The Medicines for the People Act Would Lower Drug Prices
It is common for people in elite circles to engage in magical thinking disconnected from reality.
For example, it is common for people engaged in policy debates to claim that we can get returns in the stock market that are totally unconnected to the rate of growth in the economy or to current levels of the price-to-earnings ratio.
We can’t.
That leads ostensibly serious people to project that we can get stock returns of 10 percent a year indefinitely, even when the price-to-earnings ratio is already near 40 to 1. (Before the 1929 and 1987 stock market crashes, the ratio was around 20 to 1, or about half the wildly inflated p-e ratio today.
It was also the standard wisdom that we could reduce tariff barriers to manufactured goods without any substantial negative impact on employment and wages. Even when the data clearly showed that a soaring trade deficit was costing millions of manufacturing jobs, most of the people who dominate policy debates denied reality.
The first decade of this Century was pretty awful for manufacturing workers. In December of 1999, we had 17.3 million manufacturing jobs. By December 2009, this fell to 11.5 million, a loss of 5.8 million jobs, or one-third of all the manufacturing jobs that had existed at the start of the decade. That looks like a pretty big deal.
Patent Monopolies
In this vein, it is a widespread view among policy types that we can’t get innovation without patent monopolies.
This should strike the reality-based community as pretty whacked out.
After all, patent monopolies are only one way to provide incentives for innovation. So why in the world would any serious person think it’s the only way? After all, it’s undisputed that people will work for money.
Patent monopolies are especially problematic in the case of prescription drugs.
Drugs are almost invariably cheap to manufacture and distribute. Most drugs would sell for just five or ten dollars per prescription in a free market, but because we give a drug company a patent monopoly, a drug can cost hundreds or even thousands of dollars.
Inviting Corruption
As everyone who has taken any economics knows, these patent-protected prices are an invitation for corruption.
When a company can sell a drug for $500 that costs $5 to manufacture and distribute, they have an enormous incentive to lie about its safety and effectiveness to get as many people as possible to buy it.
We saw this corruption most dramatically with the opioid crisis, where the manufacturers of the new generation of opioids misrepresented their addictiveness to have them prescribed as widely as possible. (This scandal is the motivating story in the CBS drama Matlock starring Kathy Bates.)
Opioids are an extreme case, but the problem of misrepresented research is widely recognized. Medical journals have to contend with ghost-authored articles, while medical associations have to worry that drug companies are paying conference speakers.
Cheaper Alternative
We could largely eliminate corruption by simply paying upfront for the research and then selling new drugs in a free market without expensive patent monopolies or related protections.
This is where Representative Rashida Tlaib’s Medicine for the People’s Act comes in. Her idea is to create a new division of the National Institutes of Health, the National Institute for Biomedical Research and Development.
This institute would be charged with developing drugs in important areas. It would be responsible for everything from basic research to developing an actual drug, running clinical trials, and eventually shepherding successful drugs through the FDA approval process. At that point, since it has all the rights to the new drug, the institute could allow the drug to be sold at a low free-market price.
In addition to the advantages of cheap drugs and reduced incentives for corruption, advanced funding of research should also enable greater transparency and faster sharing of research results. (No law requires drug companies to disclose results of testing on the many failed drugs.)
With patent monopoly financing, however, drug companies have an incentive to squirrel away their findings until they can secure them with a patent. By contrast, the institute’s interest would be in promoting good healthcare.
The bill would not prohibit drug companies from developing drugs on their own. And they could pitch ideas for funding to the proposed institute.
To that end, it would want to publicize any notable finding as quickly as possible.
Obviously, Representative Tlaib’s bill will not become law. Republicans control both houses of Congress and are not likely to give it a warm reception. Even if the Democrats controlled Congress, it’s unclear whether Tlaib’s bill would have much better prospects.
But Tlaib’s bill can be a jumping-off point for robust, serious debate about the best way to finance the development of new drugs. It is absurd that an archaic system like patent financing continues, unquestioned, in the 21st Century.
We can do much better with an alternative system like the one outlined in Tlaib’s bill.
We need—at the very least—to discuss better and cheaper ways to develop new and better drugs.
This opinion column, in slightly different form, was originally published on March 6, 2026, by the Center for Economic and Political Research. Photo is from their article and supplied by them.
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