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.
There’s also the problematic issue of how such a sum would be
determined.
The United States government does not have a good track record
when it comes to rewarding inventors.
For example, the federal government paid Robert Goddard — “the
father of American rocketry” — $1 million as compensation for his
basic liquid rocket patents. That was hardly a fair price given
that during the remaining life of those patents, U.S. expenditures
on liquid-propelled rockets amounted to around $10 billion.
Even though the “prize” system is widely acknowledged to be a
crackpot idea, it has a frightening number of supporters in high
places — including the U.S. Senate.
In fact, Sen. Bernie Sanders is introducing federal legislation
to create a prize system for medical innovations. Leave it to the
senator from Vermont to come up with a Ben & Jerry’s-style
solution.
If only inventing the cure for cancer were as easy as dreaming
up a new flavor of ice cream.
