The Public and the Private

The question as to what is public and what is private was thrown back in front of federal judges today as PhRMA sue’s the State of Minnesota over the Alec Smith Insulin Affordability Act. The act, which passed unanimously, obliges pharmaceutical companies to provide qualified recipients with a thirty day dose of insulin for $35.

“The lawsuit claims that because the law requires drug manufacturers to provide insulin at a reduced price — without any compensation from the state in return — it violates their Fifth and 14th amendment rights, which prohibit the state from taking private property for public use without just compensation.”

It will be interesting to see whether this is deemed a taking of a private good, or a shortcut to buffering the shortcomes of a particular industry. In the construction industry builders are required to pay into a fund to cover the state mandated ten year warranty on specified portions of the construction cost for builders who go bankrupt during the warranty window. All builders pay into a pool that rescues the consumer of an ill effect of the high risk nature of property building and development.

The nature of drug consumption is a great advantage for drug companies, as the consumer will need their product for self preservation. Yet the downside risk to the industry is that it leaves those consumers without funds in life threatening situations. Perhaps the act should have required the pharmaceuticals to set up a fund that would pay out coverage in this situation. But that would have added a layer of administration.

So it seems to me that this is not a taking of a private good by the public, but a means of buffering the downside of an industry which benefits from its upside.

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