it, I'm causing harm? If I don't help?

Fascinating.

So you're asking me to name a drug that wasn't invented? Really?

Do you think that pharmaceutical companies have unlimited R&D budgets? Do they charge full speed ahead and develop every single idea that they come up with?

I'll answer it for you:

Pharmaceutical companies are like most other companies. They have these things called budgets. There are meetings and discussions where various new drugs are discussed and funding decisions are made. They balance development cost against the potential market, and other factors. Some drugs are then developed, and others are not. Even through all of this, many paths taken are dead ends and they don't recoup anything from it. Oh, BTW, government regulations have a direct effect on what it costs to do this development, and our high corporate tax rate has a direct effect on how much money is available for development budgets.

No issues from me if someone uses their purchasing power to negotiate a better prices on drugs or any product. Entities freely negotiating deals between each other is perfectly in line with our Constitutional underpinnings. If however, one of the entities is the government, and they use this power to FORCE someone to lower their price, I have a problem with it, as do all people who believe in property rights. That is effectively no different than a mugger negotiating a zero price for your wallet by clubbing you over the head.

Well what would happen if you went to a giant drug company and tried to negotiate the price of the drug down? Please tell us and don’t raise another issue. It is a regular epidemic today; i.e nobody directly answers a question or deals with an issue in a forthright manner.

People that respect property rights don't have any problems with people freely negotiating prices between one and another. It happens every day.

What YOU are proposing though is much, much different. I wish I could get you to grasp this, but ignorance is a regular epidemic these days, or so I've heard.

Having the government set a price by force is wrong. If the company on the other side of the bargaining table is not free to take the deal or walk away, but is forced to agree, we don't have a free market anymore and I am against that with all of my being. All people who love the Constitution feel the same way.

Wow, such hate over an academic subject. What is your screen name on DU?

OK, so let me break this down for you in a simple example that hopefully you can understand (which is also the same example my prof used in my MBA program ... not something I got from Google). I will focus on your requirement that free markets have information symmetry.

Most people would consider the stock market to be the ultimate example of a free market. Prices change minute by minute. So ... lets say that I am a buyer, and you are a seller. You want to sell the stock because you have "information" that tells you that the stock is not worth holding onto any longer. This information could be from a service you subscribe to, or a tip from your stockbroker, or maybe you tried to buy the product and had a bad experience, or maybe it is just a hunch. Regardless, this is YOUR information.

I on the other hand, have my information. Mine also could have come from a service I subscribe to, or a tip from my stockbroker, or maybe you I to buy the product and had a fantastic experience, or maybe it is just a hunch. Regardless, this is MY information.

In the end, our willingness to do a transaction right now, and this price, is based not on Information Symmetry, but completely on Information Asymmetry. In fact, if we had information symmetry, there is a good chance that you would no longer be willing to sell, or I may no longer be willing to buy. Information symmetry would also say that this stock would not change in price until some piece of information changed, which could be days, weeks, months. We all know stocks are more volatile than information about them. This is why Information Symmetry is not only NOT a requirement for a Free Market, it is antithetical to a Free Market.

My final note to you is ... calm down dude. You are taking criticism way too seriously, and way too personally. I was simply trying to clear up a misconception that you were communicating before others took it as fact. You were wrong, and calling me names is not going to change the fact that you used the wrong term in the wrong context. I am not trying to cause permanent injury to your psyche here so chill out. I see that you have been a member almost as long as I have ... so you know that there are a lot of more important things being discussed on FR to get your panties in a wad over than the definition of Free Market. If you want, we can agree to disagree, but stop acting like getting called out is the worst thing that ever happened to you.

Thanks for the condescension. That is why I called you names. What we are arguing about isn't just what you call something, but rather what we are really about e.g. laissez faire capitalism, accepting the market failures that seem inevitable or striving towards markets with full competition and free of undue influence be it government or private.

Now, in this context we are talking about the "health care" "market."

Nothing could be further from what you call an "ideal" free market or what most of us just call a free market. Long gone does a doctor charge what the local market will bear for his house calls (e.g. payment with a side of ham or some such).

Further health care is not really a "consumer" "product" anyway. Public health is a public good. Everyone has an interest in the eradication of deadly communicable disease, hence only the most rabid libertine (not even libertarian) eshews the power of government to impose quarantine. The efficacy of innoculations depends not upon me getting one or you getting one, but so many people getting them that the infectious "network" is broken and there is no path of communication through a broad community or the country as a whole.

We have health care insurance, which is regulated because we all have an interest in insurance actually being effective for all its purchasers (not just health care, but auto insurance, product liability insurance, etc.) and not just the one's who were fortunate enough to purchase from a sound company.

And no the stock market is not an "ideal" free market. The Fed is in, and wall street brokers and hedge funds are in, and companies are in buying back their own shares, etc. , and so prices get pushed way out of line for very long periods of time from a level that those who do fundamental calculations of value consider fair value, and in the correction we get 2008 or 1929-193??, or tulips, or whatever.

So yeah, you can hypothesize a "free market" defined as free of any government regulation or interference. I have no idea to what end, but certainly not the end under discussion here, health care.

In order to argue free markets you have to get rid of all government regulation regarding public health, health inspections of restaurants, agricultural inspections, NIH research and all government funded university research.

I don't think it a useful thing to think about, actually. But apparently you do.

Do you even know the definition of a "Contract of Adhesion?"Are you aware that there can be a vast disparity in bargaining power between persons, firms and entities? The state can and does step in, and rightly so, when there is an abuse of the difference in bargaining power. The only question being the amount of State interference.

People have been governing contractual terms between parties for centuries. Contractual terms have been set for centuries. Price is a contractual term and has been set by third parties for centuries. Where have you been? There is a whole rich literature regarding societies management of negotiations, property, offer and acceptance, promissory language. Go read the literature before you speak.

Your statement: "Setting a price does not equal harm." You are right SOME OF THE TIME. However, if your kid is living on an anti-cancer drug at $13.00 per pill and the manufacture suddenly raises the price to $750 per pill; are you telling me you are not harmed.(This has actually happened except it was not an anti-cancer drug.)

There is nothing quite like a Libertarian fanatic; reason flees, questions are not answered, reality is avoided etc.

Prices have been set for centuries. Have you ever heard of a "Contract of Adhesion?"

Was the drug purchased for $13 under a contract of adhesion? Or is that simply another strawman?

You assume I am a libertarian. That is incorrect.

I cannot see any rational basis for your insistence that the owner of an item cannot set the price for that item. The contract of adhesion you allude to in this instance is nothing more than socialist price controls to be set by the federal government. Government control is not the answer here.

I'll bet you would make the same argument before the Pure Food and drug laws were passed. If people are sold poisonous food they can just stop buying it. If they are sold contaminated food they don't have to buy it. If your child would need a cancer fighting drug and it would cost the consumer $50.00 then would choose not to buy it if the manufacture decides to charge $1750.00 per pill and it required one pill per day. Libertarians are ridiculous.

Poor argument. Yours is saying if the drug companies made a cancer drug that instead of curing cancer, made you throw up, then I don't care. Not at all. To turn your argument to the drug one:
If I decided to start selling a new food no one had heard of before, and I charged $50/lb for it, then you have the choice to buy it. There's plenty of exotic stuff that costs too much, but people still buy it, or they wouldn't be charging that much. This stuff is crazy expensive, both in time and $$, just to bring a new drug to market, or even to get to clinical stages. And I've seen estimates up to 95% (of total drugs started) for drugs that didn't even make it to that point, but still cost a couple hundred million already. If government sets a price ceiling, how much R&D do you think is going to keep happening in the US?

Forbes: The Cost Of Creating A New Drug Now $5 Billion, Pushing Big Pharma To Change

C&EN Health: Cost to Develop New Pharmaceutical Drug Now Exceeds $2.5B

Estimating The Cost Of New Drug Development: Is It Really $802 Million?

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