August 26, 2011
The NYT has been reporting on the occasional shortages of important generic drugs that arise. It discusses possible answers today, but doesn’t discuss the extent to which drug patents are a part of the problem. Because patents allow pharmaceutical companies to sell drugs at prices that are far above their competitive market price, there is relatively little interest among manufacturers in producing drugs that have come off patents. In many cases, the barriers created by the patent holders (e.g. the potential of legal harassment) means that they maintain an effective monopoly long after their patents have expired.
As a practical matter, it would be almost costless for the government to establish a stockpile of key off patent drugs. (They could contract it with a private firm.) If they bought up a million doses of each of 200 drugs, this would cost around $800 million. The drugs could be sold at prices that cover the cost of the purchase, storage, and wastage. It is difficult to see a good argument for not taking a costless measure that could ensure people’s health while saving money.
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