Tuesday, March 22, 2005

Washington is hothouse for nutty ideas — and not just in Congress and the federal bureaucracy. D.C. lawmakers are equally capable of generating bad proposals.

Councilmember David Catania is pushing the Prescription Drug Compulsory Manufacture License Act. Put simply, Mr. Catania wants to steal the drugmakers’ patents. Standing in his way is the 5th Amendment, which limits the power of government to take private property. Which means the city would have to pay for anything it seizes.

Mr. Catania complains that medicines cost money: “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.”

With high prices a concern, we should await with trepidation Mr. Catania’s legislation to nationalize the energy companies and seize control of the private housing market. City-owned supermarkets won’t be far behind. After all, the costs of energy, shelter and food are “too high,” well beyond the ability of many Americans to pay. Government should “step in” and save us.

But apparently Mr. Catania thinks the drugmakers are worse than the oil companies because the former engage in “predatory practices.” (Actually, that was a common attack against the energy industry during the “energy crisis” long ago.)

What predatory practices? Charging enough to recoup the cost of creating what he acknowledges to be “potentially lifesaving pharmaceuticals”?

Yes, it would be wonderful if drugmakers gave away their wares. Except for one little problem: Once the cupboard was bare, how could the firms produce any more? Who would invest in companies to develop new pharmaceuticals? Indeed, would Mr. Catania recommend that the city pension plan buy the stocks of enterprises forced to sell their products at prices local politicians thought were fair?

However, the most obvious problem with the proposal to use eminent domain to seize patents is that it wouldn’t work. Blame the Constitution.

Assume the theft, er, taking, passed the 5th Amendment’s “public use” test. (Mr. Catania would have the city use its legal right to allow generics firms to make cheap copies of the medicine.) Washington still would have to compensate the companies. The more valuable the patent, the higher the payment. It would make more sense to subsidize the purchase of drugs by city residents than to spend billions of dollars on the most important patents. Not that making sense has much to do with being a D.C. councilmember.

Nevertheless, Mr. Catania might luck out. Maybe he could find a federal judge who would effectively excise the 5th Amendment. “Just compensation” would become “whatever Mr. Catania believes the drug companies deserve for developing potentially lifesaving pharmaceuticals.”

So the District would fork over a few pennies for Taxol and Lipitor. Maybe AIDS drugs would go for a dime on the dollar. Avastin and Gleevec might warrant a bit more — perhaps 15 cents. The cure for the common cold? For that Mr. Catania might be willing to pay, say, a quarter.

A great deal for patients? Sure, until they show up at the pharmacy expecting to buy the next generation of lifesaving drugs. The U.S. industry spends about a $40 billion year on drug research and development. Or did, if Mr. Catania gets his way. No company will invest the roughly $800 million that it takes, on average, to create a new medicine if it knows the government can seize the result of its work.

There ain’t no such thing as a free lunch, goes the saying.

That’s certainly the case in the field of medicine. Potentially lifesaving pharmaceuticals are expensive. But they cost a lot to develop, and they offer enormous value. Otherwise people wouldn’t demand them. Seizing company patents cannot change medical reality.

Do some lower-income people have trouble buying the drugs they need? Yes, which is why the firms themselves give away and discount drugs for millions of people at home and abroad.

If Mr. Catania really wants to help people who still aren’t receiving lifesaving medications, he should propose a targeted assistance program. Making sure that those in need are taken care of is an obligation for all of us. It shouldn’t become an excuse for politicians to win points by bashing the pharmaceutical industry.

If the D.C. Council is serious about meeting the medical needs of D.C. residents, it will consign Mr. Catania’s bill to the closest wastebasket. Ensuring people’s access to lifesaving medications is too important to be treated so frivolously.

Doug Bandow is a senior fellow at the Cato Institute.

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