Alex Tabarrok Archives

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.

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.

(This is reposted from Marginal Revolution, 10-1-11.)

In an important editorial in Science, Andy Grove, former Chief Executive Officer of Intel Corporation, advocates restricting the FDA to safety-only trials. Instead of FDA required efficacy trials patients would be tracked using a very large, open database.

The biomedical industry spends over $50 billion per year on research and development and produces some 20 new drugs....A breakthrough in regulation is needed to create a system that does more with fewer patients.

While safety-focused Phase I trials would continue under their [FDA] jurisdiction, establishing efficacy would no longer be under their purview. Once safety is proven, patients could access the medicine in question through qualified physicians. Patients' responses to a drug would be stored in a database, along with their medical histories. Patient identity would be protected by biometric identifiers, and the database would be open to qualified medical researchers as a "commons." The response of any patient or group of patients to a drug or treatment would be tracked and compared to those of others in the database who were treated in a different manner or not at all. These comparisons would provide insights into the factors that determine real-life efficacy: how individuals or subgroups respond to the drug. This would liberate drugs from the tyranny of the averages that characterize trial information today. The technology would facilitate such comparisons at incredible speeds and could quickly highlight negative results. As the patient population in the database grows and time passes, analysis of the data would also provide the information needed to conduct postmarketing studies and comparative effectiveness research.