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An 'Underground Railroad' for Patented Drugs?
Published on Sunday, September 17, 2000 in the Sunday Journal (Metro DC)
An 'Underground Railroad' for Patented Drugs?
by Robert Naiman
 
Tomorrow is the 150th anniversary of an infamous Act. In 1850, Congress passed the Fugitive Slave Act, making the federal government responsible for tracking down escaped slaves in the North and sending them back to slavery. The Act galvanized anti-slavery opinion and contributed to the development of the "Underground Railroad" to assist passage to safety in Canada. In turn, the Underground Railroad emboldened the Abolitionist movement, strengthening the belief that slavery could be imminently destroyed.

In a "lame duck" session after the November 1994 election, Congress passed legislation creating the World Trade Organization, including the controversial "TRIPS" Agreement that extended the length of U.S. patents to 20 years and made this an international standard. This made the federal government responsible for tracking down countries that promote generic drugs and punishing them. Just as the Southern slaveholders insisted that Congress extend their "property rights" to the North, so the pharmaceutical companies demanded that the U.S. government act to guarantee them monopoly profits overseas.

In each case Congress acted to strengthen the legal protection for a "property right." In each case the "property right" was one which public opinion justifiably held to be fundamentally immoral, and contrary to the fundamental human right to life and liberty.

Al Gore and George Bush have plans for extending insurance coverage for prescription drugs. Neither plan directly addresses the fundamental problem: the price gouging by pharmaceutical companies enabled by our current system of granting long patents - monopolies - to pharmaceutical companies for life- saving drugs.

Gore's plan comes much closer, and that's why the pharmaceutical companies are against it. They fear that if a prescription drug benefit were added directly to Medicare, Medicare could use its bargaining power to force down the prices paid for prescription drugs.

The Washington Post reports that the Office of Personnel Management cancelled a project for providing prescription drugs at discount prices to federal law enforcement officers after Merck and Pfizer refused to participate. Merck and Pfizer say the health plan for law enforcement officers is not a federal government agency so they should not have to give it the same discounts as it gives the federal government. The OPM notes that prescription drug costs make up more than 25 percent of the cost of health care in the Federal Employees Health Benefits Program.

Bush says he's against the prescription benefit for Medicare because it would increase "Big Government" and people should be "free to choose" by getting tax subsidies to help them purchase coverage in the market. But what he really opposes is the government using its market power to drive down prices for consumers.

Bush's rhetoric is hollow when one considers how the federal government is already intervening in the market. The federal government pays for the research that develops many drugs, it gives the drugs to pharmaceutical companies, then allows them to patent the drugs, giving the companies a monopoly and protecting them from competition.

So it's fine, according to Bush, if Big Government intervenes in the market to subsidize pharmaceutical companies through federally funded research; it's fine if Big Government intervenes in the market again through patents to protect drug companies from competition from generics, thus driving up prices and industry profits, but if the government intervenes to drive down prices with its purchasing power it's Big Brother.

In the case of the anti-ovarian cancer drug Taxol, the U.S. spent millions of dollars on research, gave exclusive marketing rights to Bristol-Myers Squibb, and then on behalf of BMS threatened South Africa with trade sanctions under the WTO for licensing a generic competitor to Taxol.

Patent abuse is not only a problem with prescription drugs. In a case going before the Supreme Court, UNOCAL was granted a patent for a "process" which was basically the writing down of a government regulation for cleaner gasoline. This absurd patent has driven up gas prices.

However, because access to essential medicines, particularly in poor countries in Africa and elsewhere, is a life-and-death issue, this would be a good place to start reforming our patent law. While Congress kowtows to the pharmaceutical industry, let us consider an "Underground Railroad" for the international and domestic distribution of patented drugs.

Robert Naiman is senior policy analyst at the Center for Economic and Policy Research.

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