The Patent System is Poorly Optimized for Medicine, Here’s Why

By Published On: February 28, 2023Last Updated: February 18, 2023

If you invent something new, filing a patent for it legally protects you from others who wish to steal your idea and use it as their own. These patent laws apply to any new and useful product, from large machines to tiny molecules. While such intellectual property (IP) protection is crucial for pharmaceutical companies developing novel drugs, they can also prevent patients’ access to medicines.

Intellectual property (IP) protection helps pharmaceutical companies generate revenue as a reward for investing time and money into developing new drugs. However, this one-size-fits-all model is poorly optimized for medicine, leading to monopolies over essential drugs and the suppression of competition in innovation and manufacturing.

Intellectual Property (IP) and Medicine

Pharmaceutical Companies Develop New Drugs…

When we’re ill, we go to the pharmacy to grab a bottle of pills. Medicines are an essential part of daily life, and civilization’s progress has been aided by the development of new drugs to help us live longer and healthier lives.

The responsibility for this falls on the shoulders of pharmaceutical companies, upon whom patients rely on to produce safe and effective therapies to treat a multitude of diseases. Drug development, however, is not a cheap process. On average, it costs US$2 billion and 14 years of development to bring a new drug to market.

This, in turn, means that pharmaceutical companies expect a (healthy) return on their investment. They are rewarded for developing a new drug by being granted a market exclusivity period, during which they have the sole rights to market and sell the drug.

…But Only if the Drug is Patentable

However, the catch is that market exclusivity can only be granted if the company actually develops a marketable drug product. To secure IP protection, pharmaceutical companies must file for patents early, often during the drug discovery stage.

Patent protection, unlike market exclusivity, goes beyond protecting the drug product. Drug formulations, manufacturing, doses and supporting devices can each fall under the scope of separate patents. Although patents expire, companies can continuously file for more patents while modifying their drug product, effectively forming a ‘patent wall’.

These patents prevent competitors from producing and selling their drugs, as doing so would count as patent infringement. It can also protect early-stage molecules from being studied by others since any drug candidate that culminates from them might also be liable for an infringement lawsuit.

In fact, patent protection is so critical to pharmaceutical companies that any potential drug that fails to secure it is promptly scrapped, even if it shows promising therapeutic benefits.

5 Reasons Why the Patent System Doesn’t Suit Drug Products

The patent system works well for most inventions and ideas, rewarding the creator with legal rights that prevent IP theft. However, the same system in medicine leads to several ethical issues that are detrimental to patients who require the (sometimes life-saving) drugs.

High Prices for Patients

The most apparent problem is affordability. Because of the resources put into researching and developing a drug, along with the cost of failed drug projects, pharmaceutical companies price their drug products accordingly to recoup these losses.

We must remember that pharmaceutical companies are private entities, with shareholders who expect returns. They take advantage of the fact that they are the sole manufacturer of a new drug to generate as much revenue as possible during this period. This has led to criticism over ludicrous price tags on medications, keeping them out of the financial reach of people who need their inventions to survive.

Furthermore, insurance companies and pharmacies compound this problem (a prime example is insulin in the U.S.). They essentially buy the drug products from pharmaceutical companies and resell them to generate net profits, adding to patient costs. But because of government regulations and healthcare policies, it can be difficult to get around them.

A Barrier to Innovation

As mentioned earlier, pharmaceutical companies will only invest in a drug’s development if they are confident it can be successfully filed for patent protection. Patents are filed as early as possible in the drug discovery process to ensure the protection covers the broadest spectrum of drug molecules and techniques.

These patents mean that rival companies cannot develop similar drugs during the protection period, or risk infringing on the patent. Since multiple patents spanning not only the active ingredient but an umbrella of related molecules are filed in parallel, it restricts further development and innovation in the field.

Unnecessary Legal Costs

As IP protection generally equates to more money, pharmaceutical companies are prone to hiring powerful legal teams and investing heavily in filing for and extending patents. This money could be spent on real innovation, but instead becomes costs that are passed onto the patients.

This system is also detrimental to pharmaceutical companies themselves, as IP-related lawsuits and disputes can take years and millions of dollars to reach settlements, often benefiting only the law firms involved. For example, Moderna sued Pfizer in 2022 over their COVID-19 vaccine, alleging that the mRNA technology used was pioneered by them and was under patent protection at the time.

This is despite Moderna declaring in 2020 that it will not enforce its vaccine patents. However, perhaps considering the success of Pfizer’s vaccine, they have now backtracked on this and demanded ‘reasonable’ compensation for a license. In response, Pfizer is expected to ‘weaponize’ their own patent portfolio to countersue.

Encourages Anti-Competitive Practices

After their patent protection period expires (usually 20 years from filing), other manufacturers can produce and sell ‘generics’: chemically identical drug products that are typically a fraction of the original’s cost. This translates into a loss of market share and revenue for the parent company.

To prevent and delay this competition from entering the market, companies often build patent walls, filing multiple related patents for the same product that extends their IP protection period. Some common strategies pharmaceutical companies employ include developing new extended-release forms of the drug or exploring other routes of administration.

Reduces Accessibility

Finally, IP protection can also reduce the accessibility of the drug to patients. Since IP protection is limited to the country where the patent is awarded, pharmaceutical companies may choose not to develop and sell drugs in countries they believe will be difficult to enforce their patents. For example, the U.S. market is extremely attractive to pharmaceutical companies, with 3/4 of their worldwide profits coming from U.S. patients alone.

Unfortunately, this usually affects low-income countries with a smaller or poorer demographic of patients requiring the medication. Drugs like HIV and Ebola are considered to be poor profit-makers since patients who need them are unlikely to be able to pay a premium, while the countries in which they are likely to be sold might not enforce IP.

What Needs to Be Changed?

While the patent system works in many cases, it is evident that current IP laws and regulations are unsuited to drug development. Both a hindrance to innovation and an unnecessary financial outlay, the current system drives up the costs and the time it takes for a drug to reach patients.

The way that drugs a licensed and the laws preventing innovation and accessibility needs to be improved, along with better regulations on drug pricing (especially when insurance companies are involved). Governments must also do more to make drugs affordable so that every patient who needs potentially life-saving drugs is not prevented by cost.

Yet, changing the patent system or segregating drug-related patents to fall under a different set of protection rights will not happen overnight (or in the foreseeable future, for that matter). The goal of finding a balance between profitability and innovation, resistant to manipulation and loopholes, is a challenging boat to rock, and one that nobody is yet willing to.

About the Author

sean author
Sean Lim

Sean is a consultant for clients in the pharmaceutical industry and is an associate lecturer at La Trobe University, where unfortunate undergrads are subject to his ramblings on chemistry and pharmacology.

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