Even the Pharmaceutical Industry Doesn't Warrant Patents
APRIL 01, 2006 by SHELDON RICHMAN
The idea that government should issue patents for inventions is odd on its face. How can someone claim an exclusive right in a “practical application” of nature’s principles? Of course, an inventor can have a right to an object. But a right to bar others from using the application embodied in that object? That’s hard to accept. Property rights arise out of the finitude of objects. Two people cannot use the same thing at the same time and in the same respect. It is otherwise with ideas. As Thomas Jefferson wrote,
“He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me. That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property.”
Jefferson then added, “Society may give an exclusive right to the profits arising from them, as an encouragement to men to pursue ideas which may produce utility, but this may or may not be done, according to the will and convenience of the society, without claim or complaint from anybody.” Here Jefferson assumes what most people assume: that patents may be necessary for innovation. Who would invest capital to create a new product if anyone may copy it? But we may ask how innovation will come from a system that protects patent holders from competition by barring others from building on previous innovations or that permits legal extortion (see the BlackBerry case)?
Leaving aside whether utilitarian considerations trump natural rights, we can address these questions in light of a transnational study of the pharmaceutical industry contained in the not-yet-published book Against Intellectual Monopoly, by Michele Boldrin, professor of economics at the University of Minnesota, and David K. Levine, Armen Alchian Professor of Economics at UCLA and coeditor of Econometrica (online at www.dklevine.com/general/intellectual/against.htm). The strongest case for patents is said to be in the pharmaceutical industry because the extraordinary R&D costs could not otherwise be recouped. If the utilitarian case cannot be sustained there, it would be a deadly blow to the case in general.
“In fact,” Boldrin and Levine write,“we shall see that the case for patents in pharmaceuticals is weak—and so, apparently, even under the most favorable circumstances patents are not good for society, for consumers, or in this case, for sick people. Patents are good for monopolists, but that much we knew already.”
Given the vastly different patent regimes from country to country and historically, with several countries having none at all, we might expect a pattern: “In particular, at least between 1850 and 1980, most drugs and medical products should have been invented and produced in the United States and the United Kingdom, and very little if anything in continental Europe. Further, countries such as Italy, Switzerland and, to a lesser extent, Germany, should have been the poor sick laggards of the pharmaceutical industry until the other day. Instead . . . the big time opposite is and has been true.”
Their most striking illustration is Italy, which had no pharmaceutical patents until 1978. Yet, “[d]espite this complete lack of any patent protection, Italy had developed a strong pharmaceutical industry: by the end of the 1970s it was the fifth world producer of pharmaceuticals and the seventh exporter….[T]he forty largest Italian firms did not simply imitate but developed their own products and innovated extensively.” After patents were introduced, the industry became more concentrated and its share of world drug development fell slightly.
As W.S. Gilbert might have put it, with patents “things are seldom what they seem.”
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