Understanding the Issues 2008: Health Care

[Schneed10]

Originally Posted by FRPLG

I agree with much of what you say but on drugs we might disagree. The incentive for companies to research and formulate new drugs is all in the profit. I think we can agree that drug companies need to maintain the highest level of motivation and increasing their exposure to generics would seem to drive profits down to me. I am not sure what the answer here is.

I disagree here. If you shorten the amount of time a patent can last, you open the drug companies up to generics sooner. This puts more pressure on the drug companies to come up with new drugs faster. If patents expire more quickly, it becomes imperative to cycle new drugs into the market faster and faster, else you end up with a slew of products exposed to competition from generics.

It will push margins down, yes. But if the drug company sits idle and brings no new drugs to market, they'll go out of business. Their only option will be to bring more new drugs, with patents, to market. If the patents don't last as long, you need more drugs in the market, or you dry up.