Giachino (00:04.0940 - 00:18.0700)
Welcome to IP Protection Matters. I'm your host, Renee Giachino. Today, we are joined by Grover Norquist, the President of Americans for Tax Reform. You can follow Grover's work and the work of his organization at ATR.org.
Giachino (00:18.0920 - 00:35.0110)
We'll be talking today with Grover about "Most Favored Nation" drug pricing and its impact on intellectual property, as well as the proposed patent tax that's being thrown around out there. Grover, welcome to IP Protection Matters. Thank you for joining me.
Norquist (00:35.0450 - 00:36.0810)
Absolutely. Good to be with you.
Giachino (00:37.0049 - 00:57.0865)
Let me start by asking a few simple questions, perhaps not necessarily with the simplest answers, but it's certainly tied to the title of this podcast. Why does IP protection matter? Why does it matter to your organization? Then why should it matter to every one of us?
Norquist (00:58.0424 - 02:06.0190)
Because property rights matter. Because if we want to limit the state/government we want to limit it from taxing our income to keep that down to a bare minimum.
We've learned throughout history that people are free and secure when they own their farms. When Caesar can't decide to steal your house because he doesn't like you. Or the king can't come and take your stuff. It's that level of freedom that allows people to act, create, raise a family and live a life free from too much coercion from the state, but it starts with property rights. That is when progress began - when people could actually own things, create things and then with intellectual property own the things they create.
Who would write books if when you printed them, the guy down the street could just take what you'd spent a year working on, print it himself and sell it. All of a sudden your work for the year would be confiscated.
Giachino (02:06.0529 - 02:37.0119)
Great analogy. We know very well, and anyone visiting your website will be very clear on this as well by going to ATR.org, that ATR generally, and then you personally, have been strong proponents of a robust intellectual property. Noting that secure property rights, including IP as you said, is fundamental to fostering this innovation to our economic growth, even job creation.
Grover, what do you see today as some of the biggest threats to IP protection?
Norquist (02:37.0550 - 05:26.0615)
Everything from politicians who don't like particular companies and want to go after their intellectual property. To be able to sue it, to regulate it and to give it to their friends. To say, I think your company is too big or you're making too much money. So I will take from you the property right that you've created and expropriate it.
You see that in efforts by other countries to say, well, if you sell pharmaceuticals in Canada or Europe, we will only pay a certain amount. Not the market price. If you disagree, we will simply steal your patent and your intellectual property and we'll produce it here. There have been trade laws that treat intellectual property differently than other trade goods, which is a mistake. I think this is back when the United States was being terribly generous to the world because “we could afford to be”.
Things that America was dominant in like culture and movies, we agreed that other countries could limit our movies because that interferes with their culture. I don't know why American movies can't be part of their culture, too. We certainly like French movies. They become part of what we do, but they said this is a culture thing. It's not a trade thing. Therefore, the right to your intellectual property and the ability to sell movies and songs overseas was limited.
Then the other one is in health and in pharmaceutical inventions that the United States leads in. Other countries said, well, we think because health is so important that we should be able to set the prices. Well, because health is so important and the creation of new drugs to save lives and make people's health better in the future is important, that you don't want to reduce the returns to creating new and better pharmaceutical drugs.
We should never have agreed to those in trade agreements. When the President said, I'm going to go talk to these people who cheat on trading agreements, those are two of the first things that they should have focused on and said, don't be expropriating money from Americans by saying we'll only pay so much for a new pharmaceutical drugs. We don't do that to you on steel. So don't do it to us.
Giachino (05:27.0105 - 06:22.0308)
I think that segues nicely, Grover, into our conversation. One of the subjects I wanted to touch on today is the "Most Favored Nation" drug pricing and its impact on intellectual property.
For you, it must almost feel like Groundhog Day in some respects because when I went back and researched the work that ATR has been doing on this, you've been involved as early as 2020 under the first Trump Administration where ATR spoke out and was opposed to the "Most Favored Nation" Executive Order that President Trump tried to put into place then. Now we fast forward to today and ATR is again publicly opposing "Most Favored Nation" prescription drug pricing.
Let me ask you to start simply for us. Define what is meant by "Most Favored Nation" drug pricing.
Norquist (06:22.0687 - 07:50.0260)
This is an effort by other countries to put price controls on American exports to them. This used to be something that left-wing Democrats [supported] on a regular basis. They said we should be able to buy cheap stuff from Canada.
As if Canada somehow had made less expensive drugs and we were keeping them out. In point of fact, they were importing American pharmaceuticals and forcing the price down saying, "We have a government monopoly," which obviously it is not a good idea, "to buy all the drugs for a Canadian government-run system. So we demand that we will only pay a certain amount. If you don't agree, then we will confiscate your property." Having set a limit on what they're willing to pay to fix prices, then to have those drugs come back into the United States with importing price controls.
Well, we don't want price controls in the United States. They always lead to shortages. Why would you want to import price controls? You're not importing drugs. The drugs are available in the United States. You're importing the price controls. That was something that only left-wing politicians supported at the time.
Giachino (07:50.0489 - 08:08.0630)
Is it fair to say that these price controls are an assault on intellectual property? How do you respond to individuals who claim that adopting "Most Favored Nation" would solve some of the healthcare system problems that Americans are facing?
Norquist (08:09.0119 - 10:19.0309)
When you set up price controls and you tell somebody if you want to rent a room in your house, you can only charge so much, then people decide not to rent. The amount of housing that's available goes down and prices go up.
In Argentina, they had price controls on housing. Milei, the new President down there, got rid of them and all of a sudden people who were never willing to rent under a price control system did decide to open up. So you had a lot more opening and the price of being able to rent a house actually went down because there was so much more supply. Supply and demand is a much better way to keep prices under control than government regulations.
If you were to say, OK, if you buy this, you can only charge half as much. Oh wow, says the guy who gets the drug. I'm much better off. Well, five years from now, if he gets a new disease, the drug for his new problem may not exist because the companies that had been out or would have been out looking to invent them go, you know what, if Canada puts those price controls on and other countries do, we're just going to be investing in sure things and not into exotic drugs, difficult drugs to make or diseases that aren't as popular as others.
They cut back on their investment because you've decided that you're going to steal from them. So people say, OK, I'll work in a different zone. Price controls lead to limits on goods and services being available, and that doesn't damage or make ill or kill the guy today who now gets the half-price drugs, but his younger brother is going to wish he hadn't done that.
Giachino (10:19.0840 - 11:18.0679)
It's fascinating because it aligns with an article that I recently read. Every day we read about how China is rapidly narrowing this innovation gap. I recently read an article on your website, ATR's website, where it was noted that America's biotech leadership is slipping as China continues to close this gap.
You noted that China's on track to surpass the US in clinical trial shares by 2027, already graduating 50% more advanced STEM grads annually and gaining ground in what you've just talked about, this novel drug output and R&D investment.
Do you believe that the "Most Favored Nation" policy, having been adopted in some states and even the attempt to adopt it here in the United States, that this is having an impact on that trend and what we're seeing happening vis-a-vis American innovation versus Chinese innovation?
Norquist (11:18.0890 - 12:24.0150)
Absolutely. Price controls always lead to limitations on new inventions. That's what is happening here. We've been doing this for a long time, too. The pharmaceutical industry, with sort of a whole bunch of regulations that take years and years to get done, you saw that they could speed it up when they did the COVID drugs. They did move quickly and they could do that more often.
Right To Try has been successful and could be more successful if they would simply allow patients the ability to try drugs if their life is in danger and speed up the adoption of new drugs with patients making the decisions about risks to take rather than the federal government saying everybody has the same risk assessment. No, they don’t. They just don't. The one-size-fits-all is always a lousy idea, and that's all government is capable of doing - one-size-fits-all.
Giachino (12:24.0690 - 13:11.0109)
Let's shift a little bit of our conversation again talking about a proposal that I think everyone can agree is going to again have a negative impact on innovation. ATR recently submitted a letter to Commerce Secretary Howard Lutnick opposing reports that the Department of Commerce is considering a new annual value-based tax on patents. Even more recently, you led a coalition letter, which we as an organization, the Center for Individual Freedom, enthusiastically signed on to.
Share with us what you're hearing as it relates to what impact a value-based tax on patents could have on innovation.
Norquist (13:11.0179 - 15:27.0775)
It increases the cost of inventing stuff and of bringing it to market. We have had a good patent system for a long time. It was one of the things that they did early on with the Constitution and the federal government. You want people to be able to get patents quickly and to disperse the knowledge of what's been invented, but also to make sure that the person who went to the expense of the work of inventing it is compensated for his or her work.
[This is] somebody who thinks they're running not a government but some sort of revenue maximizer. This is what the Democrat’s say. Well, the government's providing a service, let's tax people for it. When you have the government doing certain things, it's a monopoly. You have to get your patent from them. It's not like you could get a patent from any number of companies. You could do that too. You create a monopoly and everyone has to go to them. Then they go, oh, we could charge extra for this because we're a government monopoly. It is really ridiculous. This is not something that public servants should be thinking up.
You're not trying to maximize revenue here. You're trying to maximize the ability of the American people to invent things and get compensated for it and get it done. What do they do with the fees they have? They pay for the cost of the patent office. They don't need more money. This is just cash that will be spent on all the stuff that we don't need the government doing. We need the government to spend less. Not to figure out how to loot more people to give it more cash. Can you imagine the salaries that they'd want? The big palatial offices that they'll be building for themselves. You can imagine what these characters would do with this cash. This is one of the worst ideas to ever come up in the US government. And that's saying something.
Giachino (15:28.0364 - 15:39.0429)
For sure. Grover, what do you think the likelihood is of something like this moving forward? Then, of course, probably even a higher likelihood of there being a legal challenge.
Norquist (15:40.0359 - 16:41.0770)
I do think that there would be a legal challenge to it. Anything that generates revenue needs to go through the House of Representatives first. That's in the Constitution. It's pretty clear [in] the Constitution. This is not something that the Executive Branch can do. It's certainly not something some bureaucrat can do inside the government. So it's a bad idea.
The President does meet with and listen to many business leaders. I think he will be surprised at how many people find this to be damaging and how damaging it would be. This is a big gift to China. The President, in theory, is not in favor of giving big gifts to China. Whoever recommended this to him should be fired and thrown out of a window. A low window like on the first floor.
Giachino (16:42.0780 - 17:00.0289)
Wouldn't such a tax like this run counter even to President Trump's pro-growth policies? He's been talking about increasing American competitiveness and innovation and bringing R&D back to our US shores. Essentially this seems counter to that.
Norquist (17:00.0450 - 17:39.0420)
Yes, it is. That's why I don't think it will survive. The President has a lot of people come in, show him an idea and often these are ideas that somebody's thought through and that Republicans have wanted to do for many years, but we couldn't because the bureaucracy wouldn't do it. Presidents wouldn't take on the bureaucracy.
Trump is willing to take on the bureaucracy. He needs to be certain to distinguish between really good ideas that were stymied by the other party and by the bureaucracy and truly stupid ideas that have not been put forward because they were truly stupid and destructive.
Giachino (17:39.0569 - 17:54.0640)
This is certainly one of those. Taking it down to [how] we started our conversation today. Why should every one of us care about IP protection? A tax of this type, Grover, what do you think that would ultimately mean for consumers?
Norquist (17:54.0839 - 19:58.0675)
It will slow economic growth. It would raise prices on everything. If you go ahead and do the effort to create something and get a patent for it, it'll make it more expensive. So the prices will go up for every American who buys something. It will be more expensive.
That's not a particularly helpful idea to have a deadweight cost of government added to every new invention. Particularly every new invention. Who knows on the new inventions how much they're worth or what their value is. How much money are you willing to put behind something? The more money you put behind a new product, the more likely it is to succeed. And then they turn around and decide to loot you more. This is not helpful.
This is very unhelpful, and it is the opposite of what the President said he'd do when he ran for office. It's the opposite of what he does in most cases. It seems to me to be some bureaucrat who doesn't understand that he's not running a for-profit monopoly. It's easy to run a for-profit monopoly. You've got a monopoly. You just steal everybody's money. There is nothing clever about that. We're the Post Office and we're raising prices because we have a monopoly. OK, that's not a very good idea. It's not very clever, and it doesn't take any brains to do that.
Government is dangerous because government is always a monopoly. That's what we have to protect against. If we had seven different groups doing patents and they competed to approve your patent fastest at the lowest cost, that'd be pretty impressive. Instead we have one bureaucratic one and then they want to decide to jack up the price and act like they've just accomplished something. We're making money now. No, you're running a monopoly. Of course you can make money selling your product because you arrest anybody who doesn't use your product because you have a monopoly. The government monopoly. That's not something you'd be proud of.
Giachino (19:58.0895 - 20:12.0839)
We sure would see government grow with a tax of this type because someone's going to have to police it. Is that going to be expanded powers of the IRS? It is my understanding we're trying to constrict the powers of the IRS and should.
Norquist (20:13.0319 - 20:53.0339)
Yes. Then they go, you invent something, it goes inside another product, well how much is the value of the new product versus the old product? And somebody has to do a guesstimate of this. It gets the government all into other people's business that it doesn't need to.
There are lots of things that are important to be done. This is wasting the President's time and other people's time. It probably isn't legal. So it'll have to be struck down by the courts. Thanks to President Trump we have a Supreme Court that takes the Constitution seriously.
Giachino (20:53.0760 - 21:21.0359)
Grover, I can't thank you enough today for making the case that market-driven research and development has to continue to be supported by strong intellectual property rights if America is to remain the leader in this IP world.
I thank you for the work that you are doing and the work that ATR is doing in this arena. I thank you for your time today. Our guest has been Grover Norquist, President of Americans for Tax Reform. Thank you so much, Grover. I appreciate your time.
Norquist (21:21.0660 - 21:22.0229)
Thank you for the opportunity.
Giachino (21:22.0229 - 21:24.0359)
Have a wonderful afternoon.
Norquist (21:24.0550 - 21:25.0060)
You too.