Report Says Patents Prevent New Drugs

An anonymous reader writes "Current orthodoxy claims patents encourage innovation, by allowing developers to enjoy profitable monopolies on their inventions which in turn inspire them to create new inventions. A new report by the non-partisan General Accounting Office suggests that this orthodoxy is wrong — at least when drug companies are involved. According to the report, existing patent law allows drug companies to patent, and make substantial profits off of, "new" drugs which differ little from existing medicines. Given high profit margins on very minor innovations, the report argues that drug companies have little incentive to produce innovative new drugs. In other words, current patent law actually discourages drug companies from producing new medicines. Responding to the report, Senator Dick Durbin (D-IL) released a strongly worded statement suggesting that a legislative response will be forthcoming. "The findings in this new GAO report," said Senator Durbin, "raise serious questions about the pharmaceutical industry claims that there is a connection between new drug development and the soaring price of drugs already on the market. Most troubling is the notion that pharmaceutical industry profits are coming at the expense of consumers in the form of higher prices and fewer new drugs.""

Comments

Something different?

[itlurksbeneath]

I realize that making drugs (or any other product, for that matter) requires research and testing, etc., and manufacturers need to recoup that money spent. Plus, profits from a block-buster drug go into funding expensive research on drugs that can only target a very small portion of the population. However, making tiny changes to an existing drug and calling it "new" sucks, unless the change actually has an effect on how the drug works or reduces a side-effect.

Having said all that, maybe there should be a patent peer review board (or, in government speak, the PPRB) that reviews the validity of a patent request. Maybe patents should be harder to get and you should really have to prove your stuff is unique. After some of the vague, hand-waving tech patents, I've read, it's obvious that the guys in the government reviewing these things don't have a clue.

Thank You For Me-Too Drugs

[mcwop]

I for one am super thankful for me-too drugs. I have been through 4 iterations of basically the "same" drug for my condition. The first one caused a lot of awful side effects, and stopped working for me after awhile. The next few variations of the same thing (5-aminosalicyclic acid (5-ASA) were more effective and had no side effects. I was diagnosed with my condition about 14 years ago, and these little innovations have made all the difference.

Pharmaceutical patents are a bad idea

[Christian Engstrom]

The organization Doctors Without Borders experience first hand the effects of the patent system in third world countries.

For example, in a recent press release they write:

The case of AIDS illustrates the trend. While fierce generic competition has helped prices for first-line AIDS drug regimen to fall by 99% from $10,000 to roughly $130 per patient per year since 2000, prices for second-line drugs - which patients need as resistance develops naturally - remain high due to increased patent barriers in key generics producing countries like India.

By allowing the pharmaceutical companies to keep their prices artificially high, the patent system kills people every day, particularly in third world countries. And it's completely unnecessary.

The standard argument for allowing the pharma companies to charge whatever they want for patented drugs, is that they spend the excess revenues on research for new drugs. But that is not true.

We can look at the numbers for Novartis, Pfizer or AstraZeneca.

They all spend around 15% of their revenues on research. The number is typical for the industry. The other 85% go to other things, according to their own figures. More than half their revenues are spent on marketing an profits.

So there are clearly better ways to finance drug research than to hand out patent monopolies to the big pharma companies, and hope that they will spend the money they make on research. Because clearly, they don't.

The Swedish Pirate Party has one proposal for an alternative system. Many others have suggested other alternatives.

But at least it is time for us to start discussing the problem in earnest. Today's situation is expensive, wasteful and completely immoral. There must be a better way.

Re:Exaggeration

[AdamKG]

"Current orthodoxy claims patents encourage innovation, by allowing developers to enjoy profitable monopolies on their inventions which in turn inspire them to create new inventions" - this is still true.

Whether it is true or not misses the point. The question is not whether patents make Pharma stocks comfortable investments- that is never what a patent should be based on. Rather, the Government should only grant patents when they - as the constitution explicitly says- promote progress. The question we need to be asking, then, is "would a lack of patents lead to pharmaceutical companies investing less in research, or would it spur them to invest even more, so they could stay a step ahead of the competition without the 15-20 year lead of patents?" I don't see nearly enough people asking that question.

Without patents, patent-heavy fields like pharmaceutical research fall into cutthroat, razor-thin-margin price wars - but that is not a bad thing. In fact, it's not too different than desktop computers, where we've seen manufacturers keep up with Moore's law for a remarkable amount of time, even while having to struggle to break even on almost every product. Again, patents do not exist to provide peace of mind to investors; they exist only to promote progress. If ending them, and forcing pharmaceuticals to (*gasp*) innovate to stay in business (and even having a few go out of business when they fail to!) is the best way to promote progress, than that is exactly what we should do.

Of course, All of that only makes sense if Congress is competent and not corrupt... so much for that then.

Re:I disagree

[TheRaven64]

Here in Wales, we have something called the Technium Project. The idea is to have a set of buildings each dedicated to a particular technological field. They are filled with business incubator units (which are expensive, but quite easy to get subsidy for). The idea is that putting all of these businesses close to each other leads to sharing of ideas.

One of the buildings in the project is called the BioTechnium, and is intended for biotech start-ups. Since the building came online, only one person has been employed in it; the building manager. In spite of the fact that it was designed with biotech in mind (decontamination and isolation facilities, etc), there is not a single biotech start-up moving in. Why not? Because no one will fund a biotech company that doesn't have a large patent portfolio. You can't get into the industry without a cross-licensing agreement with all of the major players, and you can't get that without a load of your own patents to offer. The result? A barrier to entry so high no one can get over it.