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KEI Works to Make the World a Better Place in Many Ways (Video)
Knowledge Ecology International (KEI) director Jamie Love -- formally James Packard Love -- is the brain behind the "$1 a day" HIV drugs that have saved millions of lives in Africa and other poor parts of the world. Basically, he went around asking, "How much would it cost to make this HIV medication if the patent cost was removed?" At first, no one could answer. After a while, the answer came: Less than $1 a day. At that price, the Bush administration set up a massive program to deliver generic anti-HIV drugs to Africa. Jamie also works on copyright issues, boosts free software (he's a Linux user/evangelist and had more than a little to do with the Microsoft antitrust suit), and generally tries to make the international knowledge ecology more accessible and more useful for everyone, especially those who aren't rich. Or necessarily even prosperous. He's a smart guy (read the Wikipedia entry linked above), but more than that he's bullheaded. Jamie has worked on some of his initiatives for years, even decades. In many cases you can't say, "He hasn't succeeded," without adding "yet" on the end. (You'll understand that statement better after you watch the video, which we broke into two parts because it is far longer than our typical video interview.)
We've had lots of exciting arguments about that very question in the past, and I think the consensus is "yes, but there are still a lot of inefficiencies in that." Advertising, lobbying, kickbacks to doctors for endorsement and regulatory processes that are both bloated and insufficient can eat away at that money very quickly. Research costs themselves may be inflated due to the absence of market pressures forcing reagent and equipment suppliers to keep their prices down—ironically, due to patent-supported monopolies.
I'm not exactly sure how much of the budget goes this way, but when you stack it all up, it seems like it could potentially be quite a lot.
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Ever been to Canada? We have dozens of generic brands of popular drugs.
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People tend to forget that without the 'patent cost' we'd have no research. Drug companies need those massive profit margins in order to fund future research for present and future illnesses. Especially since the government drug research is at an all time low.
Remember price discrimination/market segmentation:
With patent costs, poor people with AIDs can't afford antiretrovirals. Result? The patentholder doesn't sell anything to them, and they die(and AIDs, given its transmission mechanism, has a funny habit of starting its work on mid/late teens and young adults, exactly the sort of human capital who might help their locations be less totally fucked in the future, if they aren't busy dying)...
Without patent costs? Patentholder still gets nothing; but health outcomes are substantially improved. Worst case, humanitarian win. Best case, future customers.
The tricky bit, of course, is that a rational, self-interested, patentholder(while they have no incentive to let people who could never pay die, since they couldn't have been customers anyway) does have an incentive to use whatever market-segmentation and price discrimination mechanisms are available to charge wealthier customers absolutely as much as they possibly can.
(It's analogous to universities that offer academic scholarships: It is mutually beneficial for the school and the poor-but-bright-and-motivated if talented students can afford to go to college; but it creates an incentive to set a 'Official Price: $50k+/yr. If you can't pay that, precisely as much as you can pay' rather than a lower equilibrium price, that would occur in absence of price discrimination mechanisms.)
Unfortunately, this is one of those instances where capitalism is not the best solution for everyone. There's no incentive for drug companies to spend large amounts of money researching drugs that won't see a lot of use, such as new antibiotics for fighting superbugs, or ways of actually curing chronic conditions such as diabetes. On the other hand, there would be a massive amount of benefit to actually *having* these things.
Additionally, in a purely capitalist society, the people who bear the cost for drug research are people who are already sick, and thus less able to work. Paying for drug research is more like "insurance", because it protects you from illnesses in the future. Even if I'm not sick, drug research benefits me because (on average) it increases the quality and duration of my life. On the other hand, since there's no immediate benefit, people don't want to pay for that out of pocket. Massively expanding government drug research would be a very good thing in the long run, not to mention that it would create jobs right now.