The Shifting Functional Balance of Patents and Drug Regulation

Abstract

Patents are often portrayed as the necessary reward to compensate pharmaceutical firms for the huge costs and risks associated with Food and Drug Administration (FDA)-mandated clinical trials of new drugs. But the relationship between the patent system and other regulation of drugs is more complex than this simple formulation suggests. Drug regulation operates in tandem with patents to make proprietary products profitable, and patents themselves increasingly threaten to limit profitability by diverting profits elsewhere. At the same time, resistance to high drug prices is prompting new state and federal regulatory initiatives that threaten to reduce the value of drug patents. The distinctive intertwining of patents with other regulatory regimes and the shifting role of patents in the biopharmaceutical sector call into question how this singular success story for innovation policy will play out in the future.

JEL Classification: I10, I11, I12, I18