Should a New Technology Change the Patent System?

linuxizer writes "Congress seems poised to turn an effort to create a pathway for generic biotech drugs, such as Remicade, into the exact opposite. Instead of the 5-year protection that traditional pharmaceuticals get, or the 0-year protection that the FTC recommends, the bill offers 12-year exclusivity with renewability for minor changes. The issue is highly charged, with activists waging a campaign to change the bill. Yet it also raises interesting questions for other technologies. To what extent do the traditional contours of patent law need to change in response to new technologies with a different set of market realities (biotech drugs are 22 times more expensive on average, and development costs for generics will be substantially higher) and in what direction? Need every new technological category get its own patent rules, and how do those rules get decided?"

Comments

People with the Money Call the Shots

[eldavojohn]

Apparently the author of the summary is unfamiliar with lobbying so here goes the simplest explanation I can think of for it.

Need every new technological category get its own patent rules, and how do those rules get decided?

Depends on the leaders of that category. The people with the most money will give tiny amounts of that money to the lawmakers. Then a bill is introduced and these weird rules probably get tagged onto some bill that has a much more important focus (like health care or one of the various wars we are engaged in). Since all the lawmakers received money from the the people with money, nobody objects.

Here's one of many examples in which a bill titled "Affordable Health Choices Act" gets tiny peppering of patent law attached to it like this (which is in regards to the category 'interchangeable biological products'):

... (i) a final court decision on all patents in suit in an action instituted under subsection (l)(6) against the applicant that submitted the application for the first approved interchangeable biosimilar biological product; or

(ii) the dismissal with or without prejudice of an action instituted under subsection (l)(6) against the applicant that submitted the application for the first approved interchangeable biosimilar biological product; ...

What's worse is that no voter immediately cares. Everyone cares more about things that directly affect them--like their health or their kin dying on some god forsaken soil. The immediate threat of these lobbyists is not only unseen but no one is held accountable down the line. You have to get someone not too politically savvy to be the poster child/target for this stuff if it's a whole bill you're introducing -- like Sonny Bono on copyright extension. Oh and there's another neat little thing in American politics where if you vote for that bill and then something like this gets added and you vote against the bill, your opponents label you as a "flip flopper", "waffler" or "indecisive."

Now, I paint a picture where opposition to lobbyists never arises because no one makes it a serious issue. But there are a few examples of this working positively. Example is the generic drug manufacturers do actually have some money and realize they are getting the short end of the stick so you have these lobbying wars occasionally. The really ironic thing is that name brand drugs are more expensive for the consumer. But often the consumer is on a health plan where they pay a small percentage or a copay on their drugs. If it is a copay and the consumer buys the $100/dose Calvin Klein drugs instead of the $1/dose Walmart drugs, someone (like your health care provider) is paying a lot more. Now, imagine what kind of state our health care would be in when there can't be any generic drugs for 12 years? Won't matter if you're a copay or a percentage, you'll be taking that $100/dose because it's your health and you can't exactly put a price on your health.

Re:People with the Money Call the Shots

[Anonymous Coward]

Without governments and their power the world would be run by gangs and mobs. End of story.

Now, on this specific issue: I don't know the best answer, and I don't know that there is a "best" answer for everybody. Basically drugs take a huge amount of money to develop and test to get approval. Remove the incentive of exclusivity in the market - so that anyone can copy it (yes, trade secret protection may still be there but reverse engineering will occur) and you will start to see very few new drugs created. If you posit that we already have enough drugs and don't need any new ones then it is probably OK to end protection / exclusivity. On the other hand, if you are hoping for something to combat certain cancers, etc. you aren't going to achieve that goal by ending the protections.You'd end up having to spend even more money having those 'unnecessary' governments inefficiently use money from the public coffers to do drug development and testing and then selling the formulas to generics makers.

Re:People with the Money Call the Shots

[Cassius Corodes]

Sorry but that is just retarded. Drugs require years of basic research then years of testing to get approval, and are easy to copy. See http://en.wikipedia.org/wiki/Drug_development#Cost http://en.wikipedia.org/wiki/Generic_drugs#Economics. You have to strike a balance between ensuring that drug development is profitable, but not excessively so - not an easy thing to do.

Also "governments aren't in no way necessary or even beneficial for healthy societies." - are you on drugs? Where are these fabulous government-less utopias? "In a world without such authorities" you would be still be bartering.

Re:People with the Money Call the Shots

[corbettw]

Without the FDA, the research time on these drugs would be cut from 22 years to less than one. Of course, then you'd have every charlatan out there peddling his snake oil as the latest and greatest cancer cure. And without any research to back up their claims, no one would be able to judge whether or not those claims were true until after trying the drug. And if you're going to insist that companies spend billions of dollars proving their products work, then you have to also protect them and their ability to turn a profit on those products or else no one else will ever develop any.

There's a reason why the majority of drug research is done in the US: we don't force drug companies to give away their products for free. Oh, and incidentally, one of the reasons drugs cost so much here is because other countries do put price controls in place, so we end up carrying the burden for those slackers. Too bad Congress doesn't enact an export tariff on prescription drugs, we'd make enough off that to pay for healthcare.

Re:People with the Money Call the Shots

[TubeSteak]

Oh, and incidentally, one of the reasons drugs cost so much here is because other countries do put price controls in place, so we end up carrying the burden for those slackers.

The main reason drugs cost so much is because the USA is one of the few countries that allows direct-to-consumer advertising of prescription drugs.
Last I checked, pharma spending on advertising was 2 or 3 times its spending on basic R&D.

In case you don't understand: 2/3rds to 3/4ths the price of a prescription drug is advertising.

Re:People with the Money Call the Shots

[Anonymous Coward]

This whole race towards the next patentable drug is a HUGE distraction from looking to acutually improve care

So is academic publishing and grantseeking.

It seems to me that research is best left to universities that can initiate research without the need for direct sales profits to come in later

It sometimes takes years to get a single journal article in print. Not only do companies tend to achieve results faster, being removed from the cycle of publish or perish (because they make their own money and don't have to answer to funding agencies), but they also know how to get something to market after they've invented it - something that many academics can care less about once they've published their results. And because we're operating on the premise that making a profit selling the drug is unethical, they have no reason to start caring. In fact, the situation at the current time is this: the ones who do care about marketing their discoveries start companies to sell the drugs - at a profit. As a medical researcher myself, I'd argue that they have a moral right to be compensated for the years of hard work they invest into their research, but we can also take it on a more practical basis: if they do not have a profit model, they will not be able to continue selling the drugs at all - no matter how altruistic, they would not have the resources to do it.

Recoup period

[BadAnalogyGuy]

Without a recoup period, there is no incentive to develop new treatments. 5 years is probably a good balance. 12 is probably too long. And 0 is the type of braindead proposal you'd get at a discussion site like Digg or Fark.

When you buy your house, a lot of your money is ostensibly tossed down the drain to pay for the interest on your loan. However, this interest is actually the cost to you to borrow that money. So the lower the interest, the lower your cost to borrow money. If you had no interest to pay and had no incentive to pay back a loan on time, there simply wouldn't be a loan market. No one would lend to you because there would be no hope of getting any return on their investment. Just as you expect use of money as the benefit of borrowing, they expect a small rate of interest to recompense them for their loss of the use of the money.

In many ways, the financial and pharmalogical industries are very similar in this regard.

Re:Recoup period

[crmarvin42]

They already are "Buying in" to patent protection.

The billions of dollars required to identify potential bioactive compounds, evaluate their potential plusses and minuses, then prove to the USDA/FDA/etc. that the drug is both beneficial and safe enough for approval don't come from nowhere. The company foots the bill up front, and most of the compounds they investigate either don't work, don't work reliably, or are not safe enough for approval. The company needs to make enough profit to cover the development of the 1 drug that did pass muster, as well as the 100's to 1,000's of chemicals that did not. The high prices on patented drugs pay for the R&D necessary to identify the next drug. If the patent protection is too short, the they run out of money and R&D stops.

I'm not saying I know what the sweet spot is as far as the amount of time a drug patent should be valid for. I don't believe that there is ONE number that will fit in all situations. However, charging companies for patent protection after already requiring them to spend billions on getting FDA approval in the first place is going to just muddy the waters and possibly inhibit R&D spending.

Re:Recoup period

[Halo1]

But you want to get rid of them because of present day technical difficulties that may one day be overcome? That's some good planning there, Lou.

Of course it is. You can always reintroduce them at that mythical day of the second coming when the unicorns finally descend to Earth and solve all problems with the patent system. Patent proponents have been saying for decades that problem X with the patent system would be solved within Y years once the system has adapted to whatever the new development challenging the patent system is (chemical processes, medicine, software, biotech, trolls, court/forum shopping, patent thickets, alternative innovation/dissemination models, ...), while in practice the problems only get worse and worse (increasing examination backlogs, increasing amounts of trivial patents that get granted, increasing court case costs and associated innovation overhead/drain, legal uncertainty, various uses of patents in ways that have nothing to do with increasing innovation such as Monsanto's suing of farmers that are victims of cross-pollination and continuation patents in pharma, ...)

The standard answer to remarks like this is always "don't throw away the baby with the bathwater". Reality check: the baby is long dead, now stop beating it as if it were a horse (hey, I am replying to BadAnalogyGuy).

Re:Recoup period

[Anonymous Coward]

This doesn't make sense - the point of the patent is to allow the company to recoup the cost of R&D on the drug and the other drugs that didn't work out or to fund the R&D for the next drug. Buying extensions turns the research into even more of a gambling proposition - you have to have a mega drug to actually make enough to pay off your failures and even a successful drug might not break even. This would also have the effect of shrinking the number of diseases that can be profitably researched - those affecting only a small number couldn't be profitable even if they succeed, even if there is reason to think that a drug might work for that.

Re:Recoup period

[TubeSteak]

drugs (like software) can't simply be copied and resold, if you develop a new drug you have a good 3/4 years of no competition while a competitor gets reverse engineers it and gets approval for his version, after that you have the fact that your drugs are tried and tested and you've been producing it for 3/4 years.

I don't think you know what you're talking about and neither do the mods.

In the USA, if a generic pill is shown to be identical in function to the original,
the generic pill can use the original's drug trials as proof of efficacy.

Not to mention that reverse engineering most drugs is a trivial act.

What needs to change

[Targon]

To encourage invention or innovation, the system MUST go back to the original reason for patent protection in the first place. The idea is that new ideas should be protected so the patent "owner" can develop said idea and turn it into a product. If there is no ability or intention to DIRECTLY make a product to take advantage of the protection, then the protection should be removed.

This means that patent trolls would all go away, since none of them have any intention to make a product based on the patents they own. It is one thing for a company like AMD or Intel to file a patent and make use of their inventions, and another for someone sitting in an office to buy a patent just so they can file lawsuits against anyone who makes a product that might infringe on the patent in question.

So, for all of these companies that file patent related lawsuits, they SHOULD be looked at to see if they have taken even a few steps towards making a product. If there has been no effort made to create a working product based on the technology, they should be fined for filing a lawsuit in the first place.

Re:What needs to change

[alexo]

To encourage invention or innovation, the system MUST go back to the original reason for patent protection in the first place.

To protect revenue streams, prop up failing business models and raise barriers to entry (all under the guise of "encourag[ing] invention or innovation"), the system works just fine as it is, thank you.

Longer patents = cheaper branded drugs?

[JSBiff]

I know, I'm probably being far too charitable here, but it occurs to me that at least the *possibility* exists that granting longer than 5 years on drug patents *might* lead to cheaper branded drugs? 12 years might still be a bit too long, but here's my reasoning. . .

1) New drugs cost a lot of money to do R&D, and then to get through all the clinical studies and FDA approval.

2) New drugs require the drug companies to market to both doctors and patients (although, it could be argued they should be doing less marketing to patients, and more to doctors, but that's a bit off-topic for this thread). My point is, there is a 'ramp up' period to get drugs up to their 'natural' demand level (by which I mean that enough doctors and patients know about the drug that it is probably being properly prescribed to most of the patient population that needs it). This probably takes 2-5 years, I imagine.

3) The costs of R&D, trials, approval, marketing, *and* reasonable return-on-investement currently have to mostly be done within that 5 year window, which means that the cost, per patient, for the drugs, it would seem to me, must *necessarily* be quite high.

Now, if you allow the drug companies to amortize all of those 'startup' costs for the new drug over a period of say, 8-10 years, shouldn't they be able to reduce the cost-per-patient pretty substantially (assuming that the unit manufacturing costs aren't a substantial fraction [i.e. greater than 75%] of the 'retail' price the patients end up paying, which I kind of think is probably true for most drugs)?

Re:Longer patents = cheaper branded drugs?

[salesgeek]

A patent does nothing to amortize anything. It grants a monopoly on the invention. The patent holder may do whatever they want with it after that, so price gouging is the natural thing to do.

Re:Longer patents = cheaper branded drugs?

[rotide]

You're assuming that someone with what amounts to a monopoly on a drug will somehow eventually want less profit and voluntarily drop their prices? Speaking of drugs, can I have some of what you're having?

Re:Longer patents = cheaper branded drugs?

[JSBiff]

I'm not really assuming any such thing. Actually, I'm assuming that the *potential* market demand (that is, the number of patients that might benefit from the drug) for most drugs is greater than the actual demand in terms of prescriptions sold to patients. (Almost) Any company will reduce its unit price *if* it has reason to believe that by lowering the unit price, it will increase sales enough to both offset the lost revenue and increase revenue overall. Put another way - there are some people who need the drugs, but who do not buy them because they can't afford them, and don't have insurance (or maybe their insurance company won't cover the drug, although I do think there might be laws [at least in the U.S.] requiring insurance to cover necessary drugs; not quite sure about how that works).

I'm willing to bet that if the drug companies had a longer period of exclusivity, they would somewhat reduce prices (perhaps not in the first year or two, though), in order to stimulate market demand during the period of exclusivity. I may be wrong though.

Can anyone explain the US system?

[Anonymous Coward]

Anyone know how the US drug patent system works? It seems very different from my foggy memory of the system in the UK which I think is 20-25 years for drugs.

Anyway patent extension through minor changes is nothing new the drug companies have been at that one for years. Its why you get MR (modified release) slapped on the end of your medicines even though the benefit of many MR preparations isn't that great except for patient compliance issues.

I always thought medicines got a raw deal with patent law compared to say copyright law.
Something so important, difficult to develop, costly (billions of dollars in development) and strictly regulated gets less protection than Mickey Mouse.

Now im not saying I'd like longer medicine patents, generics do a great job of driving prices down on something that is more necessity than luxury, but I find it strange that art which can take one uneducated dude all of 5 seconds to come up with is given more protection than discoveries that take 100's of highly educated people years.

Re:This is Slashdot

[lapsed]

The purpose of patent protection is to allow the patent holder to appropriate the investment the underlying innovation requires. Without patents, the incentive to invest in R&D is diminished. The US is good at biotechnology innovation, and part of the reason for this is because biotech firms know that if their research is successful, they'll be given a chance to recuperate their investment. Any solution to this problem has to continue to encourage research.

The answer is so EASY...

[Karem Lore]

The solution to the never ending patent rubbish that is coming out is:

1) All R&D needs to be logged (in terms of cost).
2) All patents are protected and valid until the net profit of selling any item has reached the level of costs, or 1 year if no progress on the the patent has been made to monetize anything.
3) After R&D costs are covered, the patent becomes public knowledge and usable in any capacity by anyone.
4) Any litigation from a patent holder can only be back tracked 1 year prior to the declaration of accusation. No, oh you've been abusing my patent since 1985, cough up Billions please...

This will help innovation of new products based on older patents by opening them up as soon as they become viable.
This will stop people sitting on patents (trolls).

You may ask about well, if on the day the patent opens some foreign firm floods the market in cheap XYZ drug...Well, no...Because said company may not develop until the patent has been released...Thus, the lawyers will be happy because they can still litigate companies who abuse this rule, patent holders will have a lead time to get profits, future innovators can innovate still and the whole world will advance much much quicker...

And no, I have not thought through everything and I am sure there are some holes in this that a eagle-eyed slashdotter will notice...but it could be a good starting point.

Re:People without the Money Burn a Witch

[Rogerborg]

Yes, I'm sure the revolution will start any second now. Tweet when it kicks off, will you?