Should We Treat Big Pharma as a Public Utility?

by Fran Quigley, Truthout | Op-Ed –

Drug prices are skyrocketing in the US, and eye-watering Big Pharma profits are rising right along with them. With millions of Americans skipping medicine doses due to cost, widespread public frustration has spurred lawmakers to propose some good ideas for addressing the crisis. Lifting the ban on Medicare negotiating the price it pays for drugs and allowing prescription drugs to be imported from other countries would be helpful. So would the US government overriding patents and licensing generic manufacture of drugs that were discovered with taxpayer funding.

Another popular idea, featured in pending Congressional legislation and more than a dozen state proposals, is forcing pharma corporations to open up their black box on drug pricing and research costs. At first glance, so-called transparency legislation, which is already the law in Vermont and has passed the Maryland legislature, can seem a bit tame. After all, what difference will it really make, as long as companies remain free to hike up their prices, with the limited requirement that they disclose and explain the increases?

There is a reason why Big Pharma fiercely resists transparency proposals. They represent a logical first step toward a reform of the US prescription medicines landscape that would be both meaningful and embraced by an angry public: treating the pharmaceutical industry as a public utility, with their business practices and prices closely regulated by the government.

If pharmaceuticals were a public utility, they would be subject to the same kind of price review and approval process for prescription drugs that already exists throughout the country for goods like electricity, water and gas. Treating pharma as a utility already has the support of some US physicians and public health experts. Last fall, the National Academy for State Health Policy issued a “Call to Action” on drug prices, urging states to use their legal power to regulate the industry. “Prescription drugs are an essential good; they are as necessary to quality of life — and life itself — as water and sanitation,” the National Academy insisted.

There are three core reasons this proposal makes sense.

First of all, the pharmaceutical industry is already government subsidized. Contrary to its free market rhetoric, the pharmaceutical industry’s business model is completely dependent on government subsidies and protections. Corporations depend on early-stage research funded by the National Institutes of Health and other government agencies, rely on bulk government purchases of their products, and collect prices that are artificially inflated by government-granted monopoly patents and protectionist trade agreements.

Moreover, patients and families rarely enjoy any of the choices that a free market might provide. Instead, they are forced to pay pharma’s named price for monopoly products that often mean the difference between life and death. Of course, the industry argues loudly against price controls. But Big Pharma is so profoundly dependent on government largesse that it would have no choice but to ultimately acquiesce to tighter regulation.

Secondly, utility regulation is as American as apple pie. The tradition of US political and cultural resistance to government regulation of private industry does not extend to the idea of public utilities. Every state already has a public utility commission that sets rates on some essential goods, even when those goods are provided by private for-profit companies. University of Michigan law professor Nicholas Bagley has written a comprehensive account of the long US history of utility regulation, which has often spread far beyond so-called natural monopolies (such as tap water and electricity) to prevent consumer exploitation in transportation, food and the financial sector. “Public utility regulation was developed precisely to address the concerns with supply, access, discrimination, and unfair pricing that have begun to plague the modern medical industry,” Bagley writes.

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Reprinted with permission from Truthout