Scrooge and IP Rights

December 26, 2006 4:24 AM

Scrooge and Intellectual Property Rights. A suggestion by Nobel Laureate Joseph Stiglitz on methods to reduce IP rights market distortions in the field of medical and drugs research.
posted by elpapacito (41 comments total)

Does this mean I'll be able to get screener versions of medications before they even come out now?
posted by srboisvert at 5:30 AM on December 26, 2006

A medical prize fund provides an alternative. Such a fund would give large rewards for cures or vaccines for diseases like malaria that affect millions, and smaller rewards for drugs that are similar to existing ones, with perhaps slightly different side effects.

He seems to be suggesting a prize for the (succesful) development of drugs but doesn't address who would bear the costs of research during the developmental stages which can be years. I can't really see drug companies funding research in return for a one off payment from the public purse.

My solution? An implied (and obligatory) license after a certain period of time. So after a year or two of exclusive exploitation by the company which developed and owns the patent, other companies could legitimately produce generic versions of the drug or technique for medical purposes. This would seem to strike a balance between inspiring innovation and enabling wider access and use.

I will humbly be accepting your nominations for a Nobel Prize.
posted by Ugandan Discussions at 5:46 AM on December 26, 2006

this was a such a shockingly bad article, i almost passed out when i saw this guy won a nobel in economics.
posted by phaedon at 5:58 AM on December 26, 2006 [1 favorite]

"Intellectual property differs from other property—restricting its use is inefficient as it costs nothing for another person to use it."

Arguably the most uncharitable representation of IP in any paper I've ever read.

"We tolerate such restrictions in the belief that they might spur innovation, balancing costs against benefits."

Says who?

"In 1995 the Uruguay round trade negotiations concluded in the establishment of the World Trade Organization, which imposed US style intellectual property rights around the world."

This statement implies that the US supports an overly restrictive, monopoly-creating, method of dealing with IP, and is solely responsible for infecting other markets with their 'capitalist propaganda'. When in fact, we are not the only country to support the economic rights of the author (hello, welcome to the west), nor are we the first to develop (or sustain) the system by which a government will enforce certain heavy-handed "moral" rights of the author (that essentially prevent the selling, buying or redistribution of those rights through any sort of financial dealing, thus locking the author to his work) - see france's "droit d'auteur", germany's "urheberrecht".
posted by phaedon at 6:18 AM on December 26, 2006

Anyone who argues that American IP law was designed to protect the inventor, and not the public, has got it ass-backwards.

Starting with the Copyright Act of 1790, the Founding Fathers designed a system that gave the inventor patent rights for 14 years - the theory being that the inventor should benefit from their hard work, but not at the expense of withholding benefit to the public. The law was designed specifically to ensure that benefits flowed to society and that inventors couldn't "lock up" knowledge.

Thomas Jefferson summed it up in 1813:

“If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of everyone, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possess the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lites his taper at mine, receives light without darkening me. That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density at any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement, or exclusive appropriation. Inventions then cannot, in-nature, be a subject of property. “

Modern corporations, and a lame and beholden Congress, have distorted and prostituted a great idea.
posted by Benny Andajetz at 6:35 AM on December 26, 2006 [1 favorite]

I'm still shocked at the idea that anyone has patented tumeric. How the hell did that happen? It's in the spice aisle of every decent grocey store, for god's sake.

The patent system in the United States needs to be torn down and entirely rebuilt; they obviously have no system for check for prior knowledge, it is completely broken.
posted by jb at 6:51 AM on December 26, 2006

this was a such a shockingly bad article, i almost passed out when i saw this guy won a nobel in economics.

Random internet idiot criticizes noble laureate discussing lauriate's field, film at 11.

_{This statement implies that the US supports an overly restrictive, monopoly-creating, method of dealing with IP, and is solely responsible for infecting other markets with their 'capitalist propaganda'. When in fact, we are not the only country to support the economic rights of the author (hello, welcome to the west), nor are we the first to develop (or sustain) the system by which a government will enforce certain heavy-handed "moral" rights of the author}

You completely fail to distinguish the difference between patents and copyrights here. Patents have nothing to do with the "the moral rights" of "authors" How is a drug company an "author" of a gene? it's not.

Semantics aside, unlike copyright patents, particularly the way the patent system is used in the Life Sciences is very American, and we're starting to see that style of IP more and more in software. That is definetly not something you see in the "West", in fact you can't get software patents at all in the EU right now.

The only thing lacking here is your own understanding, not surprising from someone who would claim to know more about economics then someone who won a Nobel prize in economics...
posted by delmoi at 8:06 AM on December 26, 2006

you know what? insult me all you want, im neither a world class economist, nor am i the world's snarkiest commentator. but at least give me something more to swing at, as opposed to defending my admittedly layman critiques of particular statements included in the article.

Semantics aside, unlike copyright patents, particularly the way the patent system is used in the Life Sciences is very American, and we're starting to see that style of IP more and more in software.

I really don't understand what you are saying here. I wish I didn't make the mistake of conflating patents with copyrights, which I have far more experience dealing with on a daily basis, despite not having a legal degree.

If you want to diss me, at least have something potent to say, that again, relates to the article (ie not emerging software patent law). If there's something I'm missing, show me it, bro.
posted by phaedon at 8:28 AM on December 26, 2006

And again: mea culpa. I re-read the latter paragraphs of the article and understand the author's real-world objections. I simply disagree with the philosophical assertions.

In other words, I agree, its hard to see how the US government could issue a patent on turmeric, but I do not agree with the broader claim that introduces that observation, namely that restrictions on "intellectual property", can and should be based on a cost-benefit analysis.
posted by phaedon at 8:33 AM on December 26, 2006

"Intellectual property differs from other property—restricting its use is inefficient as it costs nothing for another person to use it."

Arguably the most uncharitable representation of IP in any paper I've ever read.

Uncharitable and accurate.
posted by sonofsamiam at 8:52 AM on December 26, 2006

In other words, I agree, its hard to see how the US government could issue a patent on turmeric, but I do not agree with the broader claim that introduces that observation, namely that restrictions on "intellectual property", can and should be based on a cost-benefit analysis.

Ummm..you what?

Are you seriously asserting that in a situation in which patent rights delivered a net cost/ detriment to society, we would continue with them? Why? What would be the point?
posted by Ugandan Discussions at 8:54 AM on December 26, 2006

It's hard to see why cost benefit analysis of the effects of a set of laws should be ideologically discarded ; maybe it is worth recalling that we are flesh and bones entities, we may formally be working for abstract legal entities, but at the end of the day we wouldn't be satisfied by an "invisible hand" patting us on the shoulder.
posted by elpapacito at 8:55 AM on December 26, 2006

I'm actually reading Debunking Economics right now, and Stiglitz' name has come up several times (he's a critic of the neoclassical school of "thought" that makes up modern economics).

The economics of real goods aren't at all understood, economist's hand-waving notwithstanding. I can't imagine we're doing any better with IP. It's nice to see somebody step outside the completely unproven dogma and think differently about any economic issue. It's double nice that's it's about IP, where the American system is so amazingly fucked up.

Not just patent laws needs to be torn down and rebuilt, all economic thought needs to be torn down and rebuilt.

It's based on nonsense (like say, supply and demand. Current neoclassical theories of how these things behave are irrevocably broken at the most fundamental level).

And copyright and patent holders need to be reminded that those laws exist for the benefit of the public, not themselves. That they benefit is a nice side effect, but it is not the primary concern of that law, nor should it be.
posted by teece at 10:37 AM on December 26, 2006 [1 favorite]

teece: "It's based on nonsense (like say, supply and demand. Current neoclassical theories of how these things behave are irrevocably broken at the most fundamental level)."

I'd be interested in reading a more lengthy defense of this position. Care to link to something that gives more information on your views?
posted by Rictic at 10:54 AM on December 26, 2006

Debunking Economics has a lot of stuff, Rictic. Steve Keen is the author, he's a prof. of econ is Australia. The book is fascinating reading, and the critiques of economics are much stronger than I would have ever guessed (indeed, the critique of demand theory is pretty much unassailable: it's broken beyond repair).

Of course, most economists would disagree. But they don't have a valid argument, at least not that I see. The primary problem with the demand is the idea of aggregate demand. Economic demand theory talks about an individual -- the theory there is more or less OK [with a few major gotchas]. The trouble is that it has been proven to be impossible to extend the ideas of demand to an aggregate (that is, society), without either assuming that demand does not behave nicely as price increases, or without putting ridiculous and insane restrictions in place (namely, that every consumer is exactly the same, whether they are Bill Gates or an Indian dung sweeper, they both have the exact same proportion of spending on pizza; the other restriction is that a consumer's desires never change. What I want to buy with my income at 15 is exactly the same as what I want to buy when I am 85).

Economists have actually chosen to live with those patently stupid assumptions, in order to shoehorn reality into a theory that is broken. Supply theory isn't any better.

And yet, they've built the entire edifice of a supposed science on these to fundamentally flawed ideas (the math is fine; the trouble is that the mathematical model does not and can not represent reality very well at all. Economists have essentially come up with restrictions on reality to explain why their model should persist. It'd be the equivalent of saying that the Newtonian Model was perfect, and imposing restrictions on what kind of motion was "valid" in order to save the model. Except, Newtonian physics could claim a very high degree of empirical support -- economic models can make no such claim. So it would have made much more sense to do that with Newtonian physics).
posted by teece at 11:22 AM on December 26, 2006 [1 favorite]

Stiglitz may be a nobel laureate, but his understanding on patent law is somewhat shallow:

It is hard to see how the patent issued by the US government for the healing properties of turmeric, which had been known for hundreds of years, stimulated research. Had the patent been enforced in India, poor people who wanted to use this compound would have had to pay royalties to the United States.

There is a very simple reason why a patent issued by the US government isn't enforced in India: IT'S NOT VALID THERE. If it's a US patent, then it can only be enforced on US soil; this is known as the principle of territoriality. The rest of the article is similarly sloppily written.

Ugandan discussions: An implied (and obligatory) license after a certain period of time.

Uh yeah, this is exactly what we have right now: after a certain period (20 years at the latest, possibly a few years longer with an SPC) the patent expires and everybody is allowed to use the technology.

jb: I'm still shocked at the idea that anyone has patented tumeric. How the hell did that happen?

Not even Stiglitz claimed that someone patented turmeric. Please read more carefully -- that'll go a long way to prevent more states of shock.
posted by sour cream at 11:58 AM on December 26, 2006

Economists have actually chosen to live with those patently stupid assumptions, in order to shoehorn reality into a theory that is broken. Supply theory isn't any better.

Fuck that assertion. I am an apprentice economist with college degree in economy and let me tell you some thing : there is no absolute agreement among economist. I never acritically accepted the classical hypersimplification of supply and demand, described as two intersecting linear functions, the classical X of demand and supply.

That is only just another MODEL, which is an attempt to represent reality by reducing it to a series of manageable functions. Much like scientist economists attempt to understand what's going on , looking for order among the apparent chaos, patterns, repetitions, hard evidence.

Want to know how profit is made ? It is rather simple, the models describing how it happens don't even _require_ calculus. It is selling what you have for an amount of money higher then the amount you spent to acquire it (including all relevant costs). End of story.

Check out perfect competition model, attempting to describe a litte more complicated dynamics.

It is a deliberatedly _ideal_ model , let me stress it is ideal, but it is not in practice unachievable, minus the approximation to perfection ; an understanding of the mathematical concepts of LIMIT helps.

Enter Second Best theory. Check out Externalities a quite hot topic second only to risk distribution.
posted by elpapacito at 1:20 PM on December 26, 2006

Also Newton *bows to the direction of his grave* didn't have this silly little problem called "humans" changing significant rules day by day, no human was messing with the phenomenons he was studying.
posted by elpapacito at 1:26 PM on December 26, 2006

It is a deliberatedly _ideal_ model , let me stress it is ideal, but it is not in practice unachievable, minus the approximation to perfection ; an understanding of the mathematical concepts of LIMIT helps.

(I have a degree in applied mathematics -- the simplification and reduction of the math is a hindrance, not a help, in economics, from what I've seen. We need more economists with a deep understanding of mathematics).

It's a pathologically ideal model, not a deliberately ideal one, I'd say. I am not trying to dis economists -- it's a fundamentally difficult field. The simplifications made in the idealizations are dubious. That would be OK if the model had decent predictive power, but it doesn't even have that.

It's just an nifty mathematical model that describes an imaginary world that not only does not exist, but that can not exist.

And when I say "economist" I should say "neoclassical economist," which, from my understanding, makes up a very large part of those trained in economics (and pretty much 100% of the lay thinking on economics).

there is no absolute agreement among economist.

No, there isn't. But neoclassical econ is the dominant theory, and there are also legions of non-economists that swear fealty to the models/predictions of the neoclassical school of economics.

But there is a huge sense that the fundamental tenets of neoclassical economics (which is what most people mean when they say "economics") are fundamentally sound.

They most certainly are not sound. They are mathematical models that have little to no relation to reality, and they are built upon mutually exclusive or contradictory axioms. I love math, it's my passion, but a model is only as good as its relation to reality. Economists don't profess to be pure mathematicians, doing math for math's sake.

And yet, life or death, billion dollar decisions are made based upon those neoclassical models every day.

Indeed, those very flawed models will be used to argue both for and against the IP rights at issue in this thread, in spite of the glaring logical inconsistencies in the models.

And the physics analogy was just that. Physics is a much easier thing to model.
posted by teece at 2:03 PM on December 26, 2006

I find Stiglitz' articles occasionally right on target, and I'm sure that I don't have the slightest chance of understanding his serious theoretical articles, but, boy, isn't he sometimes (and this is just one of those times) just full of it.
Thing is, as sour cream points out, he clearly knows very little about either the pharmaceutical industry or patents. First of all, things are unfortunately not as simple as "discovering" a new medicine. That's in fact the easy part. Research departments come up with hundreds of interesting compounds every year. Then comes the expensive part, which is sifting among all those interesting compounds the ones that will actually work as effective and safe medicines. Out of those hundreds of compounds, only a handful, at best, will make the cut. It can happen that a new compound is discarded at the very last phase of clinical trials, after spending billions in testing: it just happened to Pfizer. That's why Big Pharma needs to recoup the losses in all those failed medicines through big profit margins in the few that make the grade.
On the other hand, pharmaceutical companies do not necessarily have an interest in pricing medicines beyond the reach of Third World patients: even from a purely selfish point of view, it'd be more interesting for them to sell millions of anti-retroviral or anti-malarial pills in those countries with a very small profit margin, than not to sell any at all, because the patients can't afford it. What scares them is that those cheap drugs would find their way back into the First World, hitting them hard...Or do you think that US patients (particularly poor, uninsured US patients) would understand that a given drug was sold at a fraction of the price just across the Mexican border?
The "patents vs. prizes" debate has been going on since a long while now. In fact, it's very much a false debate: both are perfectly compatible. The authorities could offer the prize in exchange for the patent patent rights, and this could be dealt with quite neatly. Eventually, they could even pay in advance for the development and clinical trials of promising substances. The problem is that someone would have to foot the bill for those enticements and prizes, and few seem to be volunteering so far. In short, if money is spent in developing potency pills rather than malaria vaccines, it is because we are more ready to pay for getting a stiffy than for somebody else not to die of malaria. We are the real Scrooges, not Big Pharma or intellectual property rights.
posted by Skeptic at 3:03 PM on December 26, 2006 [1 favorite]

The "patents vs. prizes" debate has been going on since a long while now. In fact, it's very much a false debate...
Dead on.
posted by phaedon at 3:42 PM on December 26, 2006

We need more economists with a deep understanding of mathematics

I concur, let me expand : we need more people with a better and deeper understanding of maths and I am among these people, but as many others I was exposed to trite repetition maths, never stimulated with enough problems to see math as as a modeling instrument.

Yet these people are players in the economic game and their behavior is , probably, more accurately described by Maslow's hierarchy of needs than by any nice function I ever met.

That said I will certainly enjoy reading D.E.
posted by elpapacito at 3:47 PM on December 26, 2006

For those who buy into Big Pharma's explanation of high prices, the following is from last month's Wired magazine article on Indian pharmaceutical company Cipla:

In practice, makers like Cipla often manufacture and sell drugs owned by other companies in countries where the patents aren't enforced. Pharmaceutical giants like Roche or GlaxoSmithKline see that as pirate behavior, arguing that if you start messing around with the patent system, you take away their profit incentive to invent new medicines. According to a 2003 study in the Journal of Health Economics, it can take 12 years and $800 million to discover one novel drug.

But the truth is that Big Pharma hardly innovates at all these days. It uses the profits from its patents to market existing drugs and buy new ideas from academic researchers or smaller firms. According to the consultancy Strategic Decisions Group, "40 to 50 percent of products in development by global pharmaceutical firms are externally sourced." Oseltamivir (Tamiflu), for example, was invented not at Roche but at a small biotech company called Gilead. Roche then bought the rights to make (and market) it. In 2004, just 36 new drugs were approved by the US Food and Drug Administration – down from a peak of 53 in 1996. So drugmakers have devised an arsenal of tactics for extending the life of their patents: Altered dosages, different combinations of meds, and novel uses for existing drugs all keep aging medications under patent – and profitable – by qualifying as new versions of old meds. That staves off competition from generics.

(As an insulin-dependent diabetic who can't get generic insulin (even though insulin has been manufactured more than 50 years), I don't trust pharmaceutical companies as far as I could throw 'em.)
posted by Benny Andajetz at 7:00 PM on December 26, 2006

who can't get generic insulin

It doesn't exist or is it incompatible with you ? Sorry to hear that anyway.
posted by elpapacito at 5:37 AM on December 27, 2006

Not to mention the fact that something like 10x as much is spent on advertising as research.

They didn't need the FCC to allow prescription drugs to be advertised, although it should be allowed on general principle. But research accounts for not so much of their budget.
posted by sonofsamiam at 6:40 AM on December 27, 2006

who can't get generic insulin

It doesn't exist or is it incompatible with you ?

Doesn't exist. I've never been able to get a straight answer why; it certainly seems a big enough market that someone would make it.
posted by Benny Andajetz at 8:39 AM on December 27, 2006

Benny,

The reason generic insulin doesn't exist is that it's a biotech drug (insulin is a hormone). Congress (I assume you're in the US, but I think Europe is in the same boat) still has not decided how to handle the approval of generic biotech drugs. There is a much higher potential for safety risks with biotech drugs than for small molecule (non-biotech) drugs. Apparently the FDA has been working on guidelines for approving generic insulin, but has yet to release them.

That being said, even if/when generic biotechs come around, there will probably mean much less profit potential compared to traditional medicines. This is because generic biotechs will probably require at least some clinical testing and the drugs themselves are more expensive to make. So there will be less incentive for the generic companies to become involved and the consumer will not benefit as much as with traditional drugs.

Also, I think that quote from the Wired article is a little misleading. I agree that Big Pharma may not be as innovative as they used to be and they now tend to buy up smaller companies and their drug candidates instead of innovating themselves (and I also agree that they spend way too much on marketing/advertising). However, these smaller companies typically don't have the money to push a drug through clinical trials nor do they have the ability to withstand the risk of a drug failing to gain approval. So many of these drugs would never hit the market without Big Pharma and their high prices.
posted by titanshiny at 9:52 AM on December 27, 2006

titanshiny :

Thanks for the scoop. I did notice on the packaging that my insulin is synthesized from e-coli.

The generic/ name brand issue is becoming more and more important as insurance companies go to tiered prescription payments. Insulin, so far, always ends up in the top "brand-name premium" tier. What a crock - they don't want to help with preventative medication, but they'll pony up to cover my stroke or amputation. Penny wise, pound foolish quarterly- bottom-line watching pricks.

Someone really needs to figure out how to make these companies separate their advertising budgets from their operating expenses. I'm not sure how one would go about doing that, but it seems unfair in the extreme to make people who have to deal with them against their will to begin with subsidize their advertising.
posted by Benny Andajetz at 10:12 AM on December 27, 2006

Pandeon, your a baffoon, we do only "tolerate such restrictions in the belief that they might spur innovation, balancing costs against benefits," period.
posted by jeffburdges at 10:12 AM on December 27, 2006

Benny, titanshiny has beat me to an answer, but I think that I can provide a couple more details.

The trouble with insulin is that it is a very complex protein which seems impossible to synthetize using conventional chemical processes. Instead, until not so long ago, it was extracted from animals, making it even more expensive than it is now, and not entirely safe.

A couple of companies found an alternative way of producing insulin (on which there is of course no currently valid patent as substance) by isolating the human gene responsible for producing insulin and splicing it into bacteria (such as E. coli). That probably took quite some effort and investment, as gene-splicing is, AFAIK (I'm not a biologist), quite a hit-and-miss affair. But once they succeeded, they turned those bacteria into tiny insulin factories, producing cheaper and safer insulin than any previous method.
They obviously patented the process. This, BTW, raised another patent controversy, as the patents also cover the genetically-modified bacteria. "Patents on life", thus. The reason is obvious: anybody who got their hands onto a single one of those bacteria could otherwise cultivate it and eventually compete against them with very little investment.
Because insulin from genetically-modified bacteria is cheaper to produce than using animals, those companies have been able to undercut their competitors, while keeping their profit margins high. The reason why there is no "generic insulin" is because it would actually be more expensive.

Ultimately, the biotech insulin patents will lapse (if they haven't lapsed yet), but even then, as titanshiny explained, it is unlikely that generic drug makers will immediately enter the market, because it would require a large R&D and certification investment.

Generic drug makers concentrate on commodity drugs which can be produced cheaply. After all, they're in it for the money too. In some countries, like India, medicines weren't patentable until recently, only processes for making medicines. That has given rise to the likes of Cipla, Dr. Reddy et al, which only had to find an alternative path for synthetising a recent drug to be able to copy it without trouble. But finding an alternative way for producing insulin is not so easy...
posted by Skeptic at 11:58 AM on December 27, 2006

And, Benny, I think your insurance company are indeed a bunch of idiots to treat insulin like that.
posted by Skeptic at 12:00 PM on December 27, 2006

On the other hand, pharmaceutical companies do not necessarily have an interest in pricing medicines beyond the reach of Third World patients: even from a purely selfish point of view, it'd be more interesting for them to sell millions of anti-retroviral or anti-malarial pills in those countries with a very small profit margin, than not to sell any at all, because the patients can't afford it.

You do see the contradiction between the above, and this:

What scares them is that those cheap drugs would find their way back into the First World, hitting them hard

Right, Skeptic? You've just refuted your first sentence there, showing that big pharma does have an interest in pricing beyond the reach of Third World patients.

What big pharma would like is a segmented market (sort of like what copyright cartels have created for themselves in the DVD market). They want a market in which a drug has a price of 100X in the First World, 50X in the Second World, and 2X in the Third World (ratios completely made up).

Interestingly, that's not a free market at all, at least not as I understand the (correct me if I'm wrong). According to most economic theory, an unfettered free market is the best thing. But here, not only do we apparently need the fetter of a patent, but we also need a segmented market, in order to make the "free" market work.

So free market economic theory is wrong in this case (that is, the free market is not the most efficient way to deliver goods to consumers), so that we really need not only the fetter of patents, but also the fetter of an artificially segmented market (if we are to deliver drugs to the Third World at a price those patients could afford).

Or big pharma is wrong that they need these things (which is the mandated position if you take the view that a free market is always the most efficient solution).

I'm not sure which it is, but I don't think big pharma would have any trouble making money even if patents were seriously curtailed. I could be wrong. The only way to find out is via empiricism, especially in light of how weak the current theory is in shedding any light on the situation.

And that gets to the heart of what bugs me about the economic arguments here. Both sides will throw out economic arguments rationalizing their position. But the reality is, we do not know which system would actually benefit society the most: should we tighten patents, leave them as they are, loosen them, eliminate them? Should we segment the market, introduce more government regulation? Reduce government regulation?

We don't know, and the reality is that the science of economics actually has very little real advice to give us on which path to take. Plausible theories supporting all positions are very easy to come up with.

sour cream:

There is a very simple reason why a patent issued by the US government isn't enforced in India: IT'S NOT VALID THERE. If it's a US patent, then it can only be enforced on US soil; this is known as the principle of territoriality.

Investigate the WIPO and the WTO. Any signatory/participants in those accords grants patent rights across national boundaries, so the argument is not at all specious. A country can choose not to enter into those agreements, but it will often face serious sanctions/tariffs/whatever from countries that do join those bodies.

Interestingly, to modern neoclassical economic theory, if patents and copyright are a good thing, they must be applied universally in order for the free market to "truly" work as it's "supposed to," meaning India should enforce any US patent, and vice versa, in the world of the neoclassical free market. And the arguments that bolster the current status quo of big pharma and patents all stem from the theory of neoclassical economics. Hmm...

Stiglitz' meta point is dead on: there are traits inherent to intellectual property that are fundamentally different than tangible property, and we really have no reason to assume the (flimsy) theories we've developed for tangible property actually apply to intangible property.

I'm not an economist, though, so do please point out any glaring error in or misrepresentation of neoclassical economic theory that I've made.
posted by teece at 12:13 PM on December 27, 2006

teece, I'm sorry, but you are wrong: What contradiction? What part of "do not necessarily have an interest in pricing medicines beyond the reach of Third World patients" don't you understand? If patented medicines could travel freely, the pharmaceutical industry will indeed have a strong selfish interest in pricing them highly everywhere. That was my whole point.
But then, your attitude, rejecting such differential pricing, is equally selfish.
As for empiricism, in fact, it has already been tried. How many important medicines have been developed in countries without strong patent protection? I'll tell you: basically zip. I'd know, because I hail from one: in my country (Spain) medicines couldn't be patented until 1992. It is a developed country, with a strong medical tradition, universities producing plenty of biology and chemistry graduates (many of whom then went unemployed or abroad), and a good public health system. It actually had quite a large pharmaceutical industry, specialised (like India's nowadays) in generics, but doing no R&D whatsoever. Ever heard of any breakthrough drug developed in Spain? Didn't think so...

This is also very deeply wrong:
Investigate the WIPO and the WTO. Any signatory/participants in those accords grants patent rights across national boundaries, so the argument is not at all specious.

Neither WIPO nor the WTO grant patents. You can file patent applications through WIPO, but they'll still have to be examined and granted country by country according to national law. And the WTO certainly doesn't do anything of the sort.

Interestingly, to modern neoclassical economic theory, if patents and copyright are a good thing, they must be applied universally in order for the free market to "truly" work as it's "supposed to," meaning India should enforce any US patent, and vice versa, in the world of the neoclassical free market.

The thing is, to be granted, a patent must fulfill a number of legal requirements. The law is not the same in all countries (the country with the most atypical patent legislation actually being the US), hence...
posted by Skeptic at 12:48 PM on December 27, 2006

Skeptic, I don't think you're understanding what I am saying, or I'm not communicating clearly.

I'm sorry, but you are wrong: What contradiction? What part of "do not necessarily"

Well, you said it yourself, medicines can and will travel among countries. The pharma industry wants a segmented market, which they don't have (and probably can't have), so they do necessarily have an interest (selfish or otherwise) in pricing medicines beyond the reach of the Third World. It would be that way under all definitions of free market that are operative today, and it would require pretty extensive abjuration of the free market to take the interest in pricing medicine beyond the reach of the Third World away.

So, they don't necessarily have that motive in a hypothetical world, but they do in this real world.

But then, your attitude, rejecting such differential pricing, is equally selfish.

I'm not rejecting anything -- if differential pricing could be shown to actually work, and it could be policed against abuse, I'd be all for it.

As for empiricism, in fact, it has already been tried. How many important medicines have been developed in countries without strong patent protection?

Again, you don't seem to be understanding my point. That's not empiricism, that's anecdote. The existence of patent-granting countries a few miles away pretty much puts the kibosh on finding out if the Spanish system would or would not have worked (and that gets to another issue: actually doing experiments here is fundamentally difficult).

Neither WIPO nor the WTO grant patents.

Not at all relevant to my point. The idea behind the WIPO and WTO is a standard implementation of IP across member nations. So the hypothetical Stiglitz mentions is not at all bizarre or contrived. Indeed, it's the reality of the multinational IP scene right now. A certain minimum level of IP protection is required; multinational patents are easily obtained.

The intent of modern IP treaties is to have IP protection as uniform as possible in "modern" economies. A patent in America is quite often going to end up being a patent in India. Yes, the patent holder has to apply in more than one place. So what? American patent law currently seems ludicrously broken, but many other countries don't seem to have a hell of a lot of trouble giving American companies patents. That's nitpicking on a semantic issue in Stiglitz' writing, and ignoring the main thrust of the idea completely.

Which is, that patents can and do cross national boundaries quite easily. It's not fruitful to get distracted by the language Stiglitz used to describe that reality, even if the language is confusing, because the use of sloppy language does nothing to refute his point.

I don't know the right answers here: neither does anybody. But there is no good evidence to say that without patents, the pharma industry would not exist. There are some data points that would support that, there are others that do not.

The arguments in favor of patents are all based upon neoclassical free market economics. And yet, big pharma exists in a market that is not a neoclassical free market in key ways. That puts those arguments in a very, very uncertain light. Further, free market economics is a really rickety structure to begin with.

That is my point. We don't know the answers to questions like these (how to treat IP economically); we don't have good economic theory to help us; we haven't performed any meaningful experimentation to find out what's best; performing experimentation is fundamentally difficult.

Yet, there is no guarantee that the current system is the best one for society, and there is not even much strong evidence that that is the case. We need more big name economist to state what is plainly the case: the current system may not be the best. It may not even be very good.

If it is the best, we should find some reasonable way to be certain that it is.

We do not have that right now. Not at all.
posted by teece at 1:52 PM on December 27, 2006

Well, you said it yourself, medicines can and will travel among countries. The pharma industry wants a segmented market, which they don't have (and probably can't have), so they do necessarily have an interest (selfish or otherwise) in pricing medicines beyond the reach of the Third World.

Actually, the market is quite segmented right now, with strong price differentials. The pharmaceutical companies are afraid that this may not last for ever, though, especially with increasingly free trade. Hence the link IP-WTO.

Again, you don't seem to be understanding my point. That's not empiricism, that's anecdote. The existence of patent-granting countries a few miles away pretty much puts the kibosh on finding out if the Spanish system would or would not have worked (and that gets to another issue: actually doing experiments here is fundamentally difficult).

Not to say reckless...Anyway, it isn't just anecdote, and I don't see what the relevance of having patent-granting countries nearby was. Those patents had no force in the Spanish market, period. And it isn't just Spain: look at India. It has large pharmaceutical companies, like Cipla and Dr. Reddy. It has an educated and competitive workforce. Nevertheless, those pharmaceutical companies just don't bother to develop new drugs.

Pharmaceutical companies aren't charities. They raise money in the capitalistic way: by promising a return on investment. They can achieve that return by investing in new drugs and selling them expensively, or by copying existing out-of-patent drugs, and selling them cheaply. Where there are patents, both alternatives can be lucrative: witness the success of Western generic drug firms like Germany's ratiopharm or Canada's Apotex. However, without patent protection, how can drug companies convince investors of the wisdom of investing their money in developing new drugs that then anybody else will be able to copy? They can't and they don't. Beyond "anecdote", there just isn't any single example of the contrary.

This doesn't mean that the pharmaceutical industry would disappear without patents. It wouldn't. Privately-funded pharmaceutical research and development, on the other hand...
The only alternative would be to fund such R&D through prizes, as Stiglitz proposes. However, who's going to pay for that? Are you? Such prizes could already be offered now to drug companies who surrendered the patent rights to the breakthrough drugs they developed though this scheme. Why isn't this done? Because nobody is offering the money.

Do you want to cut the pharmas' marketing expenditure? Fine by me: in fact, the US is pretty much alone in the world in allowing publicity for prescription drugs (a monstrosity, IMHO). But just don't believe that new drugs are developed for free...

A patent in America is quite often going to end up being a patent in India.

It's sometimes going to end up being a patent in India, and rarely with the same coverage.

That is my point. We don't know the answers to questions like these (how to treat IP economically); we don't have good economic theory to help us; we haven't performed any meaningful experimentation to find out what's best; performing experimentation is fundamentally difficult.

May I suggest you read this book? It's quite a complete economic study of incentives to innovation, and covers the "patents vs. prizes" debate in much detail. It wouldn't have been a bad thing if Stiglitz had read it too...
posted by Skeptic at 3:16 PM on December 27, 2006

Skeptic, titanshiny, elpapacito:

Thanks much for the concern and info. Metafilter,as usual, rocks.
posted by Benny Andajetz at 3:20 PM on December 27, 2006

From the original article:

It is hard to see how the patent issued by the US government for the healing properties of turmeric, which had been known for hundreds of years, stimulated research.

I'm no expert, but the phrase "the patent issued by the US government for the healing properties of turmeric" is in the past tense, which implies that the United States has issued a patent for "the healing properties of turmeric", which (according to the other part of the sentance) "had been known for hundreds of years". So a patent was issued for something which was already common knowledge, and for a substance which continues to be available in my grocery store (but maybe not yours soon, if you live in the United States). How is this not an abuse and misuse of the patent system?

Me, I'm going in there to patent the wheel. Maybe fire while I'm at it.
posted by jb at 4:33 PM on December 27, 2006

jb, a patent was issued in 1995 by the US Patent and Trademark Office to the University of Mississippi, for:

"A method of promoting healing of a wound in a patient, which consists essentially of administering a wound-healing agent consisting of an effective amount of turmeric powder to said patient."

It was a bad patent, for something that was not new. Moreover, I don't know about the US, but here in Europe, therapeutic methods are simply not patentable. The USPTO was caugh napping on that one, and the patent was rightly revoked.
posted by Skeptic at 12:23 AM on December 28, 2006

Skeptic, I would like to read the book, BUT: is it based on neoclassical economic theory? If so, it's conclusions are almost certainly wrong. If it's not, it would be really cool.

That's the point I keep trying to get home: currently, what is called economics is dismally broken. You CAN NOT trust the advice neoclassical economics gives you on issues.

Both the ideas of supply and demand are fundamentally borked in neoclassical economic theory. Which is why so many of their arguments are completely wrong. (Demand: it can not be an aggregate supply function of individual demands: it's mathematically impossible. But that is the founding assumption of neoclassical ideas of demand. Supply: falling marginal revenues are not a reality -- yet they are a founding tenet of supply theory in neoclassical economics. Taken together, essentially everything in neoclassical economics builds on these two concepts of supply and demand, and they are both completely fouled up. That's not me talking out of my ass -- both ideas come from economists. See Veblen and Saffra, for instance; both writing almost a hundred years ago, their arguments are sound, and they've never been refuted by neoclassical economics).
posted by teece at 9:41 AM on December 28, 2006

teece: Investigate the WIPO and the WTO. Any signatory/participants in those accords grants patent rights across national boundaries, so the argument is not at all specious.

This is not entirely correct. In fact, it is completely wrong.
What you seem to be thinking of is a PCT application. The idea is that you can file one application designating a large number of member states. But ultimately, every PCT application enters a so-called national stage, in which the examination leading to grant is performed by the various designated patent offices around the world.
So even if you choose the PCT route, a patent designating the US will ultimately be examined by the USPTO and a patent designating India will be examined by the Indian Patent Office.

The USPTO cannot grant patents that are valid in India.
posted by sour cream at 3:40 PM on December 28, 2006

The USPTO cannot grant patents that are valid in India.

No one said it could. The author said the US was pressuring people to adopt patent systems similar to the U.S, that would allow valid patents registered in the US to be registered in India easily.
posted by delmoi at 12:45 AM on December 29, 2006