The American Spectator

Earlier this month, the U.S. Supreme Court unanimously ruled to make it more difficult to invalidate a patent. Essentially, the court decided that “obvious” combinations of previous inventions do not warrant protection under U.S. patent law.

The case before the high court was KSR International Co. v. Teleflex Inc. The dispute was over a patent for gas pedals. Teleflex had combined two existing inventions — an electronic throttle control and an adjustable pedal. The Court ruled that this was too obvious a combination to warrant protection under a new patent.

Unfortunately, the court’s ruling will have implications that go far beyond gas pedals. Namely, it will stifle innovation in the pharmaceutical industry — which, ultimately, will have a negative impact on the future of public health.

According to Justice Anthony Kennedy, who wrote the majority opinion, “Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may…deprive prior inventions of their value or utility.”

At first glance, that seems to be somewhat reasonable — for things like gas pedals. The problem is, 21st century medicine has very little in common with automobile parts.

In medical innovation today, there are precious few “Eureka!” moments. Progress is made step-by-step, one incremental innovation at a time. Those advances require extensive research. And they’re terrifically expensive. On average, it takes nearly a billion dollars to bring a new drug to market.

But this slow, steady progress is how today’s medical advances are made — not through Hollywood-style “Aha!” moments so popular with politicians and pundits.

NEVERTHELESS, GENERIC DRUG MAKERS routinely challenge the patents of name-brand drug makers in court, claiming that they’re too obvious to warrant patent protection.

It’s far cheaper for generic companies to wage these legal battles than invent the drugs themselves. If they win, they can reap the benefits of the hundreds of millions worth of research that a name-brand company spent developing the drug. If the drug is denied patent protection, generic companies move in to reproduce low-cost copies of the same molecular combinations.

The downside, of course, is that the name-brand companies cannot recoup their R&D costs if their patents aren’t upheld. As a result, they will have less incentive to invest in developing new drugs in the future.

The high court’s ruling will make pharmaceutical innovation more difficult by reducing the incentive for companies to make small steps forward. If the courts don’t recognize the concept of incremental innovation as worthy of patent protection, investors simply won’t pay for it.

And if investors won’t pay because there’s no profit motive, name-brand companies will be unable to pursue incremental advances.

If the current system collapses, what’s the alternative? Who will pay drug companies to invent new drugs?

DISTURBINGLY, SOME FOLKS ARE now advocating a “prize” system where there are no drug patents. Instead, the government would pay a drug maker a lump sum for its innovation, and then the new drug would immediately be placed in the public domain.

This is unlikely to work. The government “prize” model has already been used in the past — in the old Soviet Union. And it was a spectacular disaster. The Soviet experience was characterized by low levels of monetary compensation and poor innovative performance.