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
    Oliver Wendell Jones, 16 Mar 2007 @ 4:59pm

    Patent Trade Offs

    If you develop a new way to record data on an optical disc, you get a patent and it becomes a huge hit and within a few years people all over the world are using your new technology. You become wealthy.

    Then, for no apparent reason, people who use your technology start falling over dead, or they start giving birth to children with birth defects, or other random but serious issues appear. Tens or hundreds of thousands of people world wide join in class-action lawsuits and wipe out all of your profits over night.

    Not likely? Of course not, because technology doesn't usually affect people in that way - pharmaceuticals do.

    You can test a new potential drug on 100,000 people for 10 years and never see a single issue - because 100,000 people doesn't account for every possible genetic combination, medical family history, potential life threatening illnesses that won't show up until later in life, etc.

    The only way you can get a pharmaceutical company to drop it's "as-long-as-possible" patent protection is to offer immunity from all possible lawsuits resulting from people using the new drug assuming that clinical trials are run to a certain specified standard (i.e., 10,000 people use the drug for 18+ months with no side effects). Otherwise the pharma companies need to squeeze every last cent out of every drug they develop to offset the potential losses from a huge lawsuit (think Vioxx, Phen/Fen, etc.)

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