Of all the dysfunctional parts of the patent system, drug patents are arguably the worst, since the exorbitant prices that patent monopolies allow mean that millions of people simply cannot afford medicines that would keep them alive or would improve their quality of life substantially.

One riposte to this criticism is that such high prices are needed in order to pay for costly research, but as Techdirt has noted before, that's just a myth. Another is that even if the system has its problems, there's no other way. But there is. In both the US and EU, the idea of replacing pharma patents with pharma prizes is gaining adherents.

One of the early attempts to do that came from Senator Bernie Sanders. At the time, we were rather sceptical because of the bureaucracy that seemed to be involved in this $80 billion scheme. Now he's back with a slimmed-down version of his idea:

I introduced a bill in the Senate that would test this new approach on drugs developed to treat one disease: HIV/AIDS. The measure (S. 1138) would eliminate legal barriers to generic competition for HIV/AIDS drugs and reward innovation directly, through a $3 billion a year prize fund.

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The prizes would be funded by the federal government and private health insurers in an amount proportionate to their share of the HIV/AIDs drug market.

Sanders claims the savings would significant: he hopes that the $10 billion US market for AIDS drugs could be supplied at generic prices for between $500 million to $1.5 billion. He also notes other benefits:

It will give larger rewards for drugs that improve healthcare outcomes and smaller or no rewards for duplicative, "me-too" drugs that are medically insignificant. It also would eliminate incentives to engage in wasteful marketing activities. Prize fund rewards will be based on evidence that drugs actually work and work better than alternatives.

Those "me-too" drugs and the huge marketing efforts that have to be put behind them to get them used instead of similar products from competitors are further symptoms of the patent system's failure to promote true innovation. The present scheme still leaves the problem of how to decide when drugs work "better than alternatives," and how much to pay for them, but at least the field has been narrowed down, which should make judgements easier.

As with his previous proposal, Sanders' latest bill doesn't stand much chance of being realized in the current political climate. But it's good to hear a US senator framing the issue in terms of patent monopolies and their distorted pricing:

The cost of the prize fund would be considerably less than the cost of buying drugs at monopoly prices.

Once people recognize that patents (and copyright) are monopolies, with all the disadvantages and abuses that implies, they might want less of them.

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This is a guest post from Lee Graczyk, lead organizer of RxRights, a national coalition of individuals and organizations concerned about the high cost of U.S. pharmaceuticals.

The House Judiciary Committee today is holding a hearing to examine the Stop Online Piracy Act (SOPA), a bill that proposes to address online copyright and trademark infringement by denying services to registrants, owners or operators of Internet sites. There has been much discussion on the technological implications of this bill, but Congress and the media have overlooked SOPA's major health implications--it would take away Americans' access to safe, affordable prescription medications from licensed, legitimate Canadian and other international pharmacies.

No one would disagree that websites illegally distributing "knock-off" goods, which include rogue online pharmacies, are a public menace. However, SOPA's definition of an Internet site that endangers public health (even worse than in its Senate counterpart, the PROTECT IP Act) is so vague and broad that safe, legitimate Canadian and other international pharmacies could be shut-down "in the dark of night."

This is because SOPA inappropriately groups together real pharmacies--licensed, legitimate pharmacies that require a doctor's prescription and sell brand-name medications--and the rogues, who sell everything from diluted or counterfeit medicine to narcotics without a prescription.

This oversight is extremely dangerous for Americans (I am one of them) who rely on legitimate Canadian and other international pharmacies to import safe, affordable prescription medications they need to survive. For example, 90,000 people in Florida alone would lose access to safe, affordable prescription medications because of SOPA.

Each year, hundreds of thousands of Americans import safe, affordable prescription drugs because they cannot afford the same brand-name medications that are sold in the U.S., which cost at least twice as much. Others refuse to pay the exorbitant costs of prescription medications when there is a more economical way that is just as safe.

The bottom line is that pharmacies accredited through organizations such as the Canadian International Pharmacy Association, Pharmacy Accreditation Services and Pharmacy Checker are the "real deal." They sell brand-name prescription medications made by top manufacturers.

A recent study by the Commonwealth Fund highlights the need for drug importation. According to the survey on health insurance coverage, a staggering 48 million Americans ages 19-64 did not fill a prescription due to cost in 2010, which represents a 66 percent increase since 2001.

Americans, especially those without insurance and seniors living on fixed incomes, should not have to make choices like whether to fill their prescriptions or buy groceries for the week. Everyone, including those in the tech community with whom we agree on the overall negative impact of SOPA, should bear in mind the severe health implications of this bill, which would affect the well-being of patients across the U.S.

If Americans don't take action to protect their right to safe and affordable medications, they could lose their access to safe, legitimate pharmacies and, therefore, vital medications they need to stay alive.

It's no secret that there was a close connection between major record labels and drugs in the past -- but people keep insisting that's all ancient history these days. So it's interesting to find out, via a federal prosecution of a cocaine ring, the news that the effort apparently hid the shipping of cash and cocaine around the country by using concert "road cases" and shipping them to and from Interscope Records' offices. Interscope, of course, is a Universal Music sub-label, which is home to the likes of Eminem and Lady Gaga.

Department of Justice prosecutors this week provided defense lawyers with shipping records detailing “pickups and deliveries” made at Interscope’s Los Angeles office by a cargo firm that was used to transport the music cases, which were alternately stuffed with kilos of cocaine and upwards of $1 million in cash.

Perhaps, rather than worrying so much about the impact of "piracy," the folks at Universal Music should be paying attention to the drug dealing happening via its own offices. Just saying.

Ah, the moral panic police are out in force yet again. A recent report from the "National Center on Addiction and Substance Abuse" is getting some attention for a study which claims that teens who spend more time on social networking sites like Facebook are five times more likely to drink, smoke and take drugs. The study also found that kids who watch reality shows are also more likely to take drugs as well. And, of course, they seem to automatically assume the causal relationship is in that direction:

"The anything goes, free-for-all world of Internet expression and suggestive television programming that teens are exposed to on a daily basis puts them at increased risk of substance abuse," said Joseph A. Califano, Jr., CASA Columbia's founder and chairman, in a statement.

It seems we have a classic conflation of correlation and causation. You could just as easily suggest that taking drugs, smoking and drinking lead teens to spend more time on Facebook. Or, more likely, it's a third factor. The general type of teen who is more likely to be active on a social network is also more likely to be active in the sort of social activities that teens are involved in -- which (despite some adults' denial) still includes drinking, smoking and taking drugs (sex too, I imagine). But pinning the blame on social networking is silly. I would bet that the same kids probably use text messaging more often. Would CASA also say that text messaging "puts kids at increased risk." Correlation is not causation and since the "National Center on Addiction and Substance Abuse" is based at Columbia University, you'd think that someone there was familiar with this basic concept.

Oh, and... obligatory xkcd:

The PATRIOT Act was all about stopping terrorism, right? We were told that special provisions that ate away at our civil liberties were needed specifically to catch dangerous terrorists -- and that the reason for such an abdication of our rights had nothing to do with simply giving the government more useful surveillance powers. Aaron DeOliveira points us to a fascinating chart that shows how often law enforcement has been using "sneak-and-peek" warrants. These warrants let officials search private property without letting the target of the investigation know. Again, we were told that these expanded powers were needed to stop terrorism. So what have they been used for? Take a look: Yup. They're all pretty much being used in drug cases. Now some might make the argument that it's important to go after drug dealers -- but that's not how the PATRIOT Act was supposed to be used.

While the Justice Department spun the taking of $500 million from Google as an important step in "protecting Americans," the reality appears to be that it's doing exactly the opposite. While there certainly may be some online pharmacies that sell fake and fraudulent (and potentially dangerous) drugs, the government is conveniently conflating those scammers with legitimate drugs reimported to the US as gray market imports. Those are still legitimate drugs, but are just more reasonably priced. In such cases, a very strong argument can be made for the fact that these drugs do a ton to "protect Americans" by allowing them to stay healthy at a more reasonable price. This is why President Obama repeatedly claimed that he was in favor of reimportation and why there's a bill going through Congress, as we speak, to allow more of it. So, it still makes no sense why the administration -- which officially supports greater reimportation -- would go after Google because some pharmacies used reimportation.

But even more to the point, the Canadian pharmacies -- who, again, were selling legitimate versions of these drugs -- are reasonably annoyed about the whole thing, and are noting that the real harm will come to Americans who can no longer get safe and affordable drugs. In fact, they may now be pushed to go to much more questionable pharmacy operations since Google will no longer point them to those who had been certified. The President of one of those pharmacies, Jan Drugs, has been passing around this open letter to Google:

Dear Google,

I am David Janeson, President of Jan Drugs. Jandrugs.com, based in Winnipeg, Canada, is a brick-and -mortar regulated and licensed pharmacy and fills prescriptions for Americans from Canada and other countries. We advertised with Google Adwords, and some small percentage of the money that you are now forfeiting to the U.S. Department of Justice is due to the money we spent to advertise with you. We provide a valuable service to our patients, and Google by allowing us to advertise, helped many Americans obtain the prescriptions they require at prices they can better afford.

Many of our customers first found us through a Google ad. Jan Drugs is blessed to have had over 100,000 American customers order from us over the years. Our customers universally have ordered medicines from us because they were prescribed a prescription drug that they found prohibitively expensive in the US. Jan Drugs is proud that we have helped many peoples lives by helping them find the prescription drugs they need at prices they can afford. Jan Drugs sells medications for conditions including depression, heart disease, high cholesterol, diabetes, cancer and epilepsy. Jan Drugs and it's customers take the position that it is ridiculous to accept that uninsured or underinsured Americans should be expected to pay higher prices than everywhere else in the world.

When Google first cancelled our advertising account we were disappointed. We believed that Google's existing pharmacy verification program should have been strengthened rather than cancelled and that the end of the verification program made the internet a more dangerous place for Americans to find their needed medications. Our pharmacy willingly participated in Google’s chosen certification program, PharmacyChecker, which was required for Jan Drugs to advertise the sale of non-controlled prescription drugs through AdWords to U.S. consumers. Now that we see that Google has paid a very large forfeiture, partly for accepting advertising for companies like Jan Drugs, we understand why you took the position you did.

Jan Drugs believes that access to reliable and affordable medication is a right. We and companies like Jan Drugs have helped millions of Americans save on their prescription medications over the internet in the same way as if they had personally visited us in Canada. Google should be proud of its' previous efforts to make the internet a safer place to purchase medications as millions have benefited and Jan Drugs believes that Google being fined is against the interests of Americans and morally wrong.

Thank you and kind regards,

David Janeson and the Jan Drugs team
250-530 Kenaston Blvd.
Winnipeg MB R3N 1Z4
Canada

Indeed, it's somewhat surprising that more Americans who rely on such things haven't spoken up about this effort by the US government which now puts them in much greater danger, either from being unable to afford the drugs they need to stay alive or by leading them to order from much less trustworthy sources.

There was a somewhat horrifying article in the NY Times recently about some serious drug shortages in the US, especially for certain forms of cancer. There are a few efforts underway to deal with the shortages, but as the article notes, it's pretty ridiculous that there are any shortages at all, since "the number of cancers diagnosed in a year was easy to predict." Of course, the real problem is that in a claimed effort to "protect" people, the FDA has made it almost impossible for competition to exist:

A crucial problem is disconnection between the free market and required government regulation. Prices for many older medicines are low until the drugs are in short supply; then prices soar. But these higher prices do little to encourage more supply, because it can be difficult and expensive to overcome the technical and regulatory hurdles. And if supplies return to normal, prices plunge.

Left out of this paragraph, but equally important, are patents, which clearly hinder such competition as well. We've discussed in the past how the FDA can often get in the way of medical innovation. Even if it means well (and I'm sure it does), putting in place systems that make it too costly to create real competition does the exact opposite of its intended purpose.

So the big story of the day seems to be about the Justice Department getting Google to "forfeit" $500 million for having ads in the US for Canadian pharmacies. This isn't a huge surprise. News broke of the investigation a few months ago, when Google mentioned in an SEC filing that it had set aside $500 million to settle this particular matter. The Justice Department, in typical fashion, play up how they're protecting Americans from harm blah, blah, blah.

Here's the thing: I can't figure out how this makes any sense at all. First off, why is Google to blame? As we've discussed repeatedly, the US is pretty clear on its liability laws that liability should be applied to the party actually responsible, not third party platforms. Google accepted ads. That should not make it responsible for the content in those ads, let alone transactions that may occur because of those ads. Even worse, Google clearly made quite an effort to make sure such ads only involved legit drugs:

Google changed its policy on pharmacy ads in February 2010, so that it would only take ads from U.S. pharmacies accredited by the National Association of Boards of Pharmacy, and from online pharmacies in Canada that are accredited by the Canadian International Pharmacy Association.

So, now, as a media property that has advertising, do I need to fear that the Justice Department can force me to forfeit money because one of you clicks on an ad and makes a transaction that the government thinks is illegal? That's insane!

On top of this, it's even more ridiculous, because the US government has almost always turned a blind eye to grey market imports of drugs from Canadian pharmacies, because they know that without such affordable drugs, people will die. Here we have the Justice Department not helping to save lives, but helping to kill people off by making it that much more difficult to get approved drugs from Canada at more reasonable prices. In fact, amusingly, Senator Patrick Leahy is pushing legislation that will expand the ability of Americans to import such drugs (at the same time he's sponsoring the PROTECT IP Act, which wold force such sites off the internet -- he's not particularly consistent, that Senator Leahy).

Let's face facts here. This has absolutely nothing to do with public safety. This is a cynical move by the Obama administration to ensure support from the pharma industry. Early on in his administration, President Obama specifically supported allowing re-importation from Canadian pharmacies. In fact, the White House has repeatedly said that it's completely in favor of allowing such reimportation.

And yet now it takes $500 million from Google not for actually doing that, but for allowing ads to appear that promote a program the administration has officially endorsed? It's hard not to take the cynical view and simply see this as the US government taking from Google in an effort to make the US pharma industry (who hate, hate, hate Canadian imports) happy.

In the meantime, as Ryan Singel points out, Google is getting dinged $500 million here, while Goldman Sachs got dinged $550 million for "melting the economy." I guess Wall Street and pharma have much better lobbyists than Google.

The more I end up learning about the US Chamber of Commerce and their blatantly dishonest lobbying campaigns, the worse and worse that organization looks. They seem to have no limits in the depths to which they'll stoop to pass bad legislation that favors some of their biggest supporters. We've pointed out in the past how one of the favorite tactics of supporters of PROTECT IP is to conflate counterfeit drugs with copyright infringement despite the two things being completely different and unrelated. But, as long as supporters of stricter copyright laws can toss in some claims about how "without this, people die!" they can get what they want. So, here's the US Chamber of Commerce putting out a propaganda video about someone who died from bad counterfeit pharmaceuticals, and using that as a reason to support PROTECT IP.

I've said all along that I agree that counterfeit drugs are a real problem (though, it should also be noted that I'm only talking about actual counterfeit drugs, not grey market or parallel import situations -- even though many wrongly lump these together). And I would have no problem with actual efforts to go after real counterfeit drugs. But the fight against real counterfeit drugs is totally unrelated to the issue of copyright infringement, and it's not just cynical, but disgustingly exploitative of the US Chamber of Commerce to use victims of counterfeit drugs to helps pass a law that is really meant to deal with copyright infringement. It's like saying to the woman in the propaganda video, "hey, your friend died to protect Hollywood from having to deal with online innovation." Disgusting. I'm all for stopping fake drugs. But "fighting rogue websites," isn't about stopping fake drugs. It's about helping the entertainment industry block innovation they don't like and don't want to adapt to.

For those who recognize the very significant problems associated with pharmaceutical patents, one popular alternative is to set up an innovation prize system, where the government sets aside large sums of cash as a reward for those who create a drug-based cure for certain issues. Senator Bernie Saners has now introduced two bills that would create potentially giant funds for such efforts -- one directed just at AIDS/HIV and one at much wider medical innovation. The bigger bill would set aside .55 percent of US GDP, or more than $80 billion per year right now. That's a pretty big chunk 'o change. The important parts are that it would also set aside at least 5% of the money to go to "open source" medical innovation efforts, which could mean about $4 billion going into open source research.

Of course, this isn't the first time Senator Sanders has suggested such a thing. Four years ago, he introduced a similar effort. As we noted at the time, there's almost no chance that this goes anywhere, because it's a plan that's simply too radical and would upset way too many special interests. That said, while I do think that this would definitely be significantly better than what we have now, I'm not at all convinced it's a good plan overall. To make this easy, I'll just repost what I said four years ago:

If the plan actually worked, and created new, more affordable drugs that saved many more lives, you could make a compelling argument that the net benefit to the economy would far outweigh the $80 billion (see Murphy and Topel's research for support on that). However, it's still not going to be easy to get people to buy into it. More importantly, it's not entirely clear how you'd allocate this money fairly. Any system like this where the gov't is giving away money is going to be gamed by the pharma companies in one way or another. It'll be so lucrative that it will be nearly impossible not to have the system gamed -- especially when it's going to involve a bunch of bureaucrats trying to determine the value of a specific drug. Finally, the bill seems to be entirely focused on pharmaceuticals -- which is part of the problem today. With so much healthcare policy focused on pharma, people forget that new technologies may start to make pharmaceuticals obsolete. Then we're left with an $80 billion subsidy for an industry that should be going away. I'm all for the economic incentives that come from innovation prizes, but building a huge mis-targeted gov't bureaucracy around them seems risky. Really, it seems to just be replacing one system of gov't subsidies with a different one, and that hardly seems likely to fix the problems currently facing the healthcare space.

Again, this would definitely be better than what we have now, but I think it just replaces one market-distorting government subsidy setup with a different one.