Socialized Medicine By Stealing Rx Patents

Sen. Bernie Sanders has unveiled legislation that threatens the future of developing new medications.  Patients now and in the future won’t have new cures and more effective medicines, should this legislation become law.

There’s a simple reason for this dire forecast:  The Sanders-Rep. Ro Khanna bill (S. 102/H.R. 465) would make the patents and intellectual property of any cutting-edge pharmaceutical entirely uncertain.

Brand drug IP would be subject to our government exterminating it if the medicine’s deemed “excessively priced.”  The government will effectively kill its patents and issue compulsory licenses to copycat competitors.

This approach resembles a Third World country more than it does the private property rights principles that have graced America.  But compulsory licensing isn’t a tool limited to copyist countries.  Developed nations — those that lag in medical progress and opt for socialized health care models — use this unjust form of official theft.

President Reagan’s Commission on Industrial Competitiveness called compulsory licensing “expropriation of the patentee’s property rights without due compensation.”  Sanders, an avowed socialist, and Khanna plan to entrench this tool of tyrants in the U.S. health care system.

Notably, Sanders and Khanna build on what Health and Human Services Secretary Alex Azar has proposed.  The Azar proposal imports for Medicare Part B the pharmaceutical price controls of 14 nations that have government-run health systems.

It’s portrayed as ending “foreign freeloaders” from paying pennies on the U.S. dollar for American-created new medicines.  But Azar’s plan merely saddles Medicare with the failed government-set pricing that ends up denying patient access to new and improved medicines.

“Excessively priced” under Sanders-Khanna would mean a drug’s U.S. price if it’s higher than the median price in Canada, France, Germany, Japan and the United Kingdom.  Never mind that their government-run health systems dictate prices.

And the label gets applied if HHS considers a U.S. price that’s below the foreign reference price to be “unaffordable.”

Sanders and Khanna clearly indicate their intentions.  Once labeled “excessively priced,” a pharmaceutical innovator faces loss of private property rights.  A section of their bill is titled, “Ending Government-Granted Monopolies for Excessively Priced Drugs.”  Here, the “brand” of newly developed medicines becomes “government-expropriated.”

This proposal, not unlike Azar’s, jeopardizes the intellectual property rights whose essence is the right to exclude others from making, using, selling or importing an invention.  Sanders-Khanna dictates waiving or voiding exclusivity and substitutes “open, nonexclusive licenses” to the former private property. 

 

The generic copyists who obtain compulsory licenses would pay the innovator a “reasonable royalty” — set by the government.

The Sanders-Khanna proposal threatens all patients’ access to cutting-edge medication.  First, it isn’t limited to government health programs such as Medicare and Medicaid, but extends to patients in private health plans and even self-paying individuals.

Second, this bill creates a perverse situation where any pharmaceutical innovator that develops a better new treatment stands to lose the most.  It takes an average of $2.6 billion and 10 years to develop a new medicine that’s approved as safe and effective, with many tries along the way that don’t meet the exacting regulatory standards.  This legislation would cause investors to shy away from pharmaceutical projects, due to the high likelihood that scientific success would spell government expropriation, regardless of patents.

Sanders, Khanna and Azar offer a siren song promising to cut Americans’ drug costs.  But their approaches actually devalue and even take away inventors’ private property rights to their costly discoveries.

With the certainty of having secure rights and IP exclusivity gone, research and development investment will likely dry up.  Fewer new drug discoveries will be commercialized.   Thus, fewer diseases will be targeted by new treatments, and cures will be fewer and farther between.

Economically, this risky idea will gut America’s life sciences sectors that provide good-paying jobs, contribute a trade surplus and spur local innovation ecosystems to thrive, because the United States leads the world in biopharmaceutical development.

Healthwise, American patients presently reap the benefits of a market-based, free enterprise-centered pharmaceutical sector.  Today, the latest cancer drugs become available in the United States more than a year earlier than in the five Sanders-Khanna reference countries.  New medicines generally reach American patients more than 10 months before those in these five nations.  These benefits are almost guaranteed to disappear.

If the state can take away your property rights and allow your competitors to gain commercially from your billions of investment and years of development, who’s going to launch new therapies?  The incentive will be gone.

This scheme should warm the cockles of Karl Marx, Vladimir Lenin and Chairman Mao.  It’s ironic that Secretary Azar will have helped open the door for this socialist flood.

James Edwards is executive director of Conservatives for Property Rights and patent policy advisor to Eagle Forum Education & Legal Defense Fund.

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