I've long agreed with this type of thinking, but i like the way Dean Baker phrases things here:
In her Washington Post column Megan McArdle tells readers that we are making great progress in developing cures for cancer, but then she warns these cures can be very expensive...
The part missing from this story is that the reason these cures would be expensive is because of the government-granted patent monopolies that make them expensive. Without these monopolies, these therapies almost certainly would be cheap.
We do have to pay for the research, but at the point people are receiving these therapies the research has already been done. We are trying to recover these costs from people facing a potentially fatal disease. This situation is made even more perverse from an economic perspective since most often there are third party payers, either insurers or the government. So we will expect these people and/or their families to be spending time lobbying insurers or the government to pay for incredibly expensive treatments, which may or may not be helpful.
What a brilliant system!
The alternative is to pay for the research upfront. The government currently spends more than $30 billion a year on bio-medical research through the National Institutes of Health. We could triple this amount to replace the research that is now patent-supported. It can still be done through the private sector, even by the same companies. They would just be working under long-term contracts -- think of defense contractors...
In addition to having the benefit of all new therapies available at their free market price, which would almost always be cheap, this system would have the advantage that all the research results would be immediately available to other researchers (a requirement of funding) so that research could progress more quickly. In addition, this system would remove the incentive that patent monopolies give companies to lie about the safety and effectiveness of their drugs.