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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?"
Of course not, unless by 'change' you mean 'abolish.'
But for these sorts of pharmaceuticals, I have to question the wisdom of allowing patents at all. Nobody really properly understands how most of this works, it's almost entirely statistics. That's not to trivialize the importance of new drugs, but patent exclusivity will discourage widespread use, reducing the statistical information we can glean from the new drugs, and making combining treatments much less safe.
Of course, the same argument works fairly well against the current pharmaceutical patent system, but again, this is Slashdot.
If something is complicated enough to deserve patent protection, then it's complicated enough that others won't be able to easily copy the idea and compete. If an idea is trivially copied, then it's not deserving of patent protection in the first place. So all patents should be accorded the same protection: none.
Reminds me of a great moment by Dr House: When he explains to his audience that Vogler's new drug will work really well, because the old drug worked really well, and nothing significant has changed, just minor changes in order to keep the patent protection.
I am officially gone from
So make companies "buy in" to patent protection. Default is 2 years and for 5 million/year they can buy up to another 8 years of protection.
yeah its not like FTC know anything about trade! (did you even read their argument.)
Do you have any idea how long it takes to get drugs approved for use by the public? 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. Patents are useful in many sectors, but medicine is even less one of them than software (especially when you consider the human cost).
IF the drug approval process was faster AND it was easy to reverse engineer drugs THEN patents are needed in medicine (probably 5 years), but until then the drug company's can shove the any proposal up their respective asses!
IranAir Flight 655 never forget!
The problem with your reasoning is that it leaves no possibility for a Research and Development for-profit business. Take ARM CPUs for example. Their business model is that they develop designs for real CPU cores (which is, in a sense, a real product, but in another sense, is not). But, they are a 'fabless' semiconductor company - they don't *build* or directly sell any actual products (except for, probably, some demo/marketing units which they ship to manufacturing partners).
They license their CPU designs out to manufacturing partners, who integrate them into all sorts of devices - cell phones, game consoles, netbooks, DVRs, DVD/Blu-Ray players, automated manufacturing devices, medical devices, etc. Anything which needs a CPU could potentially use an ARM CPU design.
So, what is so *wrong* about the ARM business model? I don't think most people would call them a patent troll, and yet without patents, they would collapse overnight. But, by your (rather vague) definition, they wouldn't likely get patent protection?
Everyone has it in their heads that drug companies should get a special monopoly because drugs are so expensive. Maybe we need to knock off the special breaks and accept what our pricing signals are telling us. A lot of this stuff is simply too expensive and we need to figure out ways to make drug research less expensive.
This is my sig.
I would agree with this in part, as long as the attempt to sell the idea to a company counts. A classic example of where the patent system works as intended is the intermittent windshield wiper. The car companies worked to develop an intermittent wiper and were unable to do so. An independent inventor developed the idea and tried to sell it to them. They asked him to demo the idea before they would pay for it. Once they saw how it worked, they developed their own and tried to claim "obviousness". He sued them and collected significant damages.
The truth is that all men having power ought to be mistrusted. James Madison
And this is where I start listing situations where the market fails or is sufficiently vulnerable to be exploited:
- Natural monopoly.
- Imperfect information.
- Positive and negative externalities.
- Non-rivalrous goods, non-exclusive goods, public goods.
I could go on. What would happen in a market anarchist system, even assuming the security agencies wouldn't degrade into gangs who would turn the country into Somalia, is that the corporations (in themselves collective constructs) merge or buy each other up until there's only a few corporations left. These become, in effect, non-democratic states, and there you are - now you have a state, but you have no say in it (before the inevitable revolution, at least).
The free market has exploits - while there are less than with certain other systems, once a body of sufficient power can make use of the exploit, such a body rewrites the rules to favor itself and then, game over.
Yep, you're wrong.
Here's the problem: most biologics are targeted at a small market niche. Even the most common diseases treated by biologics - rheumatoid arthritis (RA), Crohn's disease, etc. - only affect a small segment of the population, and among them, the only people using biologics tend to be those for whom traditional treatments fail.
So, these small markets tend to saturate quickly. From there, it's just a matter of rent extraction by the drug companies. The only way that prices will come down is for competitors to come into the market, but (with the exception of RA, which is the most common autoimmune disorder treated by biologics) this tends not to happen because of the high cost to entry and the small customer pool.
Generics provide another means to enter a market, with a much lower barrier. You just have to reverse-engineer what the other company did, or read the research if it's published. This means guaranteed competition in all but the smallest markets - and in those markets, there are already government subsidies for "orphan drugs" which treat disorders with few victims.
So the question is this: is it better for one company to be able to extract maximum rent from a group of individuals already suffering from a debilitating and possibly fatal disease, driving up the cost of health care for everyone (assuming some risk pooling, which is the case even in the U.S.), or do we want to let the companies make back their buck and then open things up so that drugs are affordable? Without
With governments and their power the world is run by gangs and mobs.
We just call them "governments".
Granted, the current set of Western governments is largely better than your average run-of-the-mill gangs and mobs. The same, however, cannot be said about many other current governments, nor many past Western governments.
This is exactly the reason democracy fails.
Democracy fails because everyone gets to vote - including the lazy idiots who have absolutely no idea who or what they're voting for. Democracy requires an informed populace in order to work. Our populace doesn't care enough to be informed.
In a world without such authorities, the success of companies would be measured solely by their ability to provide the best service to their customers.
Wrong.
Governments are 100% necessary for the functioning of a healthy society. You ever read The Jungle? Ever hear the term snake oil? There's a reason the FDA exists.
Companies are not concerned about the well-being of society, they're concerned with making money. A business will do whatever it can to make money. Without restraints or regulations, a business can be downright harmful to a society.
Without artificial restrictions, such as patents or copyrights, there'd never be an opportunity for a company not to try to improve their services. A popular argument against removing patent and copyright laws is that a company has to invest significant amounts of time and money in inventing new products (such as medicine in this article's context) and that the patent would allow them to make profit out of their investment. I believe, that if a certain product really requires years of exclusive research it also isn't possible for competing companies to copy in a timeframe that wouldn't allow for the original inventor to gain reasonable profit. Nevertheless, if another company is able to provide better selling service regarding another company's invention, why not allow it? After all, we should be concerned about mankind's collective well-being and not the profit of select companies.
Patents and copyrights are a sticky subject, especially here on Slashdot. In some cases, they seem kind of silly - like patenting a new gene sequence you discovered in a critter, or patenting a software algorithm. In other cases, like drugs, they make more sense.
Developing a drug requires literally years research and costs literally millions of dollars. Then you've got a few more years and millions of dollars to get through FDA testing.
Once you've developed a drug, however, it's a very simple process to manufacture it. You're just combining chemicals and compounds in vats and then shaping it into pills or packaging it in bottles. Once someone's done all the work to develop a drug, anyone (with the right factory) can take that formula and easily mass-produce it.
If there was absolutely no patent protection for drug companies, there'd be absolutely no reason for them to do any R&D. Why would they spend multiple millions of dollars to develop a drug; only to have the competition take their formula and start manufacturing the same thing without all those dollars spent in R&D?
"Work is the curse of the drinking classes." -Oscar Wilde
There are several MAJOR flaws in your argument that, essentially, companies should only be able to retain exclusivity until they recoup the strict costs of their R&D on their successful projects.
First, the real costs of R&D extend will beyond just the one successful project, but generally also several failed ones. In order to break even on R&D in general, they need to recoup it on just a few of their successes. In the pharmaceutical industry, this ratio tends to be less than 1 success for every 10 drugs (and this is really only accounting for drugs that gain approval... not market success).
Second, the R&D costs of a product are generally just a small fraction of the costs to actually create a successful product. Companies need to spend considerable sums promoting a product before they can break even, not to mention legal, manufacturing capacity, various other overhead, etc. All of these monies are put at risk for an uncertain outcome and generally take several years to pay off after market entry.
Third, you absolutely MUST provide strong incentives to take risk. The higher the risk, the higher the reward needs to be. This is well established by many years of economic and financial research. Who would invest in a drug company that produces novel drugs when you can essentially make the same profit by investing in a generic manufacturer with far less risk and with a far shorter timeline? Why invest in drugs at all when there are safer businesses still?
Fourth, you need to account for the time-value of money. Even if your investment was essentially risk free, you would demand an appropriate rate of return because you could invest that money in other places. A savings account would be far more liquid and likely have less risk in practical terms (not to mention other preferable investments).
Fifth, accounting for costs is not this simple. What is the cost for me, an entrepreneur, to drop out of the job market for several years when I can earn 100K+/yr salary in a risk-free job? Founders would simply never take that risk if we could only MAYBE break even if everything pans out. What about the engineers and developers I hire that accept less salary in return from an equity interest in the business (i.e., potentially large rewards in exchange for a riskier job and less salary today)? You would essentially need to dramatically increase the compensation of all such employees in excess of what it is today.
Sixth, this would give a huge edge to larger and better funded companies that could swoop into a business with an expired patent and reduce the profit potential to near zero under your regime (presuming you accounted for a bunch of the above problems).
I could name several other critical issues, but suffice it to say that your idea is a total non-starter and demonstrates an ignorance for why the current system generally works far better than you imagine (like most people on slashdot).