Defense Of Pharmaceutical Patents Still Not Adding Up

from the something-doesn't-seem-right-here dept

The pharmaceutical industry is a very interesting one when it comes to discussions of intellectual property. Even among those who dislike patents in other places, the pharmaceutical industry is held up as an example where it absolutely does make sense. However, there are reasons to question this -- and two recent stories help highlight some of the questions around the belief that patents are necessary in pharmaceuticals. The question, of course, is complicated greatly by the moral questions involving lives on the line -- but even setting that aside, there are reasons to believe patents aren't just unnecessary, but potentially damaging. Nobel Prize winning economist Joseph Stiglitz has been on quite a rampage over the past few years, publishing articles every few months pointing out how patents slow down pharmaceutical innovation. Meanwhile, economists David Levine and Michele Boldrin have a whole chapter in their book on intellectual property that shows that pharmaceutical industries have done fine even in countries that don't allow drugs to be covered by patents. Within our own government, the GAO released a report late last year noting that patents are harming drug development.

More recently, this has flared up with the stories about pharmaceuticals in Thailand. Thailand has decided to ignore the patents on an AIDS drug and a heart-disease drug for the good of its own people -- leading some to bizarrely suggest that "it's a wonder" that drug companies still invest in drug research. As David Levine points out, does anyone actually believe that no one would have invested in AIDS research if they knew that Thailand would ignore the patents? The story is made even more ridiculous by one pharmaceutical firm's announcement that it will no longer sell drugs in Thailand because of the government's decision. This seems doubly stupid. By refusing to market their own drugs there, they simply guarantee that the entire market goes to other providers.

And, as for the biggest question about how pharmaceutical companies can make back money if exact replicas in the form of generic pills are on the market, it appears that's not quite as big a problem as the pharmaceutical industry (and patent system fans) would have you believe. Stephen Dubner over at the Freakonomics blog has a post about differential pricing in the pharmaceutical industry that points to a Wall Street Journal article on the same topic. While the core of both articles is about how the difference in drug prices (mainly for generic drugs) between pharmaceuticals is huge, a secondary point of interest is that the brand name off-patent drugs still command a noticeable premium over the generic copycats. It turns out that brand certainly does matter for drugs (especially in the US, where direct consumer advertising of drugs is allowed). So with all of that, it's hard to see how the claims that generic drugs (being identical to the patented versions) destroy the market for the original drug holds up. Just like any other competitive industry, being first and having an identifiable brand (even with identical copycat products) allows the originator to command noticeable premiums.

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  1. identicon
    Extreme Centrist, 17 Mar 2007 @ 2:38pm

    I'm old enough to take lots of (prescription) drugs, and, being self-employed, I wish some of them were a lot cheaper.
    I'm also old enough to remember when none of these drugs existed, and how a lot of people died who would now take some pills and be fine.
    Last, I live in a small city with a big pharm-co. Everyone knows people who work there, and we all known something about the economics of drug companies. Getting a drug to market takes close to 10 years, and 95% fail in the sixth to ninth years. If the drug companies don't hit home runs on a regular basis, they go out of business. Take away patents, and home runs turn into singles. The rhetoric that the pharm-co's won't be harmed by taking away their patents is just as stupid as politicians saying that the California electric companies wouldn't be harmed by deregulati Sorry, a brown out caused me to lose a few letters.
    ** Only new drugs are truly expensive because of patents. No high prices, no new drugs. This is a lose/lose situation. **
    This entire discussion, while it is very important, is about politicians pandering to the AARP. I hope it stays talk, because my city, which I like very much, will be screwed if this goes anywhere.

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