Patent Laws in Pharmaceuticals

Economics Economics Questions
1

I’m having trouble understanding IP, and, specifically Patent Laws in Pharmaceuticals because of the inherently risk-oriented nature.

Considering how front loaded and capital intensive drug manufacturing can be, how would companies justify the skewed risk/reward that would result from not being Patent protected for X amount of years to recoup their massive RnD expenditures while trying to make a profit?

Put simply, would it not stifle risky and potentially groundbreaking medical RnD for medical patent law to not assure a short-term recovery and expansion of capital?

Note: I realize this is a utilitarian argument, and, yes, I’ve already read articles on this subject, so please don’t give me more hyperlinks :slight_smile:

2

2 points to consider:

  1. Why is drug manufacturing so front loaded?

  2. Why don’t manufacturers of branded drugs lower the drug price once the patent expires?

3

  1. Because scientific innovation requires a tremendous amount of capital, as opposed to other types of innovation, like art and literature. Not only this, but only a fraction of these costly experiments lead to anything fruitful at all.

  2. I’m not sure that this is true; prices fall a good deal once a patent expires, but not always to the level of generics. This can be ascribed to brand recognition.

4

Your OP makes absolutely no sense. You claim to have read the material that directly refutes/answers the exact questions you pose, and yet, here you are posing them.

5

OK, well you got me. However, I only have a tenuous grasp on the concepts expressed in those articles (that you organized, apparently), and I was fishing for someone deeper down the rabbit hole to explain it in different words. By playing devil’s advocate I am trying to work out the kinks in my own understanding.

This is my favorite of the articles thusfar: http://archive.mises.org/9300/

But, I must admit, while I can certainly understand literature and music, and even the computer boom of the last 35+ years, the pharmaceutical patents seem to be of a different nature. I can buy that the patent system raises costs for the consumers (and leads to the larger issue of healthcare availability), yet I am having trouble understanding how we could see the same exponential advances in medical science that we have seen in the last 50 years without the increased incentive to fund huge (and risky) R&D. Forgive me if this seems inane.

6

This is why I am always suspicious, and actually quite annoyed with people who go around posing questions and then pre-empting any responses they might get by informing everyone that they essentially already know everything and are familiar with all the resources anyone might recommend to them, so “please don’t try to tell me to go read something.”

If you’re so knowledgeable and well-read, why the hell are you asking questions? Either you’re in need of further education or you aren’t. Don’t try to have your cake and eat it too by trying to get others to offer you insight while at the same time alleging that any resources you might be linked to are beneath you.

If you desire assistance, at least be honest and humble enough to acknowledge that obviously you don’t know everything, and be open to any input you might receive.

If you’ve already read something on the subject, great. Provide a list so you don’t get suggested something you’ve read. Or better yet, point out a specific passage from something you’ve read and explain what it is you don’t understand or why you don’t think it’s a very good argument and what sort of support you’re looking for. But don’t sit there before you’ve even received a single response and say essentially “I’ve already read everything so don’t try and give me any hyperlinks. kthanks :)”

I’m gonna directly reject your restriction and do just that. If you’ve already read these articles then kindly point out exactly why you don’t feel they address your objections and offer a counter argument.

Pharmaceutical “Printers” and Patents

Kinsella on The Medical Freedom Report: Patents on Medical Technology and Pharmaceuticals

Citizen Science, Microfinanced Research, Patent Trolls, and Pharma Prizes (especially the comment thread)

The FDA-Patent Pharmaceutical mess

Tabarrok’s Launching the Innovation Renaissance: Statism, not renaissance (seach for “Regarding patents for pharmaceuticals”)

There’s No Such Thing As a Free Patent

Patently a Problem [trailer] [full film]

That ought to get you started. I can offer more if you can offer a compelling counter argument that would require it.

7

No, prices don’t fall a good deal once a patent expires. I know because I sell them for a living.

The game is played like this:

  1. Drug loses patent and goes from tier 1 on patient’s insurance to tier 3.

  2. As a result, patient’s copay increases from $10 to $60.

  3. Drug company then gives patient a voucher worth $50 to reduce patient’s copay back to $10.

  4. Since the cost to the patient hasn’t changed, they don’t switch to generic competitor.

  5. Drug company can then continue to gauge insurance company for ridiculous prices.

8

??? Why dont the insurance companies react by increasing the co-pay again?

9

I appreciate your response and I’ll be sure to read those articles and get back to you with any specific questions.

However, I really never claimed to be well-read at all. And just the fact that I’ve read a couple articles does not mean I have successfully absorbed the concepts and ideas therein, which is why I simply wanted to read what someone else had to say about it. I believe that is the student-teacher relationship, and I consider myself to be very much a student amongst much more knowledgable people like yourself. Sorry for annoying you through my unwitting ignorance, but no need for the vitriol.

10

Ignorance is not a crime…just maybe don’t cut off responses before you even get any?