Eminent domain is not just for land. In extreme cases like this where a profit motive is the only thing keeping us from curing huge numbers of people, the US government should write a single check, take the rights, and start handing out pills.
As far as the company is concerned, that could even be a preferable outcome. Cash now and the marketing benefits to promote its other drugs.
Let's walk through this. Drug develop is mostly funded with private money. Yes, the NIH funds basic research that often support drug research, but private companies fund most of the bill. It's in the hundreds of billions each year.
Now why would they do that? Well, they expect that they'll give a company $500M and it will turn into $2B or $3B. However, most of those companies will fail and the $500M will turn into $0.
So that would mean that the returns on the drugs that are successful need to be really high. What if they weren't? Well, all that private money would dry up pretty dam quickly.
Look at the money going into cancer research. It's a huge amount every year. It's not just because cancer is a terrible disease and affects everyone, it's because the returns on cancer therapy are high.
You could just tell private companies, "stuff it, you don't get to make money" and try and have the gov't do it on their own. Of course you'd need to increase the NIH budget by what? 10x?
Our current system isn't perfect, but it does a dam good job aligning the incentives of people with money and people who need new drugs.
As someone who works at a university and does work for drug trials, I don't agree that they are fully privately funded. They use university staff much of the time, and those staff are not paid market rate. They get equipment hire at academic rates rather than commercial rates too. Just thought I'd add my 2c.
I agree, violently. Protecting the researching company's incentives is hugely important. Otherwise we're getting the current crop of drugs at the expense of future drugs.
Eminent domain requires "just compensation" that courts interpret as fair market value. Since the company that created the drug was recently acquired there's a really easy number to put on it.
I think the government should put a value on every life (or quality adjusted life year, whatever), and offer to pay that much for any drug that saves lives.
From that perspective, $84k per life saved doesn't sound that unreasonable, and creates a huge incentive to develop similar drugs in the future.
But I don't think valuing every life at $84k would be sustainable. And why should the drug company itself get to determine the price, with no upper bound?
Sure. But if they demanded a trillion dollars per pill, the government shouldn't have to pay for it. It would bankrupt the country. They shouldn't be able to set a price and force the government to pay it.
The only reason we have this crazy system is because people refuse to put an economic value on life.
Then nobody would buy it and they would lose their investment.
> force the government to pay it
They can't force the government to do anything. Of course, the government can just take the pills from them, but if they did that, then no more cures would be developed.
> people refuse to put an economic value on life
People do all the time. Every time you (and everyone else) make a decision of risk vs cost vs utility, you do. For example, some cars are safer than others. How does that influence what you'll pay for a car?
You missed the part where insurance companies and government programs are obligated to pay for treatment regardless of costs. A limit needs to be put on this. E.g. spending a million dollars on a treatment that is only decreases the risk of death by 5% puts a $20 mil value on life, which is too high. I don't know what the number should be, but it's something we need to decide.
>Of course, the government can just take the pills from them, but if they did that, then no more cures would be developed.
There seems to be a common misunderstanding of how eminent domain works. The Constitution requires "just compensation", which the courts interpret as fair market value.
The investors and the courts may have very different notions of the fair market value. If it's much less than the investors expect, expect no more cures. Consider that the whole point of the government taking it is the idea that the fair market price is too high.
Also, there are many, many ways the government can take things without just compensation. For example, civil asset forfeiture. They could get the patent declared invalid. Laws and regulations are very complex, there are a lot of levers the government can pull.
Price controls have a very long history of unintended negative consequences. Keep in mind that the cure was developed with the expectation of high profits, and with no cure all the lives at stake would have died.
Suppose a cure for Alzheimer's never happens because price controls were put on the Hep C cure? Are you willing to risk it?
The price will come down after the patent expires. People are better off with a high priced cure than no cure.
Scientists are not profit motivated. Scientists don't work to produce more drugs faster just because the CEO is managing better. This is definitely something that can be funded by the public and should be funded completely by the public on a not-for-profit basis. Then we can no longer make these sort of ridiculous economic arguments.
Then why not make any scientist who discovers any very important drug or therapy into a billionaire. If they are motivated the same way corporations are, then that should super motivate them produce more drugs faster. In fact why don't universities work the same way?
Which drugs are produced by startups? As far as I know most drugs are produced by massive incumbents. The cost and the regulation is too much to do anything else. And as far as I know those incumbents are not turning their researchers that research those drugs into millionaires or billionaires.
I would wager that most drugs are discovered by startups. Pharma has a very well established "farm team" system where venture-backed companies do the compound discovery and complete Phase I and perhaps Phase II trials, then get bought by one of the major players, for exactly the reason you mention -- nobody wants to rebuild the infrastructure to manufacture and sell pharmaceuticals.
However, the founders of those startups are rewarded handsomely for their effort, assuming they are successful.
Scientists may or may not be profit motivated. But you can sure afford a lot more scientists to work on a problem, and give them much nicer labs, and pay for expensive animal and human trials, insurance, etc.
> In extreme cases like this where a profit motive is the only thing keeping us from curing huge numbers of people, the US government should write a single check, take the rights, and start handing out pills.
Yeah, but, as your own link notes, courts (and the constitution) require fair market value for compensation. This doesn't save you any money at all; eminent domain can only have an impact when someone is refusing to sell at the market price. But Gilead is very very happy to sell at the market price. The issue is people upset at what that market price is.
If the US government could come up with the fair market value of the exclusive rights to manufacture Harvoni and Sovaldi, the problem wouldn't exist, because the same amount of money could also just buy all the doses of Harvoni and Sovaldi on the open market.
> As far as the company is concerned, that could even be a preferable outcome. Cash now and the marketing benefits to promote its other drugs.
Oh sure, they'd love for the US government to buy a million doses at $84k each and start handing them out. I don't think that solves any problems though.
Edit: Wait, or is your comment actually just an argument for single payer healthcare, and I'm just being obtuse? If so, my apologies for missing the joke, and I think you're right: The most obvious role for the government is funding universal catastrophic care, and I think this should be a part of that.
Yes, it amounts to single payer healthcare for drugs.
It's different from the government buying individual doses on the market because the current price is set to achieve the fair market value of the drug by treating a small subset of infected patients. Manufacturing costs are so small in comparison, we could treat everyone for nearly the same price.
We could do that. On other hand, we could just pay them the expected market value of the drug when they first invent it then give it to public for almost nothing.
"You can cure cancer with those three drugs? Was going to make tens of billions? Here you go: guarantee of tens of billions of subsidies over next 20 years in exchange for the patent and license for anyone to produce it generically."
Boom! Tens of thousands of lives saved a year. Way better than investing into the TSA. :)
When you say "we pay the market value" and "give to the public for almost nothing", "we" and "the public" are the same group and therefore it makes no sense to make the distinction.
Unless by "we" you mean "the wealthy" and "the public" you mean "the poor", in which case the increased tax that has to be set up for that will just be reverted into the cost of the service/good provided by the wealthy, the wages of their employers, or turn into capital flight, and so forth. In short, you're basically taking money from other areas of people's lives and making them put it into health care. Which could be achieved by themselves by saving, if that's what they wanted to do.
I live in the U.S. if I didn't mention it. Here, we differentiate between the rights of the public as a whole and private individuals. Businesses and I.P. tend to be a form of private property. So, "we" the public can't take what "we" consider private. That's a contradiction.
In this specific case, it's the public paying money to private parties for their property to move into public hands. Then, that public property is manufactured to be distributed to the many, private parties in need that constitute the general public.
As far as the company is concerned, that could even be a preferable outcome. Cash now and the marketing benefits to promote its other drugs.
Edit: Just a reminder that eminent domain requires paying the property owner. https://en.m.wikipedia.org/wiki/Just_compensation