Last week, the House of Representatives introduced a bill that was meant to strengthen patent and other intellectual-property rights. Unfortunately for the entire pharmaceutical industry, the bill overlooks the most crucial reason for protecting intellectual property rights: spurring innovation.
The primary goal of the bill, called the "Prioritizing Resources and Organization for Intellectual Property Act of 2007," is to more closely monitor the production and sale of counterfeit and pirated music, movies, and pharmaceuticals, and to increase penalties on people who engage in such actions. The bill also proposes the creation of a new division of the Department of Justice to deal solely with "law enforcement" of intellectual-property rights.
However, the World Health Organization estimates that less than 1% of all pharmaceuticals in developed countries are counterfeit. So instead of worrying about the small amount of counterfeit drugs entering the country, perhaps Congress should focus on ways to create new incentives for pharmaceutical innovation.
Whether it's due to a stricter FDA or simply declining drugmaker productivity, the FDA has been approving fewer new drugs in recent years. Congress could easily encourage pharmaceutical firms and investors to plow more money into drug development if it lengthened the time during which drugmakers could exclusively market their approved compounds.
Under current law, a copyrighted product like Disney's iconic Mickey Mouse receives as much as 120 years of protection from most forms of reproduction. In contrast, most new pharmaceutical drugs get a maximum of 14 years of marketing exclusivity. And once you figure in the lengthy drug-development process, almost all small-molecule drugs actually get fewer than 14 years of generic-free sales.
With such a relatively short window of opportunity, drugmakers are often unwilling to develop new compounds that would require studies involving thousands of patients and years of clinical testing to get approved. Small-molecule drugs that would treat Alzheimer's disease and many cardiovascular indications fit this description.
Advocates argue that the shorter patent and exclusivity provisions for pharmaceuticals get cheaper generic drugs onto the market more quickly, but the reality is that there would be no new generic drugs if there first weren't a branded counterpart.
The logic is simple: The best way to stimulate drugmaker productivity -- besides offering outright subsidies -- is to extend the marketing exclusivity for a branded drug. In turn, creating better incentives for branded pharmaceutical drugs will lead to more generic compounds and cheaper prescription-drug costs.
The hottest area of commercial drug development right now is in biologics, and it's not just a coincidence that there's no easy way to produce or sell a generic biologic or biosimilar drug in the United States. That additional buffer of protection is the reason AstraZeneca (NYSE:AZN), for example, is willing to pay so much to acquire MedImmune. It also explains why Carl Icahn reportedly offered $23 billion for Biogen Idec (NASDAQ:BIIB).
Wouldn't it be nice if Congress had enough sense to focus on improving incentives for new drug discoveries, rather than proposing bills to ensure that someone isn't illegally downloading the latest 50 Cent hit?
Further Foolishness on drug patents:
