State of Innovation

Patents and Innovation Economics

Avik Roy’s Excellent Analysis of Drug Patent Settlements

Mr. Roy’s article “Why Drug Patent Settlements are Good for Consumers”  is a breath of fresh air in this debate.  Mr. Roy shows why these settlements are good news for consumers.  Patented inventions are property rights with the same logical basis as property rights in land.  As Ayn Rand pointed out Patents and copyrights are the legal implementation of the base of all property rights: a man’s right to the product of his mind.”  “What the patent and copyright laws acknowledge is the paramount role of mental effort in the production of material values: these laws protect the mind’s contribution in its purest form: the origination of an idea.”

History has clearly shown that when governments interfere with private property rights, it always results in less economic activity.  Less economic activity is always bad for consumers, since they have fewer choices and more importantly their income is negatively impacted.  The US government’s interfering with drug companies’ patent property rights have will have the same effect.  The government is not just interfering with drug companies’ property rights, it is also interfering with contracts.  This is clearly not in the spirit of Contract Clause of the US constitution and is detrimental to economic activity.

Mr. Roy clearly shows how government interference in these contracts and patent rights is not beneficial to consumers.  He explains,

If the government banned the “devious tactic” of legal settlements, the likely outcome is that consumers will spend more on pharmaceuticals, not less. Claims to the contrary are only accurate if you believe that generic companies are dumb enough to settle even when they would win in court. The truth is the opposite: modern generic companies like Teva employ the most sophisticated patent lawyers on the planet. You can rest assured that they will only settle when they think their case is weak.

Please read his full analysis.

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July 8, 2010 - Posted by | Patents | , ,

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