[JackFr]

I am not an expert on the economics of pharmaceuticals, however based on work of an expert I have come to believe that patents are not essential to the way medical research works today.

Patents are essential to the current business model of pharmaceutical companies -- they are necessary to guarantee a return on investment, but the portion of the investment devoted to R&D and clinical trials is dwarfed by the marketing.

     If you look at the big companies you can divide their budget into 4 big 
     categories. One is R&D, one is marketing and administration; the 
     other is profits, and the other is just the cost of making the pills and
     putting them in the bottles and distributing them. The smallest of 
     those is R&D. The smallest is Research and development. Profits
     usually are about the same. Marketing and Administration is 
     more than twice as much.

http://www.econtalk.org/archives/2012/11/angell_on_big_p.htm...

[netcan]

That's not an unreasonable perspective. But is the dynamic he describes predictable, is it the only dynamic or at least the dominant one? I assume he is not suggesting that the only effect will be minor adjustments to the way these industries work. If patents disappeared tomorrow, a tornado would run through the pharmaceutical world.

That doesn't mean that there aren't gains to be had from a moderate version of that approach. I just don't think there is a theoretical framework capable of telling us the right answer in economics. Economics is at its best more similar to zoology than physics. Zoology will not accurately predict the way species and populations will react to a reduction in available water sources or the introduction of new species. On the rare occasions that it's feasible, repeating the experiment will rarely yield the same result.

[chimeracoder]

> I have come to believe that patents are not essential to the way medical research works today.

> Patents are essential to the current business model of pharmaceutical companies -- they are necessary to guarantee a return on investment, but the portion of the investment devoted to R&D and clinical trials is dwarfed by the marketing.

Your comment contradicts itself.

If, as you say, patents are "necessary to guarantee a return on investment", then it doesn't matter if the R&D is the largest cost or not, because the company won't produce a profit (and therefore won't produce new drugs) without the patent.

In fact, it's quite reasonable to think that both massive marketing and time-limited protection from competition are necessary to ensure enough of a return to guarantee continued investment into the industry. It doesn't have to be one or the other.

[JackFr]

You're right -- it was not carefully written. My point is that the current pharma business model is not essential to medical research in general (rather than research today).

Patent protection for drugs (and chemicals in general) was weak or non-existent in Europe until the 1970's, and despite that there was research and development of drugs.

I think the system we have today is largely driven by the patent mechanism, and while not terrible, could be made better by tweaking the patent system.

The government sponsored monopoly is supposed to guarantee a return on the R&D, not guarantee the return on Superbowl ads for another erectile dysfunction drug.