Stealth Tactics to Mitigate Effects of Prescription Drug Patent Monopolies

Government-granted patent monopolies allow US drug companies to charge prices 30- or 40-fold above free market prices, and sometimes more than 100-fold. The new Congress is forging ahead on various forms of legislation to lower prices, but states and private philanthropies can quickly apply several mechanisms to force prices closer to free market levels.

These mechanisms are explained in The Future of the Pharmaceutical Industry: Beyond Government-Granted Monopolies, published today by the Center for Economic and Policy Research (CEPR). The report's author, economist Dean Baker, sketches out alternatives to fund development of new drugs so they can be sold immediately at generic prices, and ways to purchase drugs from foreign countries.

"Patent monopolies on prescription drugs lead to economic distortions and provide incentives for corruption," said Baker. "US drug prices tower above free market prices, but that opens up enormous opportunities for small-scale changes to the system."

New drugs could be developed outside of the patent system and then sold at generic prices. This could be funded by either state governments, which already fund a substantial amount of research through their university systems, or by private philanthropy.

Since patent-protected drugs in the US can typically be purchased at far lower prices in other counties, either send patients abroad to purchase cheaper drugs or bring cheaper drugs into the US.

The report explains both of these methods in detail.