Companies like Apple, Microsoft, Oracle, and IBM which hold a huge number of software patents and aren't exactly keen on seeing that system go away, either. But yes, big pharma relies almost exclusively on patents to recoup R&D costs.
R&D costs actually make up a pretty small portion of the pie. It's unclear what if anything patents are doing to recoup those since they're all just copying each other with designer drugs that are just slightly different enough to not violate someone else's patent. The pharma industry is probably a better example than the software industry for why patents suck. http://www.dklevine.com/papers/imbookfinal09.pdf
It costs ~$1B to bring a pharmaceutical to market because of the amount of testing and clinical trials required to make sure you're doing more good than harm. Of course some are copycat drugs, but that's going to be inevitable.
There are real advances too, and those wouldn't happen without some ability to generate a return on the $1B or more you spent on the drug (let alone the hundreds of millions on drugs that didn't make it).
R&D being a small part of the budget doesn't change that. The fundamental business is still based on the patent system.
Their solution seems to be that the government should fund the expensive part of drug development.
That sounds like a terrible idea though: now you'll have the govt "picking winners" that can go to market. As with anything in the government, that will be subject to tons of lobbying, earmarking, waste, and endless debate.
But if you think about it, Pharma drugs are actually similar to SW or movies or music. In each of those, a large investment produces a good which is cheap to replicate (knowledge of efficacy/safety of a compound, or in SW / movies / music, bits arranged a certain way).
Each of these need protection on the investment to create it, so that there can be a return.
In SW, music, and movies/etc, that protection is essentially copyright law.
The only difference with Pharma is that copyright law doesn't buy them anything. So they need some other mechanism of protection.
Maybe it doesn't have to be a patent: how about an exclusive government license to sell a pharmaceutical tied to the FDA approval. Kind of like a pharmaceutical-specific patent.
The key is that financing still happens via private means, and there isn't a fixed quota of budget or # of drugs... Let the market decide the right amount for our society to spend on drugs.
The government should step in when there is a market failure (e.g. unpriced externalities, or tragedy-of-the-commons, etc). But just the fact that there's a large investment that needs protection for an ROI isn't a market failure.
It doesn't matter if it's a better example for why patents suck. They are spending more than we are lobbying congress to keep the current patent regime in place.
> But yes, big pharma relies almost exclusively on patents to recoup R&D costs.
What? I was under the impression that they rely mostly on advertising to recoup costs, their advertising budgets are generally much larger than their R&D budgets.
Coincidentally, I just posted a huge rant against, "It's just marketing" in another thread, but I'll respond to this much less rantier.
Big pharma uses patents to protect their monopoly on a drug for seven(?) years after its introduced. Once that window is up, generics come in and take a huge chunk of sales. Pharma uses marketing and advertising to push their new drugs to try to sell as many during the patent window as they possibly can, when they have a large markup on it.
These days big pharma has outsourced all their early stage development to startups, purchasing compounds in the late stages through acquisition. They do pay for research, but it's not going to look that way on their balance sheet.
Their primary function, as you say, is shifting far towards the marketing end.
> What? I was under the impression that they rely mostly on advertising to recoup costs, their advertising budgets are generally much larger than their R&D budgets.
It's completely irrelevant what the size of their advertising budgets are. They will increase their advertising budget as long as they think that the added revenue will be larger than the added costs.
But if they have no patent protection, they will probably have no profitable product to advertise at all.
