A “Uniquely American” Socialism
The word “socialism” continues to strike lightning bolts of terror in the hearts of many Americans, especially those nearing retirement age—this at the same time they don’t know exactly what the word means. In truth, “socialism” is hard to pin down, but behind all the definitions there is the idea of an economic system of cooperation, of cooperative effort, as in people generally trying to work together to take care of each other. In fact, socialism does not have to be connected to a harsh, totalitarian government at all, as in the former Soviet Union. It can also exist in a democracy, in a gentle form, as in Sweden.
But whatever the actual meaning, many Americans fear it like a Biblical plague, convinced that it has to be something awful. There is an irony here, of course. Socialism is alive and well in the United States, operating right now, right under our noses, as it has done for years. It is, to borrow a phrase, a “uniquely American” socialism. It is, oddly, a system that has been turned upside down and stood on its head. It redistributes wealth, all right, but our American form of it takes money from the poor and working class and gives it to the rich.
Many writers and economists of the last decade have tried to find a language to address this idea. Some tried “welfare for the rich” or “socialism for the wealthy,” but these found no traction in the media and soon died out. Today, a favorite, recurring phrase seems to be some variation of “socialized costs and privatized gains,” which sounds intellectual and sanitized but means, exactly, that it is a system benefiting the rich at the cost of the average citizen. The middle class and the poor are notable for paying their taxes, but do we need reminding, after the revelations of this 2016 presidential campaign, that the rich frequently do not? These “privatized gains” are definitely not reaped by most of us, who sow the seed money and pretty much get stuck with the bill.
President Obama declared that his decision to leave private insurance companies squarely in the middle of our national health care system was a “uniquely American solution,” meaning, I guess, that the pattern of taking money from the working class to give to the rich would remain in play. I use his phrase deliberately, because nowhere is the idea of using taxpayer money to subsidize the rich more flagrant than in our nation’s dealings with health care and the pharmaceutical industry.
It goes like this. A scientist, who probably got an education at a public university, applies for grants to study some medical problem in need of a solution. These grants, of course, are taxpayer funded, and are distributed fairly generously. According to the National Institutes of Health website, around $32 billion dollars is awarded annually to more than 50,000 grants at over 2,500 universities, medical schools, or other research institutions. The receiver of the grant then buys equipment, hires people, and goes happily to work, frequently in free space given by a public university.
Now, here is the interesting part. Because of the Bayh-Dole Act of 1980, this scientist is able to get patents for discoveries in his or her own name, to form a company to exploit the patents, or to sell the patents to another company and keep the money. The government, which funded the research, no longer has a claim on the patents or inventions. The CEOs of big pharmaceutical companies (you can picture Martin Shkreli here) are hiding in the bushes, rubbing their hands in glee, waiting to charge exorbitant prices for necessary drugs.
Stephen King did not make this up. This is not fiction. It is not a delightfully scary movie starring Jack Nicholson. This is precisely the real-life story of one of the great life-saving drugs of recent years, sofosbuvir, developed as a cure for millions of people infected with the hepatitus C virus. Marketed as Solvadi by Gilead Sciences, it sells in America at $84,000 for a 12-week treatment. In 2014 alone, the drug brought in $12.2 billion in sales, slightly more than the company paid for the rights to the drug from Pharmasset Inc.
Now, Pharmasset, Inc. is none other than a company set up by brilliant Professor Raymond Schinazi of Emory University, the man who received grants and lead the research and development of the wonderful drug, sofosbuvir. He was brilliant to discover the drug, doubly brilliant to use taxpayer money to hire university trained researchers, and triply brilliant to assign the patents to his own drug company, which sold the rights to Gilead Sciences for $11 billion. The research was funded heavily by grants from the NIH and the Veterans Administration. How much money did the American taxpayer realize from this wonderful discovery and sale? Exactly nothing, unless you count the income taxes paid by Pharmasset, Inc. and Professor Schinazi, if they paid any at all, which, as we have learned to our dismay, is not likely to be very much.
How patients pay the $84,000 for a treatment is another sorry tale of robbing the taxpayer to help pay the tariff, through Federal and state grants, still enriching the stockholders of drug companies in the process. Of course, some can’t pay and just have to live in fear, or possibly die, though numbers for that are not readily available. Finally, for another macabre detail, we can mention the estimate of researchers at Liverpool University that the actual production costs of the drug in question are somewhere near $135. Add a generous amount for packaging and shipping, and, yes, marketing, and you still have a markup a bit north of $80,000. Perhaps this explains why India, which refused to grant a patent to Gilead, can provide a treatment of the generic drug for $300. Enough said.
This is just one example, but there are many others, from the recent price-gouging scandal involving epipens to the ongoing price-gouging scandal surrounding insulin. In fact, it never stops, and the examples differ only in minor details.
Is this fixable? Of course it is, but it requires that the very people who are responsible for the system take action. Is this likely? Not really, because the people responsible for fixing the problem are taking money, and I do mean lots of it, from the very drug companies themselves, in the form of political contributions. These figures are available, but they are not particularly easy for the average citizen to find. Before me now, as I am writing this, I have an online article by Mike Ludvig of Truthout stating that Rep. Jason Chaffetz (R-Utah) has received over $198,000 for his campaigns from the pharmaceutical industry over the last several years. Chaffetz happens to be a Republican, but Democrats receive these contributions as well, so the problem can’t be solved by an appeal to party affiliation.
One item on the fix-it agenda would be to reverse the Bayh-Dole Act of 1980. This would again assign patents for grant-funded work to the American people, the people who actually paid for the research in the first place. Another step would be to prohibit lobbyists from handing out money like trick-or-treat candy to politicians. A final step might be to set up sensible regulations about pricing. Now the zig-zag lightning bolt that accompanies the word “regulation” threatens to strike.
But to get back to socialism—we have it now! We have had it for years, only in a truly terrible form. Instead of the well-off and the rich assisting the not-so-well-off, we have the poor making their daily contributions to the rich in the form of outrageous prices for necessary things, like life-saving drugs, which their tax money funded in the first place. It is truly socialism stood on its head, reversed, become its own opposite. We need a new name for it—Trickle-up Socialism, The Reverse Robin Hood Economic System, Screw the Taxpayerism, or maybe just Greed Run Amuck.
Whatever amusing name finally sticks, we have to come to grips with our reality. Just as knowing and naming a serious disease of the body doesn’t actually cure it, seeing our political problem clearly is only the first step in correcting it.
Sachs, Jeffrey. “The Drug That Is Bankrupting America.” http://huffingtonpost.com/jeffrey-sachs/the-drug-that-is-bankrupt_b_6692340.html
Ludwig, Mike. “How Much of Big Pharma’s Massive Profits Are Used to Influence Politicians?” Truthout Report, September 30, 2015.
Swanson, Ann. “Big pharmaceutical companies are spending far more on marketing than research.” The Washington Post, Wonkblog. February 11, 2015.