At Reason, Where Black is White — and Market Competition is a “Grab”

At Reason, Elizabeth Nolan Brown (“Feds Make a Pharma Patent Grab”) gives new meaning to the term “grab.” Most people would consider a state-granted monopoly on the right to produce something to be in itself a grab. But not Brown. 

The Biden administration recently invoked the Bayh-Dole Act of 1980, in claiming the right to seize the patents on drugs whose makers engage in price-gouging. “When drug companies won’t sell taxpayer-funded drugs at reasonable prices, we will be prepared to allow other companies to provide those drugs for less,” an economic adviser explained. Concerning this, Brown writes:

President Joe Biden claims authority to act under the Bayh-Dole Act of 1980, which lets nonprofits and small businesses retain ownership of inventions made possible by federal contracts, grants, or cooperative agreements — so long as they patent and license these inventions. Its impetus was all the innovation languishing under government ownership….

Under the Bayh-Dole system, it’s easier for inventions (including pharmaceuticals) to get from the research stage to the market stage. Since the point of the law is to let the public benefit from innovation, it contains a stipulation saying the government can take ownership of an invention if an institution doesn’t commercialize it.

By any normal definition, the patent giveaway in Bayh-Dole was itself a government-enabled corporate grab. A patent is, literally, a state-enforced monopoly that entitles its owner to produce a particular good and sell it at any price it sees fit, with market entry by competitive producers legally prohibited. The patent seizure, or “march-in” stipulation is simply an inadequate provision for dealing with the worst abuses of a state-granted power which is inherently evil and shouldn’t exist at all. 

What’s more — even assuming the legitimacy of patents as such — Bayh-Dole was badly designed as a response to the problem of the government’s lack of resources to work the patents on drugs developed with taxpayer-funded research. Rather than grant monopoly rights to one corporation to work the patents, it could instead have simply made the patents public and allowed any company to work them.

Even many right-libertarians who are otherwise shameless defenders of corporate power condemn patents and other forms of intellectual property as illegitimate. Murray Rothbard, who — before his journey down the paleocon rabbit hole to become a cheerleader for police violence and fellow traveler with reactionary racist Hans Hermann Hoppe — took at least some genuinely principled anti-corporate positions, rejected patents outright. And Stephan Kinsella, otherwise one of the most strident defenders of big business and its profits currently writing, is equally strident against patents.

But Brown has a history of defending powerful corporations whose entire business model is based on patents, “criminal contempt of business model” laws, and other legal barriers to competition.

Her framing of Biden’s proposed action is hilariously alarmist. It would, she warns, “take redistribution to new extremes” and “effectively give the government control over the price of drugs.”

Um, no. The primary abuse of power was granting the patents in the first place. It was the patents which redistributed income from consumers to drug companies, and gave drug companies state-enforced control over the price of drugs. Thanks to patents, which grant absolute control over pricing to pharma companies by outlawing competition, it’s common for a patented drug to be priced at twenty times the cost of production. That means that 95% of that price is a tax paid by the consumer, to the corporation as a wielder of state power. Any provision for patent seizure, whether for failing to work the patent altogether as originally envisioned in the law or more broadly for egregiously abusive pricing, far from being a power grab, should be seen as a reduction in illegitimate state power. 

The central function of the state is to subsidize the operating costs of big business, facilitate accumulation, restrict competition to levels compatible with stable oligopoly structure, stimulate adequate demand to prevent depression, absorb surplus capital with no profitable outlet, and otherwise serve the reproduction needs without which the current model of corporate capitalism could not survive. In other words, the state’s primary function is to enforce the privileges by which an economic ruling class extracts a surplus from the rest of society. Any state regulatory action which restrains abuses of such privilege may appear as an increase in state power in formal terms, but in substantive terms it is a net reduction in the level of statism.

Of course Biden’s retail responses to the wholesale abuse of a privilege, which is in itself inherently abusive, are laughably inadequate. The only adequate action would be, not merely seizing the patents of some drugs, but abolishing patents altogether and voiding out those currently in existence. The result would be something right-libertarians claim to support: competition.

The Center for a Stateless Society (www.c4ss.org) is a media center working to build awareness of the market anarchist alternative