Are Patents Appropriate for Pharmaceuticals?

Logic Behind Patents

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.

Difficulties with Pharmaceutical Patents

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).

Originality

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?

Utility

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.

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.

Do Pharmaceuticals Deserve Patent Protection?

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.

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.

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.

Conclusion

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.

-- MattDavisRatner - 26 Nov 2008

I realized as I was writing that there were more and more aspects that I had to leave out. I wanted to mention the problems arising from having different protections in different countries which would necessarily lead to a discussion of capital flight, but it did not seem to fit in. I also hoped to provide a little more of a discussion of some possible solutions to the problem, for instance cutting the costs of FDA approval, but without more background it seemed out of place.

-- MattDavisRatner - 26 Nov 2008

I think this essay is a complicated one to write--putting the case for skepticism about pharmaceutical patenting in 1,000 words is hard, because there are so many myths about drug development that go into the story of "the $800 million pill." It isn't easy to indicate the lines of refutation all the way around.

You make it a little harder on yourself, too, by being a less than fully precise on some points. The single-molecule model of pharmaceutical patenting is important to discuss, because indicating the forms of inventing or innovating that would substitute for the patent pipeline requires explaining the relation between basic research into disease mechanisms, the physical chemistry of drug discovery, and the epidemiological nature of 3-stage controlled trials.

You also should have considered describing how patenting changes the incentives with respect to stable, effective treatments. The Allhat study on hypertension drugs and the marketing effort that followed, described in the New York Times on November 30, as well as the fate of the Lipitor patents which so intimately involve the same subject matter, would make a feasible case study. These issues are far more important to the realities of pharmaceutical development than capital flight arising from different terms of patent protection, which is not a real-world issue. Contemporary pharma, dependent on statistically significant treatments for lifestyle diseases, rather than the "wonder drugs" that cured acute life-threatening infections for pennies, maximizes revenue by treating richer people: capital flees poverty and its diseases, not shorter patent terms.

-- EbenMoglen - 01 Dec 2008