“No possible good can ever come of a Patent Law, however admirably it may be framed.”
- The Economist, 1851
Many people can imagine a world full of innovation that does not have patents. But when they think of pharmaceuticals, this seems like an exception. Pharmaceuticals are relatively simple to produce but have high research and development costs. So it’s obvious, surely, that there have to be patents in pharmaceuticals.
This exception, however, may not be as necessary as people think. Two economists have researched the history of chemcial and pharmaceutical innovation. Michele Boldrin (Professor of Economics at the University of Minnesota) and David K. Levine (Armen Alchian Professor of Economics at UCLA and co-editor of Econometrica) argue (PDF) that it is not the case empirically that patents increase pharmaceutical innovation. Among the examples they give, they point to Italy. In Italy there were no patents on pharmaceuticals until 1978. Bear in mind that countries like India and even African nations are told they need patent protection in order to develop economically. Yet between 1961 and 1980, 9.28% of the world’s new molecular entities (NMEs) came from Italy. NMEs are the most important advances in pharmaceuticals as they represent leaps rather than just gradual progression. The authors suggest that after patents were introduced, Italy actually became less innovative, not more.
The example of Italy will be puzzling to many because it is totally contrary to everything the pharmaceutical industry says. Interestingly, before Italy introduced patents, its pharmaceutical industry contained lots of players: patents quickly reduced the number of companies involved. No wonder Big Pharma likes patents: they restrict competition.