As is the case with most Trump officials, Commerce Secretary Howard Lutnick’s comments bear only an accidental relationship to reality. However, he does occasionally have the kernel of an idea that makes sense. 

This is the case with his comment that the United States should get a return on research that it funds at universities and other institutions. We should get a return on this research, but not in the way Lutnick seems to envision.

Lutnick appears to want drug companies to continue to use government-funded research — the same way they do now — but then pay a portion of their earnings back to the government to compensate for the government’s research funding. This would be an incredibly perverse way to have the public rewarded for research funding.

As the industry currently operates, it relies on government-granted patent monopolies, a far more important subsidy,  to be able to charge high prices for its drugs. This allows drug companies to recover their research costs and also to make profits — sometimes very large profits — on drugs that people need for their health or even their life.

It is because of patent monopolies that some cancer patients find themselves begging insurance companies or government agencies to pay tens or hundreds of thousands of dollars for the drugs they need to treat their illness. If that fails, and they don’t have a fortune themselves, they try GoFundMe. 

Lutnick apparently wants to give us part of the spoils in this story. So, we fund the research, let the drug company have a patent monopoly, and then look to get back part of the drug company’s haul as a result of Trump laying claim to a stake. In the case of Medicare, Medicaid, and other government programs, that would mean we are happily seeing drug companies jack up the prices the government pays through these programs, because the drug companies are giving us a cut. That could make sense in Donald Trump Land, but not in Reality Land.

The far better route would be to simply pay for the research upfront. As it stands now, government funding through NIH and other government agencies comes to a bit less than one-third of total research spending in the sector. Most of the research funded by the government is more basic scientific research, such as the development of mRNA as a useful tool for making vaccines. The research supported by drug companies is mostly devoted to the development and testing of specific drugs or vaccines. 

The government could look to triple its spending on research and move it downstream, so it was actually paying for the development of drugs and vaccines. There are different ways in which the disbursement of research funding could be structured. 

My preferred route would be to have companies bid on long-term contracts to carry out research in specific areas. For example, a company could assemble a research team with a proven track record that bids on a contract to do research on breast cancer or heart disease. The contract would require that all patents that result from the research are placed in the public domain, so that any drugs or vaccines developed could be produced as cheap generics from the day they are approved. (I outline how this sort of system could work in chapter 5 of Rigged [it’s free], but there are also other routes.)  

This would eliminate the problem of patients struggling to pay for high-priced medicines. It’s rare that a drug is expensive to produce and distribute. The high prices that people struggle to pay are almost always due to a government-granted patent monopoly or related form of protection. We eliminate the problem of high prices if we take away the patent monopoly.

The benefits of directly funding the research go even further. If new drugs are sold in a free market, with more normal profits, we largely eliminate the incentive for drug companies to lie about the safety and effectiveness of their drugs. It’s a very different world if a drug company stands to make $10 or $20 on a prescription rather than $200 or even $2,000. We most likely would not have had drug companies pushing the new generation of opioids so hard, if their drugs were all sold as cheap generics.

There would also be less opportunity to lie, even if drug companies wanted to make up stories about the safety and effectiveness of their drugs. The contracts could stimulate that all findings and clinical trial results must be fully open, and posted on web as quickly as practical, so that other researchers could quickly build on successes and not follow dead ends on paths that proved to be failures. 

This shift would also be useful from the standpoint of the actually coherent claim of the MAHA crew that we neglect nutritional and environmental factors that affect people’s health. If a company had bid on a contract to do research related to heart disease and found that some types of diet were effective in reducing the incidence of heart disease, this could be the sort of discovery that would position it for future grants. As it stands now, the company only gets a profit if it develops a patentable product.  

This would be an important shift in the structure of incentives. We want research to be focused on the best ways to improve public health, not producing patentable products. 

Going this route could make a huge difference in public health, as well as save us around $550 billion a year ($4,400 per household) on pharmaceutical products, if the government paid for research costs upfront and let all new drugs be sold as generics without patent protection. It is unlikely Lutnick and the MAGA crew would ever look to go this way, when push comes to shove, they seem to have little interest in confronting powerful corporations for the public good. But there is no reason the rest of us can’t at least think about it, until we get some sanity back in government.