ANALYSIS/OPINION:
Last week, Americans celebrated Thanksgiving. People may not remember that the Pilgrims first adopted a socialist-style political system when they arrived at Plymouth Rock. It led to a collapse of their new colony: Production dropped by half and half the colony died off. Gov. William Bradford instituted a system of private property, and their fortunes reversed. They indeed had much to be thankful for.
Presidential candidates like Sens. Bernie Sanders and Elizabeth Warren are once again offering up the same false promises of socialism that destroyed the colony at Plymouth Rock. Right before Thanksgiving, Sen. Kamala Harris ironically called for government theft of property rights if companies would not obey her presidential dictates in setting prices.
Ms. Harris joined the bipartisan moral panic about drug prices. She threatened to “snatch” patents in a government “takeover” of the U.S. pharmaceutical industry if drug companies did not “play by our rules” in obeying her presidential mandates “to set drug prices.” Good riddance to a presidential candidate threatening companies like an autocratic socialist ruler.
The primary reason for the success of the U.S. innovation economy of the past two centuries has been its commitment to the rule of law and protection of property rights. This is what made possible the innovations of Alexander Graham Bell, Thomas Edison, Nikola Tesla, the Wright Brothers and hundreds of others who had the fruits of their productive labors secured to them by the U.S. patent system.
Researchers at Tufts University have estimated that the average cost of research and development in each drug sold to consumers today is $2.6 billion — money and labor expended before a company has made a single penny in selling the drug to patients. What innovator would invest their time and money to make any new product or service when it merely becomes a target for arbitrary dictates and theft if companies don’t “play by our rules?”
The patent system made possible the modern pharmaceutical industry and its miracle cures for cancers, viruses and other scourges that have killed without restraint for thousands of years. Innovators spend 10-15 years and invest billions in R&D only with the legal security of a property right in the fruits of their productive labors. It’s the same principle that a farmer should be secured in the fruits of his labors over the year it took to sow, husband, reap and sell the food he produced. The products of these productive labors are rightly secured as property rights — a key to the ultimate success of the Pilgrims and later the United States.
Like the Pilgrims eating all of their turkeys and leaving none to make more, Ms. Harris and other presidential candidates would kill the golden goose that has laid the golden eggs of economic growth and a flourishing society in the U.S. — the rule of law and protection of property rights.
Unfortunately, myths drive this push for autocratic rule and socialist policies that would destroy the patent system and the innovative pharmaceutical industry that it created. It is not drug discovery that costs billions in drug development; much of the development of a new drug is spent navigating the Food and Drug Administration’s regulatory approval process with less than 12 percent of new medicines approved for use in the health care market by the FDA. Moreover, almost half of all drugs and medical care are already paid for by state and federal governments. These state programs impose non-market-based price caps on what companies can receive for their products and services. The result is what economists call “cross subsidization,” as non-government patients end up subsidizing those who receive government-paid, below-cost medical care.
Unfortunately, myths drive this push for autocratic rule and socialist policies that would destroy the patent system and the innovative pharmaceutical industry that it created. It is not drug discovery that costs billions in drug development; much of the development of a new drug is spent navigating the Food and Drug Administration’s regulatory approval process with less than 12 percent of new medicines approved for use in the health care market by the FDA. Moreover, almost half of all drugs and medical care are already paid for by state and federal governments. These state programs impose non-market-based price caps on what companies can receive for their products and services. The result is what economists call “cross subsidization,” as non-government patients end up subsidizing those who receive government-paid, below-cost medical care.
In sum, patents are the all-too-easy scapegoat for government officials like Ms. Harris who blame others for many problems caused by their own past policies.
In recent years, drug companies have produced incredible miracles — creating new breakthrough treatments for hepatitis C and cystic fibrosis, to take two recent examples. They’ve turned death sentences into manageable conditions. We should be praising drug companies and the innovators who have modern life a veritable miracle by historical standards. Instead, politicians from Ms. Harris to President Trump vilify them and issue threats that one expects to see from socialist autocrats like the late President Hugo Chavez of Venezuela.
We do not have to go back to the Pilgrims to understand the destruction that is wrought by socialist policies. Chavez took the wealthiest, most successful country in Latin America back to the pre-industrial age. In Venezuela today, basic commodities they used to enjoy, like food, clean water and modern medical care, have disappeared. Scourges like malaria are again running rampant. Chavez destroyed Venezuela with the exact same autocratic, socialist policies that Ms. Harris promised to impose against the drug companies.
It is fitting her campaign ended shortly after threat of a government takeover of the pharmaceutical industry. Unfortunately, she continues with threats and pushing socialist policies in the Senate. Venezuela and innumerable other historical examples from the Pilgrims to today tell us how this will end.
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