A Nobel laureate has argued that the US could save $300 billion (£217 billion) a year by scrapping the pharmaceutical patent system and replacing it with publicly funded research and development contracts.
Currently, the costly work of identifying new cures, running human trials and manufacturing treatments is incentivised by promising pharmaceutical companies patents that allow them to sell successful drugs for higher, monopoly prices.
But George Smith, who shared the 2018 Nobel Prize in Chemistry for pioneering work on viruses that infect bacteria, argued that this system has become enormously inefficient and costly for taxpayers and patients, a critique long made by some economists.
“There are a number of economists who believe it would be much better to replace the promise of government-granted monopolies with direct public funding of direct drug development,” he told this year’s Lindau Nobel Laureate Meeting, which brings together prizewinners and young scientists.
The vast bulk of the underlying research that leads to new treatments is already funded publicly, he said.
A case in point were the mRNA vaccines that are so effective against the coronavirus that caused the pandemic. “That technology has depended on hundreds of major discoveries in immunology over at least a century in many dozens of countries, and it, of course, stands on the shoulders of modern molecular biology and virology,” he said. “The overwhelming majority of this work was done in academic labs with public funding.”
Currently, patents are the reward for pharmaceutical companies to make the “final steps” in drug development, like “highly focused optimisation of the leads that emerge from publicly funded exploratory research”, the development of manufacturing facilities and “very expensive and demanding” human trials.
Professor Smith’s proposal was to replace this patent incentive system with long-term, competitive public contracts for companies to find the most socially beneficial treatments.
“To be sure, the contractors, like us academic scientists, would compete vigorously with one another for contracts,” he said.
Crucially, “all results and resources would be made publicly available as soon as feasible” so that other scientists and companies could use them immediately, he explained. No patents would be allowed, and the resulting drugs would be sold at “generic drug prices”.
To match current private research and development pharmaceutical spending, the US government would have to spend an extra $100 billion a year, he calculated.
But this is dwarfed by the $500 billion the US spends on pharmaceutical products each year, said Professor Smith, curators’ distinguished professor emeritus of biological sciences at the University of Missouri.
Under a public system with no patents allowed, he argued, these costs would fall by a factor of five because all drugs would be much cheaper, generic versions.
All in all, a public system would therefore save the country about $300 billion a year, he argued, a saving of some 60 per cent.
“Remember, we’re not talking about reducing the industry’s actual research and development budget,” said Professor Smith. “That 60 per cent doesn’t go to research and development, it goes to lawyers, advertisers, lobbyists and, especially, to wealthy investors.”
