In the pharmaceutical industry, a patent is a twenty-year-long right given to a company to allow it to develop a specific drug that cannot be replicated by other competing companies. Patents are essential since they often transform pharmaceutical firms into monopolies, thus reducing competition. A breakdown of reasons why pharmaceutical corporations deserve patent rights, alongside potential negative effects associated with them, form the basis of this paper.
Why Pharmaceutical Corporations Should Be Granted Patents
Patents Encourage Research and Development
Each year, the pharmaceutical sector in the United States manufactures new drugs. According to the World Health Organization, 2015 recorded the highest drug innovation rates, with the introduction of 232 new cancer medications, 131 type-2 influenza vaccines and 154 new neurological treatment drugs (Wang, 2020). Such novel therapeutics are the product of patents, with corporations expecting returns on their drug research investments. For instance, in 2021, Bristol-Myers Squibb invested approximately half a billion dollars in innovation (Thakur–Wernz & Wernz, 2022). This cost, according to the company’s CEO, is expected to skyrocket within the next decade. The section below highlights how patents help drug companies to recoup their investments.
Support the Company’s Costly and Extensive Efforts in Research
Patent rights are very critical for the success of firms in the drug industry. Since medication development is costly and time-consuming, these firms use patents to recuperate their expenses, which in turn allows them to fund additional research (Thakur–Wernz & Wernz, 2022). For example, Mevacor, an anti-cholesterol medication by Merck, trounced the drug market throughout the 1990s (Wang, 2020). This company’s supremacy was a result of years of research before receiving Food and Drug Administration approval.
Can Make a Company Profitable
Drug companies which own major patent rights are generally more profitable since their capital base allows them to patent drugs in their clinical trials stages. When these new interventions get approval from the United States Food and Drug Administration, these firms make huge profits in the global pharmaceutical market. For instance, in 2021, Novartis leapfrogged Pfizer in financial performance after the company obtained patents for methylphenidate, clozapine, letrozole, and cyclosporine drugs (Thakur–Wernz & Wernz, 2022). The section below elaborates on three main reasons why drug companies should not be granted patents.
Why Drug Companies Should Not be Granted Patents
Promotes Antitrust issues
Over the years, some brand-name pharmaceutical corporations have been paying generic manufacturers to keep their products off the market so that the former can maximize profits from their parents. Such side payments are a breach of antitrust regulations as large corporations independently benefit from patents that were previously shared with generic firms. For example, the Schering-Plough Company managed to pay a generic firm, Upsher-Smith, $50 million to avoid the introduction of a generic medication model (Lee 2019). A few years later, the former amassed enormous profits from this deal.
Encourages Unethicality
Pharmaceutical corporations with monopolistic control over a product may explore such opportunities by charging exorbitant prices. For instance, Pfizer Inc. and Flynn Pharma Ltd. breached antitrust guidelines in 2020 by charging extortionate prices for an anti-epileptic medication (Thakur–Wernz & Wernz, 2022). This is a major handicap of the patent rights, which makes some drugs to be strictly limited to the few who can afford them.
May Fuel Biased Innovation
There have been debates between firms that have the right to benefit from the development of revolutionary treatments and those that want to push other companies to develop new medications for underdeveloped countries. Over the last two decades, approximately 1350 new drugs have been developed (Lee, 2019). However, barely two percent of these new treatments are for tropical diseases such as yellow fever. The development of treatment options for tropical diseases is considered less profitable by many pharmaceutical corporations and hence receives the least attention. In summary, although these rights encourage companies’ costly and extensive efforts in research, their contribution toward unethical problems in the pharmaceutical industry cannot be overlooked. The analysis of patent aspects among pharmaceutical firms can help readers understand the role of drug industry monopolization.
References
Lee, P. (2019). Reconceptualizing the role of intellectual property rights in shaping industry structure. Vand. L. Rev., 72, 1197.
Thakur–Wernz, P., & Wernz, C. (2022). Impact of stronger intellectual property rights regime on innovation: Evidence from de alio versus de novo Indian bio-pharmaceutical firms. Journal of Business Research, 138, 457-473.
Wang, Y. (2020). The anti-monopoly regulation of reverse payment patent settlement agreements in the pharmaceutical industry in China. Asia Pacific Law Review, 28(1), 202-224.