No Rx for rising D.C. costs

D.C. Council member David Catania is on a mission to save D.C. Medicaid beneficiaries money on prescription drugs. Last year, he successfully pushed through Access Rx, which requires the D.C. government to negotiate with drug companies for discounted prices. This year, his plan is to cut the drug companies out of the deal altogether by simply stealing their drug patents. After all, why mess around with the middleman if you don’t have to? The problem is that Mr. Catania’s proposed Prescription Drug Compulsory Manufacture License Act would be an act of criminal socialism.

More specifically, the measure would allow the District to claim by eminent domain patented drug formulas so that generic manufacturers can make and sell them on the cheap. Using a bit of demagoguery required for socialist programs, Mr. Catania said, “Big drug companies are pricing our residents out of the market for potentially lifesaving pharmaceuticals. As a result, this government has no choice but to step in and address the predatory practices of the pharmaceutical industry.” Like the states, the District subsidizes patented drugs for Medicaid participants, and those costs are increasing. Also, because the mayor has declared a public health emergency, Mr. Catania reasons, the government has a legal right to invoke eminent domain in the public interest.

Eminent domain, however, is used to seize real property, as in real estate, with “just compensation” provided to the owner. It’s dubious that a patent, which is considered intellectual property, even falls under the criteria of eminent domain. Even if it does, and that’s a question the courts will decide should Mr. Catania’s proposal become law, the District would still have to pay out a hefty sum to all those pharmaceutical companies. And if fair value were paid, there would be no savings for the city.

The Constitution does grant patent-infringement immunity to states that seize patents, as long as it is done with due process and the owner is justly compensated. Mr. Catania argues as such and cites a 1999 Supreme Court decision. That ruling, however, makes clear that states have retained their constitutional protection because there is little evidence to suggest “that unremedied patent infringement by States had become a problem of national import.” In other words, so far the states have not abused their authority. Stealing hundreds of drug patents seems to cross that line.

Mr. Catania’s proposal is bad policy because, as reimportation opponents also argue, it will only defer the problem of rising drug costs. If the District starts stealing patents, other states will as well, with diminishing returns to the pharmaceutical industry. Despite Mr. Catania’s characterization of the drug companies, they are the ones creating the best drugs in the world — and they can’t do it for free.