Why should profits made with IPR protection, patents, be taxed the same as profits made in the nude?

Sir, I refer to Andrew Ward’s “FT’s Big Read on Drug Prices: Tweaking the formula” April 26.

First of all I did not know of Nice and I must admit I am impressed that some formal rulings exist on whether to fund the use or not of some medicines. That certainly must help to put a lid on some bureaucrats’ “flexibility”.

That said, the article reminds me of a question I have posed many times before, including in Op-Eds in my country Venezuela, and in letters to you.

Why on earth should profits derived from operations under the protection of an Intellectual Property Right (IPR), patents, be taxed at the same rate than profits obtained fighting it out in the markets, naked, with no protection at all?

Surely the revenues of a special IPR/Patent profit tax could be ploughed back into some type of insurance scheme that could help cover some medicine costs the society can in general not afford to cover.

@PerKurowski ©

Risk-adverseness is also the subject of fashion.

Sir, John Kay asked “Why do we need to pay billions of pounds for big projects” August 21 and I suddenly remembered an anecdote, from some decades ago, which might illustrate one of the causes. 

In Venezuela, after a devaluation of its currency, the Bolivar, I witnessed amazed a CFO of a big multinational covering his company’s Bolivar positions by buying a swap at an absolutely absurd high price, and which de facto guaranteed a much larger loss that anything that could happen leaving that position un-hedged. I asked him why, and this is what he answered: 

“Per I know this is utterly silly, but you have to understand me, if I spend millions of dollars covering this exposure, and that would result in a huge waste of resources, nothing will happen to me, but, if I lose one single dollar, because of a non-hedged FX position, I am out!” 

In a similar way, if a bureaucrat spends millions of dollars more in order to have a reputable name carry out the works nothing happens, but one dollar of loss suffered in the hands of an unknown, that can bring him down… and the “reputable” make it of course their business for this to be well known. 

So you see, not all same risks are equal, even when measured in dollars, or pounds. Risk-adverseness is also the subject of fashion. 

Look at bank regulators, if banks go down, they feel responsible, but, if the economy tanks because of how they try to avoid bank failures, that doesn’t seem to bother them.