ES EN
Menu Menú

Publications

Publicaciones

Search Publications

Buscar publicaciones

Filters Filtro de búsqueda

to a

clear selection Quitar los filtros

none

Article Artículo

Free Market Drugs: A Key Part of Elizabeth Warren's Transition to Medicare for All

(This post first appeared on my Patreon page.)

Earlier this month, Senator Warren put out a set of steps that she would put forward as president as part of a transition to Medicare for All. The items that got the most attention were including everyone over age 50 and under age 18 in Medicare, and providing people of all ages with the option to buy into the program. This buy-in would include large subsidies, and people with incomes of less than 200 percent of the poverty level would be able to enter the Medicare program at no cost.

These measures would be enormous steps toward Medicare for All, bringing tens of millions of people into the program, including most of those (people over age 50) with serious medical issues. It would certainly be more than halfway to a universal Medicare program.

While these measures captured most of the attention given to Warren’s transition plan, another part of the plan is probably at least as important. Warren proposed to use the government’s authority to compel the licensing of drug patents so that multiple companies can produce a patented drug, in effect allowing them to be sold at generic prices.

The government can do this both because it has general authority to compel licensing of patents (with reasonable compensation) and because it has explicit authority under the 1980 Bayh-Dole Act to require licensing of any drug developed in part with government-funded research. The overwhelming majority of drugs required some amount of government-supported research in their development, so there would be few drugs that would be exempted if Warren decided to use this mechanism.

These measures are noteworthy because they can be done on the president’s own authority. While the pharmaceutical industry will surely contest in court a president’s use of the government’s authority to weaken their patent rights, these actions would not require Congressional approval.

CEPR / November 30, 2019

Article Artículo

Should We Have Billionaires?

(This post originally appeared on my Patreon page.)

The Democratic presidential campaign has taken a strange twist in recent days, with candidates being asked whether we should have billionaires. While there may be some grand philosophical questions at stake here, I will stick to more mundane economic ones. The real question is; how do you want the economy to work?

The basic story is that if we have a market economy, some people can get very rich. If we buy the right-wing story, the super-rich got their money from their great contribution to society. If we look at it with clearer eyes, the super-rich got their money because we structured the economy in a way that allowed them to get super-rich.

This is a point which seems very obvious, but for some reason is largely ignored in policy debates. Most typically these debates take the market distribution of income as a given, and then ask the extent to which we might want to redistribute to have less inequality. The right of course wants little if any redistribution, while people on the center and left argue for varying degrees of distribution.

But it is completely absurd to treat the market distribution of income as given. The market is incredibly flexible and it can literally be structured in an infinite number of different ways. (Yeah, I know I make this point all the time, but I can’t help repeating myself.)

My favorite here is patent and copyright monopolies, both because it should be obvious that these features are structured by the government, and there is an enormous amount of money at stake. Patents and related protections raise the price of prescription drugs alone by close to $400 billion a year over the free market price, or 1.8 percent of GDP. If we add in the impact of patents and copyrights on medical equipment, software, movies, fertilizers and pesticides, and other areas, the cost could easily exceed $1 trillion annually or close to 5.0 percent of GDP.

Many of the country’s billionaires, starting with Bill Gates, owe their vast fortunes to these government-granted monopolies. As I, and others, have argued these can be extremely inefficient mechanisms for supporting innovation and creative work. Not only are they redistributing income upward, they also slow economic growth, and in the case of prescription drugs and medical equipment, impair people’s ability to get health care.

The industry with the largest share of the super-rich is finance. There are many ways this sector can be organized differently in ways that are likely to be both more efficient and produce fewer huge fortunes.

CEPR / November 23, 2019