Diamonds Are Forever. Why Not a Drug Patent?

5/29/09

Tell me if this makes sense to you:

—If I buy a diamond, I can own it for as long as I like;

—If I produce a brand name for a product, provided that I trademark it, I can own it for as long as I would like, until and unless it becomes “generic” (like the term “escalator”, which actually started as a brand name);

—If I write a novel, provided that I copyright protect it, I can own it until I die, and my heirs can maintain those rights for 70 years longer; but,

—If I invent a drug, even if I protect that intellectual property to the full extent of U.S. patent law, I can only own it for 20 years from the date I file for a patent on it.

I can own a tangible good forever, I can own a trademark virtually forever, I can own a copyright for my entire life plus 70 years. But property which is more intrinsically a part of me – my idea, my invention, the product of my intellect – I am only allowed to own that for 20 years after I reveal it to the patent office.

Rationally, it seems obvious that all property – whether tangible or intellectual – should be subject to the same rules and laws of ownership. If you can own a gemstone forever, you should be able to own an invention forever. In fact, if a society wishes to impose differential standards for ownership rights to different types of property, wouldn’t it make more sense that preferential treatment be given to those items which are the product of your talent, your creativity, your self, over those things which you earn or purchase based upon that product of your efforts? The logical extension of this argument, in any free society, is that you should be able to own all property, whether purchased or invented, physical or ethereal, for as long as you wish. Patents, trademarks, copyrights, title – all should be perpetual.

And yet, even in the United States, the country most devoted to free markets and property rights, we live with these irrational, illogical, and even unethical limitations upon intellectual property ownership. In fact, when you hear lawmakers, lobbyists, and pundits talk about patent reform, particularly in regards to drugs, the direction that is most often espoused is to further tighten and shorten the patent protection available to inventors. How did we get here? What would cause a free society like ours … Next Page »

Carl Weissman serves as Chairman and CEO of Accelerator, a joint investment vehicle backed by a syndicate of venture capital firms, and as a Managing Director at OVP Venture Partners. Follow @

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  • http://wherephone.com Allen Smith

    You can keep your invention forever, you just keep it secret – for example the formula for Coke. The deal you strike when you get a patent is that you are given exclusive use of your idea for a limited time in exchange for full disclosure. We grant patents not to make the inventor as much money as possible but to benefit society as much as possible by giving the first inventor a time-limited monopoly. Intellectual property is different than something like a diamond. You give your diamond and you don’t have it anymore, you give me the formula for your new wonder drug and you still have it and now we both can give it. As a patented inventor myself I want to see my inventions used as widely as possible and as long as I can pay the mortgage I am less concerned about extracting every penny from every user.

    My question is not why are patents only 20 years, but why are copyrights forever. Is perpetual copyright helping us as a whole or hurting us? Would fewer books be written, fewer movies and songs produced if copyright only lasted 20 years?

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  • Jim

    You’ve got to be kidding me! It should be LESS time, not more. I say 5 years, 10 years tops.

    Why? Because drug companies have a long and well documented history of exploiting their discoveries for huge profits while watching people suffer and often die as a result.

    I understand drug companies need to make a profit, but there should be some incentive to have more humanity too.

  • http://www.roboticstrends.com Livy

    “Since drug companies currently only have a finite lifetime during which they have patent protection, they have to try to squeeze every drop of profit possible in that short period.”

    True, but without those limits they will “squeeze every drop of profit possible” forever.

  • Andrew Koyfman

    Sounds great, but if the government grants monopolies on something, it should extract a fair price and regulate more stringently. After all, every other monopoly is regulated – gas, electricity, phone, etc. So if you are OK with even more government oversight (how much did your executive make?), price controls on drugs, etc. then I am fine with giving you a monopoly for life. Although I suspect that won’t spur any innovation.

    Seriously though, this is a terrible idea.

  • Tyler Orion

    I think this is a great idea. I don’t usually post comments but thought I’d counter the naysayers. Giving an incentive for the longer-term recouping of drug development costs could well reduce the price and add incentives for small biotech firms to continue developing innovative therapies. And if we do get some form of a government sponsored healthcare system, prescription drug pricing may well be regulated anyway. Thanks for an inspired idea- now how to sell it to Congress!

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  • http://www.lymanbiopharma.com Stewart Lyman

    I agree with Carl that this subject is one worthy of substantial debate. However, some of the arguments he puts forward are simply illogical. It is true that if you buy a diamond you can own if for as long as you like. However, buying a diamond does not give you the right to prevent others from selling diamonds. This is the protection that a patent affords (the right to prevent others from practicing your invention), so how is the diamond example relevant? As to the idea that a perpetual patent would allow drug companies to introduce drugs at a lower price to keep competitors from entering the field, I would predict just the opposite. Prices would be high until a competitor enters the field, and only then would prices likely decline. If companies can engineer their way around patents to come up with similar drugs, such as the multiple statin family members, why would perpetual patents affect this trend? It should also be noted that the addition of competing agents does not lower the costs of drugs. Test this concept out yourself by comparing prices on the internet of ED drugs Viagra, Cialis, and Levitra. The two newer drugs price out about the same as the first to market. Finally, while it may be true that perpetual patents would allow a company to embark on projects that will only reap benefits after many years, such as orphan disease treatments where there are few patients, I seriously doubt many companies would go down this road. Why invest money in a treatment that will only pay off in 20 or 30 years when they can plow money into a market that is larger and can generate returns sooner? Hard to imagine this in an era when companies are judged on Wall St. on a quarter-year basis. Perpetual patents are a terrible idea, not just in biotechnology, but in all areas of technology.

  • Ed Kesicki

    Carl has hit on something. I think his points are very good and counterintuitive. Having longer patent life might actually encourage competition and result in much improved drugs. Many times the first drug out has drawbacks that could be addressed by followers. But what is the point of making one if the original patent runs out so soon? The only ones that can play are those the already are in the game and close to the finish
    And the Coke “secret formula” example is not valid since a drug molecule’s exact structure is easy to elucidate, unlike a complex flavor formula.
    I can see some drawbacks of course, like a company choosing to sit on patents. Now at least there is some sense of urgency to bring things forward. Anyway, I think Carl brings up some thought-provoking ideas and I thank him for his commentary.

  • Carl Weissman

    Clearly I do not write my thoughts clearly enough, because so many of you have jumped in with the knee-jerk response that patents will cause monopolies, and monopolies will lead to price gouging.

    Please read the piece again. Lipitor, the #1 drug (by sales) in the world, is one of many patented statins, which are only one class of cholesterol lowering drugs. I also outline the case of blood pressure lowering drugs.

    Patents do not create monopolies. Almost all patented drugs face serious competition on price and performance.

    Patents are not a method by which government sanctions monopolies. Getting a patent is not a deal with the government that gives you a monopoly for a set period of time.

    Instead, a patent is much more analogous to a title to a piece of real estate. It describes the boundaries of a piece of (intellectual) property, and states who the owner is.

    It is worth your time to rethink your knee-jerk reactions to new ideas, and to question your dogmatic positions.

  • Dave

    Re-thinking the patent system has great merit, particularly as you move outside of the narrow world of biotech. I’d assert you cannot have it both ways. You cannot have the vague, broad protections granted to patents today forever. If you wish to grant lifetime patents, then we should consider markedly narrowing the scope of patent protection by granting patents only to truly novel, original ideas within a narrow field described in detail in a patent application.

    Your analogies to copyrights misses a key element in the reason for their protections. Copyrights are forever in large measure because their protection is very narrow. You copyright a book, not a concept about a book or an idea for a book, or an idea on a topic for a book. Your real estate analogy is a similar one. You can own a distinct piece of real estate and only one person can own a piece of real estate at a time. Someone can own the real estate next to you not be blocked by your “idea” about real estate (with a varying overlay of government/societal regulation depending on where and type of property), but you cannot seriously assert the patent process works that way today.

    Patents are granted on much broader ideas, even setting aside the debate on what Bilski means to business method patents. If you wanted to patent a compound for a single drug, not an idea or a concept or a thought or a derivative, maybe patents could go forever. Outside of drugs, you could theoretically patent a Toyota Prius, but not patent hybrid cars or cars generally.

    Under the current system, lengthening patents forever seems silly. You’d just end up with more and more Cabilly patents–a patent many biotechs will tell you they license for reasons akin to a “protection” racket not because they really, genuinely needed it, and more and more patent trolls.

  • http://dosadi.com Spike

    When I read this kind of argument, it is commonly (as here) written by somebody who benefits from the exercise of patent or copyright, who has been confused by the name into thinking that it is ‘what it sounds like’. It isn’t. Intellectual Property Rights are not ‘rights’ in the sense of the Bill of Rights. They do not come from God and are not Natural, they were invented by humans, and designed (in ancient legal fashion) by *analogy* with property and property rights.
    Intellectual Property is also not Property in the same sense as a diamond. You cannot uniquely possess it, it has almost 0 cost to copy, and effectively perfect copies can be created by accident by unrelated parties. The idea of treating an invention or a story as ‘property’ is itself a human invention, based again on analogy.
    The only word in ‘Intellectual Property Rights’ which is literally honest and not a form of subliminal persuasion, is ‘Intellectual’.

    All intellectual property rights inherently involve preventing people from doing things they would otherwise be *free to do*, relying on government coercion, in the hope of collective economic benefit. That expectation of economic benefit is the *only* justification for IP, and it is a practical, not moral, justification.

    The analogy to a single diamond is silly – an intellectual property right is like the right to own all diamonds, everywhere, including those not yet mined. Yes, that’s a brilliant idea – let’s make tangible property ownership work like that. I claim ‘ice cream’, ’cause there’s some in my freezer.

  • http://www.lymanbiopharma.com Stewart Lyman

    It’s nice to have a topic posted that has generated so many interesting replies. A few additional comments while we’re waiting for the patent attorneys and economists to weigh in with their opinions. First, just because people disagree with your position doesn’t mean their responses are knee-jerk and not well thought out. I’m a named inventor on 21 US drug patents, so I have cogitated on this subject a bit. Let’s look at a real world example of an extremely successful biotech drug – Amgen’s blockbuster erythropoietin (Epogen). The first patent for this was submitted in 1984 and was issued in 1987. Epogen was approved for sale by the FDA back in 1989. According to the 17 year rule mentioned in Weissman’s op-ed piece and in effect at the time, this would have given Amgen patent coverage until 2004. However, we are five years past that date, and no new erythropoietins have come to market in the US. Why? A quick search on the Patent Lens website shows that Amgen has been awarded not one, not two, but 19 different patents with the word erythropoietin in the title. This includes composition of matter patents, manufacturing patents, and use patents. By filing multiple patents of these various types, drug companies can block competitors from entering the market for a considerably longer time than 17 (or for that matter) 20 years. Not only has Amgen successfully kept competitors from selling erythropoietin in the US (they blocked Roche’s Mircera in 2008), they were even successful in blocking Transkaryotic Therapies in 2001 from selling a drug that activated the production of endogenous erythropoietin in the body. It’s hard to imagine that Amgen would need a forever patent to defend their intellectual property on this or other drugs in their portfolio, and the same applies to other drug companies.

    Patents are very unique creations. They don’t give you the right to do something, they give you the right to prevent others from doing something. Let’s get back to the diamond example. If you have a diamond you can sell it. It’s your diamond and I can’t sell it, whether you have a patent on it or not. I can’t sell your house, your car, or your dog either. But should you be able to stop others from mining diamonds? Selling diamonds? Owning diamonds? A diamond is nothing like intellectual property.

    One final point. I was trying to think what the world would be like today if forever patents had been awarded during historical times. Imagine if perpetual patents had been awarded in the past on such things as “method of producing flames by friction i.e. fire” “domestication of animals” or “substance that conducts electrons”. Broad patents such as these would have severely impacted the growth of civilization. A holder of such a patent would have amassed enough wealth that Bill Gates would like a pauper in comparison. Even if broad patents weren’t awarded, imagine a company that had a forever patent estate comprising “tomatoes” “beefsteak tomatoes” “cherry tomatoes” “grape tomatoes” “method of growing tomatoes” “method of processing tomatoes”. You might not be able to obtain the ketchup and tomato slices that make your cheeseburger so tasty. And maybe the salsa makers would find the licensing requirements too expensive to use tomatoes (let’s go with the corn salsa instead)! Debating the length of patents is a worthwhile exercise, as is the related topic of giving drugs market exclusivity separate from patent issues. But a forever patent is simply too long!

  • ST

    I, too, disagree that patent should be perpetual.

    The way the biotech/pharma industry uses patents differs from the way other industries (e.g., software, telecom, etc.) use patents. Witness the distinct sides taken in the battle again the previous Patent Reform Act.

    Therefore, to use only a drug example to argue for broad-based change in patents is inappropriate.

    Rather than changing the patent system to fit the biotech/pharma industry, which seems to be the main focus of the opinion piece, I suggest a change in the regulatory apparatus. Permit the FDA to grant “monopoly rights” to particular chemical structures and biologics for the first company to file an IND (or other stage of regulatory approval) on such structure or biologics. The monopoly rights can be time limited, field limited, or other.

    This could reduce the costs associated with patents and permit biotech/pharma companies to focus their financial resources on drug development. Their focus would be on drug development because such monopoly rights can be linked to [regulatory] development milestones.

    Such system also would not require wholesale changes to the patent system (which affects much more than just biotech/pharma). Any changes could be instituted at the FDA-level; changes will be forthcoming from the Obama administration.

  • Ed Kesicki

    Carl, I applaud you again for hitting a nerve that resulted in such passionate comments on Xconomy. A 20 year patent life is very short for drugs that have to go through a mandated testing process that is long, rigorous, and expensive. That leaves you with the choice to simply take a risk and not file until you are closer to the clinic, which could be years after you actually made the invention. Big risk, but this is the current thinking. I come from a small-molecule background, so all comments aare addressed to this.

    Stuart makes a good case against perpetual patents.

    I like the previous comment by “ST”. Treat a single composition more like a copyright and bestow a special extended protection–not to the patent, but to the exact molecule that is approved. This frees others to use the invention to commecialize their own similar molecules, but it adds a barrier that makes it harder than just making a knockoff of the same formula. Treat the chemists’ artwork with a little more reverence, that’s what I say. Copyrights for approved molecules.

  • Ben

    Carl,

    Pointing at one example where a patent on something wouldn’t cause a monopoly and passing it off as some kind of evidence that there never would be a monopoly is absurd.

    Intellectual “property” is nothing like physical property and trying to make it so is perverse.

  • Matt

    Great discussion on an interesting proposal by Carl. I agree with most of the replies that perepetual patents wouldn’t work. I actually think it may stifle innovation. If you could protect your cash cow forever, why make another one? Granted, there will be other similiar therapeutic molecules that will enter the market, but I’m not sure that will necessairly drive prices lower. Differences remain in these drugs, and those differences could still account for prices remaining high.

    A finite patent life seems to drive innovation, firms are always looking for the next big thing. Taking away that finish line, may take away the drive to compete to some degree.

    That said, 20 years of protection from filing is far too short in this industry. I dont think there is another tech area that is as heavily regulated as biotech/pharma. I could invent a shoe tomorrow, and easily be selling it 3 months from now with no government hurdles to jump through. Not so with a drug. For drugs, something along 20 years from approval makes more sense, and even that may be too long.

    Also, this seems to be the only industry in the world where you increase your price on obselete products. Costs to manufacture, package and bring approved drugs to market decrease over time, but price is increased to try and maintain some profit. Why not allow the industry to compete with generic products on price post patent expiration? Best Price is silly…

  • CMCguy

    Interesting concept and although I think Drug Patents should be extended perhaps 5-10 years because of lengthy development/approval periods an indefinite grant is inappropriate. As others have noted there is trade-off in the system to provide info to the public domain which often spawns additional innovation. Patents are essentially a knowledge repository like much other scientific literature. Yes there is irrationality and illogical in all this, reflecting historical democracy and politics. Not sure what you mean by unethical limitations unless you are suggesting the general lack of ethics of how some seem to take advantage of the process.

  • Palo

    Derek Lowe has a very good reply to this –sorry, I have to say it– superficial argument.

    http://pipeline.corante.com/archives/2009/06/04/perpetual_patent_motion_machine.php

  • slc

    Although this is a provocative idea, what is to prevent a company to stop working on early stage research altogether? If a company can make billions a year perpetually, why do any research after one blockbuster drug?

  • http://www.spreadingscience.com Richard Gayle

    Of course, since we can patent genes, a perpetual patent would allow Myriad to forever be the sole manufacturer and user of diagnostic kits based on the BRCA-1 and BRCA-2 genes in breast cancer. They could charge whatever they wanted ($3000 at the moment) because there is and would be no competition. You can not get around the patent with a new gene sequence. That is not like making a ‘me too’ therapeutic.

    http://www.nytimes.com/2009/05/13/health/13patent.html

    The Constitution states that the Congress will be able:

    To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries

    Limited Times.

    Patents are provided by our Constitution as a balance between the needs of society for new innovations and the needs of the inventor to benefit from their invention. Research has demonstrated that the optimal time for copyright should be about 15 years, not 70+. Extending these grants for more than a limited time grossly distorts this balance.

  • Noah Bullock

    Umm… because that would be daft, Carl.

    Diamonds are tangible, non-duplicable items that come out of the ground. They carry their value with them in so far as people perceive them to be objects of value.

    Patents are artificial manifestations of governments, created in order to incentivize innovation. Once the innovation has been paid for, it’s no longer in the interest of society to protect the creator’s monopoly. Time for the brain cells to get off their lazy brain cell asses and go solve another problem.

    One might as well ask why the government doesn’t create everlasting diamond mines (the fed?) or gobstoppers, for that matter.

  • John Keith Hohm

    Someone very clever decided to wrap copyright law, patent law, and trademark law into a common term of “intellectual property”, and the phrase has apparently allowed Carl to believe that the ideas protected by these laws should be treated the same as physical property. Without copyright law, there would be nothing preventing anyone from copying an original author’s work; without patent law, anyone would be free to implement an inventor’s original idea.

    Fortunately Carl’s argument is not solely dependent on the false analogy to real property; he is trying to argue that the public good would be better served by perpetual patents. Carl makes a valid point: the cost required to bring a new drug to market might not be borne by the benefit the developer receives from the patent on it, and the situation could be improved. Carl proposes to fix it by upping the benefit of the patent, but there is another way.

    The better fix is to lower the cost of bringing drugs to market. Reduce or eliminate the FDA approval process so that novel drugs can sooner benefit patients, and the limited patent duration will more easily offset the cost of development.

    Of course, this will still require drug makers to continue developing new drugs to maximize profit from patent protection. That seems like an upside to me.

  • jason

    Did you check to see if Statins and ACE inhibitors were patented as entire drug classes before the individual drug molecules were patented. It is quite possible that the concept of an ACE inhibitor was patented and expired before any drug reached market. If this patent continued forever there would never have been competition amongst ACE inhibitors.

    What if Edward Jenner (1796) had a perpetual patent on the process of vaccination? Early patents in a field tend to be very broad and can severely limit competition.

    There are special rules for drug companies that extends the duration of drug patents. This is to account for the long time required to reach market.

    Patent duration was changed from 17 years from the date of issue to 20 years from the file date to end abuse. Prior to the change it was possible to file for a patent and keep the application active at the patent office for literaly dozens of years in some extreme cases. People would game the system to let technology catch up with their idea. Now the clock starts ticking once the application is filed. This prevents abuse.

    The question should be why are copyrights so ridiculously long. It is certainly easier to compose a song than it is to bring a viable drug to market.

  • Victoria Vassileva

    How to sell a drug patent abroad to a big phatmaceutical company?

  • guenter

    For an author: It is quite strange that a man in your years can’t see a difference between a THING, that he buys, and a RIGHT OF EXCLUSIVITY (or RIGHT TO HOLD A MONOPOLY), granted by government temporarily, and, namely for such a long time like 20 years.
    I beleive it is shamefull.

  • AJ

    As a physician, with all sincerity, I hope you are never put in a position to realize how incredibly stupid and immoral your article is.

  • Carl Weissman

    AJ,

    The fact that you are a physician is meaningless to this discussion. If you are a learned and open minded man, I hope that I have the opportunity some day to talk through this issue with you. And I have no issue with you calling me stupid. However, the idea that my position would be immoral means only one of three things:

    1) You did not read the entire piece;
    2) You did not understand what I wrote; or,
    3) I did not clearly enough articulate the point.

    Since everyone from patients to inventors would be benefited from this approach, and nobody would have anything taken from them by coercion of force, all immorality has been eliminated.

    Patents are not licenses or rights of exclusivity. They are deeds to property – intellectual property. To say that someone can have a deed to a piece of land in perpetuity, but can only own the product of their own intelligence and invention for 20 years, is the ultimate immorality.

    Carl

  • partzy

    If you completely created a drug, you might have some right to keep a patent forever, but 45 of the top 50 drugs had their starts with NIH (not private pharmaceutical company) research. Congress allowed pharma companies to take the drugs from NIH, patent them, and sell them at enormous profits for some years without having to reimburse the American public anything!

    20 years is MORE than enough.

  • Michael Borromeo

    Perpetual patents would eliminate the generic drug industry, reducing competition. While companies could create their own versions of drugs to compete, the ultimate effect is an increase in the control of price the company/companies can exert. An industry does not have to be dominated by a monopoly to be uncompetitive. Oligopolies can operate with similar effects through collusion.

    The pharmaceutical industry lends itself to monopolistic/oligopolistic behavior through its enormous barriers to entry (research, clinical trials, marketing). Without patents, the “tragedy of the commons” is realized and there is little incentive to innovate. With perpetual patents, (1) all or most consumer surplus (benefit) will be squeezed out, (2) prices become unnecessarily high, leading to (3) lower quantity purchased.

    Another potential argument against perpetual patents is the idea of a single point of failure (with a monopoly). What if a patent holding drug company is unable to produce a drug for whatever reason, either temporarily or permanently. If temporarily, depending on the length of time it is unable to produce their drug, competitors might try to create their own version, or (if it’s a small span of time) ignore it. In the latter case patients who use the drug would be left without options while the company gets back on its feet. Monopoly situations become more common the rarer the disease is.

    So, while perpetual patents would be “fair” for drug producers, consumers would lose out. Thus, the 20 y ear balance between no patents and perpetual patents which is now in place attempts to address each group. Are there unintended consequences? Sure. Is the balance perfect, or beyond adjustment? I doubt it. But, balancing the good of consumers with the good of producers is rarely a bad thing.

    Lastly, other people have brought up the diamond and trademark examples used, but they are, I think, poor comparisons to drug patents. If I buy a diamond, I am not preventing the next guy from buying a similar one (except in the obvious rare case). If I write a song or a book and copyright it, sure I can charge $1,000 for the song or book, but, differentiated though it might be, people have equally effective choices available to them from other artists or authors (who can enter the market fairly easily).

  • Mark

    “Clearly I do not write my thoughts clearly enough, because so many of you have jumped in with the knee-jerk response that patents will cause monopolies, and monopolies will lead to price gouging.”

    Carl, we heard you, but maybe we don’t believe you. Your claim is that Lipitor has substantial competition already. If that were really true, then why are the prices so high? In a market economy price is not arbitrarily set by the manufacturer to recover their R&D costs in set number of years, they are set by the market. Unfortunately, on top of R&D costs, the marketing costs are out of control. In fact, the entire drug industry has an unbearable stench even worse than collection agencies.

    Also, I think you forgot to mention what pharmas your venture capital firm has invested in. Shame.

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