Government Granted Monopolies are Good for Business

Few markets in the United States are as ripe with corruption as the medical market:

A drug that treats a variety of white blood cell cancers typically costs about $148,000 a year, and doctors can customize and quickly adjust doses by adjusting how many small-dose pills of it patients should take each day—generally up to four pills. At least, that was the case until now.

Last year, doctors presented results from a small pilot trial hinting that smaller doses could work just as well as the larger dose—dropping patients down from three pills a day to just one. Taking just one pill a day could dramatically reduce costs to around $50,000 a year. And it could lessen unpleasant side-effects, such as diarrhea, muscle and bone pain, and tiredness. But just as doctors were gearing up for more trials on the lower dosages, the makers of the drug revealed plans that torpedoed the doctors’ efforts: they were tripling the price of the drug and changing pill dosages.

Before some socialist reads this and thinks that they’re going to be oh so clever by posting, “See? This is what happens under capitalism,” let me explain how this kind of behavior is enabled by government.

In a market unrestrained by government interference, news stories like this would result in competitors making cheaper alternatives to the drug in question. However, in this case the manufacturer has a patent, a government sanctioned monopoly, on the chemical makeup of the drug, which makes it illegal for other manufacturers, at least in countries that recognize the patent, to make a product using that same chemical makeup. If a drug manufacturer wants to triple the price of their patented products, there’s nothing to stop them because no competition exists.

If you look at drugs that are no longer patented, there are usually several generic alternatives to the name brand drug. These generics have the same chemical makeup and therefore do the same thing but they usually cost a fraction of the cost of the name brand version. Once a generic is on the market the original manufacturer can either keep their prices absurdly high and lose a bunch of business or bring their prices down to a more reasonable level in an attempt to compete.

Unfortunately, so long as manufacturers can patent chemistry, they can set their prices as high as they want.

One thought on “Government Granted Monopolies are Good for Business”

  1. On the surface, generics sounds great, but in reality, the availability of generics is often worse for the patient. They aren’t given the choice to move to a cheaper generic, and are instead forced into it by insurance companies.

    While the medical industry will tell you that the generics are exactly the same as the brand name, that is not true. Brand name patents list the components of the medications, but do not provide a recipe for other manufacturers. They must reverse engineer the product, which results in a medication that does not perform exactly the same as the brand name.

    In fact, the FDA allows the maximum blood levels of generics to vary as much as 20% below and 25% above the brand name, and don’t even specify how the absorption rate must compare. If medication is absorbed too quickly, the side effects will increase, and the patient may be left with inadequate blood levels by the time they reach their next dosage, resulting in poor control of their condition.

    In addition, the pharmacies don’t consistently fill the prescription with the same generic each time. They fill based on what they happen to have in stock at the time. As a result, any variances in fillers (which play an important role in bioavailability and side effects), bioavailability, and physical tolerance are further exaggerated for the patient, as they could be switched from a generic that consistently falls 20% below the brand name to one that falls 25% above the brand name. This reduces the efficacy and safety for the patients. On the subject of safety, I should also add that generic medications are not held to same level of testing as the brand name medications.

    While it is not ideal for brand names to have a patent (aka monopoly) on a medication, it actually ends up being far worse for the patient when that patent expires. Generics are not equivalent to the brand name medications. The patient ends up fighting a battle with the insurance companies to get back on the brand name, because the generics are not effective, and insurance companies often refuse to cover the brand name when generics are available, with no regard as to whether those generics are actually effective. At least when the patent is in effect, the insurance companies must cover the brand name medication, because there are no alternatives.

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