Burden from Pharmaceutical Industry Drug Patent Monopolies Exceeds Interest Payments on National Debt

The pharmaceutical industry must find it convenient that the financial burden it imposes in general on American society is mentioned a lot less than the much more minor burden imposed by interest payments on the national debt.

The deficit hawks have also never raised any concerns about the burdens created by government-granted patent and copyright monopolies. This is bizarre since these monopolies are an alternative mechanism to direct funding. The government could directly pay for research on drugs, software, and other items, paying for it through taxing or borrowing, or it can tell private companies to do the research and then give them monopolies to allow them to recover their costs.

The deficit hawks hyperventilate endlessly about the former route of paying for things, but completely ignore the latter, even though it poses a much larger burden. In the case of prescription drugs alone, the burden is more than $370 billion a year (we pay more than $450 billion for drugs that would likely cost less than $80 billion in a free market). This sum is just under 2.0 percent of GDP and more than twice the interest burden net of money rebated by the Fed. The total cost from these monopolies, including medical equipment, chemicals, software, and other items would likely be more than three times the cost of drug patents.

Anyone who is seriously concerned about the burden of government debt on future generations must also be concerned about the burden posed by patent and copyright monopolies, if they are consistent. Of course, if their goal is simply to cut Social Security, Medicare, and other social programs then it is understandable they would not want to discuss patent and copyright monopolies.

I’m not linking to the full article, but what’s not referred to is that there’s a different process possible to incentivize pharmaceutical innovation than using patent monopolies and other unjust legal protections for the industry. The pharmaceutical industry’s trade group, PhRMA, says that pharma corporations spend $70 billion a year on research and development. This is also in light of the industry spending more on stock buybacks that mostly benefit the upper class than it spends on R&D.

So the U.S. spends a few hundred billion dollars more a year than it has to on prescription drugs, and instead of giving that taxpayer-directed money away to be misused by the pharma industry, a lesser amount could be spent on direct funding for the NIH (say $90 billion a year) — with much better research outcomes and lower prescription costs for consumers. This isn’t the easiest concept to understand, but it’s valuable if you’re able to see it, and I linked to where I wrote about it in more depth as well.