Updated: Feb 28

It isn’t surprising when nations with little respect for property rights use multilateral bodies to take away someone’s property. It may not be terribly surprising, but certainly disappoints when an American lawmaker helps foreign countries and international organizations to assault private property, primarily of U.S. firms. That’s what Rep. Jan Schakowsky is doing.

Rep. Schakowsky is pressuring President Biden to back the World Trade Organization’s forcing biopharmaceutical innovators to waive the intellectual property on their COVID-19 inventions, including on vaccines, diagnostics and therapies.

At the WTO, India, South Africa and other nations are pushing for a raid on COVID-19 intellectual property. They’re calling for exactly the opposite of what the world needs in order to ensure broad access to these medicines and vaccines.

Its premise claims that property rights in IP pose a barrier to access and affordability. In fact, secure private property rights, including in patents and IP, promote collaboration and future discovery and development.

Anybody who’s tired of the COVID pandemic restrictions, economic disruption, government diktat (ranging from the reasonable to the ridiculous), school closures or other impositions for a year now should vigorously oppose this theft of innovators’ COVID-fighting IP.

News flash to antiproperty rights, drug price control advocates: COVID isn’t the last pandemic, and COVID will remain with us, similar to the flu, for some time to come. So be careful what you wish for.

We need continued R&D, funded by revenues from current product sales, to keep new drug investigation going. That feeds the pipeline that will bring forth the next virus’s treatments, diagnostic tests and vaccines.

Simply put, this WTO property expropriation will risk dramatically diminishing the R&D pipeline — putting in jeopardy creating medicines to fight future diseases and viruses.

Patrick Kilbride of the Global Innovation Policy Center explains:

“The timeline for COVID-19 vaccine deployment in 2020 has been nothing short of miraculous – and it would have been impossible absent the decades of research investment it built upon. Additionally, for every 25,000 therapeutic compounds that start in the laboratory, 25 make it to clinical trial, 5 make it to market, and only one recoups the cost invested. Intellectual property protections signal to innovators and investors that shouldering this risk is worth it.”

Further, the proposal at WTO that Rep. Schakowsky favors would weaken key IP obligations secured by the TRIPS trade agreement, which imposes certain respect for IP rights (though some signatory countries adhere more closely to TRIPS requirements than do others).

This radical proposal — an assault on property rights in general and on pharmaceutical innovators’ IP in particular — is all the more troublesome because of its false pretenses, leveraging a global pandemic to advance a longstanding anti-IP agenda.

Expropriation by suspending COVID vaccine patents won’t help poor countries in the short term, and it will seriously harm midterm and long-term progress on curing, treating and preventing COVID and a range of diseases.

The Schakowsky-backed IP theft will damage not only these envious nations whose disrespect for property rights and the rule of law are driving this effort, but everyone worldwide.

Ironically, Rep. Schakowsky and the nations pushing this property-taking scheme are aiding and abetting Communist China. Their scheme would weaken our leading drug innovators, America’s global leadership in biopharmaceutical research and undermine the very innovation system that gave us several remarkably effective vaccines at light-speed.

This advantaging our adversarial competitor comes at the same time President Biden’s CIA pick says he’ll focus on China, our “formidable authoritarian adversary.” And as the Senate Armed Services Committee holds a hearing on “Emerging Technologies and Their Impact on National Security,” in which Communist China featured prominently. And when the Republican Study Committee has put forward a significant initiative to counter Chinese economic, technological and espionage aggression.

How short-sighted can someone be? How short-sighted can supposed allies and “neutral” countries be that they’re willing to risk U.S. and much of the world’s economic strength for theft.

This initiative should be rejected. It’s a recipe for a worldwide lose-lose. And it sets a bad precedent of international expropriation of the fruits of innovators’ R&D.

A bright spot of the humming, gleaming pre-COVID U.S. economy was the remarkable performance of domestic oil and gas production and jobs in the U.S. energy sector. America became a net energy exporter for the first time in decades.

Thanks to fracking technology, extracting smaller petroleum deposits efficiently, safely and economically revved a blue-collar industry that produced low gasoline and oil prices, thousands of good-paying jobs and new wealth. And Holman Jenkins writes that “the one innovation that greens opposed, fracking, has done more to reduce emissions than all government efforts combined.”

Importantly, domestic energy’s flourishing brought the United States as close to energy independence as we’d seen in years and years. This U.S. economic independence that put good money in the pockets of hard-working Americans contributed to several Islamic Middle Eastern nations’ cooperation with U.S.-led advances toward peace with Israel and pariah status for Iran. Thus, real national security progress occurred, thanks to freely making use of our abundant natural resources.

Unfortunately, that progress is at risk because of policy reversals by Washington’s new regime. Climate change has become the new priority.

The new Washington regime is wrecking productive, valuable jobs in a government-induced exercise in futility. Yet, there’s little if any gain from this poor-odds bet. C. Boyden Gray notes that electric car quotas “do nothing quantifiable to reduce carbon emissions.” Jenkins, of the Wall St. Journal, says, “No matter how you fiddle the data, personal EVs are a single-digit factor and belong low on any list of [greenhouse emissions] priorities.”

Most threatening to property rights and republican self-government is the recklessness being used to reverse course. For instance, Executive Order 13990, Executive Order 14008, Secretarial Order 3395 and other unilateral actions aim to stall domestic energy production and critical mineral extraction, while repealing and replacing gas autos with electric vehicles.

This makes us dependent on troubled nations’ raw-materials supply for critical minerals and on China’s supply chain for ion batteries that run electric cars. It places excessive demand on U.S. electrical grids to keep those expensive new EVs charged, also costing consumers more for cars and on utility bills.

Rather than smooth, market-driven transitions as new technologies become viable and economically sensible, drastic federal measures dictate quick switches that could well leave America vulnerable to adversaries and quash our economy while doing little for the environment. That’s the approach Democrats say they’ll take in the next highway and infrastructure bills. California seeks to impose its own electric car quotas. Talk about wholesale politics; the term now takes on frightening meaning.

There is pushback. Rep. Lauren Boebert (R-Colo.) has introduced H.R. 859, the Protecting American Energy Jobs Act. This constructive bill would protect America from dangerous, unilateral actions such as those mentioned above and restore the status quo ante for energy jobs while a closely divided Senate and House could debate a constructive course. There’s little chance of enacting safeguards to preserve our domestic energy progress and to block administrative overreach, given the my-way-or-the-highway tyranny in D.C.

Nevertheless, it’s encouraging that a freshman in the minority party could attract the support of about 30 national, state and local industry and policy organizations for her legislation. Perhaps H.R. 859 and similar bills will foster a more deliberative, collaborative, bipartisan approach to crafting solutions. Unilaterally giving the pendulum a big, sudden swing the opposite direction risks not only jobs and overwhelming levels of disruption. Partisan strong-arming threatens private property rights, self-government and liberty, not to mention any hope of national unity.

The famous line from Shakespeare’s Romeo and Juliet says “a rose by any other name would smell as sweet.” Like that famous illustration, international reference pricing by any other name (e.g., MFN, international price index) stinks as badly and has as destructive effects.

The “most favored nation” or MFN model from the Center for Medicare and Medicaid Innovation amounts to a government price control mechanism. It’s one form of a price control known as international reference pricing. Whatever the flavor a price control or reference pricing may be, government price controls on drugs or health care deprive the private property rights of patients, of medical providers, of medical innovators.

The Centers for Medicare and Medicaid Services in late November issued an interim final rule implementing an MFN model, importing foreign price controls for certain Medicare Part B drugs. Conservatives for Property Rights filed comments opposing MFN, also joining more than 70 conservative and free-market organizations in separate comments. The initial price control scheme floated in 2018 was an international pricing index. Both MFN and IPI import the prices foreign government-controlled health systems dictate.

What began as an effort to force “foreign freeloader” nations with government-controlled health systems to pay their fair share for American-developed brand pharmaceuticals led to adopting socialistic, artificially low prices from abroad.

MFN, like IPI and other international reference pricing, adopts foreign governments’ price controls for cutting-edge medicines. The government could apply the same socialistic tools to other medical goods and services. That dangerously treats the products of medical innovation as mere commodities, devaluing the entire front-end R&D investments.

International reference pricing schemes, as MFN does, risk the health of seniors in Medicare Part B. IRP denies these patients access to the most appropriate medication and in effect rations treatment. CMS admits “beneficiaries may experience access to care impacts by having to find alternative care providers locally, having to travel to seek care from an excluded provider, receiving an alternative therapy that may have lower efficacy or greater risks, or postponing or forgoing treatment.” CMS “assumes that utilization of MFN medicines may decrease from 9 percent to 19 percent over the course of the demonstration.” Such harmful side effects stem from any government price controls.

In short, MFN, IPI and other versions of IRP import government-fixed prices and apply them to medicines that vulnerable patients need for care received in clinical settings. Various forms of care disruption occur, including rationing, and these patients suffer needlessly and cruelly as their medical conditions worsen.

Seniors in Medicare have few options at this point. IRP changes the rules for them in the middle of the game. It does so for doctors and providers, too. IRP will drive market consolidation, run physicians out of medical practice, make Medicare as unattractive as Medicaid in which to practice medicine, and hit rural America extremely hard.

Ironically, price controls ignore the wise counsel of the Council of Economic Advisors. In 2018, the CEA produced “The Opportunity Costs of Socialism.” This report discusses how assaulting private property rights with socialist tools causes great harm. It cites how socialist takeovers of farms from private owners result in less food. It talks about the Venezuelan government’s takeover of the petroleum industry leading to less oil.

The CEA report illustrates how government-run health care, including in internationally price-referenced countries, backfires. “Lowering prices by having a single payer for innovative healthcare technologies is analogous to reducing patent lives . . . .”

Government price controls, rationing access and other restrictions on medical goods and services reduce private R&D spending, harming innovation. It has “short-term benefits lowering prices for existing technologies, but at the cost of reducing the flow of new technologies that ultimately lower the real price of health.”

We’d do well to remember what economist Thomas Sowell observed: “Whenever and wherever government controls have been put into effect to hold down prices, the most common consequence has been a reduction in the quantity supplied.” Price controls weaken supply — and governments ration access to what’s available. Price controls drive up demand — lower prices ultimately harm more citizens than they help because their government doesn’t buy enough of a medical good for all the patients needing that product.

That is, price controls always result in worsening matters, opposite to what officials claim they were aiming for. Here’s more evidence (see section 8, International Costs and Access).

Taking property rights from American patients (their health, equities in their benefits) and medical providers (the viability of their livelihoods), punishing biopharma and medical innovators and reducing innovation, rewarding socialist “foreign freeloaders.” Heck of a price to pay to “save” a little money.

Bottom line: Government price controls do more harm than good. Price controls are anathema to conservative, free-market principles. Whatever the flaws in the U.S. health system, government price controls, such as international reference pricing, are never the solution. That’s because, in essence, reference pricing and other price control schemes endanger property rights and market-based choice and competition — the keys to innovation, quality and value.

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