Patent buyouts distort the structures of innovation, chill research and require significant upfront costs

Notwithstanding their virtues, sale-triggered patent buyouts for federal funding recipients are a form of limited government intervention in the pharmaceutical industry. Their impact is accordingly limited. Using patent buyouts, the government could only set prices for its approved therapeutics, which would take years to acquire or develop. In most instances, acquired investigational candidates would fail in clinical trials, dashing the hopes of patients eager for affordable treatments.253 Moreover, a promising government-backed investigational candidate could chill early-stage R&D within a therapeutic class because successful approval of the candidate would constrain class pricing. For example, if the government successfully marketed a diabetes drug and charged a competitive, rather than supracompetitive, price, researchers might abandon alternative diabetes drug projects; the existence of a lower-cost product in the diabetes market might constrain pricing, with consumers choosing the lower-cost drug unless the alternative drug were markedly superior. Whether to continue R&D would be a strategic decision for potential competitors because many promising candidates fail and some competitors may have already sunk significant resources into similar products. Additionally, patent buyouts require significant upfront expenditures, providing return on investment at best a few years later when early adopters of new R&D-related tax incentives decide to spin off therapeutic businesses. Given campaign realities for legislators elected to two- or six-year terms, delayed gratification may mean no gratification.