Yesterday, Ezra Klein was talking about the relative profitability of different parts of the health care sector. Looking at the data, what stuck out to me wasn’t just how unbelievably profitable the major drug manufacturers were (with 23 percent net profit margins), but how dramatically more profitable they were than the rest of the health care sector, which have more market competition, like generic drug makers, which have 5.4 percent net profit margins. It is a strong reminder that, from a company’s perspective, competitive free markets are for suckers and the big money is made pursuing ever-stronger government-protected monopolies–like the drug makers have done for patented medication.
PhRMA has truly turned exploiting their government-sanctioned monopolies into a money-making art form. Not only do they get the government to indirectly fund much of their research and development, but the drug makers have been able use a relatively small part of the profits made from their patents for political bribes donations to make their government-protected monopolies even more radically profitable.
For a very modest political investment of $150 million in the Obama administration, PhRMA was able to keep their monopoly status unbelievably profitable by both preventing Americans buying cheaper drugs from Canada, and maintaining the absurd law that prevents the United States government as one of the largest drug purchaser in the world from using its massive market share to negotiate for the lowest price possible.
For a similarly modest investment in members of Congress, they were also able to radically extend their special patent monopolies on biologics with an absurd 12-year exclusivity period. Both will result in a tens of billions of dollars return on a few million dollars of political spending.
No doubt these billions in added profits due to recent political victories will allow these companies to spend even more money on political lobbying to push to make their current government-protected monopolies even stronger and more profitable.