State of Innovation

Patents and Innovation Economics

Obama – Change Pharmaceutical Patent Term to 7 Years

President Obama has proposed changing the length of time patents covering pharmaceuticals are enforceable.  His proposal is to change the patent term from 20 years to 7 years.  According to Medical News Today, it takes 8 years on average for a new drug to receive FDA approval.  Thus, the President’s proposal is to essentially eliminate patent protection for drugs.  If this proposal is implemented, the net result will be to kill innovation in the pharmaceutical industry.   This will increase the long term cost of medical care.  Medicines are inexpensive medical treatment compared to surgical techniques, the main alternative. 

This is exactly the wrong course to take in reforming health care.  The key to reducing the cost of health care in the long term is to introduce more innovation into the health care industry.  Some of the institutions limiting innovation in health care include, the FDA approval process, Diagnostic Related Group billing, absurd lawsuits against drug and vaccine makers, and third party payer systems that substitute the judgment of business people for medical doctors. 

If we want to reduce the cost of health care, we need to introduce more innovation into the system not less.  Some pro-innovation reforms include changing the legal system so that only true negligence results in liability in the health care industry, overhauling the FDA approval process to reduce the cost and time of introducing a new patent, and reducing the third party payer systems so that consumer choices can spur innovation in health care.


August 13, 2009 - Posted by | -Economics, -Philosophy, Innovation, Patents

1 Comment »

  1. Another “brilliant” proposal by the current adminstration. You are exactly right that it takes a very long time and is extremely expensive to develop new drugs and take them through the necessary clinical trials that are required for FDA approval. If the intent of the current administration is to markedly curtail the development of new drugs then this will accomplish it. I don’t think there is any debate that the U.S. pharmaceutical industry leads the world in the development of new drugs.

    This whole issue is very complicated though given that many in our society feel that health care is somehow an entitlement. I do not agree that it is an entitlement but with many people feeling that way and with our government covering the costs for a lot of new drugs perhaps the current adminstrations goal is to actually markedly reduce new drug development so as to not have to cover those additional costs. Some drugs such as Herceptin (which is used for breast cancer) are said to cost $100,000 per year.

    I think the solution we need—-which I know is currently (and perhaps forever) a pipe dream is to get government totally out of medical coverage such that the free market would allow us to accurately determine the true value of these new drug developments. I would, of course keep the patent term at 20 years instead of the ridulously short suggestion of 7 years. Pharma companies, venture capitalists, etc will simply not invest the money in new drug development if the patents only last 7 years.

    Comment by Kevin Halling | August 15, 2009 | Reply

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