Big Pharma, Big Lies – and Mitt

U.S. Senator Mitt Romney (R, Venture Capitalists)

A few readers have criticized WC and the Magpie Principle because, by definition, the Magpie Principle rarely involves doing any in-depth analysis on the potpourri of topics WC writes about. Mostly, that’s fair criticism, but occasionally an issue gets WC worked up enough that, after WC calms down enough to write coherently – to the extent that ever happens – the result is a series of blog posts focused on a single topic.

In this case, the trigger is Big Pharma and the recently concluded hearing Thursday held by the Senate Committee on Health, Education, Labor and Pensions, chaired by Sen. Bernie Sanders (I, Vermont), on Big Pharma and its role in America’s ludicrously over-priced health care and criminally corrupt politics. It’s too big to even attempt to discuss in a single post, so WC will have several over the next week or three, focusing on specific topics.

As a starting point, here’s what Sanders’ committee found Big Pharma was doing with prices of medications.

Source: U.S. Senate Health, Education, Labor and Pensions Committee, Feb 6, 2024 Report

You can see the costs charged by U.S. Pharmaceuticals to U.S. patients are multiples of the prices charged elsewhere in the world. Stelara, for example, is 6.5 times more expensive in the U.S. than in France. Senator Sanders called drug pricing in the US “outrageous,” noting that Americans spend by far the most for prescription drugs in the world.

By contrast, Senator Mitt Romney (R, Utah) opined,

In capitalism, if you’re running an enterprise where you have a fiduciary responsibility to your owners, you try and get as high a price as you can. That’s what you try and do. You try and make as much profit as you can. That’s how free enterprise works. You think Chevrolet sits back and says, ‘Gosh, how can we get the price of this Chevrolet down?’ No, it’s like, ‘How high a price can I get and maximize the profit for my shareholder?'”

Sen. Mitt Romney, Senate Committee on Health, Education, Labor and Pensions, October 8, 2024

WC offers the distinguished senator from Utah a thought experiment. Let’s first suppose the Senator wants to buy a new car. He can go to his Chevrolet dealer and offer a price for the car with the features he want; if dissatisfied, he can go to a Mercedes dealer and try for a better offer. Or Ford. Or Toyota (although WC doesn’t see Romney in a Toyota). He can negotiate with the dealers, playing off one against the other. He can dicker.

Now let’s suppose Senator Romney were unfortunate enough to develop cancer. And that the only drug with a chance of treating him was Keytruda. There’s only one vendor. There’s no competition, because Merck has a monopoly on Keytruda. A monopoly created by federal statutes, the kind of intellectual property called a patent.¹ Merck, with its monopoly, can charge Romney just as much as it damn well pleases because of that government-granted monopoly.

Of course, the thought experiment is incomplete, because Senator Romney, after his earlier, profitable career as a robber baron, and lifetime health care for having served as a senator, can afford whatever price Merck wants to charge. For the rest of us, Merck’s overweening, monopoly-driven greed may put the price of the cancer cure out of our reach, or, if our health insurers can manage Merck’s extortionate price, forces our health insurers to raise their premiums charged to all of us, further breaking our already broken health care system.

Capitalism in America has never permitted monopolists to charge without for their goods and services. Public utilities, a form of natural monopoly, are regulated. Not as well regulated as we might like, but regulated. An electric utility cannot arbitrarily raise its rates; the natural gas company cannot decide in the name of bigger shareholder dividends to quintuple the rates for a cubic foot of natural gas. Prescription drugs, by reason of the patent laws, are “unnatural” monopolies but, unlike “natural monopolies,” their prices are unregulated.

And whatever Senator Romney thinks, and whatever lame analogies he may offer, that’s a very bad idea.

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¹ A patent granted for research performed using U.S. taxpayer dollars, in some cases. WC does not know if Ketruda involved federally-subsidized research.