Pharmaceutical patents: not so necessary after all?

Intellectual property is topic on which it seems that the vast majority of people – economists, politicians, and laymen – agree: patents and copyrights are necessary for innovation, and without copyright or patent protection, people who have no reason to innovate because they could not charge more than the marginal cost of production (i.e., the cost of stamping a CD or producing a pill, as opposed to paying the artist to sing the song or the researchers to discover the drug). The copyright argument is being put to the test right now with the internet making enforcement impossible and forcing music artists, TV creators, and filmmakers to compete in a world with significantly weaker copyright protections out there for creators.

Patents, though, are still alive and kickin', and are even expanding their reach based on international agreements whereby rich countries foist IP laws on developing countries in exchange for access to Western markets. Probably the most beloved of all patents is the pharmaceutical patent. Everybody gets pharmaceutical patents, right?

Wrong. Michele Boldrin and David Levine, in his book entitled Against Intellectual Monopoly (free online!), make the case against pharmaceutical patents based on the historical case of Italy, which was the last major industrialized Western country to institute patents for medicine (here is that chapter). Long story short, not only did the pre-patent area have more innovation (not just imitation, but actual research innovation), but there were many more small firms competing before the institution of patents than after. Boldrin and Levine also make the argument that this diminishing level of competition among pharmaceutical companies is the reason for the steady rise of drug companies marketing to consumers and doctors ("marketing" being a very charitable way of putting it, in the case of doctors). They also cite a study towards the end that's pretty damning to the modern American drug industry's defense of patents, where they find that the costs of these patents in terms of cost and innovation far outweigh the protective benefits of giving the patent holder monopoly power of their invention.

I look forward to reading the whole book, but considering I just read the chapter dealing with the most difficult issue for IP opponents (pharmaceuticals), I expect good things from it.