Diamonds Are Forever. Why Not a Drug Patent?
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 to make these sorts of laws?
It seems that the origin of these limitations has to do with some notion of the public interest being served by making inventions freely available to the public after some period of time. Somehow, intellectual property is judged as being so important to the public good that society cannot allow it to be owned in perpetuity, like tangible property.
While the intent of this “public policy” probably seemed rational when instituted, the logic that underlies these arguments is both faulty and fails to serve the public good as originally intended.
In fact, the greatest public (and private) good would be created by allowing patents to protect intellectual property indefinitely.
I can hear the gears grinding in your heads right now. What is he talking about? Doing that would create monopolies! Monopolies are bad and unfairly burden society by extracting usurious prices for products that should serve the public good! Your outrage is almost palpable. But your conclusions are flawed.
Let’s take the specific case of a novel drug.
First, will a perpetual patent protecting that drug’s composition of matter create a monopoly? Clearly not. Let’s take a look at a couple of examples: cholesterol and blood pressure medications. The single best selling drug in the world is Pfizer’s atorvastatin (Lipitor), a member of a class of drugs called statins. Is it the only cholesterol lowering drug? No. Is it even the only statin for lowering cholesterol? No. There are at least seven other statins on the market (all also covered at some level by patents), including such well known drugs as rosuvastatin (Crestor) and simvastatin (Zocor). The same is true in the area of blood pressure medications – even more so in fact. There are several classes of drugs for lowering blood pressure, including beta blockers, ACE inhibitors, and angiotensin II inhibitors. Just within the ACE inhibitors, there are no fewer than nine marketed drugs all of which have or had patent protection, including drugs like fosinopril (Monopril) and quinapril (Accupril). Cholesterol and blood pressure are but two examples, and prove definitively that patents do not necessarily create monopolies or eliminate competition. If patents do not necessarily create monopolies, it follows that perpetual patents would go no further in the creation of monopolies. They would only preserve the right of an individual or entity not to be stripped of ownership of their own invention at the arbitrary whim of arcane laws.
Second, would a perpetual patent lead to artificially higher prices, and even “price gouging?” Absolutely not. As noted above, patents do not in and of themselves lead to monopolies and any lack of competition, and so patent owners still need to compete in the market on the basis of price and quality. In fact, a perpetual patent would be more likely to lead to lower drug prices. Many factors go into drug pricing, but one definite factor is the need to recoup development expenses and maximize revenues and profits over the lifetime of the patent. 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. This leads to prices higher than in a completely free market. In fact, this perverse disincentive was only exacerbated when patent lifetimes were shortened from seventeen years from patent issuance to twenty years from patent application. It often takes three years just to get a first office action from the United States Patent & Trademark Office (the first substantive response you get after filing a patent), let alone an allowed or issued patent!
And for sure, a 20-year patent lifetime for a drug is actually a lot less than that. That’s because drugs are regulated and must be approved by the Food & Drug Administration before they can become marketable products at all. It often takes up to ten years of clinical trials to get an FDA approval, meaning that drug companies are left with very short patent lifetimes in which to recoup and profit from their investment in the development of a drug. That investment has recently been estimated at over one billion dollars per every approved drug (amortized over research & development, clinical trial costs, including all preclinical and clinical/regulatory failures), so the pressures to rapidly recoup massive research and development expenses have been ratcheted up in the extreme (driving drug prices higher). But is the solution patent reform that would further shorten patent lifetimes, as some politicians and pundits would like to see happen? No, that would only make things worse. The solution is to go the opposite direction.
With a perpetual patent, drug companies would be free to think longer term about pricing (without the artificial addition of patent lifetime in the equation). They would set prices lower in order to discourage new competitors from entering their market. This would enable the innovator to retain greater market share, and generate higher long term sales. The likely result is pricing near, if not lower, than current generic pricing.
In fact, with perpetual patents, the public good is better served because the incentive to discover and develop drugs is maximized. Secure in the knowledge that they will own the products of their own discovery and development efforts, drug companies will be able to assess the true risk vs. reward of any development programs free of artificial time limits imposed upon their ownership of those products. This means that even the development of treatments for diseases affecting smaller number of patients can become economical. The companies that invest in such treatments can benefit from perpetual protection of their intellectual property, which mitigates the negative effect of the size of the potential annual market. Perpetual patents would create the optimal environment under which innovators, drug development companies, and financial investors could invest intellectual and financial capital in even greater numbers of potentially fantastic therapies. Is the public good not best served by delivering the most and best drugs into the healthcare system at the lowest possible prices? Perpetual patent protection would have that effect.
These are simply quick and relevant arguments for the institution of perpetual patents. The subject has generated, and deserves, treatises of tens of thousands of words, not just the fifteen hundred words you have read here. However, I hope that I have been successful in convincing you that a rational approach to property rights would treat all types of property equally, whether tangible or intellectual. Such an approach is actually the best way in which to serve the public interest.