this Biden The government is rolling out a framework to enforce government authorizations for medicines developed with taxpayer money, saying it is prepared to grant licenses to other companies to produce them at a price if drugmakers refuse to make their products “reasonable” . Lower costs….
If a company refuses a license for its product, the government has the power to grant a license on its own. These are called step-in powers because they allow the federal government to “step in” and license products themselves.
Seizing patents to lower drug prices may sound good to politicians. However, does it stand up to economic scrutiny?
My colleagues at FTI Consulting and I wrote a white paper titled “The role of intellectual property rights in the biopharmaceutical field“—Study of consumer, producer, and social welfare in situations where the government would seize 10%, 25%, or 50% of the patent rights for patented drugs. The analysis found:
In the short term, consumers would benefit from the removal of intellectual property rights protection, as weaker protection (such as giving up patents) would lower prices while having a limited short-term impact on innovation. However, just three years later, consumers are worse off relative to the status quo and are suffering significant damage in the medium to long term.
Consumer surplus decreases because the threat of patent expropriation leads to lower investment in R&D and fewer drugs in development. In fact we found:
… By giving up patents on 25% of drugs, annual R&D investment will fall by 9%, 11% and 29% by 2023, 2025 and 2030 respectively. Intellectual property rights covering 25% of drugs would reduce the number of new drugs launched annually from 46 in 2021 to 33 in 2050.
If Biden's candidacy is widely used, the potential long-term impact on social welfare could be huge.
…There is a 25% chance that overturning pharmaceutical intellectual property protections would reduce social surplus by $16.1 trillion between 2021 and 2050 (an average of $536.2 billion per year, or 0.6% of global GDP).
Of course, manufacturers also suffer from patent confiscation. While many politicians focus on the impact on big pharmaceutical companies, failure to protect intellectual property rights can also harm smaller biotech companies, as well as universities with technology transfer offices (TTOs).
In short, President Biden's focus on short-term drug prices could have greater medium- and long-term negative consequences for patients and society.
