Proposed policy. Get rid of the Drug Micro Monopoly.

Require multiple suppliers for any FDA approved drugs.

This seems like a no brainer to me. One of our problems in the US is the expense of drugs. In other countries with more comprehensive government supplied health care there are price controls. In this country it is considered anti-capitalist to be involved with price controls to the point that our sitting president has not given medicare the right to negotiate lower prices directly with drug companies. The US pays more for drugs than other industrialized nations and thus subsidize drug development that other countries benefit from. The government is already involved by giving drug companies temporary monopolies through our patent system. And without this government involvment their industry would collapse.

Of course drug companies say that they have to do a lot of research to get even one  sucessful drug on the market.  So they need these temporary monopolies to get a decent return on investment.  However there is no way for the markets to determine a fair price because a consumer expects their insurance company to pay whatever it takes to keep them alive.  The status-quo is not unacceptable. Between the micro monopolies and the third party payer system the markets do not have room to operate properly.

I would require multiple suppliers for each drug that gets FDA approval. The research company could auction off rights to manufacture/sell their drug to two other companies so there would be at least three suppliers. This would allow the drug research company to recover some of their investment quickly and industry experts (the researcher’s competitors) should be able to determine the proper value of the drug during the auction phase. We would have to be careful of collusion. (Three companies always buying each others patents but never manufacturing their partner’s drugs). But the situation should be no worse than what we have now and should be a little better.

Written on October 18, 2008