A Critique of Strong Patent Protection
Brian Lam
A Critique of Strong Patent Protection
Abstract
In this paper, I attempt to analyze the negatives and positives of patent protection. The discussion will include an analysis of impact to firms and profits, particularly in the pharmaceutical sector, their innovations as a result, and the ultimate impact to society. Traditionally, it is believed that stringent patent regulations hurt the profits of large biotechnology companies, giving them less of an incentive to innovate. As a result, society loses. The paper will challenge this argument by considering the social benefit of allowing patents to expire and giving them less protection, through cheaper pricing of generic drugs, resulting in a greater number of innovations to society and investment in R&D. I will also discuss the importance of public funding of projects in the R&D phase, particularly among small inventors, along with the benefit of research done by universities, allowing them to take part in innovation in partnership with corporations as an approach more beneficial to society than what multinational pharmaceutical companies are capable of achieving on their own. And while these efforts result in more competitors within the global biotechnological industry, they may temporarily decrease profits to large firms, but provide opportunities for firms to become even more competitive and adapt their strategies in order to serve the greater good of the people who need affordable access to their products. In the pharmaceutical industry, the average cost of bringing a single new drug to market is as high as $800 million and lasts only 12 years apart from extensions (Boldrin 1). What is unique about the industry is that the cost of shipping a single container of medicine is the same, whether it is the first or the millionth container. With such high costs and constant returns to scale, it is unsurprising that the innovation of new drugs causes large firms who’ve invested in R&D the desire to
A Critique of Strong Patent Protection
Abstract
In this paper, I attempt to analyze the negatives and positives of patent protection. The discussion will include an analysis of impact to firms and profits, particularly in the pharmaceutical sector, their innovations as a result, and the ultimate impact to society. Traditionally, it is believed that stringent patent regulations hurt the profits of large biotechnology companies, giving them less of an incentive to innovate. As a result, society loses. The paper will challenge this argument by considering the social benefit of allowing patents to expire and giving them less protection, through cheaper pricing of generic drugs, resulting in a greater number of innovations to society and investment in R&D. I will also discuss the importance of public funding of projects in the R&D phase, particularly among small inventors, along with the benefit of research done by universities, allowing them to take part in innovation in partnership with corporations as an approach more beneficial to society than what multinational pharmaceutical companies are capable of achieving on their own. And while these efforts result in more competitors within the global biotechnological industry, they may temporarily decrease profits to large firms, but provide opportunities for firms to become even more competitive and adapt their strategies in order to serve the greater good of the people who need affordable access to their products. In the pharmaceutical industry, the average cost of bringing a single new drug to market is as high as $800 million and lasts only 12 years apart from extensions (Boldrin 1). What is unique about the industry is that the cost of shipping a single container of medicine is the same, whether it is the first or the millionth container. With such high costs and constant returns to scale, it is unsurprising that the innovation of new drugs causes large firms who’ve invested in R&D the desire to
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