Patents, Intellectural Property

Tuesday, Mar 30, 2010

http://www.youtube.com/watch?v=q1Pi4w8ddA8

Some people love the pharmaceutical industry and some people despise it: there is little middle ground. The pharmaceutical industry is the poster-child of every intellectual monopoly supporter. It is the vivid example that, without the sheltering patents provide inventors with, the outpouring of new wonder drugs we have grown accustomed to would have not materialized, our life expectancies would be a lot shorter, and millions of people would have died of the diseases Big Pharma has instead managed to cure. In the opposite camp, Big Pharma is the scourge of humanity: a club of oligopolistic white men that, by controlling medicine around the globe and refusing to sell drugs at their marginal cost, are letting millions of poor people die. Withdrawal of supply by the big pharmaceuticals is as close to economic crime as anything can be, we are told. The wonders of contemporary medicine and biotechnology are the fruits of intellectual property, it is countered...

It is often argued that the best case for patents is in the pharmaceutical industry. The fixed cost of innovation is large, with estimates of the average cost of bringing a single new drug to market as high as $800 million in current dollars... Indeed, according to industry surveys, the only industry in which patents are thought to play an important role in bringing new products to market is the pharmaceutical industry...

The pharmaceutical industry is a complicated beast to vivisect, which can be approached from many contradictory angles and viewpoints. We will stick to ours, narrow that it may be, and ask – how strong is the case for patents in pharmaceuticals? Is there substantial evidence that without patents we would not have the medicines we have, or at least we would have a lot fewer and worse medicines? Would the industry shut down and talent move to some other, more rewarding, enterprise if patents on drugs were more or less abolished, that is, if the world became like Switzerland until 1978 or Italy until a year later?

In fact, we shall see that... the case for patents in pharmaceuticals is a lot weaker than most people think - and so, apparently, even under the most favorable circumstances patents are not necessarily good for society, for consumers, or in this case, for sick people. Patents are good for monopolists, [Big Pharma], but that much we knew already.

Historically, intellectual monopoly in pharmaceuticals has varied enormously over time and space. The summary story: the modern pharmaceutical industry developed faster where patents were fewer and weaker...

In the U.S. drugs have been patentable since the beginning, for the very simple reason that chemical products have always been patentable...

In most of continental Europe, until recent years, only the process of producing a drug could be patented, so once a drug was discovered, a second producer could also produce it provided they found a different way of doing so. The rationale behind process versus product patents is given by the German Association of the Chemical Industry in a memoire to the Reichstag. They point out that the same chemical product can be obtained by different processes and methods and even starting from initially different materials and components. Hence, there is social value in patenting a new process, as it rewards the innovator without preventing further innovation. There is negative social value in patenting a specific product, as this would exclude all others from producing it, even through different processes...

In France, under the law of July 5, 1844 pharmaceutical inventions could not be patented... the law of January 2, 1966 finally introduced limited patents for pharmaceutical products in France; the ban on patenting drugs was completely lifted only in 1978...

In Germany, the law of May 25, 1877 introduced patents for both chemical and pharmaceutical processes, while products were explicitly excluded...The Law of April 4, 1891 extended patent protection to products obtained via a patented process. Finally, the law of September 4, 1967 introduced general patentability of chemical and pharmaceutical products in Germany...

In Switzerland, patents for chemical and pharmaceutical products were explicitly prohibited by the constitution... Constant German pressure eventually led to the adoption of patents for processes with the Swiss Law of June 21, 1907, which was nevertheless quite restrictive. The Law of June 25, 1954 continued to apply only to processes but extended the length of patents from 10 to 18 years. Patents for products were introduced in Switzerland only in 1977...

In Italy, pharmaceutical patents were prohibited until 1978... Despite this complete lack of any patent protection, Italy had developed a strong pharmaceutical industry: by the end of the 1970s it was the fifth world producer of pharmaceuticals and the seventh exporter...

In Spain, the Ley de Patentes introduced patents for products in 1986, as a consequence of the country’s entrance in the EEC. The law began to be applied only in 1992. Before that date, regulations dating back to 1931 explicitly prohibited the patenting of any substance and, particularly, of any pharmaceutical substance. Patenting of processes was instead allowed...

Now, you may be wondering, why are we boring you with all these details about specific countries, patenting of chemical processes, and pharmaceutical products, and so forth? For a very simple reason: if patents were a necessary requirement for pharmaceutical innovation as claimed by their supporters, the large historical and cross country variations in the patent protection of medical products should have had a dramatic impact on national pharmaceutical industries. In particular, at least between 1850 and 1980, most drugs and medical products should have been invented and produced in the United States and the United Kingdom, and very little if anything in continental Europe. Further, countries such as Italy, Switzerland and, to a lesser extent, Germany, should have been the poor sick laggards of the pharmaceutical industry until recently. Instead the opposite was true for longer than a century.

Against Intellectual Monopoly, Michele Boldrin and David K. Levine, Professors of Economics, UCLA and Washington University, 2010, http://www.micheleboldrin.com/research/aim/anew.all.pdf (amazon, interview).

In a very recent and publicized case, Pfizer announced the writing off of almost $1 billion of expenditure sunk into the development of a new drug, Torcetrapib, which failed dramatically short of its expectations. Of the billion dollars involved, $800 million went to pay for clinical trials, while the Irish plant where the drug was supposed to be produced amounted to just $90 million.

Same

Slightly related:

Most people who illegally download movies, music and TV shows would pay for them if there was a cheap and legal service as convenient as file-sharing tools like BitTorrent.

That's the finding of the most comprehensive look yet at people who illegally download TV shows, movies and music in Australia, conducted by news.com.au and market research firm CoreData.

The survey canvassed the attitudes of more than 7000 people who admitted to streaming or downloading media from illegitimate sources in the past 12 months.

It found accessibility was as much or more of a motivator than money for those who illegally download media using services like BitTorrent.

More respondents said they turned to illegal downloads because they were convenient than because they were free, when it came to all three types of media covered by the survey — TV shows, movies and music.

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And more than two-thirds said they would pay for downloads from a legitimate service that was just as convenient if it existed.

Most pirates say they'd pay for legal downloads, news.com.au, Andrew Ramadge, May 06, 2010, http://www.news.com.au/technology/download-culture/internet-pirates-say-theyd-pay-for-legal-downloads/story-fn58oolp-1225863187697.