Government pensions, Pharma patents

Seth Sandronsky is a Sacramento-based freelance writer

In Sacramento and statewide, government workers’ pensions are front-page news. Their “unfunded pension liabilities” sound scary.

But wait. Rising local and state government pension costs are a private-sector health-care issue. That’s a simple fact, and one that is simply underreported.

Recent Organization for Economic Co-operation and Development figures show that U.S. health-care costs are the highest in the world, at $7,960 per capita (vs. the next highest-priced health-care-per-capita countries: $5,352 per person in New Zealand and $5,144 per person in Switzerland, respectively).

One main reason for the U.S.’s high prices is pharmaceutical firms, or Big Pharma. How is this so?

Our federal government provides these giant global firms—for example, Pfizer—monopoly patents that generate super profits. These patents allow drug companies to hike prescription-medication prices up to 100,000 percent (and that’s no typo, it’s one-hundred-thousand percent) more than the “marginal cost of production—the cost of producing one more unit of the good,” writes Dean Baker, an author and economist, in his Taking Economics Seriously.

Pfizer “earned” that kind of revenue from drugs such as Lipitor for cholesterol, the patent for which expired at the end of last November. Generic versions of this drug are now pushing prices down.

That is how market competition works. Without that competitive push, government patents boost drug prices.

OECD data shows that per capita, pharmaceutical costs are $956 in the United States vs. $661 in Iceland and $640 in France, the nations with the second- and third-highest prices.

Making consumers of health care—including those both with and without government pensions—pay higher prices fails to address what creates such costs. Consumers, including those with current or future government pensions, do not drive up these prices.

Big Pharma has billions of reasons to keep alive government intervention for its benefit. Big Pharma is part of the 1 percent.

Ending monopoly drug patents now benefits taxpayers and government pensioners. They are the 99 percent, and they’re the ones with skin in the health-care game.