Big
Pharma and Big Telecom endless repeat as gospel truth the highly questionable assertion
that government oversight stifles innovation.
Facing the prospect for Medicare administrators, newly authorized to
negotiate or even set caps on the prices of a very few drugs, Big Pharma has
launched an outreach offensive stating as a given that such action will "stifle
innovation" and "harm consumers." See, e.g., Tomas J.
Philipson, The Deadly Side Effects of Drug Price Controls, The latest
Medicare guidance will stifle pharmaceutical innovation—and it’s worse than we
thought, WALL STREET JOURNAL (April 5, 2023); available at: https://www.wsj.com/articles/medicare-drug-price-controls-will-make-america-sicker-research-innovation-negotiations-private-insurers-b503b4ba.
Big
Pharma's big fib reminds me that Big Telecom uses the same gambit. In the case of telecommunications, incumbent carriers
swore that mandatory network access neutrality would stifle innovation and
reduce capital expenditures in new technology.
Some of their favorite legislators, now obsessed with mandating "fair
treatment" by social media, conveniently forget about their virulent
opposition to nondiscriminatory broadband network access.
Does
innovation disincentivization pass a reasonable person's "smell
test." Successful incumbent ventures
will scrimp on developing and bringing to market new products and services,
because the Big Bad Government acts in ways that might constrain upside profitability? Incumbents simply will conserve capital and
scrimp on research and development, apparently content to squeeze out profits
from prior investment in now aging innovations?
Does
this strategy make any sort of business sense, particularly for industries that
reward innovation with government-conferred monopolies in the form of patent
protection and limits to competition?
I
concede that a tougher environment for price gauging does create new
incentives, such as redoubled efforts to extend the patent monopoly of a soon
expiring drug by reformulating it to provide extended release, or to coat it
with something to reduce the risk of stomach distress. Similarly, I can see how the potential, for
harm to innovation, exploits anxiety about any adverse impact on global market share
in industries with national security risks, such as telecom, broadband, and
computer chips.
On
the other hand, does can anyone seriously claim that commercial ventures will
deliberately handicap their future marketplace competitiveness and ability to
introduce faster, better, smarter, and possibly more expensive new drugs and
telecommunications services? If you believe that, then explain to me why wireless
carriers plan the deployment of next generation networks, year end and year
out, without regard to which political party has more FCC Commissioners and
whether network neutrality obligations apply.
Is
5G wireless the last innovation we can expect from Verizon, AT&T, TMobile,
and Dish?
