Deadly gaps in the patent system : an analysis of current and alternative mechanisms for incentivising development of medical therapies.
Type of content
The cost of medicines imposes a significant financial burden on society, with New Zealand spending $783.6 million between 2012 and 2013 alone. The majority of these costs are due to the monopoly prices charged for new patented drugs. The pharmaceutical industry argues that these high prices are necessary to recover the costs of drug development, which can exceed a billion dollars for a single drug. Because new medicines are relatively cheap to reverse-engineer and manufacture, in absence of a minimum period of exclusivity provided by patents, it is alleged that it would not be commercially viable to develop new medicines.
Most criticisms of the patent system relate to the high prices charged for patented medicines. However, there is another issue which has received limited academic commentary to date, namely, whether the pharmaceutical industry’s reliance on patents means that otherwise socially valuable medical therapies are being screened out or ignored, and whether alternative incentive mechanisms are needed to address this problem.
The aim of this thesis is to address this issue. First, the laws applicable to patentability and regulatory approval of new medicines will be discussed, with a focus on New Zealand and the United States. Second, evidence will be provided for the existence of three broad categories of medical therapies which lack private incentives for development under the current patent system: unpatentable therapies, unmonopolisable therapies and unprofitable therapies. Other problems with the reliance on patent monopolies will also be discussed. Third, the process of pharmaceutical reimbursement that is used to determine the price of medicines under the current system will be described, and a set of criteria will be proposed for an ideal incentive system, against which the current system is compared. Fourth, alternative incentive mechanisms for medical therapies comprising exclusivity-based ‘pull’ incentives, prize-based ‘pull’ incentives, and publicly funded ‘push’ incentives, will be analysed and ranked against these ideal criteria. This thesis concludes by proposing two legislative frameworks as part of an optimal incentive system alongside the current patent system, namely, extended regulatory exclusivity for incentivising unpatentable therapies and a prize-based mechanism combined with increased public funding for incentivising unmonopolisable and unprofitable therapies.