Bringing a new therapeutic to market is a challenging and costly endeavor. Strong intellectual property protections, which enable manufacturers to recoup their successful investments into new treatments, are absolutely essential to encouraging innovation. However, activists and government regulators who seek to weaken IP rights often fail to recognize this fundamental reality.
One example of this is a JAMA article published on March 27, which argues that certain diabetes medicines — such as insulins and GLP1As — would be more widely accessible if their prices were regulated to around the cost of production. This is untrue and reveals a crucial misunderstanding of how strong IP rights promote competition to increase the availability of innovative drugs.
| Claim: “Patents prevent competition and play a leading role in keeping prices high for a wide range of medicines.” |
| In reality: Patents play an essential role in promoting competition. Strong patent rights ensure that a company that develops a useful innovation — no matter the company’s current size or market share — will have a fair chance to succeed in the marketplace on the basis of its own ingenuity. In contrast, without protection for intellectual property, large companies would be able to copy competitors’ innovations with impunity, stifling competition and allowing established giants to set their own prices unopposed. Patent protections also only apply for a limited time, meaning that all but the newest drugs have generic alternatives available. Indeed, more than 90% of prescriptions filled in the United States are for generics. |
| Claim: Regulating drug prices to only slightly above the cost of manufacture would “afford manufacturers returns, while avoiding excessive profit margins.” |
| In reality: The cost of manufacturing, by itself, is just a small portion of the total costs that go into producing a drug. While per-unit manufacturing costs are often low, the cost of developing a drug and shepherding it through clinical trials is steep. When accounting for the cost of failure — the fate of nine in 10 clinical drug candidates — the average cost of developing a new drug is $2.6 billion. The market prices for drugs are designed to not only offset their manufacturing costs but also their R&D costs, which can take drug developers many years to recoup. Excessive regulation of drug prices would detract from developers’ R&D budgets, not just their profits. |
| Claim: Weakening drug patents and forcing lower prices would “enable expansion of diabetes treatment globally.” |
| In reality: Forcibly lowering drug patents by weakening IP would likely restrict worldwide access to diabetes treatment by preventing the development of new and more cost-effective medications. Reliable IP rights in the United States drive the development of innovative drugs that benefit Americans and those around the world, with more than half of new drugs being launched first in the United States. At the same time, evidence from countries like India and South Africa demonstrates that weaker IP laws do not result in lower medication prices — a fact the article itself acknowledges. Blunt tools such as price controls are much more likely to affect patients by reducing their treatment options than by making medicine more affordable. |