Monday, February 19, 2007

Intellectual Property & Research Incentives for making drugs

In a recent talk, nobel laureate Joseph Stiglitz asserted two very interesting ideas that need substantiation and evidence:

1) First he stated that the patent process is socially inefficient because it awards pharmaceutical companies monopoly power over their particular drugs, thus allowing them to reap large profits off of potentially small contributions but also giving them the incentive to maintain that monopoly power. To bolster this idea he put forth as a fact the idea that pharmaceutical companies spend more on marketing and advertisements than research. The implication being that pharmaceutical companies are using patents to solidify monopoly power rather than to do more research - which is the ostensible social purpose of patents - to give incentives for further research. But the question is, is it true that pharmaceutical companies spend more on marketing and advertising? And if so, where are these figures and what are these figures? Is it a 5 to 1 ratio and who is claiming this? Is this information being spun? And if it is not, shouldn't we be outraged?

2) Stiglitz made a second and similar proposition: he stated that pharmaceuticals spend more on lifestyle drugs - see viagra - then they do on lifesaving drugs. First, is this true? Second, what are the implications of this? I'm guessing my market oriented colleagues will suggest that the market wants what the market wants and that's ok. But as a matter of public policy, especially where lives are at stake, should we be willing to accept this? My answer to that question is an unequivocal no. But then this begs the question of what solution to the problem? Should some lines of research be sponsored wholly by government funding? And if so what implications for the patent process?

Su Dongpo

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