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Government And Business in Voice for Reason
Government & BusinessRegulations

Prescription Drug Benefits Violate the Rights of Drug Companies

by Onkar Ghate | July 24, 2002

As both Democratic and Republican proposals to provide prescription drug benefits for the elderly failed in the Senate, members of both parties vowed to try to reach a compromise and get a bill passed as early as next week. Any such bill, if approved, would be a violation of the property rights of drug companies.

Such a violation is not a problem for many like former Senator David Pryor, who described the drug companies as “robber barons of the American health care system.” In the name of the elderly and needy, calls for the government to dictate to pharmaceutical companies to whom and at what price they must sell their drugs grow daily. But all of this is profoundly unjust. The drug companies have a right to the drugs they create. We should admire, not vilify, them for their inventions.

Project the enormous thought, effort and risk-taking required to produce a new drug. It takes years of research, of hypotheses tested and rejected, of promising avenues leading only to dead ends, of struggles to raise money–until a potentially viable drug is finally identified. Then the candidate must be refined and rigorously tested for its safety and efficacy, usually resulting in its discard (only 1 in 5,000 compounds tested reaches the market). If the drug proves safe and effective, the company must advertise it and educate the medical community in its use, otherwise all the company’s efforts will have been for naught. On average, it takes $500 million and 12 to 15 years to bring a new drug to market.

The development of Lipitor, the life-saving cholesterol drug that is part of a small class of drugs known as statins, is a good case in point. A chemist at Warner-Lambert (now part of Pfizer) invented the compound. Then a team of Warner scientists in the early 1980s began investigating the compound in earnest, which included a two-year ordeal to discover how to manufacture it without also producing undesirable byproducts. (They created a three-week manufacturing process that included using liquid nitrogen to run their reactions at temperatures below minus 80 degrees Celsius). Nevertheless, after eight years of research, results were less than stellar: animal studies indicated that the drug was no more effective than other statins at lowering cholesterol. Despite the time and money already invested in the drug, some in the company urged that they cut their losses by shelving it. But others countered that animal testing is not always predictive of effects in humans and that the market for statins would eventually be huge, so even if their new drug captured only a small share of that market, it would still generate significant revenues. Fortunately, the second group won and human testing began.

Human trials revealed that Lipitor was the most potent statin yet created.

But naysayers again arose: many claimed a powerful statin was undesirable because they thought lowering cholesterol levels drastically was actually harmful. Warner, however, rightly suspicious of this conclusion, pressed ahead. In 1997 Lipitor was finally approved and the medical community turned to the view that the lower one could bring LDL cholesterol levels, the better. Because of its unprecedented ability to do this, Lipitor became one of the world’s best-selling drugs, saving literally millions of lives. If that were not enough, new research indicates that Lipitor may be useful for treating not just heart disease but also such diverse illnesses as Alzheimer’s, cancer and diabetes.

By virtue of the mental and physical work necessary to create a drug like Lipitor, the inventor acquires a moral right to it–for the same reason that you acquire a moral right to, say, the home or small business you’ve worked years for. The right to property recognizes that those who choose to exert the thought and effort necessary to produce material values have the exclusive right to enjoy and benefit from them. In granting a pharmaceutical company a patent on its invention, therefore, the law is not bestowing an unearned gift on the company: it is simply recognizing the moral right of a creator to his creation.

To dictate to pharmaceutical companies how they must use their property is to deprive them of their freedom. If they do not have the right to control and benefit from their inventions, they in effect become slaves forced to serve those who need their drugs. But need does not give anyone a right to make slaves of others. The need of a bum for shelter does not give him–or the government–the right to expropriate your home (or its basement). Likewise, the need of a patient for a prescription drug does not give him–or the government–the right to expropriate the company’s drug (or control its price).

Do not be so short-sighted as to think that violating the drug companies’ property rights will benefit you. For what is to become of you thirty years from now, when you are stricken with cancer but cannot buy the next Lipitor that would have been invented by the research that would have existed if only drug companies had been free to earn the profits necessary to fuel their vast research programs? It is no accident that despite the massive spending by other countries on health care, America produces most of the world’s new drugs: America most respects intellectual property rights.

Violating the pharmaceutical industry’s property rights undermines the principle of individual rights. Today it is the drug companies who are to be stripped of their property rights, tomorrow, perhaps the big oil companies, the day after, homeowners. When that day arrives, when, say, the government takes your home away from you and gives it to the “homeless,” could you claim you are the victim of injustice? Or would you be reaping what you have sowed?

I for one want the future in which today’s vast potential for medical breakthroughs becomes tomorrow’s reality. I am therefore eager to respect the property rights of the creators of that future–and to pay them what they ask for their achievements.

About The Author

Onkar Ghate

Chief Philosophy Officer and Senior Fellow, Ayn Rand Institute