This article seeks to overview some structural features of the pharmaceutical markets and pharmaceutical patent systems, which have a negative impact in terms of welfare outcomes (i.e. optimal level of pharmaceutical patent protection). It starts from the basic assumption that both innovation and health level are drivers of economic growth. By properly balancing incentives for innovation and access to affordable medicines, the combined (welfare) effect should be maximized. The dynamic interaction between patent seekers and patent challengers is critical this respect. The structural features of the pharmaceutical markets and pharmaceutical patent systems deter to a certain level patent challengers’ reaction against global patent strategies. We propose measures that could help to restore the pharmaceutical patent system’s ability to maximize welfare outcomes. It primarily focuses on pharmaceutical markets, pharmaceutical patent systems, and economies of developing countries.
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There are, however, other critical aspects that play a major role in innovation. For instance, as part of the ‘InnovationStructure’: (i)the attractiveness of the natural environment of exploding science and technology; (ii) government tax credits and subsidies for R&D; (iii) company spending on R&D; (iv) procurement of advanced technology products. As part of the ‘Cluster Specific Conditions’: (i) production process sophistication; (ii) extent of product and process collaboration; (iii) local supplier quality; (iv) state of cluster development. As part of the ‘Quality of Linkages’: (i) absorptive capacity for new technology; (ii) University/Industry Research Collaboration; (iii) venture capital availability.
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There are additional factors (also drivers of economic growth) which can be influential when choosing the level of pharmaceutical patent protection, making public policy decisions more complex (e.g. compliance with international obligations for gaining market access and attracting direct foreign investment: Trade-Related Aspects of Intellectual Property Rights and/or Free Trade Agreements which impose intellectual property rights standards).
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In formal terms, PI represents the probability of winning an individual suit, LI the value of the recovery if the plaintiff wins, and CI the costs that the plaintiff must bear, then a plaintiff will bring an individual suit when PI × LI − CI > 0.The simple term CI is a more complex reality. Because a successful plaintiff might be able to shift some costs or fees to the defendant (and conversely mightbear some of the costs or fees of a successful defendant), the precise formula for filing suit is PI × LI − [CI(π − NS) +(1 − P)CI(π − S) + (1 − P)CI(Δ − S)] > 0, where CI(π − NS) is the amount of the plaintiff’s costs and fees that are non-shifting (i.e., costs that the plaintiff must bear regardless of the suit’s outcome), (1 − P)CI(π − S) is the expected value of the plaintiff’s costs and fees that the successful plaintiff can shift but the losing plaintiff must bear, and (1 − P)CI(Δ − S) is the expected value of the defendant’s costs and fees that the losing plaintiff must bear. Here, we use CI to represent this fuller analysis. For simplicity, werefer to the expected benefit, PI × LI − CI, as EBI. Thus, a plaintiff will file an individual suit when EBI > 0.
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Section 21 U.S.C. § 355(b)(1)(G); 21 C.F.R. § 314.50(h), § 314.53. ‘The applicant shall file with the application the patent number and the expiration date of any patent which claims the drug for which the applicant submitted the application or which claims a method of using such drug and with respect to which a claim of patent infringement could reasonably be asserted if a person not licensed by the owner engaged in the manufacture, use, or sale of the drug. If an application is filed under this subsection for a drug and a patent which claims such drug or a method of using such drug is issued after the filing date but before approval of the application, the applicant shall amend the application to include the information required by the preceding sentence. Upon approval of the application, the Secretary shall publish information submitted under the two preceding sentences. The Secretary shall, in consultation with the Director of the National Institutes of Health and with representatives of the drug manufacturing industry, review and develop guidance, as appropriate, on the inclusion of women and minorities in clinical trials required by clause (A)’, emphasis added.
