The Grafty

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[ed. note: This is another post in Firedoglake’s semi-regular series exposing and exploring ways in which the federal government spends vast sums or forsakes vital revenue in a perpetual, profligate and pathetic quest to assure corporate America that the elected representatives of we the people are really, truly, madly, deeply “business friendly.” With each story, we hope to highlight another government giveaway, tax break, or loophole handcrafted by lawmakers and lobbyists to keep the powerful powerful and make the rich richer. If the reverse Robin Hoodism rises to special heights, we will present it with the FDL Wealthy Welfare Award—or, as we have taken to calling it back here, The Grafty.

As the government works its way up to what will almost certainly be an unprecedented season of deficit peacockery--no doubt resulting in a calls for cuts to Social Security, Medicare, and the other guylines of our social safety net--remember the Grafties, where real money is available to meet our obligations without taking even more away from those who can least afford to lose.]

One thing to understand about capitalism is that individual companies inherently hate market competition that should, in a perfect world, drive their profit close to zero. When possible, they often try to eliminate competition through collusion with other firms, this is known as a cartel. More often, though, in America, they seek corporate welfare from the government. They make huge donations to politicians in hopes that, in exchange, the politicians will give them hugely profitable government subsidies or special government-protected monopolies.

This is what the drug companies are doing in their latest attempt to get politicians to extend their already incredibly long and highly profitable government-protected monopolies on biologics. From the Wall Street Journal:

A bipartisan group of senators including Sen. Orrin Hatch (R., Utah) and Sen. Kay Hagan (D., N.C.) sent a letter Jan. 7 calling on the Food and Drug Administration to interpret the law in ways favorable to the brand-name makers.

The letter says companies should get an additional 12 years of exclusivity if manufacturers alter an existing product to improve safety or potency. It also calls on the FDA to define “exclusivity” in a way that might help delay generic applicants. The Biotechnology Industry Organization helped draft the letter, their counsel said.

The new, 12-year exclusivity period passed as part of the health care reform law was already a disgusting crime against the public.

The FTC determined that a zero exclusivity period would be needed, mainly because unlike the $1-5 million it costs to develop a small-molecule generic, a biosimilar would likely cost $100-200 million and take twice as long. Biologic makers don’t even need their current sweetheart arrangement, yet these lawmakers want to make it even more profitable.

Effectively extending an already unnecessary exclusivity period is practically pure theft committed against the public and the government, which ends up paying much more for these drug through Medicare, Tricare, VA and Medicaid. By preventing competition, it should drive up the cost of these life-saving drugs by billions.

Classic corporate rent-seeking

If I were a company with a current patent on a biologic I would want this change desperately. Why bother to create new, useful products when I can instantly have politicians increase the value of the monopoly the government granted me by also having the government adopt new ways to protect me from the free market?

What company wouldn’t want to have the government let it sell a product for whatever price it wanted, have the government use its power to stop anyone else from selling the product, and have the government directly or indirectly pay for buying the product?

Of course, our elected representatives in a government supposedly “of the people by the people for the people” shouldn’t be putting the rent-seeking of a few well connected corporations over the needs of regular people and the federal treasury.

The four senators who signed the letter: Kay Hagen (D-NC), Orrin Hatch (R-UT), John Kerry (D-MA), and Mike Enzi (R-WY)