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
    HG, 18 Mar 2007 @ 11:19am

    The pharma industry doesn't receive HUGE amounts of money from the government for research!!! That's what 60 minutes would like you to believe, but the fact is that MOST of the government money that isn't spent by the government goes to universities to do the research. The rest goes to that National Institute of Health. Is is extremely rare that ANY medicine in use today has resulted directly from government funded research. Rather, this research typically tests concepts for new drugs. The pharma companies peruse the results of these concepts and then begin exploring routs to develop a molecule that may be linked to the discovered concept. Many fail and these failures cost billions of dollars annually. Few succeed and make it to the market.

    A typical drug patent is 20 years and the clock begins ticking at the moment the molecule has been discovered. Then it must be developed and tested for safety in 3 or more phases of trials. On average, these testing phases last 12-14 years. Once the drug hits the market, it has 6-8 years to recoup not only its development costs, but also the development costs of all the others that failed along the way.

    Oh, don't forget this: the lawsuits and patent challenges begin usually 1-2 years after the drug hits the market, so now their are huge legal fees on top of it.

    Do you get it? Don't trivialize this topic unless you dig deeper. Don't mess with the development of new cures. I am selfish. I want whatever it is that may kill me later in life erradicated before I can get it!

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