October 15, 2017
The Washington Post had a lengthy piece on the intense lobbying efforts by the pharmaceutical industry, along with retail drug store chains, to block legislation that would have imposed stronger penalties for improperly prescribing and distributing opioids. While the piece provides considerable detail on the efforts of specific actors to intervene with members of Congress to weaken legislation, it neglects to mention the importance of patent monopolies in this picture.
As everyone who has taken Econ 101 knows, when the government imposes a tariff in a market that raises the price of an item by 10 or 20 percent, it encourages corruption. The beneficiaries of this tariff have the incentive to lobby to try to extend and enlarge this protection. Lobbying and bribing politicians can be a more effective way to increase profits than cutting production costs or developing a better product.
In the case of patent monopolies, the price can increase by a factor of ten or even a hundred, equivalent to a tariff of 1,000 or 10,000 percent. The implied mark-ups provide an enormous incentive for companies to lobby to protect and enhance their markets. As the piece tells readers, “each 30-pill vial of oxycodone was worth $900.” If a 30-pill vial was selling for $30, there would have been much less incentive to lobby against legislation that would limit sales.
For some reason, patent monopolies and their role in maintaining high prices for opioids are never mentioned in this piece. It is probably worth mentioning that the Washington Post gets a substantial amount of advertising revenue from the pharmaceutical industry.
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