The economics profession has produced endless studies estimating the losses from 10 percent tariffs on shoes and 15 percent tariffs on shirts. They have worked hard to ensure that all right thinking people believe that such barriers to trade are crimes against humanity. For some reason economists don't show the same zeal in documenting the costs associated with patent protection for prescription drugs. This patent protection typically raises the price of drugs by several hundred percent above the competitive market price, often the price increases are several thousand percent above the free market price. As economsts know, the monopoly profits created by this sort of government intervention also provide enormous incentives for corruption. For example, they provide incentives for drug companies to give kickbacks to doctors for prescribing their drugs in cases in which they may not be helpful or may even be harmful. The NYT reports on one such case, in which doctors who prescribe antipsychotics for off-label uses on children were paid substantial fees for giving lectures to other doctors. If would have been helpful if the article had gotten an economist to explain that such behavior is a predictable result of government granted patent monopolies.
--Dean Baker
