Specifically, effective IPR key to pharmaceutical innovations that solves disease

Being that it is an exclusive right to a piece of knowledge, patents are often considered to be a kind of monopoly. Criticism has been heaped upon patents in exactly the way one would expect given this definition. The creation of intellectual property rights creates an allowable exclusivity. Yet, it should be immediately apparent that patents do not automatically confer a monopoly over an industry. For example, a pharmaceutical company that invents a new and improved cancer medicine is still in competition with alternatives from other companies, which ultimately acts as a constraint on their ability to charge prices above a competitive level.

Commercial success is tied to more than just an innovative idea; superior marketing, management, positioning, and other factors are likely to be more important than the patent itself. Moreover, individuals and companies will seek multiple solutions to the same problem, whether that might be in new commercial arrangements or products. By limiting a particular avenue for competitors, patents have the potential effect of promoting further innovation by encouraging others to develop new products.

PATENTS IN PHARMACEUTICALS

The medical field presents a strong case for patents, and because of its unique features, allows for a better understanding of the current tensions in other areas of patent policy.

The medical field has a lone inventor myth, which is exemplified in the belief of the cure for cancer. The truth is that there is unlikely to be any sole cure, but rather through research and applied innovation, effective methods and treatments for dealing with these diseases will be found. Of course, this means that the entire endeavor will be expensive. As with any piece of property, the bounds of intellectual property must be set, which is where we first encounter the variance that can exist between industries under patent protection. Compared to software patents where there is far less clarity in breadth of patents, medical patents tend to be more discreet in their delineation. It is relatively clear what constitutes a new drug and what does not.

Pharmaceutical companies also differ from other industries in their cost structure, including the time and resources needed to bring an innovation to market. Both the research phase and the regulatory approval process are costly and time intensive.

Biopharmaceutical discovery has benefited from a remarkable shift in research and technology. Even in the last 10 years, the methods to innovation have been revolutionized, spurred on by better understandings of genetic relationships. Take for example, Gleevec, a treatment for chronic myeloid leukemia. Before the drug was introduced, less than a third of those diagnosed with chronic myeloid leukemia were alive five years later, but after it became available that figure jumped to 90 percent. The method of research responsible for its development was extremely innovative and as such the total development was costly. Gleevec and the drugs that followed it are part of a new breed of drugs that are far more complex than their predecessors.

Even with biopharmaceutical innovations, estimates place the average cost of bringing a successful new drug to market at around $1.2 billion. After compounds are screened for use to treat a condition, only about 1 out of the 6 that make it to clinical trials will eventually obtain FDA approval. The table below shows that total industry research and development (R&D) has increased in recent years.

The marginal cost of another pill is often miniscule compared to the initial investment cost. Prices for generic drugs are substantially lower than the original brand because these new firms don’t have to amortize the initial R&D costs over a drugs patent life. Additionally, pharmaceutical firms face high risks in their ventures as well as high costs of entry compared to other industries.

Clinical trials provide an example of the costs to develop a market ready drug. As the Tufts Group has shown, the average length of a clinical trial increased by 70 percent from 1999 to 2005. In that same time period, the average number of routine procedures per trial increased by 65 percent. To add to that, the average clinical trial staff work burden increased by 67 percent. To top it all off, enrollment criteria and trial protocols resulted in 21 percent fewer volunteers being admitted into trials and 30 percent more enrollees dropping out before completion of the tests.

Overall, the regulatory process of drug approval levies a heavy risk for manufacturers and innovators. For every one drug that passes through the regulatory approval process, manufacturers usually assess 5,000-10,000 substances. This is a time consuming and expensive process where innovators hope to see a return on their investment over the long-term. The FDA aims to strike a balance between access to life-saving treatments and assuring the public with standards of safety in all pharmaceuticals.

The final step in pending drug approval usually involves hundreds to thousands of participants in a blind study of the drug. This part of the process now represents about 40 percent of pharmaceutical companies’ R&D expenditures. However, this often-cited statistic actually understates the amount spent. R&D expenditures include all pharmaceutical candidates that a company tests—including hundreds that never reach this trial stage. An analysis conducted by the Manhattan Institute found that for the drugs that are actually approved, these clinical trials typically represent 90 percent or more of the cost of developing an individual drug all the way from laboratory to pharmacy.

CONCLUSION

Medical treatments are among the best cases where intellectual property law has gotten things right. Patents are an important way to ensure that the benefits of research are captured by the creator. Solving the 21st Century’s problems will require complex solutions that will only come about because of intense research and development. Patents ensure that this research takes place. Even though some have criticized aspects of the patent regime, the system itself still serves as a testament to and an enabler of American innovation.