Medical Patents Must Die
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Prometheus gave man fire, thankfully he didn't charge every time man lit a match. Prometheus Labs in contrast wants to charge patients for a rule that says when to increase or decrease a drug in response to a blood test. Quoting Tim Lee:

The patent does not cover the drug itself--that patent expired years ago--nor does it cover any specific machine or procedure for measuring the metabolite level. Rather, it covers the idea that particular levels of the chemical "indicate a need" to raise or lower the drug dosage.

Even this is not quite right for suppose a physician notes that the patient's metabolites are within the range where a change in dosage is not necessary; although the physician takes no action she still has used the patent and thus must pay Prometheus Lab a fee or infringe.

We already have significant incentives for producing pharmaceuticals (and thus the instructions required to best use those pharmaceuticals), we support medical research through universities and non-profit hospitals, and there is plenty of opportunity to profit from the manufacture of tests. Will we really get enough additional innovation to justify the monopoly prices and deadweight losses when we enforce patents on medical rules? Remember, we have to pay the higher prices on all the rules not just the ones brought into being by the patent.

And if medical patents why not economic patents? Will Scott Sumner now patent a rule for adjusting the money supply in response to metabolites the futures market?

Patents like this are a logical consequence of the extension of patentable matter to software and business methods but extending patents to software and business methods has created huge legal costs without any increase in innovation.metabolism1.jpg

Most importantly, patents can reduce innovation and are especially likely to do so in fields where innovations build on innovations. In fields of cumulative innovation, previous patents owners become veto players who can threaten to holdup the new innovation unless they are granted a share of the proceeds. In theory, bargaining can result in an efficient outcome. In practice, it means lawsuits, delay, waste and reduced innovation.

Since a smartphone may rely on many thousands of previous patents, the smartphone industry has heretofore been considered a classic case of how too many veto players can impede innovation. But now consider human metabolism, one of the most complicated systems known to man (just a tiny fraction of that system is shown at right), and note that if Prometheus is successful in this lawsuit that any correlation in that system can be patented. This is a recipe for disaster.

Addendum: Scotus Blog has a roundup of links. See Launching the Innovation Renaissance (Amazon link, B&N for Nook, also iTunes) for more on patents and their problems. Hat tip also to E.D. Kain who writes:

The world, it appears, is determined to turn me into a full-fledged libertarian. What with SOPA, PIPA, the NDAA, software patent trolling, police violence, and now patents on how doctors provide treatment to their patients, it's becoming more and more clear how pernicious the law can be when it's designed for powerful special interests, national security hawks, and big corporations.

Cross Posted from Marginal Revolution.

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2 Comments

Mr. Tabarrok-

While your expertise in economics may be impeccable, I suspect you have not spent very much time in a lab, and therefore probably do not appreciate the difficulty, amount of time and expense involved in drug discovery.

It is probably the most difficult industry in which to succeed. Here are some interesting figures:

It takes 10,000 new chemical compounds on average and 13 years to make one drug. Given an average career of 20 years, a competent chemist has about a 5% chance of discovering an actual drug over the course of his entire career.

It takes an average of 57 projects to come up with one marketed drug. And even then, only 2 in 10 of these will be profitable.

Here are approval times (from the start of the project) for a few well known drugs:
Proscar 9 years
Prozac 18 years
Mevacor 9 years
Zofran 8 years
Tamoxifen 16 years
Taxol 28 years

These are all first-in-class, novel therapies--all for unmet or poorly met medical needs.

With the cost of a new drug up to $1.3B, who in their right mind would spend the time and effort to attempt such a discovery?

Patents enable innovation, not suppress it. These drugs have saved hundreds of thousands of lives. Would we really be better off it we never had them?

Mr. Bloom appears to have stopped reading at the title or at least missed the point of the article. What do drug discovery costs and patents have to do with patenting drug usage guidelines?

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