Retarding Innovation

As part of his recent budget reduction plan, President Obama once again seeks to decrease the biotech drug market exclusivity from twelve years, as shoveled in under Obamacare, to seven years.

The biotechnology industry argued it needed 12 years of freedom from lower priced competition to recoup research and development costs. Any less, it argued, would retard innovation. The generic industry, as well as many insurers and employers who pay health care bills, said a much shorter period would suffice.

So if I read this correctly, the folks who develop new drugs say they need more time as the exclusive owner’s of their products in order to guarantee a return on their significant investment in the lengthy development process. On the other hand, the folks who want their formula to capitalize on their initial investments, the folks who pay for these drugs in service to their clients, and the folks who offer their employees health care plans, say they know better how much time/money is enough.  Therefore, the President is seeking to use the force of government, not to protect the innovators' rights,  but to benefit the other folks who say they have to pay too much for the benefit of other's innovation.  Once again, he decides how much is enough.

This may lessen the cost of some drugs in the short run (this is not definitive as other companies have not picked up the biogenic drugs after they were available for copy), but it is an excellent way to insure that fewer companies will risk their capital on the development of new life-saving drugs.

How the President's political pandering, never-ending energies toward creating an unknowable and chaotic business climate, and elitist drive for picking the winners and losers as only a messianic statist can is still seen by some as progress is beyond me. After all, once the government controls all of the producers' incentives under the guise of for the people, individual choices will be meaningless – as will the extraordinarily enlightened values once enshrined within the country founded on the sanctity of individual rights.   

Comments

Steve D said…
On the other hand, this protection is in addition to the 20 years allowed by the patent. It stands to reason that this issue could easily be solved by just extending patent protection for all inventions.

Because biologics are more difficult or expensive to make they should have more protection? No, all inventions should be protected equally.

I've never understood the twenty year patent law - what makes twenty years so special? Ownership of any invention should extend at least for the inventors lifetime.
September 21, 2011 at 3:41 PM
Lynne said…
You ask excellent questions that I cannot answer. I read somewhere in my research that the biologically-derived drugs were not being picked up after their protection had ended (sadly, did not have the reference handy to share). But I do know that passing a law one year offering 12 years of protection (hard won by the drug developers) then trying to rewrite it within a year of that agreement has got to increase the instability of that entire market. I also know that while the government has an important role to play in protecting the innovators' rights, it is not by arbitrarily determining and re-evaluating how much is enough for them.
September 21, 2011 at 4:21 PM
Steve D said…
I agree, though I will stick to the point that those 20 years for patent protection are just as arbitrary (why not 21?). It’s based on the pragmatic argument that promoting innovation is the function of patents rather protecting property.

For example, how many people would put down money to buy a house, if squatters were allowed to invade their home after their twenty years protection was up.

If someone has a good principled argument for not extending patents over the entire life of the inventor, I would like to hear it.
September 22, 2011 at 10:10 AM
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