海角大神

When patents kill: Genzyme's patent-protected, life-saving drug

Should intellectual property protect the rights of a pharmaceutical company who can't produce enough of a key medication?

As noted by Mike Masnick on Techdirt (post reprinted below), due to the monopoly granted by patent (yes, ), people are literally dying because Fabrazyme is in short supply and the sole, monopolistic manufacturer, Genzyme, can鈥檛 make enough quickly enough鈥揳nd no one else is permitted to make it due to the patent. I鈥檓 sure the will callously, arrogantly, and smugly retort that without patents, Genzyme would never have invented the drug in the first place, and instead of, oh, 5,000 people dying, 20,000 would die. So saving 15,000 (I鈥檓 guessing at the numbers) is better than none, right? So the ones who die have no complaint about the patent system, since without it they鈥檇 die anyway. What a chilling mentality; and of course there is no reason to think drugs would not be invented absent patents.

If the concern here is that pharmaceutical companies need the be able to charge monopoly prices to be able to increase revenues enough to provide enough return on investment to make the original research worthwhile, wouldn鈥檛 a simpler and more direct solution be to remove the costs already imposed on them by the state鈥搕axes, regulations, FDA process鈥搃nstead of trusting that same destructive state to 鈥渉elp鈥� them? The history of innovation and patenting is rife with example after example of near-simultaneous invention occurring, but the first to file (or invent, depending on the jurisdiction) gets the monopoly. Absent patents, they would all be able to take products to market. They all benefit already from the accumulated body of human knowledge that they had no role in producing. They build on the insights and discoveries of others from the past; and in the future, people will build on their discoveries being made now. What is wrong with this? Emulation and learning are good things. The market thrives on competition; competition is not possible without the freedom to emulate. When current innovation incrementally builds on knowledge from the past, when future innovation will build on knowledge from the present鈥搃t is bizarre and obscene to impose artificial limits on contemporaneous learning and sharing and emulating and competing.

Absent patents, there would be even more innovation. As Robert Weissman from Public Citizen, quoted by Masnick, notes: 鈥� Of course there are no competing suppliers 鈥� why would any firm try to enter a market it believed closed by a patent monopoly?鈥� Companies avoid engaging in R&D in patented markets. Of course, this is one reason patents distort the market and R&D, as explained by Rothbard and others. (See Rothbard, :

鈥淚t is by no means self-evident that patents encourage an in颅creased absolute quantity of research expenditures. But certainly patents distort the type of research expenditure being conducted. For while it is true that the first discoverer benefits from the privilege, it is also true that his competitors are excluded from production in the area of the patent for many years. And since one patent can build upon a related one in the same field, com颅petitors can often be indefinitely discouraged from further re颅search expenditures in the general area covered by the patent. Moreover, the patentee is himself discouraged from engaging in further research in this field, for the privilege permits him to rest on his laurels for the entire period of the patent, with the assur颅ance that no competitor can trespass on his domain. The com颅petitive spur for further research is eliminated. Research expen颅ditures are therefore overstimulated in the early stages before anyone has a patent, and they are unduly restricted in the period after the patent is received. In addition, some inventions are con颅sidered patentable, while others are not. The patent system then has the further effect of artificially stimulating research expen颅ditures in the patentable areas, while artificially restricting re颅search in the nonpatentable 补谤别补蝉.鈥�

See also Arnold Plant, 鈥�,鈥� Economica, New Series, 1, no. 1 (Feb., 1934), p. 43.)

And yet, in Orwellian fashion, the intellectual properteers justify IP in the name of promoting innovation. War is peace. Sickness is health. Murder is collateral damage. And stultifying innovation is somehow promoting it!

The victims of this murderous policy in this case tried to lobby the NIH to authorize other companies to produce some more of the life-saving drug鈥揳nd pay royalties to Genzyme. How is Genzyme harmed by this? They would be receiving the proceeds of a private tax levied in their favor courtesy of the USPTO. But, predictably, disgustingly, . There is no justification for this outrage. What the petitioners basically want is a compulsory license. The feds have the authority to grant this. There is no good reason not to. As I argue in :

Paying royalties is one thing. This is similar to a tax. It impedes and puts a drag on efficiency. Worse still is the prospect of an injunction, which can simply shut a company down. Quite often this is what a competitor will seek. They do not want damages or money: they want to dominate the market and eliminate competition. Or the threat of injunction is used to basically wring money from an alleged infringer (e.g., the , even though the patents were under appeal at the PTO, due to the threat of an injunction).

If the purpose of the patent system is to provide some incentive to innovators, then receiving a monetary payment should be sufficient. Patent injunctions should be abolished entirely. The only remedy should be an award of damages (for past infringement) or a compulsory license (ongoing royalties based on future 鈥渋nfringement鈥�).

This would prevent patentees from shutting down competitors. At most, they could impose a small 鈥渢ax.鈥� Litigation costs, insurance premiums, and the ability of patentees to extract unreasonable royalties from alleged infringers would be radically curtailed. On the other hand, because patentees would still be able to seek reasonable royalties, there would still remain a substantial incentive to file for patents.

The compulsory licensing approach is not new. Some countries impose compulsory licensing on patentees who do not adequately 鈥渨ork鈥� the patent. The United States already provides for compulsory licensing in certain cases, as the US government threatened to do in the Cipro anthrax drug case. Also, in the wake of the recent eBay case, some courts are awarding some form of ongoing royalty of compulsory license instead of an injunction.

Here鈥檚 Masnick鈥檚 post:

from the patents-costing-lives dept

Earlier this year, we wrote about the situation with a petition to the National Institute of Health (NIH) to let other companies , a drug that treats Fabry disease. Fabry disease is an enzyme deficiency that can create very serious problems in those who have it 鈥� including kidney failure and heart attacks. Genzyme holds the patent on Fabrazyme, but has a problem: it can鈥檛 produce enough of the drug. That means people die. A group of Fabry patients petitioned the NIH to see if other companies could be allowed to produce just a little more Fabrazyme. They didn鈥檛 ask to break the patent. All they wanted was to let others make the drug, and pay Genzyme a royalty. On top of this, it鈥檚 worth noting that the key research for the development for Fabrazyme wasn鈥檛 actually done by Genzyme, but was done by the Mount Sinai School of Medicine and was financed with taxpayer money from the NIH.

At the time, we doubted the petition would be approved 鈥� and . An opening was left for an appeal, if another petition is filed by a company that wants to make Fabrazyme, rather than the patients (you know, the folks actually suffering). As the statement of Robert Weissman from Public Citizen makes clear, this is a ridiculous situation:

Why is NIH resorting to legal gymnastics to avoid exercising its legal authority to ensure an adequate supply of an important medicine? NIH agrees Genzyme is failing to produce an adequate supply of the important medicine Fabrazyme. It is plain that removing the patent monopoly on the drug is a necessary condition to enabling other potential manufacturers to enter the market. Yet NIH chooses to deny a request to issue open licenses for the Fabrazyme patents 鈥� a request for which it has undisputed legal authority 鈥� on the Alice-in-Wonderland, self-justifying grounds that there are as yet no competing suppliers. Of course there are no competing suppliers 鈥� why would any firm try to enter a market it believed closed by a patent monopoly?

------------------------------

海角大神 has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.