Democratic Senator Charles Schumer from New York is up to his anti-market activities again. Last week, he threatened to introduce legislation in the U.S. Congress to force Swiss drug maker, Roche, to give up its rights to Tamiflu if the company did not license other pharmaceutical companies to produce Tamiflu. Roche currently holds the patent rights for Tamiflu, a product that offers significant promise in combating bird flu. Two days later, Roche appeared to agree to increase the number of production licenses for its Tamiflu drug in order to reduce the potential negative consequences of bird flu.
Thus from a consumer standpoint, Schumer’s threats appear to have produced a positive outcome. However, it is essential that drug firms are able to capitalize on their significant investments in research & development spending that produces these important drugs. As long as drug companies feel that they may be required to relinquish their patents in cases of high or even critical demand, they will under-invest in research that brings these drugs to the market place. Grandstanding by politicians, as exhibited by Schumer, will produce unacceptably low levels of investment in new product development among pharmaceuticals. As painful as it may be in this case, politicians need to allow the market to make these important decisions. To do otherwise, while producing a short term gain for the consumer, will generate significant long term pain for both consumers and businesses.