
Patents that kill - graeham
http://www.economist.com/blogs/freeexchange/2014/08/innovation
======
michaelq
The simplest solution would be to significantly shorten the patent duration
for pharmaceuticals, and start it the day a drug gets FDA approval. This would
uncouple two things that should have never been coupled in the first place:
development time and window of exclusivity in the market.

~~~
xaa
Companies would (justifiably) still want provisional patent protection for the
very long period between the idea's conception and FDA approval, to reduce the
risk on their huge investment.

Thus, wouldn't this idea exacerbate the already rampant abuse of provisional
patents?

Or if long provisional patents weren't allowed, then companies probably would
avoid products with long FDA approval times, which is the very problem you're
trying to solve.

~~~
mcherm
> Companies would (justifiably) still want provisional patent protection for
> the very long period between the idea's conception and FDA approval

I disagree. For drugs this wouldn't be a problem.

The company that invented it is forbidden from making money off a drug that is
not approved, so they have every incentive to get the approval as soon as
possible.

Other companies would not be prevented by patent law from producing the drug
during the time, but they would be prevented by FDA regulation. And they would
not be inclined to invest since they would know that the patent would issue as
soon as the drug was approved.

~~~
xaa
Well, the international enforceability of US patents is already sketchy at
best, and if the phamaceutical doesn't even have a patent at all, there's
absolutely nothing stopping a company from producing and selling it in a
country that doesn't have standards quite as tight as the FDA.

Also, your comment

> The company that invented it is forbidden from making money off a drug that
> is not approved

raises another interesting issue. In the current system, a company CAN in fact
make money off of such a drug, by selling the patent to someone else.
Actually, many drug patents originate in universities, and then are sold to
drug companies. I doubt the university lobby would be keen on losing that
major revenue stream.

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dalek2point3
here is the original paper in case anyone's interested:
[http://www.nber.org/papers/w19430](http://www.nber.org/papers/w19430)

And here is the abstract: Patents award innovators a fixed period of market
exclusivity, e.g., 20 years in the United States. Yet, since in many
industries firms file patents at the time of discovery (“invention”) rather
than first sale (“commercialization”), effective patent terms vary: inventions
that commercialize at the time of invention receive a full patent term,
whereas inventions that have a long time lag between invention and
commercialization receive substantially reduced - or in extreme cases, zero -
effective patent terms. We present a simple model formalizing how this
variation may distort research and development (R&D). We then explore this
distortion empirically in the context of cancer R&D, where clinical trials are
shorter - and hence, effective patent terms longer - for drugs targeting late-
stage cancer patients, relative to drugs targeting early-stage cancer patients
or cancer prevention. Using a newly constructed data set on cancer clinical
trial investments, we provide several sources of evidence consistent with
fixed patent terms distorting cancer R&D. Back-of-the-envelope calculations
suggest that the number of life-years at stake is large. We discuss three
specific policy levers that could eliminate this distortion - patent design,
targeted R&D subsidies, and surrogate (non-mortality) clinical trial endpoints
- and provide empirical evidence that surrogate endpoints can be effective in
practice.

------
dnautics
It keeps annoying me that nearly everyone (including Richard Posner [0] and
notch [1]) says that 'medicine makes for the best case for patents'. I'm not
convinced that patents are necessary for pharmaceuticals, and I'm trying to
prove that's the case [2].

[0] [http://www.theatlantic.com/business/archive/2012/07/why-
ther...](http://www.theatlantic.com/business/archive/2012/07/why-there-are-
too-many-patents-in-america/259725/)

[1] [http://notch.tumblr.com/post/27751395263/on-
patents](http://notch.tumblr.com/post/27751395263/on-patents)

[2] [http://indysci.org/projectmarilyn](http://indysci.org/projectmarilyn)

~~~
pessimizer
I don't know if you're familiar with Dean Baker:

"Patent monopolies are one mechanism to provide an incentive for innovation,
however they are a tremendously inefficient mechanism."

[http://www.cepr.net/index.php/blogs/beat-the-press/health-
ca...](http://www.cepr.net/index.php/blogs/beat-the-press/health-care-costs-
dont-blame-the-free-market)

[http://www.cepr.net/index.php/Publications/Reports/financing...](http://www.cepr.net/index.php/Publications/Reports/financing-
drug-research-what-are-the-issues)

~~~
dnautics
thank you for those links. Incidentally Drew Curtis also outlines the
dichotomy in policy pressures really well.

[http://www.ted.com/talks/drew_curtis_how_i_beat_a_patent_tro...](http://www.ted.com/talks/drew_curtis_how_i_beat_a_patent_troll)

I'm surprised that the first link of yours doesn't show the fact that Pharma
companies make upwards of 10-16% margin which is high for the healthcare
sector, versus Generics companies which make ~5%, in line with "companies in
general"; and insurance companies which pre-ACA were making negative-~2%
margins. It's hard not to believe that the ACA was just a bailout for
insurance companies, in exchange for mild vilification.

~~~
pessimizer
>I'm surprised that the first link of yours doesn't show the fact

[https://encrypted.google.com/search?hl=en&q=medical%20patent...](https://encrypted.google.com/search?hl=en&q=medical%20patent%20site%3Acepr.net)

Dean Baker has written a _lot_ on patents in medicine, and in other fields as
well. It would probably be interesting for you.

------
tbrownaw
Why is (well, _should_. Literal "is" is reasonably clear) drug exclusivity
handled separately from drug approval? Since the one is needed to make up for
the costs imposed by the other, shouldn't they be handled as a unit under the
same agency?

------
richardwigley
"A clinical trial for patients with metastatic prostate cancer lasts only
three years compared to an 18-year-long trial for those suffering from a
milder, localised prostate cancer. Since a typical patent is in force for 20
years, firms only have two years of effective patent length left to
commercialise a new drug against localised prostate cancer.

The data paint a bleak picture. The economists find that pharmaceutical
companies conduct 30 times more clinical trials for recurrent cancer drugs
than for preventive drugs"

~~~
maxxxxx
How do you conduct a trial for a preventive drug? Just wondering.

~~~
TheLoneWolfling
Give a bunch of people the drug and a bunch of people a placebo, wait a long
time (decade+), see if there is a statistically-significant decrease in the
thing that it is trying to prevent.

~~~
maxxxxx
It seems quite difficult to set this up. Who wants to take an experimental
drug for decades? And if it's a rare disease you need a lot of people.

------
danielweber
This is arguing for _longer_ patents for drugs, since the 20-year-long patent
causes the industry to only look for drugs where you can get through
development and trials quickly enough that they enough years left on the
patent to make revenue.

------
technotony
The solution to this is regulatory exclusivity. The big cost is going through
the FDA process, companies could simply be granted a 15 year exclusivity once
they've passed that bar. The FDA already has a process setup for granting
this.

------
arikrak
In general, regular capitalism is best for progress, since government-funded
operations don't have the same incentive to succeed, to avoid waste, etc.

However, for something like developing drugs, it may be worthwhile to have
more government involvement. The article mentions how drug companies can focus
on their profits to the detriment of society. One might even wonder if the
Hepatitis C cure was priced so that not everyone could afford it, so the
disease wouldn't be eliminated...

~~~
danielweber
1\. The drug industry not creating a drug doesn't stop a charity from
developing it. (Bill Gates once wanted a drug developed that didn't have
enough of a market, so his foundation paid out of pocket for it.) It's not "to
the detriment of society" for them to pursue their own ends, and more than it
is "to the detriment of society" that I'm typing away on HN instead of being
outside picking up trash.

2\. Conspiracy theories about keeping diseases around are misfounded. a) The
drug in only effective in _EDIT_ 97% of people. b) The patent will eventually
expire. c) The price for the drug is cheaper than the lifetime cost of
treatment, making it a win-win scenario. (Plus the eventual expiration of the
patent will make this very cheap in the long term.)

~~~
arikrak
97% is pretty high, but I agree that it's not too likely that's the drug
company's plans.

Note that the government grants the drug company a monopoly to sell their
drug, so it makes sense to place some limitations on pricing, or at least
negotiate like other government do.

