Patents and Eminent Domain

mrbill writes "Interesting take on the Eminent Domain case now before the Supreme Court. Could the same logic behind using Eminent Domain to take real property be used to take a Patent? Apparently some states are contemplating taking drug company patents to force lower drug prices." From the article: "Patents are the key to huge drug-company profits. The industry will fight vociferously to protect them. In West Virginia, where the issue came up last summer, industry lawyers warned a legislative advisory council away from proposing such action on patents, claiming it would be unconstitutional. "

Comments

Re: Won't this deter research?

[Black Parrot]

> Since the drug companies invest so much in research due to the potential profit, wouldn't reducing the potential profit reduce the incentives for research?

I don't know whether it's true or not, but critics claim that the drug companies spend 10x as much on advertising as they do on research.

Profits at a pharmaceutical company

[ArsSineArtificio]

I don't know whether it's true or not, but critics claim that the drug companies spend 10x as much on advertising as they do on research.

There's no need to discuss these things theoretically, when all publicly traded companies have to make SEC filings of their financial statements.

According to Pfizer's most recent 10-Q filing, for instance, they incurred "selling, informational, and administrative expenses" of $4,036 million (or 31.5% of revenues), and "research and development expenses" of $1,888 million (or 14.7% of revenues). The former category includes much more than advertising (administrative expenses include accounting, payroll, facilities maintenance, etc.) Nevertheless, total administrative and marketing expenses were only about twice as much as R&D costs.

People like to talk about the rapacious profits of drug companies. Well, go and look at the numbers for yourself: Pfizer's earnings per share are $1.19; Eli Lilly's are $1.66; Merck's are $2.90. By way of comparison, American Electric Power is $1.51, Wal-Mart is $2.41, Staples is $1.40, Home Depot is $2.26, Anheuser-Busch is $2.77.

Drug companies are not massively more profitable than everything else. People who think that they are should simply invest in them and benefit from the price-gouging which they are supposedly inflicting upon the public.