"In fact, the comparison is overly generous to the industry since we pay four or five dollars in higher drug prices for every dollar we get of patent financed research. We are on a path to spend more than $400 billion this year on prescription drugs. If these drugs were sold in a free market without patents or other protections the cost would almost certainly be less than one-fifth this amount. In some cases, the gap in costs between the patent-protected price and the free market price is more than one hundred to one. Sovaldi sells in the United States for $84,000 per treatment. A generic version is available in Bangladesh for less than $1,000. Drugs are almost always cheap to manufacture and distribute, it is patent monopolies that make them expensive.
This means we are paying more than $320 billion in higher drug prices every year to support $60 to $80 billion in research by the industry. The rest goes to sales and marketing, profits, legal expenses and other costs associated with the patent-supported research model. Even this $320 billion is an understatement since it doesn’t include the excess costs paid by people in Europe, Canada, and elsewhere due to patent monopolies.
It frankly is bizarre that anyone would insist that patent monopolies are the best and only way to support the development of new drugs. Virtually all of the incentives created by this system are wrong. It gives drug companies an incentive to keep as much of their research secret as possible. Merck and Pfizer want to make sure they benefit from their research, not their competitors. Science advances most quickly when it is open for review and sharing. (We already do spend more than $30 billion a year on research through the National Institutes of Health, which everyone seems to agree is enormously productive.)
If we had an alternative funding mechanism where the research was paid for upfront then a requirement of support could be that all results are made public as soon as practical. This would be a huge benefit to the progress of research, in addition to the benefit of having new drugs sold at generic prices."
http://cepr.net/blogs/beat-the-press/dangerous-thoughts-on-alternative-to-government-granted-patent-monopolies-on-drugs
This means we are paying more than $320 billion in higher drug prices every year to support $60 to $80 billion in research by the industry. The rest goes to sales and marketing, profits, legal expenses and other costs associated with the patent-supported research model. Even this $320 billion is an understatement since it doesn’t include the excess costs paid by people in Europe, Canada, and elsewhere due to patent monopolies.
It frankly is bizarre that anyone would insist that patent monopolies are the best and only way to support the development of new drugs. Virtually all of the incentives created by this system are wrong. It gives drug companies an incentive to keep as much of their research secret as possible. Merck and Pfizer want to make sure they benefit from their research, not their competitors. Science advances most quickly when it is open for review and sharing. (We already do spend more than $30 billion a year on research through the National Institutes of Health, which everyone seems to agree is enormously productive.)
If we had an alternative funding mechanism where the research was paid for upfront then a requirement of support could be that all results are made public as soon as practical. This would be a huge benefit to the progress of research, in addition to the benefit of having new drugs sold at generic prices."
http://cepr.net/blogs/beat-the-press/dangerous-thoughts-on-alternative-to-government-granted-patent-monopolies-on-drugs