The EU’s Dubious ‘Free’ Trade Agenda on Pharmaceuticals

By Robert Kennedy

The SARS-CoV-2 pandemic has shocked many of us. But perhaps the most shocked were those in the European Commission who are responsible for the provision of pharmaceuticals to the populous. In a roadmap plan for a new piece of legislation, the Commission lays out a comprehensive approach to regulating pharmaceuticals and free trade, based on the lessons learned from the pandemic. A key idea of said legislation is the improvement of patients’ access to safe and affordable medicines while also supporting innovation in the EU’s pharmaceutical industry. It is meant to address the life cycle of medications, putting scientific and technological advances into practice, filling market gaps and applying the lessons learned from the pandemic. This strategy aims to achieve strategic autonomy of the EU from the world’s pharmaceutical market. In a very mercantilist fashion, the roadmap describes a set of ideas that would inhibit foreign companies from participating in the EU’s market, while also propping up domestic producers. Now, whether this would actually have the intended benefit of increasing patient access to medical care or would only serve to continue the overregulation of Europe’s markets is another question.

There are a number of specific issues that one could pick apart for the sake of demonstrating the misguided nature of this regulation. Let us start off with one of the most fundamental issues of this roadmap: need-driven development does not require government intervention to function! This proposed legislation has numerous declarations within it that assume a free market needs the intervention of a government to provide what is demanded by the consumer. This is fundamentally wrong. In fact, the only real impact a government could have by interfering with this most basic economic principle of consumer demand, would be to make things a lot more inefficient.

One rather large issue with commenting on this proposal is that it does not actually suggest any concrete regulations, rather, it makes a declaration of what the government should do without providing an explanation for how it is to be done. A prime example of this is the statement that the EU should “ensure the affordability of medicines for patients” How? And, perhaps more importantly: how is a government supposed to do that better than a market?

Another dubious claim, which I referenced earlier, is that the EU should put barriers on the free trade of pharmaceuticals in order to achieve strategic autonomy from other nations. But rather than doing this by deregulating Europe’s internal markets or strengthening intellectual property rights, the exact opposite is proposed. Namely, that the EU increasingly intervenes in the market through legislation and worsens it further by closing it off to foreign competitors through a method not documented in the literature but can be assumed to be either tariffs for the foreign competitors or subsidies for domestic producers, as well as weakening IP rights. All this would do is increase inefficiency and, with that, the price the consumer has to pay, thus rendering the regulation effective at doing the exact opposite of what it is intended to do, by pricing the poor and disadvantaged out of the market, decreasing patient access to medicines.

Fundamentally this is an issue of government overstepping its bounds. Though the intentions of these ideas are undeniably good, that does not make the ideas good. We may declare proper access to safe and affordable medicines a human right, but as is so often said in rebuttal of such arguments, just because it is a human right does not make it immune to scarcity or the laws of the free market. Fundamentally, government can never grasp the complexity of the relationships between individual consumers and producers, and in all the instances where government has tried it, it has failed. It is vital to understand that in most of these previous occurrences the intentions were just as pure and good as they are now, but it is a slippery slope we go down.

Probably one of the greatest scams of all time is that government has somehow gotten large portions of the population to support the regulations that will eventually, when applied thick enough, lead to government control, and with that, the downfall and destruction of freedom, all while believing firmly that what is being done is good and pure and will make our collective lives better. The famous proverb the road to hell is paved with good intentions, sums the point up nicely.

Robert Kennedy is a research intern at the Austrian Economics Center.