Increasing the value of homes incentivizes homeowners to invest in home improvements and encourages builders to invest in building new homes that have the latest and greatest features.
In the end everyone benefits, including neighbors who see their own home values increase and the community as a whole, which benefits from the increased revenue used for the local school system fire department and for filling potholes.
But imagine a situation where your neighbor is complaining that the price of your home — your own personal property — is too high, and in turn is causing their own property taxes to increase. Your neighbors decide to do something to reduce the high prices. But instead of simply petitioning local elected officials to reduce property taxes, they have, in their mind, a more direct solution: confiscate your home, sell it at a reduced price and cause the values of all homes in the neighborhood to decrease. However, in the long-run, everyone would suffer as the neighborhood deteriorates with fewer investments being made for roads, public schools and public safety. Who would want buy a house there?
The good news is that any property owner understands this is an extreme hypothetical that would fortunately doesn’t happen with homes. The bad news is, this type of extreme property confiscation is close to becoming a reality, with the only difference being that it would apply to America’s drug and biologic manufacturers. By introducing H.R. 6505, the Medicare Negotiation and Competitive Licensing Act of 2018, some members of Congress are attempting to set the price of patented drugs, even though our own government has long opposed such compulsory licensing practices because they discourage investment in the discovery of new lifesaving drugs.
Just like with real property, these shortsighted and counterintuitive drug price policies are a threat to our health, as well as to intellectual property ownership. The United States has long sought to balance and protect the property rights of intellectual property owners to encourage them to invest huge resources for the development of new lifesaving drugs on the one hand, and the need for people to have access to quality, cost-efficient prescription drugs on the other hand. That is why over the years Congress has enacted a variety of laws to promote access to generic versions of brand name pharmaceuticals? most notably, the Hatch-Waxman Act and the Biologics Price Competition and Innovation Act. These two laws were purposefully designed to strike the right balance between innovation and competition.
However, as with many laws, the Hatch-Waxman Act and BPCIA are clearly not all that is needed to address the high costs of prescription drugs. Every American knows that prescription drug prices are still too high and many people have no ability to get the lifesaving medications they need. This is a problem that everyone — from the president to congressional Democrats — wants to address.
Unfortunately, in an effort to address this problem, several of my Democratic colleagues are pushing for a forcible taking of property rights in the hope that it will drive down prescription drug costs.
Their proposals — naively described as “compulsory licensing” — would permit the federal government to unilaterally bypass the existing laws that Congress has enacted and grant a license to generic drug manufacturers. Reasonable patent protections are the lynchpin that enables the innovation, investment and research that drives the discovery of new lifesaving drugs. Giving the federal government — particularly unaccountable and unelected federal bureaucrats — free reign to unilaterally choose to ignore intellectual property rights would destroy this lynchpin, effectively gutting incentives for future innovative research — particularly in areas of significant unmet need affecting elderly Americans, such as Alzheimer’s Disease.
The very idea of compulsory licensing flies in the face of not only innovators’ property rights, but also longstanding policy in America. The federal government has consistently fought efforts by foreign governments who engage in compulsory licensing with American companies, because our government rightly opposes robbing these innovators of a fair return on their research and development investments. Just this past year, the United States Trade Representative informed Congress that compulsory licensing in foreign jurisdictions “unfairly shift[s] the burden for funding such research and development to American patients and those in other markets that properly respect IP, and discourage[s] the introduction of important new medicines into affected markets.”
With American intellectual property rights currently at risk in China, Chile, El Salvador, Peru and Russia due to compulsory licensing threats, why would any of my colleagues wish to import such a system to the United States?
To be clear, I believe that reforms are necessary to make it easier for generic drug and biosimilar manufactures to gain access to the market. Americans need — and deserve — access to affordable prescription drugs. President Donald Trump and Alex Azar, secretary of the U.S. Department of Health and Human Services, should be commended for record-breaking approvals of generic drugs and biosimilars, but Congress should take action as well. There are several appropriate proposals that Congress has considered in the past, such as the bipartisan legislation designed to end "pay-for-play" schemes, proposed by Sens. Amy Klobuchar, D-Minn., and Chuck Grassley, R-Iowa.
Congress can and should consider sensible measures to our nation’s prescription drug crisis. America can, and should, lead the world in real solutions that support innovation, produce competition and provide real, concrete deliverables for patients. What we cannot do is engage in policies and practices that will cause us to lose our position as the global leader in biomedical and pharmaceutical innovation. I’m committed to working with my colleagues in a bipartisan, bicameral fashion to address the costs of prescription drugs in this country, but we must do so in a way that promotes innovation and investment and protects American men and women who depend on access to lifesaving prescription drugs. Increasing competition, not confiscation through compulsory licensing, is the answer.
Thom Tillis is a Republican U.S. senator from North Carolina and the chairman of the Senate Judiciary Subcommittee on Intellectual Property.
Read the op-ed here.