From a letter to the editor in today’s Financial Times, an argument that I hear very regularly these days:
As a matter of public policy, surely patent protection for drugs that treat deadly diseases such HIV/Aids should not be handled in the same fashion as drugs that treat erectile dysfunction.
While I appreciate the sentiment, I’m uncomfortable with the practical implications. Does someone want to convince me otherwise?
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I’m not sure about that example (there is a very slippery slope for anything even vaguely more health-related than Viagra), but how about equal patent terms for drugs that cost hundreds of millions to research and test, and which don’t have network effects on deployment, and for software ideas that take 5 minutes to think up and a weekend to do an 0.1 implementation, and which have huge network effects once deployed? That is clearly broken.
This argument is really only possible because drug patents exist – if there were no patent protection for AIDS drugs there would be no AIDS drugs of which to ponder patent ethics.
The standard argument goes as follows: Drugs cost a lot of money to produce yet are relatively easy to copy. Without patent protection, innovators have no way to recoup their R&D expenses. Strong patent protection and a lack of price controls are why the U.S. is the world leader in biotech and pharmaceuticals. The balance is that we all share the burden by paying the highest prices for drugs. We get drugs for a bunch of very pressing needs, but the market-driven model is also why we get a bunch of drugs for questionable indications.
Without patent protection, the drug development is not longer innovation-based, but adopts a race-to-the-bottom commodity model. This is something that the Indian pharmaceutical industry is beginning to realize, in reverse. Whereas Indian drug companies have traditionally focused on producing generic versions of drugs patented elsewhere, their adoption of TRIPS accords and worldwide patents are comepelling resident firms to start innovating.
What patents do is reward innovation by granting innovators a temporary monopoly. In exchange, innovators must publish the best mode to practice their invention – this facilitates open adoption post patent expiration (this is a biggie – trade secrets, the alternative to patents, never expire). The alternative method to incentivize innovation without patent protection would be to pay for R&D expenses up front, essentially having the government fund all of drug development.
So the question is, when do you want to pay: up front or after the fact; and, who is more capable of developing innovative new drugs: government sponsored research institutes or market-driven pharmaceutical companies?
The answer isn’t a simple one. Both systems have their pros and cons, but ask yourself this – which country is best at producing needed drugs, and how does it incentivize their development?
A couple points:
Re: US leadership in Pharma, while I think our broad patent protection is likely a big cause, it’s important to note that I *think* this to be true. Correllation does not imply causation, etc.
A very big criticism of the American approach is that there are strong market incentives to create drugs that TREAT SYMPTOMS (continued revenue stream) as well as disincentives to TREAT DISEASES (one-time payment). I know incentives remain to cure disease permanently, but my point is valid. I have no suggestions to address this problem.
Finally, much of the funding towards drug R&D occurs in government funded universities and studies. Often breakthroughs are then sold to the big Pharma firms or spun off into smaller drug companies. Why do they get to profit off of public funding?
Clearly the US leads in drug research. Patents seem to be at least somewhat effective at encouraging this. I just worry that the continued sales of Viagra is more appealing than the creation of a one-time AIDS vaccine.
Mark