No different from the scores of NGOs who get 80%+ of their money from governments, the EU and/or the UN.

Singleton's claims appear to be nonsense.

The most egregious: he claims that Pfizer et al don't operate in a free market, but in a protected market. They actually live in one of the most highly regulated markets.

Does the US federal government have to approve new software sold by Microsoft? No, but it does have to approve every single new or generic product from Pfizer et al, before that product can ever see the light of market day in the US. That process takes many years of patent life.

This article points to the tip of the iceberg as far as questionable practices employed by pharmaceutical companies. Take just about any day on Radio 4 and you will hear their apologists promoting an endless stream of drugs. If you didn't "know" that the BBC are completely unbiased you might get the idea they are bought and paid for by drug companies.

Does the author suggest we abandon intellectual property rights, specifically patent rights? If so, he should come out and say it, rather than making vague accusations that Big Pharma is anti-free market and statist. Of course, Big Pharma is really only that way because of (1) the onerous safety regulations they're forced to comply with and (2) the massive subsidies that members the general public demands they receive - namely government funded healthcare - which often have the effect of turning into price ceilings - especially in Canada where the government is, by law, the only purchaser of drugs. (Of course there is an argument to be made that patented pharamceuticals are products that should be subject to price controls considering they have are given legal monopoly status).

Finally, I find it curious that a self-styled libertarian blog is resorting to Ralph Nader styled arguments to demonize an industry that is in large part responsible for the long and healthy lives many of us are able to live.

At first glance, I read "Some, supposedly independent, think tanks now receive over 50% of their funds from drug companies......" and got quite confused as to why drug companies were supporting armoured fighting vehicles.

Seems to me that it would be only fair for the Globalization Institute to reveal where it gets it's funding from if it's criticising 'donor capture' in other think-tanks ...

I'm pleased that Alex has finally come out against state capitalism. I will be sending him a book by Murray Rothbard so that his conversion to real libertarianism can become complete. He should also read Kevin Carson's work at mutualist.org

Exactly the opposite is true.

Pharmaceutical companies make business in the environment of price regulation in most countries. This is akin to rent regulation in the housing market. Maybe you've heard what Assar Lindbeck, member of the Nobel Prize Memorial Award committee, said about rent regulations: the most efficient way to destroy cities right after carpet bombing.

Drug price regulation hinders R&D worldwide. The fact that the American pharma market is *relatively* lightly regulated makes R&D move to the USA.

Most big pharma companies have strong incentives to make the market freer, not vice versa.

Alex Singleton is spot on, and it is good to see a person so heavily linked to the ASI critiquing state-capitalism. It is also of upmost importance for defenders of global free-market capitalism to criticise absences of free-market capitalism, especially when it is these absences that anti-globalisationists point to as reasons to fight capitalism.

Take John Coupal's post above:

The most egregious: he claims that Pfizer et al don't operate in a free market, but in a protected market. They actually live in one of the most highly regulated markets.

Does the US federal government have to approve new software sold by Microsoft? No, but it does have to approve every single new or generic product from Pfizer et al, before that product can ever see the light of market day in the US. That process takes many years of patent life.

But these regulations provide protection for big pharmeceutical companies. They ensure that supply of medical products is greatly reduced relative to demand, allowing prices to rise, and then they shut out any new enterprise that would be attracted to the industry by these high prices, any new enterprise that would increase supply. quality control regulation always has this effect. That is why people in industries regulated by it like such regulation.

The operant word here is "Big" - Big Pharma and Big Government.

Yes the government regulates, but the variant Big Industrial X soon makes its peace with regulation, and even desires it as it cuts competition. Big Government and Big Industry exist in a symbiotic relationship mutually beneficial to both. Of course consumer protection and progressive R&D that can only result from artificially maintained economies of scale (of course to benefit the masses) are used as the rationale. In no way blithely thrown around but this is fascism in as near a pure form as the practical allows.

It is standard practice of the lefties to denounce and dismiss any research or position paper, by anybody, with the template phrase: "they were funded by the rich/big oil/big multinationals/industrial military complex/big meanies/etc."
This is nonesense.
Of course, ALL universities and ALL think-tanks and research institutions receive money from various individuals, foundations, corporations and governments.

To claim that all scientists are corrupt scoundrels and all research papers reflect only the opinion of it's fund donnor - this is pure Marxism (a.k.a. idiocy).

Most researchers are honest people (even if not all are very bright), and their results reflect their best and honest opinion of the facts, no matter who helps fund their research.
If a research is incorrect (that happens), you have to go over the details and point to the actual errors. Merely naming the donnor does not refute the validity of the paper.

About the Pharmas - the matter isn't so simple as Alex tries to present it. There was a clamor that the poor in African were dying of AIDS and could not afford expensive medicine. So the Pharmas were pressed by Governments to supply the medications at low prices, or to license local producers to produce generic pills at low prices.
Now you want to re-import those cheap drugs and sell them to the rich also, destroying the Pharma's income source ? Who will then pay for R&D ??

If you really had a free global market in drugs you'd have to enforce patent rights world-wide, and give up cheap drugs for the Africans. Free market means the same price everywhere, and that could be a high price.

I don't know what's the best solution, but it seems Alex is oversimplifying things.

I thought libertarians were supposed to understand principles of economics. Patents are awarded for innovation. This gives pricing power to firms. Rich countries will be charged a lot for new drugs; poor countries much less.

Cross-country trade in drugs circumvents this price discrimination. Two possible outcomes:

1.) Profits from drugs go down, thus fewer future drugs will be forthcoming.

2.) Poorer countries are no longer given a discount, because drug companies realize these drugs will be reimported.

Socialized countries in Europe should be terrified of the U.S. allowing re-importation. Say good-bye to your much cheaper drug prices.

Because patent protection lasts 17 years in the US, drug companies only get 7 years to recover their R&D costs. 10 years of that patent protection is wasted while the FDA decides to approve the drug.
Reform FDA and our drug prices would fall.

Interestingly:

Because the US does not control drug prices, generic drug prices are lower in the US than other countries due to price competition.

A huge number of drugs are coming off patent in the next few years, so people will come to the US to get cheap drugs.

It would be interesting if someone could find a statistic about the number of new drugs being developed in the US vs. Canada and EU, Japan, etc.

It also seems to me that all pharmas, whether US owned or foreign, have US subsidiaries, and rely heavily on profits made in the US for funding of new R&D. That is: the profits to be made in the US is what drives drug innovation in foreign countries also.

Another point for Alex: if he is in search of a worthy free marked campaign - how about drug price deregulation in Britain and the EU (of which Britain is a part) ?
(That was a guess, I have no idea to what extent prices are regulated, but I guess they are).

From the article: "given that they spend less on R&D than on marketing or on profits to shareholders, their claim that free trade would affect their R&D makes no sense."

That is a preposterously stupid statement. Even setting aside that marketing is designed, as at every company, to pay for itself through increased sales and profits, (and that R&D decisions are similarly made in order to raise profit, and are made independently of marketing decisions) does Mr. Singleton possibly believe that making some drugs less valuable would not affect their research or sale?

A drug company, even when fantastically profitable, makes the vast majority of those profits from a small number of highly sucessful drugs. Some drugs are incredibly profitable. Other drugs (including things like malaria research, or drugs that target rarer diseases) are not incredibly profitable, and are barely worth the money that the research costs. Reduce patent protection, and drug companies, while they will still likely continue to research the blockbusters, will cut research on all the marginally profitable drugs which are now marginally unprofitable.

Drug companies make many independent decisions about what and what types of drugs to research. Like any company, they make their decisions on the margin. To suggest that they wouldn't cut marginally profitable drugs if those drugs became unprofitable is pure economic fantasy thinking. Yes, sometimes research produces unexpected results or benefits; but certain methods and ideas are thought of as having a better chance for success than others.

There is, to be sure, an argument that less patent protection would be good. Perhaps the lower prices on the blockbuster drugs would provide enough consumer surplus in order to cancel out the effects of fewer marginal drugs being researched. Also, although it's not a libertarian or free-market argument, perhaps the consumer surplus gained from lowering prices on the highly successful drugs could be used to subsidize research into the less profitable drugs, or used to perform public research on that. That's an entirely reasonable argument. However, that is entirely different from saying that less patent protection would not reduce R&D. To argue in the real world, one should argue (and it is quite possible to do so), that the decreased amount of R&D will be relatively small, and sufficiently small as to be made up by the benefits.

Mark wrote:

Socialized countries in Europe should be terrified of the U.S. allowing re-importation. Say good-bye to your much cheaper drug prices.

Canada is already looking to restrict exports of prescription drugs.

Pharmaceutical markets are no more protected by patents than any other industry. To say that patents don't work in pharmaceuticals is to say that they do not work as concept at all.

Patents not only lead to more R&D long term but they stimulate parallel development short term. Any drug that is proven successful soon gives rise to a "class" of similar drugs developed by other companies. It is easy to develop the drug class because the information about the parent drug is right their in the patent.

Perhaps Singleton needs to understand that "Free trade" doesn't mean, "I get what I want for Free."

"Because patent protection lasts 17 years in the US, drug companies only get 7 years to recover their R&D costs. 10 years of that patent protection is wasted while the FDA decides to approve the drug."

My understanding is that the average FDA approval time is 16 months. You seem to be including the time taken to develop the drug as well as the FDA approval time. I'm open to being won over to your idea. After all, I tend to take the view that governments are ineffecient. But merely asserting a 10 year approval time doesn't provide me with the hard evidence I need.

It's a lucky Pharma company indeed that gets seven years to recover the R&D costs of a successful product. Two or three is more like the real world figure.

And Alex, we know that the actual FDA approval time is about 16 months, but that is not the point - the approval time only starts when the submission is made. The submission cannot be made at all until (ever more) lengthy trials have been completed, (ever more) complex information has been complete and collated, etc etc. And the rules/requirements can be, and often are, changed along the way, causing a start-over-again situation.

You should not forget either, that a successful product has to recover not only its own development/trial/submission costs but also those of any UNsuccessful products which got part of the way through the process and were then dropped or cancelled. Some of these may have cost almost as much as your hypothetical block-buster, and suddenly it's all sunk money.

As for generic (copycat) manufacturers, they don't make better cheaper products, they make the SAME product, which they can sell cheaper because they have not had to cover the overheads of development. Their business model is exactly the same as if you or I were to make copies of Windows software CD's and sell them for 50p each. If there were no research-based Pharma companies, the generics would have nothing to copy, and would not exist.

Mr. Singleton appears to be convinced, with the statement I quoted earlier, that pharmaceutical companies do not attempt to maximize profit. I am stunned. How else, though, could he have claimed that the idea that R&D would be reduced was ridiculous because the drug companies were already making money, or because they already spend so much on advertising? Clearly no matter how much money they are making, they would try to push their profits higher by canceling unprofitable-looking R&D if it became unprofitable because of patent law changes. Clearly as well, advertising is designed to pay for itself in profits by bringing in larger sales; its size is irrelevant.

Now, it is possible to argue that the R&D that would not be done with patent law changes is better off not being done, since the benefits to the consumer and the general society are low relative to the R&D spending, and thus there is more efficient uses for the money. There are plenty of ways to make all sorts of arguments favoring patent law changes. But to claim that it would make "no difference" in R&D spending for such specious reasons as he does above forces one to call into question Mr. Singleton's knowledge of economics, and causes me to disgregard his statements as those of either one who is ignorant or a demogogue.

Big pharma are the biggest beneficiaries of government regulation of drugs (and the "competition", vitamins and supplements).

Doesn't it bother anyone that they are also the biggest funders of the research that these regulations are based on?

According to a study in Nature, nearly 16 percent reported "Changing the design, methodology or results of a study in response to pressure from a funding source"

http://www.nature.com/nature/journal/v435/n7043/fig_tab/435737a_T1.html

http://www.nature.com/nature/journal/v435/n7043/fig_tab/435737a_T1.html