27 March 2013

Pay To Delay

Federal regulators are pressing the Supreme Court to stop big pharmaceutical corporations from paying generic drug competitors to delay releasing their cheaper versions of brand-name drugs. They argue these deals deny American consumers, usually for years, steep price declines that can top 90 percent.
The Obama administration, backed by consumer groups and the American Medical Association, says these so-called "pay for delay" deals profit the drug companies but harm consumers by adding 3.5 billion annually to their drug bills.
But the pharmaceutical companies counter that they need to preserve longer the billions of dollars in revenue from their patented products in order to recover the billions they spend developing new drugs. And both the large companies and the generic makers say the marketing of generics often is hastened by these deals.

Basically, this exposes the fundamental problem of patent law:  how many drugs would make it to market if the producers/inventors didn’t have some sort of monopoly?  It’s easy for consumers to complain about how big pharma wants to screw consumers over by paying companies to delay production of generic drugs.  What’s forgotten is that big pharma already had the power to prevent companies from doing so thanks to having a limited-run monopoly on production.

Now, most consumers will agree that big pharma must have an incentive to produce the drug, and will thus agree to the terms of patent law, which gives big pharma a monopoly.  But then, many of these consumers will turn around and complain that big pharma is acting like a monopoly.  Well, duh! But if you accept that proposition that big pharma should have monopoly rights to have an incentive to produce the drug in the first place, on what grounds would you object to big pharma using the market to extend their monopoly rights?  And if you don’t think that big pharma should be able to extend monopoly rights by buying off competitors, on what grounds do you say that big pharma should have monopoly rights in the first place?