Freedom Line Blog

Today, the House Energy & Commerce Committee holds a hearing entitled “Lowering Health Care Costs for All Americans: An Examination of the Prescription Drug Supply Chain” that offers another opportunity to advance substantive reform.

CFIF applauds the Committee, and members Brett Guthrie (R – Kentucky) and Morgan Griffith (R – Virginia), for their collective efforts on this issue of affordability.  In that effort, we also continue our own effort to emphasize the importance of avoiding destructive government price controls, which only serve to make lifesaving pharmaceuticals less available to Americans, not more available.  It’s also critical to maintain focus on ongoing reform in the pharmaceutical benefit manager (PBM) arena, which actually can bring improvement, as we’ve consistently emphasized:

For those unfamiliar, Pharmacy Benefit Managers (PBMs) amount to middlemen that control prescription drugs for millions of Americans.  A majority of Americans receive health insurance through employer plans or government programs such as Medicare, which in turn cover prescription drugs through PBMs.  Those PBMs negotiate with drug companies and pay pharmacies, but throughout the process determine the drugs that insured patients may obtain and at what cost.

The problem is that PBMs operate in such an opaque and complex manner that they’re able to inflate drug costs while claiming to be working to reduce them.  It has reached a point where even the Federal Trade Commission (FTC) is now investigating PBMs’ role in driving up costs for Americans.”

Another critical arena offering potential reform? What’s known as Section 340B:

At issue is Section 340B of the Public Health Service Act passed in 1992 to help hospitals – especially those serving low-income and uninsured populations – to purchase pharmaceuticals from drug manufacturers at significantly discounted prices.

In theory, those savings for hospitals should have translated into lower out-of-pocket prices for everyday patients by being passed along to them.

Since 1992, however, real-world practice has not lived up to that laudable Congressional intent.  As the number of participating hospitals and pharmacies has grown, oversight has failed to keep pace with the scale and complexity of the program.

As a result, hospitals and their partner pharmacies have increasingly exploited the 340B program in ways that bring significant revenue streams for themselves, but no demonstrable benefits for the consumers who were the law’s original intended beneficiaries.  Multiple studies examining the growing discrepancy have exposed how hospitals and their partners generate tens of billions of dollars each year from 340B drug sales.  Rarely, however, have those funds been passed on to patients in the form of lower drug prices or even reinvested into better patient care.

Outrageously, some hospitals even charged full prices to patients for pharmaceuticals discounted under the 340B program, and then pocketed the difference rather than pass them on to consumers as designed.  The federal agency in charge of administering the 340B program has highlighted those transparency concerns and an inability to accurately audit the program in practice.

Accordingly, since 1992 the 340B program hasn’t fulfilled its intended aspirations.  Instead of reducing drug costs for patients, it has too often incentivized hospital profiteering, distorted healthcare behavior and ultimately raised costs rather than lowering them.”

Our message is clear:  Keep up the positive work, and focus on reform where it works, while avoiding the catastrophic potential pitfalls of drug price controls, whether through so-called “Most Favored Nation” (MFN) or other iterations, or erosion of strong patent rights that make American pharmaceutical innovation the envy of the world.

In order to lower healthcare costs for all Americans, a pivotal and necessary realm to address remains health insurance.

It’s therefore appropriate that the United States House of Representatives Committees on Ways & Means and Energy and Commerce will hold a timely hearing this week with executives representing major U.S. insurance companies.

Currently, the health insurance industry remains highly concentrated while American consumers continue to pay higher and higher healthcare costs.  At a deeper level, Pharmacy Benefit Managers (PBMs) amount to middlemen that control prescription drugs for millions of Americans.  A majority of Americans receive health insurance through employer plans or government programs such as Medicare, which in turn cover prescription drugs through PBMs.  Those PBMs negotiate with drug companies and pay pharmacies, but throughout the process determine the drugs that insured patients may obtain and at what cost.

The problem is that PBMs operate in such an opaque and complex manner that they’re able to inflate drug costs while claiming to be working to reduce them.  It has reached a point where even the Federal Trade Commission (FTC) commenced an investigation of PBMs’ role in driving up costs for Americans.

That’s why this week’s hearing with insurance company executives is so important, and offers such a critical opportunity to make real, meaningful progress on the ongoing concern to American consumers.

It’s critical to emphasize that the answer to healthcare affordability doesn’t lie in counterproductive drug price controls or violating critical patent protections for pharmaceutical innovators.  That would do nothing to lower healthcare costs, and would instead only make critical lifesaving pharmaceuticals and healthcare innovations less available to Americans.

To improve consumer access and affordability, let’s achieve real reform where it matters – at the health insurance and PBM levels.

As the United States Senate Finance Committee convenes today for a meeting entitled “The Rising Cost of Health Care:  Considering Meaningful Solutions for All Americans,” the enduring adage of medical care applies:  Do no harm.

Specifically, as we’ve detailed at CFIF, we must especially avoid potentially catastrophic ideas like drug price controls (whether through so-called “Most Favored Nation” (MFN) programs or any other) and violations of patent and intellectual property (IP) protections in which the United States leads the world.  Indeed, our more free-market approach explains why America leads the world in lifesaving healthcare innovation, accounting for an astonishing two-thirds of all new drugs introduced to the world each year:

The reasons that MFN schemes would only exacerbate existing problems are several.

First, drug price controls depress innovation in foreign nations such as those in the European Union (EU) that practice them.  That’s because drug innovation requires massive investments in research and development (R&D), often exceeding $2.6 billion to bring each new potential drug to the consumer market.  Consequently, when foreign governments impose artificially low prices, they necessarily strip pharmaceutical innovators of the revenue required to fund new treatments.  As a result, fewer breakthrough therapies arrive, and the slowdown in medical advances can cost lives.

As noted above, that consequence isn’t hypothetical or open to debate.  To wit, the more market-oriented U.S. accounts for an astounding two-thirds of all new drugs introduced to the world, far above our share of the world’s population or economic production.  That’s no accident or coincidence.

Second, and partly as a consequence of the dynamic described immediately above, drug price controls reduce access to lifesaving drugs.  Nations that impose them suffer from delayed drug availability and restricted access, whereas the newest and most effective pharmaceutical innovations typically reach the U.S. market first.

To illustrate, of 270 medicines introduced in the U.S. from 2011 through 2018, only 53% became available in France, 64% in Britain and 67% of them in Germany.  Only 52% of that 270 became available to Canadians, 41% to Australians and 48% to the Japanese.

If the U.S. were to adopt MFN pricing, it would foolishly import those foreign delays and access restrictions, in turn reducing American consumers’ access to cutting-edge treatments.”

Along the way, the Committee should also highlight the perils of continued subsidies for ObamaCare and the potential benefits of other patient-centered reforms like health savings accounts (HSAs) and Section 340B reform.  Healthcare costs remain an important concern for Americans, and we must promote federal policies that improve matters for consumers and patients, not harm them.

Over at American Enterprise Institute (AEI), James Pethokoukis wrote a fascinating piece, “America’s Forgotten Prelude to Its Special Century,” in which he explains what led to the century during which America became the most prosperous, powerful and innovative nation in human history between 1870 and 1970.  “Yet America’s special century,” Pethokoukis notes, “did not emerge ex nihilo.  The pro-growth groundwork was laid in the less glamorous decades between 1790 and 1870.”

Critically, Pethokoukis notes the importance of intellectual property (IP), and patents in particular:

Equally important was an innovation culture, according to Rosenbloom.  Patents grew almost five times as fast as the population between the years 1790 and 1850.  Ordinary mechanics drove a culture of tinkering and incremental improvement (what economic historian Joel Mokyr has called the “Industrial Enlightenment.”).”

As we often highlight, strong patent and IP rights (including copyrights, trademarks and trade secrets) play just as important a role today in America’s innovation and economy on everything from lifesaving pharmaceuticals to technology to entertainment.

In our latest Liberty Update, CFIF highlights the debut of the “Most Favored Patient” initiative, which offers the optimal blueprint going forward for lower drug costs, greater access and better healthcare.

Well, the policy heavyweights behind Most Favored Patient come from the group at Unleash Prosperity, including Steve Forbes, Stephen Moore, Phil Kerpen, and Thomas Philipson.  And in addition to their new work at Most Favored Patient, they’ve unveiled a new commentary explaining how drug prices in the U.S. are actually cheaper than in other developed nations with which we’re often unfairly compared:

It IS true that Americans pay more for new drugs under patent. That, of course, is because American pharmaceutical companies spend billions of dollars inventing the major breakthrough drugs and the rest of the world free-rides on those R&D costs.

But most drugs consumed in the U.S. are generics. Those prices are cheap. And generics last forever, whereas a patent lasts 10 to 20 years before generics take over.

A new blockbuster study by UP senior fellow Tomas Philipson has two amazing findings:

First: “The U.S. has the highest generic market share (93 percent).”

Second: “The U.S. has some of the LOWEST generic prices among developed countries.” Medicare and Medicaid pay almost 20% less for prescription drugs than in Europe, Canada, and the U.K. It is true Americans pay more for the patented drugs, but many residents of countries with socialized medicine don’t have access to these drugs at virtually any price because of socialist price controls and government-run health care.”

Along the way, they offer this helpful illustration:

This offers just a sample of the great work from Unleash Prosperity, and also the sort of policy insight that we can anticipate from Most Favored Patient.

As we at CFIF often highlight, strong intellectual property (IP) rights – including patent rights – constitute a core element of “American Exceptionalism” and explain how we became the most inventive, prosperous, technologically advanced nation in human history.  Our Founding Fathers considered IP so important that they explicitly protected it in the text of Article I of the United States Constitution.

Strong patent rights also explain how the U.S. accounts for an incredible two-thirds of all new lifesaving drugs introduced worldwide.

Elected officials must therefore work to protect strong IP and patent rights, not undermine them.   Unfortunately, several anti-patent bills currently before the U.S. Senate Judiciary Committee this week threaten to do exactly that.  Those bills include S. 1040, which rests on the myth of a “product-hopping” problem under U.S. law.

As CFIF has explained, however, bills like S. 1040 and acceptance of the “product-hopping” falsity would dangerously threaten U.S. innovation in an increasingly competitive world economy:

Myth:  Anti-patent activists employ this deceptive term when a manufacturer introduces a new, different drug that may compete with or replace  older version and provide expanded patient choice and access.  They claim that by introducing a new product covered by new patents, biopharmaceutical manufacturers are somehow engaging in anticompetitive activity, fending off entry of generic or biosimilar competitors.

Fact:  U.S. patent law rightfully grants patent rights for new and useful improvements to existing drugs.  That incentivizes research and development and the multiple years of risk-taking and experimentation needed to make existing products even better.  Such improvements open the door for reduced side effects, lower dosage requirements, improved potency, extended effectiveness or alternative uses.  Additionally, as the COVID-19 pandemic has illustrated, it’s important to upgrade existing drugs to address potentially mutating viruses and diseases. Depriving pharmaceutical innovators of patent protections for those critical improvements or otherwise disincentivizing those innovations would mean they’re far less likely to be developed, resulting in fewer options for patients.

We cannot jeopardize America’s status as the world’s leader in innovation, including pharmaceutical innovation and availability on the basis of anti-patent myths.  Hopefully wiser minds on the Senate Judiciary Committee prevail.

However else one opines on the merits or perils of artificial intelligence (AI), everyone of good faith can agree that it mustn’t become a tool for brazen copyright infringement.  Artists who pour their (sometimes literal) blood, sweat and tears into their creative works shouldn’t have those works stolen and exploited by AI bots.

That is particularly true as it relates to AI music generators specifically created for that exploitative purpose.

For that reason, we should all welcome and applaud major record labels for their decisive lawsuit against AI generators Suno and Udio, whom they accuse in their complaints of copyright violation on an “unimaginable scale.”

The complaints make for gripping reading unlike most legal filings, but we’re not talking here about sampling various songs or “fair use” or ambiguous similarities between songs.  We’re talking about wholesale theft, scraping songs for exploitation, which not only punishes artists but America’s entire world-leading music industry.

The complaints can be – and should be – read in their entirety here and here, and we should welcome this effort to enforce creators’ IP rights, regardless of how the broader AI landscape continues to expand.

File under “You Can’t Make This Stuff Up.”

Somehow, it actually seems like a farcical April Fools’ Day headline, in fact.  Google, with its deep history of scraping and scanning other sources’ substantive content for its own uses, now objects to OpenAI using YouTube content to train its text-to-video generator:

The use of YouTube videos to train OpenAI’s text-to-video generator would be an infraction of the platform’s terms of service, YouTube Chief Executive Officer Neal Mohan said.”

Optimists might hope that Google is finally recognizing and preparing to correct its wayward course, while realists and cynics will roll their eyes at what they’ll label naivete.  As the old adage goes, however, “every saint has a past, every sinner has a future,” so we’ll maintain hope.

Americans are by now broadly aware of the threat posed by Chinese-owned TikTok, including its threat to U.S. national security.

In recent days, we’ve witnessed in real time another emerging TikTok threat reaching the headlines:  The threat it poses to intellectual property protections, which undergird America’s status as the most artistically and musically productive and influential nation in human history.

Universal Music Group, however, has decided to stand up and fight back by removing its catalog of songs – including artists like Taylor Swift, Drake and Billie Eilish – from TikTok.

Tone-Deaf TikTok has built its aggressive worldwide empire largely on the backs of music created by American artists, as even its corporate leadership openly admits.  As TikTok’s very own “Year in TikTok 2021 Music Report” states in its opening sentence, “Music is at the heart of the TikTok experience.”

Those are its own words.  Indeed, TikTok content features music to a degree beyond other social media platforms.

As the contractual relationship between Universal and TikTok approached its end on January 31, TikTok decided to play hardball by proposing to compensate songwriters and artists a fraction of what other social media platforms pay, essentially disregarding its reliance on music-based content amid ascending advertising revenues and user base.

In other words, TikTok demands a right to build a music-reliant business without paying fair market value for that music on which it relies.

Songwriters and performing artists invest enormous amounts of time, talent and resources in creating their original works of art.  In so doing, those artists and songwriters obtain intellectual property rights in their creations.  By leveraging its massive and growing worldwide power, TikTok seeks to exploit those creative works for its own benefit without just compensation.  That violates the artists’ intellectual property rights, which have provided the fuel by which America became the world’s leader in music influence.  Artists deserve fair compensation for the use of their creations, and TikTok cannot be allowed to jeopardize America’s system of IP protections.

It also merits emphasis that TikTok’s behavior threatens emerging artists and songwriters most of all.  Whereas established artists often possess other potential revenue sources, emerging artists and songwriters rely more heavily upon royalties and fair compensation for their works.  Consequently, TikTok’s refusal to fairly compensate for use of music in expanding its platform will stifle growth of new musicians and restrict their ability to sustain careers in an already competitive industry.

TikTok has made many enemies, and its behavior in this instance helps illustrate why that’s the case.  It is inherently unfair and improper for TikTok to use its vast and growing control to exploit songwriters’ and musical artists’ creations to amass even more profits and expand its worldwide reach without offering fair compensation to those creative minds who play such an outsized role in its business model and growth.

Universal Music Group merits applause for standing up to TikTok, which may inspire others in positions of power to follow its lead.

Following up on our latest Liberty Update commentary highlighting the deepening disaster that is the Biden Administration healthcare and pharmaceutical policy, The Wall Street Journal notes that prescription drug prices have actually ACCELERATED their price inflation since Biden’s so-called “Inflation Reduction Act”:

Prescription drug prices increased by 2% during the Trump Presidency owing to greater generic competition, yet they’ve increased 5.5% so far under Mr. Biden. In November they rose at an annual rate of nearly 6%. Has the White House considered that the reason Americans don’t believe that the President’s policies have helped them is because they haven’t?”

The Biden Administration needs to correct course for the benefit of Americans, not double down.  But time is running out.

CFIF recently marked the ignominious one-year anniversary of the Biden Administration’s misnamed “Inflation Reduction Act” (IRA), whose title even Biden himself admitted was mistaken.

We noted how, as a result of the IRA, drug shortages have already reached record highs, increasing by 30% between 2021 and 2022 alone, according to a report in March from the Senate Committee on Homeland Security and Governmental Affairs.  Another report from the American Cancer Society also sounded the alarm on emerging drug shortages, caused in part by drug price control policies.  Thus, just one year in, drug shortages have reached record levels under the looming threat of drug price controls, weaker intellectual property protections and regulatory browbeating.

This week, as reported by Politico, the same Biden Administration that called inflation “transitory” and insists in the face of public blowback that “Bidenomics” is somehow succeeding announced that it will soon release the first ten prescription drugs selected for its destructive price control scheme:

President Joe Biden has sought to sell health policies like the new Medicare negotiation program as part of a broader ‘Bidenomics’ agenda set to underpin his reelection campaign.  The drug pricing push, he has argued, will help counter inflation and boost the economy by slashing the amount Americans have to shell out each year for critical medicines, although prices negotiated on the first set of drugs won’t take effect until 2026.”

Given Biden’s shoddy record for accuracy and competence so far, Americans will be forgiven for their skepticism.  As we noted, the consequence of price controls will be shortages and less innovation, which we’re already witnessing.  Americans aren’t buying this “Bidenomics” pitch, and will pay a heavy price unless and until these dangerous drug price controls are reversed.

“The record of price controls goes as far back as human history.  They were imposed by the Pharaohs of ancient Egypt.  They were decreed by Hammurabi, king of Babylon, in the eighteenth century B.C.  They were tried in ancient Athens.” -Henry Hazlitt

Today marks the one-year anniversary of Joe Biden’s misnamed “Inflation Reduction Act” (IRA), which even he now admits shouldn’t have carried that title.

Beyond Biden’s own regrets, however, Americans deserve to understand its destructive impact on our healthcare system and world-leading pharmaceutical innovation sector.

Namely, our traditional market-based approach has resulted in an unrivaled legacy of pharmaceutical innovation and abundance relative to the rest of the industrialized world.

For example, the United States accounts for approximately two of every three new lifesaving drugs introduced worldwide, meaning that we alone create twice as many new drugs as the entire world combined.  As another illustration, American consumers enjoy a substantially higher availability of critical drugs compared to people in other advanced economies.  Of 270 new medicines introduced domestically since 2011, only 52% of them were available to our neighbors just across our northern border in Canada, 41% in Australia, 48 % in Japan, 53% in France, 64% in Britain and 67% in Germany.

Destructive drug price controls, however, maintained an illogical appeal for the Biden Administration and the political left.

They can’t say that they couldn’t have foreseen the downsides of the IRA.  Amid debate over broad drug price controls back in 2021, a University of Chicago study warned of their potential negative impact on future drug innovation and availability:

The United States has far fewer restrictions on price than other countries, but the Biden Administration has announced their goal to lower drug prices through greater price regulation. …  [N]ew drug approvals will fall by 32 to 65 approvals from 2021 to 2029 and 135 to 277 approvals from 2030 to 2039.  These significant drops in new drug approvals will lead to delays in needed drug therapies, resulting in worse health outcomes for patients.  

Several years earlier, even the United Nations World Health Organization (WHO) similarly warned about the consequences of government price controls and intellectual property violations:

[P]rice controls, combined with the threat of market lockout or intellectual property infringement, prevent drug companies from charging market rates for their products, while delaying the availability of new cures to patients living in countries implementing those policies.  

Disregarding those warnings and textbook economic logic, the Biden Administration and Pelosi-Schumer Congress plowed ahead with the IRA, whose drug price control provisions President Biden bizarrely trumpets as a 2024 reelection theme.  From branded drugs to off-patent older generics, the Biden Administration accelerated government efforts to artificially target drug prices, oblivious to the foreseeable consequences.

We’re now suffering the consequences of that agenda.

Drug shortages have already reached record highs, increasing by 30% between 2021 and 2022 alone, according to a report earlier this summer from the Senate Committee on Homeland Security and Governmental Affairs:

Shortages of critical medications continue to rise – including drugs used in hospital emergency rooms and to treat cancer, prescription medications, and even common over-the-counter treatments like children’s cold and flu medicine.  The number of active drug shortages in the U.S. reached a peak of 295 at the end of 2022. …  Between 2021 and 2022, new drug shortages increased by nearly 30 percent.  At the end of 2022, drug shortages experienced a record five-year high of 295 active drug shortages.  

Separately, a new report from the American Cancer Society warns of emerging drug shortages, caused in part by drug pricing policies:

Chemotherapy drugs used to treat cancer are increasingly in short supply and have returned to the list of top-five drug classes affected by shortage.  Expanded demand, supply shortages, limited manufacturing capacity, and low profit margins for generic therapies are among the factors resulting in the current nationwide shortage.  …  A number of the drugs included in the shortage don’t have an effective alternative.  As first-time treatments for a number of cancers, including triple-negative breast cancer, ovarian cancer and leukemia often experienced by pediatric cancer patients, the shortage could lead to delays in treatment that could result in worse outcomes.  

Accordingly, drug shortages have reached record levels under the looming threat of drug price controls, weaker intellectual property protections and regulatory browbeating.

Instead of perpetuating the IRA’s spiral of price control insanity, elected leaders should return to the more market-oriented approach that brought unrivaled innovation before more Americans pay the needless cost.

Today is World Intellectual Property (IP) Day, and CFIF is proud to join a broad coalition of conservative, libertarian and free-market organizations in celebrating a key element that not only drives worldwide innovation and prosperity, but also is the central component explaining American Exceptionalism in worldwide innovation, power and prosperity.

In that latter regard, nothing stands above our enduring legacy of protecting IP – patents, copyrights, trademarks and trade secrets.  America throughout its history has protected IP like no other nation before or since.  Our Founding Fathers deliberately inserted text protecting IP rights into Article I of the Constitution, which reads, “Congress shall have the Power … To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”  As James Madison explained in the Federalist Papers while advocating ratification of the Constitution, protecting IP respected the natural right of individuals to enjoy the fruits of their labors, while also serving the public good by encouraging innovation.

That assurance that one’s creations will enjoy legal protection in turn promotes creative activity, which is why patent holder Abraham Lincoln noted that America’s IP protections, “added the fuel of interest to the fire of genius in the discovery and production of new and useful things.”

Consequently, no nation spanning the entirety of human history even approaches America’s record of patented invention, from the telephone to the airplane, from lifesaving pharmaceuticals like the polio vaccine to the internet.   No society remotely rivals our copyrighted artistic influence, whether in the form of motion pictures, television programming or popular music.  No nation’s trademarks stand recognized in the way that the Coca-Cola or Apple logos are instantly identified across the world.  A direct relationship exists between our tradition of IP protection and our unrivaled success in innovation and prosperity.

That’s precisely why CFIF is so pleased to join other organizations here in the U.S. and across the globe in celebrating World IP Day, highlighting IP’s critical importance:

On World IP Day, we celebrate the role intellectual property plays in bolstering entrepreneurship, innovation, economic growth and quality job creation…

The U.S IP system drives economic growth, accounting for $7.8 trillion in GDP (41% of total GDP) and more than 47 million jobs.  Direct and indirect employment in IP industries accounts for 44% of U.S. jobs.

IP-intensive industries create high-paying jobs.  Average weekly-wage earnings are 60% higher than earnings in other sectors.  Accelerating the growth rate of women who participate in IP-intensive industries means increasing their earning power and financial well-being.

Unfortunately, some politicians here in America and abroad fail to respect the role of IP in boosting innovation and wellbeing, and actively seek to undermine it with such misguided efforts as surrendering patent rights to Covid vaccines developed in the U.S.

We cannot let that occur, lest Americans and billions across the world suffer.  Accordingly, on this World Intellectual Property Day, we urge national governments, policymakers and other organizations around the world to promote policies that strengthen intellectual property protections and ensure that a healthy innovation environment can thrive.

This week, Senator Elizabeth Warren (D – Massachusetts) and a group of fellow liberals submitted a letter to the United States Department of Health and Human Services (HHS) demanding that the federal government employ so-called “march-in” rights under the Bayh-Dole Act of 1980 to disregard private patent rights on the critical cancer drug Xtandi.

Here’s why that’s a terrible and potentially deadly idea that the HHS, other lawmakers and the American public must oppose.

Simply put, disregarding patent protections for pharmaceutical innovators will bring innovation to a halt and deprive Americans of lifesaving drugs.  America currently produces two-thirds of all new drugs worldwide, and that’s because our nation honors and protects patent rights, it doesn’t violate them.

It’s especially outrageous that Senator Warren and her cohorts seek to leverage the Bayh-Dole Act of 1980 to facilitate their scheme.  The Bayh-Dole Act was passed in order to extend patent rights to universities and nonprofit research entities whose research was assisted by federal funds, not weaken them.  Prior to Bayh-Dole, very few innovations partially funded by federal dollars were ever commercially pursued – only 390 in the year prior to its passage.  Four decades later, however, that number approaches 7,500, with over 420,000 inventions and 13,000 new startup enterprises formed.

That explains why The Economist magazine labeled Bayh-Dole the most important bill of the past half-century:

Possibly the most inspired piece of legislation to be enacted in America over the past half-century was the Bayh-Dole Act of 1980.  Together with amendments in 1984 and augmentation in 1986, this unlocked all the inventions and discoveries that had been made in laboratories throughout the United States with taxpayers’ money.”

Alarmingly, however, this groups seeks to undermine patent rights for Xtandi by exploiting a “march-in” provision within Bayh-Dole to empower the federal government to commandeer new drugs and license the patents on inventions partially funded by federal dollars to third parties.   According to their flawed logic, the market prices of some drugs render them insufficiently available to the general public, and on that basis they encourage federal bureaucracies to forcibly license those drugs’ patent rights to other third parties for manufacture and sale.  That would constitute a frontal assault against private pharmaceutical innovators, disregarding their patent rights and the enormous investments they’ve made over years and decades to conceive, perfect, produce and distribute those drugs.  It would also contravene the statutory terms of Bayh-Dole itself.

Indeed, Senators Birch Bayh and Bob Dole themselves confirmed that the law bearing their names did not intend or allow cost to become a mechanism for imposition of de facto drug price controls:

Bayh-Dole did not intend that government set prices on resulting products.  The law makes no reference to a reasonable price that should be dictated by the government.  This omission was intentional;  the primary purpose of the act was to entice the private sector to seek public-private research collaboration rather than focusing on its own proprietary research.”

That’s precisely why the National Institutes of Health (NIH) has rejected every one of the “march-in” petitions that it has received during the Bayh-Dole Act’s existence.  It has consistently and correctly ruled that attempts to leverage price allegations to justify march-in would undermine the very goal of the act and ultimately harm American consumers.

People like Sen. Warren and her cohorts nevertheless claim that federal funding toward pharmaceutical research justify government march-in intrusion, falsely asserting that pharmaceutical innovators somehow enjoy a free ride at taxpayer expense.   That’s false.

Private funding for research and development actually dwarfs public funding.  According to the NIH itself, private sector R&D far exceeds NIH funding throughout recent years and decades.  In 2018, as another example, the NIH spent $3 billion on clinical trials involving new or existing drugs, compared to $102 billion in R&D by the U.S. biopharmaceutical industry.  Indeed, the pharmaceutical industry stands as the single largest source of business R&D funding in the U.S., accounting for 17.6% of all U.S. business R&D.  The next-closest counterpart is the software sector at 9.1%, with the automobile industry at 5.9% and the aerospace industry at 4.1%.

Senator Warren and her cosigners also allege that inflation somehow justifies their demand, but the fact is that drug prices significantly trail overall inflation.

Accordingly, the facts show that strong U.S. patent protections and the Bayh-Dole law promote pharmaceutical R&D investment, and there’s simply no legal or logical basis for advocating march-in regarding Xtandi.  Pharmaceutical innovation demands billions of dollars in sunk costs of investment, not to mention potential product liability lawsuits for any errors.  Strong patent protections, which Bayh-Dole codifies, help ensure that those costs and risks will be fairly and sufficiently rewarded.  They provide innovators and investors the incentives to create pharmaceuticals that save millions and even billions of lives worldwide.

The demand by Senators Warren and her cosigners would dangerously jeopardize that.

As we approach Thanksgiving, you may have heard (or personally experienced) that the cost of Thanksgiving dinner this year is up a record 20%.

Meanwhile, guess what’s actually declined in price, according to the federal government itself.  That would be prescription drug prices, which declined 0.1% last month alone.

Perhaps the Biden Administration should focus on helping everyday Americans afford Thanksgiving, rather than artificially imposing innovation-killing government price controls on lifesaving drugs, which are actually declining in price and nowhere near the inflation rate afflicting other consumer costs.

We at CFIF often warn how attempts at “drug price controls” will only succeed in killing lifesaving drug innovation, in which the U.S. leads the world without a close second.

Joe Biden’s so-called “Inflation Reduction Act” constitutes a perfect illustration, and in a Wall Street Journal piece entitled “The Inflation Reduction Act Is Already Killing Potential Cures,” USC Schaeffer Center for Health Policy & Economics fellow Joe Grogan shows how “we’re already getting signs of the damage”:

One poorly crafted provision is driving companies away from research into treating rare diseases.  In its Oct. 27 earnings statement, Alnylam announced it is suspending development of a treatment for Stargardt disease, a rare eye disorder, because of the company’s need ‘to evaluate impact of the Inflation Reduction Act.’  Alnylam’s decision turns on a provision in the Democrats’ bill that exempts from price-setting negotiations drugs that treat only one rare disease.  The company’s drug is currently marketed as treating only amyloidosis, and thus is exempt from Medicare’s price setting.  If Alnylam proceeded with research into treating Stargardt, it would lose its exemption.”

And that’s not even the end of it.  Earlier this week, Eli Lilly announced termination of a blood cancer drug because, “In light of the Inflation Reduction Act, this program no longer met our threshold for continued investment.”

Mr. Grogan proceeds to offer a must-read primer on how and why this is happening, then concludes by admonishing the next Congress convening in January to abandon this instant disaster and promote innovation instead of cheap Biden Administration talking point schemes:

The Democrats may have achieved a short-term talking point for the midterm elections, but in the long term this partisan healthcare bill will prevent patients from receiving innovative, lifesaving treatments.  A new Congress would serve Americans well by replacing the Inflation Reduction Act with an approach that recognizes the need for economic incentives to bring new treatments to patients.”

Good advice.

When pondering the origins of American Exceptionalism, and what makes us the most innovative, prosperous nation in human history, look first to our tradition of protecting intellectual property (IP) – patent, copyright, trademark, and trade secret property rights.

After all, other nations match or even exceed the U.S. in free market rankings (24 nations in the latest annual Index of Economic Freedom, in fact).  No nation, however, can match us for sheer innovation.  America accounts for less than 5% of the world’s population, and even with the world’s largest economy we account for under 25% of the global economy.  In contrast, no nation can match our scientific innovation, from flight to space exploration to the internet.  Nor can any nation match our artistic leadership, from the film industry to television to music, or claim as many instantly recognizable trademarks, from Coca-Cola to Apple.

Year after year, that’s why the U.S. leads global rankings of IP protection.

Perhaps most conspicuously, the U.S. accounts for fully two-thirds of all new lifesaving pharmaceuticals introduced to the world each year.  In an era increasingly reliant on pharmaceutical treatments for everything from Covid to cancer to Alzheimer’s, that is a leadership of which we should remain both proud and protective.

Inexplicably, however, some voices seek to undermine that IP leadership position.  A group called I-MAK offers the latest assault, with a “study” entitled “Overpatented, Overpriced,” which attempts to show “how excessive pharmaceutical patenting is extending monopolies and driving up drug prices.”  We employ scare quotes around the term “study” because I-MAK’s work has been previously debunked and exposed by leading IP scholars like George Mason University and Antonin Scalia Law School Professor Adam Mossoff and Senator Thom Tillis (R – North Carolina) for using defective and non-transparent supporting data.

Indeed, we highlighted earlier this year how drug prices have remained far, far below overall inflation.  Efforts like I-MAK’s would only end up suffocating drug innovation, not reducing prices, as we’ve also highlighted:

Of all new cancer drugs developed worldwide between 2011 and 2018, 96% were available to American consumers.  Meanwhile, only 56% of those drugs became available in Canada, 50% in Japan, and just 11% in Greece, as just three examples.  Patients in nations imposing drug price controls simply don’t receive access to new pharmaceuticals as quickly as Americans, if they ever receive them at all.”

Even the World Health Organization (WHO) acknowledges that overseas consumers’ lower access to pharmaceutical innovations stems from their governments’ imposition of price control regimes:

‘Every time one country demands a lower price, it leads to lower price reference used by other countries.  Such price controls, combined with the threat of market lockout or intellectual property infringement, prevent drug companies from charging market rates for their products, while delaying the availability of new cures to patients living in countries implementing those policies.’”

The irrefutable reality is that U.S. patent protections explain why we produce the overwhelming share of new drugs worldwide, including the Covid vaccines.  Efforts like I-MAK’s latest “study” continue a bizarre ongoing affront to property rights, the rule of law and IP.  If successful, they would only mean fewer future vaccines and treatments, and must be flatly rejected.

We at CFIF often highlight the clear and present danger that drug price control schemes pose to American consumers, who benefit from our private pharmaceutical sector that leads the world – by far – in innovation.  A new lung cancer treatment breakthrough in the form of Amgen’s Lumakras illustrates that interrelationship.

Simply put, Lumakras reduced the risk of progression by 34% compared to chemotherapy in patents with advanced lung cancer, which is particularly welcome considering lung cancer’s especially low survival rate (18.6% over five years, and just 5% for advanced forms).  The breakthrough required years of research and enormous amounts of investment, however, which The Wall Street Journal notes makes Lumakras the type of innovation put at risk by new drug price controls recently enacted by Congressional Democrats and the Biden Administration:

The drug is by no means a cure, but progress occurs at the margin and some patients who had what amounted to a death sentence now have hope to live.  Lumakras is also much less brutal than chemotherapy.

Yet the drug might not have been developed had the Medicare take-it-or-leave-it negotiations that Democrats recently enacted been in effect earlier.  Their price controls will penalize in particular small-molecule drugs like Lumakras that have the potential to help large numbers of patients.  Within six years, Lumakras could be targeted by bureaucrats for price controls and the payoff on Amgen’s investment could vanish.

The reason for that is simple.  Straightforward economic principles dictate the inevitable negative blowback from government price controls, whether in the form of 1970s gas lines here in the U.S. or food shortages in Venezuela.

Even the United Nations World Health Organization (WHO) warns explicitly about these negative consequences of price controls on drug innovation:

[P]rice controls, combined with the threat of market lockout or intellectual property infringement, prevent drug companies from charging market rates for their products, while delaying the availability of new cures to patients living in countries implementing those policies.  

Closer to home, a recent University of Chicago study quantified the destructive effect of drug price controls on future lifesaving innovations:

The United States has fewer restrictions on price than other countries, but the Biden Administration has announced their goal to lower drug prices through greater price regulation…  [N]ew drug approvals will fall by 32 to 65 approvals from 2021 to 2029 and 135 to 277 approvals from 2030 to 2039.  These significant drops in new drug approvals will lead to delays in needed drug therapies, resulting in worse health outcomes for patients.  

As the University of Chicago points out, the U.S. maintains a more market-oriented approach to pharmaceutical innovation than other developed nations, which benefits American consumers.  Of 270 new medicines introduced here in the U.S. since 2011, for instance, Canadians could only access 52% of them, the Germans 67%, the British 64%, the French 53%, the Japanese 48% and the Australians just 41%.  Moreover, the U.S. accounts for two-thirds of all new drugs introduced to the world.

The real-world numbers speak for themselves.  Americans benefit immensely from our world-leading pharmaceutical sector, and Lumakras offers just the latest welcome example.  The sooner the recent drug price control schemes are repealed or scaled back, the more Americans who suffer from cancer and other ailments stand to benefit.

Congress doesn’t maintain a spotless record of affixing accurate titles to proposed legislation, but in the case of the American Music Fairness Act (H.R. 4130), the House of Representatives nails it.

Now it’s time for the Senate to take up companion legislation and bring greater fairness to performance rights in the music industry.

By way of background, federal law currently secures royalty payments for songwriters and others when their songs are played on AM-FM terrestrial radio, but not for the performing artists themselves.  Deepening that odd paradox, performance artists receive compensation when their songs play on digital broadcast platforms like the internet, satellite and cable.  Terrestrial radio broadcasters, however, somehow remain exempt under existing law from having to pay that same compensation.  There’s no logical or legal justification for that paradox, which amounts to crony capitalism in the form of a special government carve-out.

Fortunately, the American Music Fairness Act currently before the House would finally secure performance rights for artists whose recordings are played on terrestrial radio (with exceptions maintained for smaller mom-and-pop stations).  In 2021, we at CFIF joined numerous fellow conservative and libertarian organizations in a coalition letter to the House amplifying the need to pass this legislation to protect artists’ natural intellectual property (IP) rights:

The Constitution protects intellectual property rights and specifically delegates to Congress authority to protect creative works.  Artists who produce music therefore have the right to protect their intellectual property, including both the writer and performer of a given recording.  When a given work is transmitted, common sense and basic fairness dictate that the medium of transmission should not affect the existence of these rights.  Yet, under the current regime, a performer does not hold effective or enforceable rights to his or her product when it is distributed through terrestrial radio.”

Opponents of the American Music Fairness Act illogically suggest that it would somehow introduce needless market regulation, but the obvious reality is that the market is already regulated in the discriminatory manner described above.  The American Music Fairness Act would merely level the playing field and respect the value of the artists’ works.

Some opponents of H.R. 4130 also falsely attempt to portray it as creating a “tax.”  As leading anti-tax crusader Grover Norquist of Americans for Tax Reform answers, however, taxes are compulsory payments to government, whereas royalties are voluntary payments to broadcast others’ creations:

[W]hat is proposed is not, in fact, a tax but a royalty.  The definition of a tax is the transfer of wealth from a household or business to the government.  Taxes aren’t voluntary; paying a royalty is.  It is completely within the rights of broadcasters to decide not to pay for the use of a performer’s song by simply not using the song.  This may not be an ideal option, but these songs actually are the property of someone else…  Just as dishonest as calling a tax a fee or fine, so too is it wrong to apply the word ‘tax’ to a royalty payment.  Creating the negative perception that this legislation creates a new tax may be convenient in the short term and assist opponents in gaining political support;  in the long run it is incredibly unhelpful to those who work to reduce the burden of government in our everyday lives.”

By any standard of fairness and logic, performing artists possess a natural right to enjoy the fruits of their labor and creativity, just like any of us do for our work.  After all, artists already receive performance payments from non-terrestrial radio stations, reflecting the value of their work.  The American Music Fairness Act simply corrects an unfair and illogical federal carve-out.

Accordingly, the House should promptly pass this long-overdue legislation, and the Senate should similarly take up companionate legislation.

As Senators Joe Manchin (D – West Virginia) and Kyrsten Sinema (D – Arizona) betray their “moderate” charade and join Senate Majority Leader Chuck Schumer’s (D – New York) latest tax-and-spend monstrosity, we’ve highlighted the preposterousness of the claim that imposing drug price controls will in any way address out-of-control inflation.  Price controls will kill innovation, but do nothing to reduce inflation, because prescription drug prices simply aren’t the problem.  Once again, economist Steve Moore offers a handy illustration of that truth:

Prescription Drug Costs Aren’t the Problem