Debts, Deficits, And Patent Monopolies

The government could just pay the money directly for the pediatric trial, but this would be a direct expenditure that adds to the deficit. If instead, it adds six months to a patent, the company is paid by being able to charge higher drug prices for this period. In effect, the government is allowing the company to tax patients to cover the cost of the trial.

This is the same story with outstanding patents raising the cost of prescription drugs far above the free market level. By my calculations, we will pay roughly $400 billion (1.8 percent of GDP) more this year for prescription drugs because of government-granted patent monopolies and related protections. If we add in all rents from patents and copyrights the annual amount could easily top $1 trillion.

Anyone who is really concerned about the burden that government debt places on our children must also include the rents that companies will collect from patent and copyright monopolies. These rents are in effect privately imposed taxes that the government allows companies to collect.

The idea of selling the ability to tax is not new. Centuries ago, it was common for governments to do tax farming, which effectively meant that it sold the right to impose a certain tax for a set period of time.

Suppose the government sold off the right to collect the estate tax for the next two decades for $1 trillion. The deficit hawks could all be very happy because our debt would now be $1 trillion lower, but anyone capable of logical thought would see that this has not relieved the burden of the debt on our children one iota.

It is the same story with patent rents. The annual payments that our children will make in the form of higher prices, on everything from prescription drugs and medical equipment to software and video games, dwarfs the interest burden on the debt. But for some totally inexplicable reason, the deficit hawks only focus on the government debt and never mention patent rents.

I leave the explanation for that one to greater minds than mine.

1 2
View single page >> |
How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.