August 31, 2017
One of the ways in which the government pays for things it wants done is to grant patent and copyright monopolies. This is not a statement about the merits of patents and copyrights as mechanisms for financing research and creative work; it is a definition. The government grants these monopolies to allow companies to charge prices that are far above the free market price as a reward for its past innovation or creative work.
In this way, patent or copyright monopoly can be thought as being like a privately imposed tax. If a drug company like Gilead Sciences can charge $84,000 for a Sovaldi, when the free market price would be something like $300, it has the same effect on the public as if the government imposed a tax of 28,000 percent on Sovaldi. It is the same amount of money out of people’s pockets.
We can argue about the merits of patent and copyright monopolies (see chapter 5 in Rigged [it’s free]), but the fact that they are alternative mechanisms that the government uses to finance research and creative work is not an arguable point. If we spent another $400 billion a year on research (roughly 20 percent of annual income tax collections), this would show up in the deficit and add to the debt. Yet somehow we are supposed to not pay attention when the government grants patents and copyrights that add hundreds of billions of dollars to what we pay for drugs, medical equipment, software and other protected items. (By my calculation, drug patents and related protections add close to $400 billion to what we spend each year on prescription drugs alone.)
This obvious point is missing from almost all the whining about the debt and deficit (see here for today’s example). The additional costs the public pays for items as a result of granting patent and copyright monopolies are never mentioned as burdens imposed on future generations. Somehow, we are not supposed to be concerned about making our kids pay huge amounts of money to Pfizer and Microsoft, it’s only a burden when the money has to be paid to the government.
That might fly as cheap political rhetoric, but it doesn’t make sense. And the people who talk about debts and deficits without mentioning patent monopolies deserve only ridicule, they should not be taken seriously.
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