Monopolies outweigh – broader patents are net worse for innovation by patenting concepts, creating serial litigation that locks out innovators and new drugs

As we show in more detail in the next section, the profits of (especially) the big pharmaceutical industries and their shareholders are often excessive. A major cause of these excesses are the strong commercial monopolies granted to the pharmaceutical industry through their patents. Most of the economic studies we discuss are (rightly) critical of the current system of drug production. Yet, it is often the case that the crucial role of patents is not adequately analyzed or acknowledged. Two key factors explain why these patents lead to huge profits and high drug prices. First, the often comprehensive monopolies create a powerful market position for their owners. Second, this strong position significantly weakens the negotiation space of governments and governmental agencies.Footnote6 They need to negotiate with pharmaceutical companies about the reimbursements these companies will receive for the drugs they deliver. It is true that governments around the world have been trying to reduce the (growth of the) costs of medicines for decades.Footnote7 In spite of this, as specified in the next section, drug prices have continued to rise to amounts that already are, or will soon become, definitely unsustainable. In addition, some general features of the theory and practice of patenting reinforce these conclusions. Overly broad patents inappropriately extrapolate the significance of the inventions on which patent applications are based and thus strengthen the monopolies of the pharmaceutical companies. Seth Shulman’s (Citation1999) book Owning the Future still offers an eye-opening (if also depressing) critique of the unjustifiable broadness of a host of approved patents. The many product patents grant their holders an even stronger protection. They provide an exclusive right of commercially exploiting the product as produced by any (known or, as yet, unknown) process. Thus, the holders of a product patent are rewarded for an unspecified range of hypothetical inventions, which they have not actually made available. Therefore, the protection awarded through a product patent can never be “sufficiently supported by the description of the actual invention,” as is required by patent laws and regulations. In fact, product patents effectively patent a concept and hence they are illegal (Radder Citation2004, 283–286). Finally, pharmaceutical companies employ a number of tactics to expand their monopolies beyond the usual patent validity of twenty years. For instance, by re-patenting a drug on the basis of “improved formulations,” “new indications” or “combinations with another drug” (Van der Gronde et al. Citation2017, 12). A consequence of these thus strengthened monopolies is a substantial weakening of the negotiation space of the public stakeholders.