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> | Eben- this represents a significant overhaul of the first draft, but I think this version focuses on more pertinent issues. | | | | |
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< | Are Patents Appropriate for Pharmaceuticals? | >
> | Is the Patent Bargain Appropriate for Pharmaceuticals? | | | Logic Behind Patents | |
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< | The main idea of a patent is encouraging useful innovation. We want our society to progress, and one mean to this end is the financial incentive of giving the innovator a monopoly on his product for a discrete amount of time, hence a patent. The most common justification for such an exclusive right is society’s benefit from the publication and availability of the invention. Because the social welfare created by the invention outweighs the costs to invent, it is valuable to promote the invention process by allowing the inventor to recover his costs, and gain some level of financial profit from his work. The theory behind this system breaks down if any of these elements are missing. | >
> | Patents are meant to encourage useful innovation. Originally, patents were a means of encouraging immigration of especially skilled individuals to the United States. In exchange for moving here and sharing their skills, the government gave these individuals a monopoly for a discrete amount of time. To the government, the social benefit of bringing these skilled innovators, as well as their products, outweighed the social costs of awarding monopolies because the individuals would establish themselves in the United States and continue to innovate. However, once the social costs of the monopolies outweigh the benefits of the innovation, patent rights are no longer appropriate.
Currently, patent protection is provided for all useful, original innovation, without any cost/benefit analysis. Lacking such a restriction, patent law extols innovation as a goal to be encouraged unconditionally. This appears to be a hyperbolic valuation. This paper discusses the suitability of patent protection with respect to pharmaceuticals. | | | Difficulties with Pharmaceutical Patents | |
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< | Patents for pharmaceuticals are a controversial matter. This is especially the case because pharmaceuticals do not easily fall into the requirements stipulated for a patentable invention. In this paper we focus on three of the major issues with such products: 1) their originality, 2) their utility, and 3) their social costs (i.e. the restricted access to useful drugs resulting from the length of the patent life and the restriction on further advances due to veto power of patent holders). | >
> | Patents for pharmaceuticals are a controversial matter. This is especially the case because pharmaceuticals do not easily fall into the requirements stipulated for patentable inventions. We will first discuss the nature of pharmaceuticals complicating their protectability under patent law, and progress to some of the social costs of pharmaceutical patents. | | | Originality | |
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< | A pharmaceutical drug is a combination of chemicals. The originality in a drug is therefore not the materials, nor the use of the materials, but rather the specific combination of the chemicals. The way that scientists combine the chemicals is based on their physical properties and known reactions. Therefore, how can any “new” combination, based on information possessed by the community, be seen as an original, rather than derivative, work? This becomes even more problematic when considering the rights a patent gives its holder to prevent future derivative work from the patented material. If the new combination is “original”, should not any slight change in the formula be “original” as well? | >
> | Each pharmaceutical patent is based on a single molecule and its affect on a specific condition. From there, new patents arise from the combination of those molecules in order to affect other medical conditions. The originality in a drug is therefore not the materials, nor the use of the materials, but rather the specific combination of the chemicals and its relation to a medical condition. The way that scientists combine the chemicals is based on their physical properties and known reactions. Therefore, how can any “new” combination, based on information possessed by the community, be seen as an original, rather than derivative, work? | | | Utility | |
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< | The utility of each pharmaceutical drug is difficult to determine. Before the true efficacy is known, a drug must go through many stages of testing and clinical trials. However, if we waited to give patents based on their clinical effectiveness, there would be an inefficient number of researchers doing clinical trials all trying to be the first to get FDA approval. Instead, the patent process allows patents to be obtained where future research will be needed to determine the true usefulness of a drug. Thus, because derivative rights are given exclusively to the patent holder, further research within the specific domain is portioned off for the patent holder before the chemical combination is found to be useful. | | | | |
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< | Social Costs
The danger of monopolizing derivative rights, as mentioned above, rests in the limitation of possible progress. With the stated goal of encouraging progress, limiting derivative works seems to be counter-productive, especially in an area where every product is seemingly derivative and patents can be obtained without proving utility.
The length of the patent protection exacerbates this dilemma. The longer a patent holder has exclusionary rights (now in the vicinity of 20 years), the less innovation is encouraged. If the goal is to help society by offering new pharmaceuticals, long patent lives are neither beneficial nor appropriate. | >
> | The utility of each pharmaceutical drug is difficult to determine before a patent is given, and that utility is often misleading. A significant difficulty with establishing true efficacy is the amount of time a drug must spend going through the many stages of testing and clinical trials. Because of this time requirement, if we waited to give patents based on the pharmaceutical’s clinical effectiveness, there would be an inefficient number of researchers doing clinical trials all trying to be the first to get FDA approval. (Instead, we have an inefficient number of researchers doing clinical trials after the first drug is FDA approved, but we discuss this later.) The patent process therefore allows patents to be obtained where future research will be needed to determine the true usefulness of a drug. | | | | |
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< | Do Pharmaceuticals Deserve Patent Protection? | >
> | Even if this utility is established, it presents a misleading statement to the public. For a pharmaceutical to pass the “utility” requirement, it must simply provide statistically significant results of treating the specific medical condition better than a placebo. It need not out perform, nor even perform at the same level as, pharmaceuticals currently on the market. It need only be better than a sugar pill. This utility becomes even more misleading because pharmaceuticals are healthcare goods, and individuals have great difficulty differentiating and evaluating the efficacy of healthcare goods. Even without this complication, the fact that new pharmaceuticals need only treat the medical condition more effectively than a placebo, and not treatments already available, calls into question the true “usefulness” of new pharmaceuticals. | | | | |
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< | Proponents for pharmaceutical patents argue these special aspects of pharmaceuticals make it even more necessary that pharmaceuticals be provided patent protection. They point to the high-initial and low marginal costs of pharmaceuticals. The “inventor” will need to put significant capital into the research and development of the drug, but each drug can be easily copied for significantly less money. Therefore, the claim is that without patent protection, free riders would wait for others to spend the money researching, copy the formula, undercut the “inventor’s” price and thereby eliminate all incentive to invest in pharmaceutical research. | >
> | Social Costs | | | | |
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< | This argument is flawed. First, it assumes that the only reason anything is ever done is for money. While money plays a large role incentivizing conduct, it is not the only reason people are motivated to invent. Even without arguing an altruistic world where individuals perform a socially beneficial act with the purpose of bettering society, there are many personal reasons that pharmaceuticals will continue to be developed. The individuals performing the actual development of the drugs are scientists. They have been dealing with the chemicals and their effects for significant periods of their lives. There are easier ways to make money than through pharmaceutical research, and if it were only the money, these scientists would be in a different line of work. Instead of money, it was a personal interest, whether adding to the scientific body of information, curing a specific condition, achieving fame in the scientific community, or love of the actual scientific procedure, that brought these individuals to the field. This original motivation does not disappear without the ability to make an exorbitant return on the “invented” drug (even in today’s system it is the companies, not the scientists, who see this extreme level of profit). Some individuals may decide not pursue this profession without the promise of huge bonuses, but it is a gross hyperbole to state all research will disappear. | >
> | Coupling the questionable utility of pharmaceuticals with individuals’ difficulty of determining their utility creates perverse incentives for pharmaceutical companies. First, FDA approval of a drug incentivizes pharmaceutical companies to market that drug aggressively. The company has already sunk large amounts of capital into the research and development, and will then try to recover its costs and gain a profit by direct advertising to the public and physicians. Because individuals cannot determine the different efficacies of the available treatments, they turn to advertisements and their doctors. Consumers turn to advertisements first because pharmaceutical companies convince individuals to ask their doctors for the company’s pharmaceutical through direct ads. If the drug has some positive efficacy for the condition, which is a requirement for FDA approval, it is extremely difficult for doctors to deny the patient what they want. Even when patients turn to their doctors first, the recommendations are influenced by the massive propaganda campaigns pharmaceutical companies aim at physicians. Since FDA approval does not require any comparison testing of the new pharmaceutical and existing treatments, physicians have no data as to which treatment is best for the patient. The social cost is therefore that individuals are not receiving the best treatment available. They are not aware of what the best treatment is, and are greatly influenced by wanting the “latest and greatest” treatment. (For more on pharmaceutical marketing leading to expensive drugs being used rather than more effective treatments, see the New York Times article on the ALLHAT study here. ) | | | | |
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< | The argument also runs into a problem claiming all capital for research and development will disappear because of weakening patent protection. As it is, the government already subsidizes approximately half of the costs of pharmaceutical research and development. In addition to the government, grant foundations fund scientific research every day. Grants fund research that adds to the scientific body of knowledge without providing the foundation any monetary return, and still this science takes place. How many neuroimaging studies would take place without public or private grants? Yet, they continue to receive funding without the immediate impact on the population’s health that pharmaceuticals have. | >
> | This heavy marketing incentive is compounded by the incentive for pharmaceutical companies to create drugs targeting the same conditions as recently patented drugs. Once one drug for a specific condition receives patent protection, all other companies who ever want a profitable monopoly treating such a condition must patent a similar drug as soon as possible because such a patent is worthless when the first drug becomes generic. This seems to introduce competition into the market, which would therefore benefit consumers, but it is a false benefit. The social ill of confusing advertisement campaign has been already been discussed. In addition to this, the government subsidizes approximately half of the costs of pharmaceutical research and development. Do we really want to spend our tax dollars creating multiple pharmaceuticals for the same condition without evaluating whether that money is going to pharmaceuticals that are better than the already available treatments? | | | Conclusion
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< | It may be necessary to retain some type of monetary incentive to encourage pharmaceutical innovation and pay for the research and development. However, because of the nature of pharmaceuticals, patent law is not designed to protect these creations, and our society pays for this application of the wrong regulatory scheme. | >
> | Whether it is necessary to retain some type of protection for pharmaceuticals to encourage development is questionable. It is unquestionable that because of the nature of pharmaceuticals, patent law is not designed to protect these creations, and our society pays for this application of the wrong regulatory scheme. | | |
-- MattDavisRatner - 26 Nov 2008 |
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