A generic drug is "a drug product that is comparable to brand/reference listed drug product in dosage form, strength, route of administration, quality and performance characteristics, and intended use"1. India, Brazil, Thailand, South Africa and even smaller African countries such as Zambia, Ghana, Tanzania, Uganda and Zimbabwe produce generic drugs2. The production of generic drugs is a controversial issue due to the existence of patent protections on most pharmaceutical products that current law considers to be the property of the firms that produced them. Proponents of generic drugs point out the extremely high prices charged for brand name drugs as compared to generics when they are permitted, as well as the needs of the developing world for cheap drugs in their battle with various life-threatening diseases as reasons to circumvent conventional patent law and to permit the production of generics generally. Opponents of generic drugs hold that the patent rights are essential in order to encourage pharmaceutical companies to develop new and better drugs and that generic drugs are potentially harmful. Debates center around the issues of the inviolability of patents, the needs of the developing world for drugs and how best to meet them, and whether generic drugs can be a suitable and cheaper alternative to conventional brand name drugs.
The current drug patent regime is largely designed to benefit and shield the profits of large pharmaceutical companies. This is due to the fact that most of the laws on drug patents were written by lobbyists and voted upon by politicians in the pay of those firms. The pharmaceutical industry is simply massive and has one of the most powerful lobbies in most democratic states, particularly the United States. The laws are orchestrated to contain special loopholes, which these firms can exploit in order to maximize profits at the expense of the taxpayer and of justice. For example, through a process called "evergreening", drug firms essentially re-patent drugs when they near expiration by patenting certain compounds or variations of the drug1. This can extend the life of some patents indefinitely ensuring firms can milk customers at monopoly prices long after any possible costs of research or discovery are recouped. A harm that arises from this is the enervating effect that patents can generate in firms. When the incentive is to simply rest on one's patents, waiting for them to expire before doing anything else, societal progress is slowed. In the absence of such patents, firms are necessarily forced to keep innovating to stay ahead, to keep looking for profitable products and ideas. The free flow of ideas generated by the abolition of drug patents will invigorate economic dynamism.
There is nothing unjust about the patent system. It protects everyone equally. The nature of democracy is such that people are allowed to express their opinions and to organize to further certain aims. Drug companies have a particular interest in protecting their patent rights so it is only natural that they should involve themselves in the process of how those patents should be treated legally. They are not miscreants, but rather are participants in a system that is designed to be as fair as possible for everyone.
Many developing countries are fraught with terrible disease. Much of Africa and Asia are devastated by malaria, and in many parts of Africa AIDS is a horrendous scourge, infecting large percentages of many countries populations. For example, in Swaziland, 26% of the adult population is infected with the virus1. In light of these obscenely high infection rates, African governments have sought to find means of acquiring enough drugs to treat their ailing populations. The producers of the major AIDS medications do donate substantial amounts of drugs to stricken countries, yet at the same time they charge ruinously high prices for that which they do sell, leading to serious shortages in countries that cannot afford them. The denial of the right to produce or acquire generic drugs is effectively a death sentence to people in these countries. With generic drugs freely available on the market, the access to such drugs would be facilitated far more readily and cheaply; prices would be pushed down to market levels and African governments would be able to stand a chance of providing the requisite care to their people2. Under the current system attempts by governments to access generic drugs can be met by denials of free treatments, leading to even further suffering. There is no ethical justification to allow pharmaceutical companies to charge artificially high prices for drugs that save lives. Furthermore, many firms that develop and patent drugs do not share them, nor do they act upon them themselves due to their unprofitability. This has been the case with various treatments for malaria, which affects the developing world almost exclusively, thus limiting the market to customers with little money to pay for the drugs3. The result is patents and viable treatments sitting on shelves, effectively gathering dust within company records, when they could be used to save lives. But when there is no profit there is no production. Allowing the production of generic drugs is to allow justice to be done in the developing world, saving lives and ending human suffering.
1 United Nations. 2006. "Country Program Outline for Swaziland, 2006-2010". United Nations Development Program. Available:
2 Mercer, Illana. 2001. "Patent Wrongs". Mises Daily. Available:
3 Boseley, Sarah. 2006. "Rich Countries 'Blocking Cheap Drugs for Developing World'". The Guardian. Available:
Allowing the sale of generic drugs will not help the plight of the developing world. Many drug companies invest substantial amounts of money, gleaned from the sale of profitable dugs in the developed world, into researching treatments for the developing world. Without the revenues available from patent-protected drug sales, companies' profits will fall, precipitating a reduction in pro bono giving and research. Allowing the production of generic drugs will thus in the long run hurt the developing world.
The sale of generic drugs invariably reduces costs to consumers. This is due to two reasons. It may be the case that an individual or firm with a patent, essentially a monopoly right to the production of something, may not have the ability to efficiently go about meeting demand for it. Patents slow, or even stop the dissemination of the production methods, especially when a patent-holder is unwilling to license production to others1. Such an outcome is deleterious to society, as with no restrictions on drug production an efficient producer, or producers, will emerge to meet the needs of the public, producing an amount of drugs commensurate with demand, and thus equilibrating market price with that demand2. This market equilibration is impossible under conventional patent laws, as it is in the interest of firms to withhold production and to engage in monopolist rent-seeking from consumers3. This leads firms to deliberately under-produce, which they have been shown to do in many cases, as for example the case of Miacalcic, a drug used to treat Paget's Disease, in which its producer deliberately kept production down in order to keep prices high4. When a firm is given monopoly power over a drug it has the ability to abuse it, and history shows that is what they are wont to do. By allowing the production of generic drugs, this monopoly power is broken and people can get the drugs they need at costs that are not marked far above their free market value.
1 Kinsella, Stephan. 2010. "Patents Kill: Compulsory Licenses and Genzyme's Life-Saving Drug". Mises Institute. Available:
2Stim, Rishand. 2006. Profit from Your Idea: How to Make Smart Licensing Decisions. Berkeley: Nolo.
3 Lee, Timothy. 2007. "Patent Rent-Seeking". Cato at Liberty. Available:
4 Flanders Today. 2010. "Big Pharma Denies Strategic Shortages". Flanders Today.
Allowing the production of generic drugs will only increase production of drugs currently on the market. Without the profit incentive that patents provide, pharmaceutical companies will not invest in the expensive process of developing new drugs in the first place. It is a necessary trade-off, as patents are essential to incentivize innovation. Furthermore, many states have mandatory licensing laws in states requiring companies to license the rights to the production of drugs so as not to precipitate shortages.
Patent regimes cause firms to inefficiently allocate resources. One such inefficiency arises from the duplication of effort by firms seeking to develop the same or very similar drugs, though only the first to do so may profit from it due to the winner-takes-all patent system. This leads to brutal races and excessive expenditure of resources to be first over the line and to monopolize the production, at least for a time. These races can thus lead to efforts by firms to steal research from one another, thus resulting in further wastes of resources in engaging and attempting to prevent corporate espionage. Another serious inefficiency arises in the production of similar products to existing ones, seeking to get around existing patents. Such has been the case for years in the pharmaceutical industry, which has succeeded, for example, in curing erectile dysfunction dozens of times. An overemphasis on such spinning off of similar products is the result of patent-generated inefficiency 1. The inefficiency does not end with production, however, as firms likewise devote great amounts of resources and effort to the development of non-duplicable products, in monitoring for infringement, and in prosecuting offenders, all of which generates huge costs and little or no return 2. Furthermore, the deterrent effect to patent piracy generated by all the efforts of the state and firms has proven generally minimal. Clearly, in the absence of patent protection for pharmaceuticals, markets and firms will behave more efficiently. This is shown by the introduction of generic antiretroviral drugs for treating AIDS where the introduction of generic drugs forced the price of the branded drugs down from $10439 to $931 in September/October 2000 3.
1 Gabb, Sean. 2005. "Market Failure and the Pharmaceutical Industry: A Proposal for Reform". National Health Federation. Available:
2 World Intellectual Property Organization. 2011. "Emerging Issues in Intellectual Property". Available:
3 Avert.org, "AIDS, Drug Prices and Generic Drugs",
The costs associated with the current patent regime are necessary to the maintenance of innovation. It may be costly, and technically inefficient to police property rights, but that does not make them less of a right. If firms feel they can benefit from fighting infringers of their patent rights, it is their right to do so. The state likewise, has an obligation to protect the rights, physical and intangible, of its citizens and cannot give up on them simply because they prove difficult and costly to enforce.
An individual's idea, so long as it rests solely in his mind or is kept safely hidden, belongs to him. When he disseminates it to everyone and makes it public, it becomes part of the public domain, and belongs to anyone who can use it. If individuals or firms want to keep something a secret, like a production method, then they should keep it to themselves and be careful with how they disseminate their product. One should not, however, expect some sort of ownership to inhere in an idea one has, since no such ownership right exists1. No one can own an idea. Thus recognizing something like a property right over something like a drug formula is contrary to reason, since doing so gives monopoly power to individuals who may not make efficient or equitable use of their asset. Physical property is a tangible asset, and thus can be protected by tangible safeguards. Ideas do not share this right to protection, because an idea, once spoken, enters the public domain and belongs to everyone. This should apply all the more with vital drugs that are fundamentally for the public good by improving health.
1Fitzgerald, Brian and Anne Fitzgerald. 2004. Intellectual Property: In Principle. Melbourne: Lawbook Company.
Ideas can be owned, to a certain extent. The creative effort involved in the production of a drug formula is every bit as great as the building of a new chair or other tangible asset. Nothing special separates them and law must reflect that. It is a fundamental violation of property rights to steal from drug companies the rights they own to drugs by allowing the production of generic knock-offs.
Generic drugs are meant to retain a substantial degree of bioequivalence with their brand name predecessors. Yet, even under strict testing laws in this regard, generic drugs have on several cases been shown to manifest side effects not present in their parent products. For example, a generic version of Wellbutrin XL, an anti-depressant, that was ostensibly chemically equivalent to the brand name drug, caused suicidal episodes in several users1. This demonstrates that no amount of chemical testing can guarantee true bioequivalence, and thus generic drugs cannot be considered as identical to brand name drugs in terms of safety. While improving testing of generics would go some way toward fixing this problem, it would not do so entirely, as the market for new drugs will be so greatly widened with the approval of generic production that the cost of screening will be very high and the likelihood of poor knock-offs reaching consumers, particularly in the developing world where screening is less robust, is increased substantially2. Brand name drugs may be more expensive, but their safety is more thoroughly guaranteed. Flooding the market with cheap, potentially dangerous alternative drugs helps no one but the undertaker.
1 Childs, Dan. 2007. "Generic Drugs: Dangerous Differences?". ABC News. Available:
2 Mercurio, Bryan. 2007. "Resolving the Public Health Crisis in the Developing World: Problems and Barriers of Access to Essential Medicines". Northwestern University Journal of International Human Rights. Available:
Dangerous generic drugs are rare, and when they are found they are quickly pulled from the market. Arguments against generics on the grounds of safety are no more than alarmist nonsense. When people go to the drug store they have a choice between expensive brand name drugs and cheaper generics. It is their right to economize and choose the less glossy alternative.
Without patent protection, innovative and enterprising firms lacking the capacity to market successfully or efficiently produce new drugs might develop new drugs and never release them, since it would simply result in others profiting from their efforts. After all, no one likes to see others profit by their hard work, and leaving them nothing; such is tantamount to slavery. Patent protection encourages the release of new ideas and products to the public, which serves to benefit society generally1. The main mechanism for this is the system of licensing, by which firs can retain their right of ownership over a drug while essentially renting the ability to produce it to firms with productive capacities that would better capitalize on the new product. Furthermore, the disclosure of ideas to the public allows firms to try to make the product better by "inventing around" the initial design, or by exploiting it once the term of the patent expires2. If the drug formula never enters the public, it might never do so, leaving society bereft of a potentially valuable asset.
If firms are afraid their formulae will be stolen, then they should keep them hidden. Otherwise, they should seek to make their new drug public, benefiting everyone so that the most people possible can have access to them. The release of ideas is most bountiful when there is active and constant competition to produce newer and better products and ideas. This is only possible in the absence of constricting patent protections. Furthermore, firms' attempts to "invent around" patents do not actually benefit anyone, as their aim is often not to improve upon existing models, but to design products that are as close to replicas as possible without violating law. This is a gross misallocation of resources created by the unjust patents regime.
When a firm directs individuals to mix their labor with its capital or other resources, part of that firm's identity inheres in the product that arises from the effort. This is the origin of, and fundamental philosophical justification for, property rights. Property rights are an unquestioned mainstay of life in all developed countries, and are an essential prerequisite for stable markets to develop and function1. The law protects patent rights in much the same way as more conventional physical property, as well it should. Individuals and firms generating ideas and using their effort to produce an intangible good, such as a new drug formula, have a property right on those ideas and the products that arise from them. It is the effort to produce a real good, albeit an intangible one, that marks the difference between an idea in someone's head that he does not act up, and intellectual property that can be protected by a patent. Developing a new drug is a very intensive endeavor, taking time, energy, and usually a considerable amount of financial investment2. The cost of developing a new drug varies widely, from a low of $800 million to nearly $2 billion per drug and is rising3. People and firms deserve as a matter of principle to benefit from the products of the effort of creation. For this reason, stealing intellectual property, which developing generic drugs is, is the same as stealing an actual physical product. Each is a real thing, even if one can be touched while the other is intangible in a physical sense. As a matter of principle, property rights can be assigned to intangible assets like drug formulae, and in practice they are a necessity to many firms' financial survival.
1Fitzgerald, Brian and Anne Fitzgerald. 2004. Intellectual Property: In Principle. Melbourne: Lawbook Company.
2 Congressional Budget Office. 2006. Research and Development in the Pharmaceutical Industry". The Congress of the United States. Available:
3 Masia, Neal, 2008, "The Cost of Developing a New Drug", Focus on Intellectual Property Rights, America.gov, Available:
No one can own an idea. Thus creating something like a property right over intangible assets is a meaningless endeavor. Doing so gives monopoly power to individuals who may not make efficient or equitable use of their inventions or products. Physical property is a tangible asset, and thus can be protected by tangible safeguards. Ideas do not share this right to protection, because an idea, once spoken, enters the public domain and belongs to anyone who can use it.
When a real chance of profit exists in the development of a new product or drug, people and firms put the effort into developing and creating them. The incentive to profit drives a great deal of people's intellectual endeavors. Research and development, for example, forms a major part of industries' investment, as they seek to create new products and inventions that will benefit consumers, and thus society as a whole. Research and development is extremely costly, however. The US pharmaceutical industry alone spends tens of billions of dollars every year on researching new drugs1. The fear of theft, or of lack of profit stemming from such research, will serve as a powerful disincentive to investment. Without the protection of patents, new drugs lose much of their value, since a second-comer on the field can simply take the formula and develop the same product without the heavy costs of research involved, leaving the innovative company worse off than its copycat competitor. This will lead to far less innovation, and will hamper companies currently geared toward innovative and progressive products. Patent protection is particularly important to companies with high fixed costs and low marginal costs, such as pharmaceutical firms. Without the guarantee of ownership over intellectual products, the incentive to invest in their development is diminished as they will not be guaranteed a payback for their research costs as a competitor could simply take the product off them. Within a robust patents system, firms compete to produce the best product for patenting and licensing that will give them a higher market share and allow them to reap high profits. These incentives lead firms to "invent around" one another's patents, leading to gradual improvements in drugs and treatments, benefiting all consumers2. Without patents the drugs companies are trapped in a kind of prisoners' dilemma where both are individually better off by refusing to innovate, yet both suffer if neither innovates. Patents are the solution to this: if a company innovates, it alone can reap the rewards of the new invention3. In the absence of patent protection there is no incentive to develop new drugs, meaning in the long run more people will suffer from diseases and ailments that might have been cured were it profitable to invest in developing them. Clearly, patent protection is essential for a dynamic, progressive pharmaceutical industry.
1 Congressional Budget Office. 2006. Research and Development in the Pharmaceutical Industry". The Congress of the United States. Available:
2 Nicol, Dianne and Jane Nielsen. 2003. "Patents and Medical Biotechnology: Empirical Analysis of Issues Facing the Australian Industry". Center for Law and Genetics Occasional Paper 6. Available:
3 Yale Law & Technology. 2011, "Patents: Essential, if flawed", Available:
Research and development will continue, irrespective of intellectual property rights. The desire of firms to stay ahead of the competition will drive them to invest in research regardless. That their profits will be diminished by the removal of intellectual property rights is only natural and due to the fact that they will no longer have monopoly control over their intangible assets, and will thus not be able to engage in the rent-seeking behavior inherent in monopoly control of products. The costs of commercialization, which include building factories, developing markets, etc., are often much higher than the costs of the initial conception of an idea1 these are areas where competition will force down costs. Furthermore, there will always be demand for a brand name over a generic product. In this way the initial producer can still profit more than generic producers, if not at monopolistic levels.
1Markey, Justice Howard. 1975. Special Problems in Patent Cases, 66 F.R.D. 529.
Mercurio, Bryan. 2007. "Resolving the Public Health Crisis in the Developing World:Problems and Barriers of Access to Essential Medicines". NorthwesternUniversity Journal of International Human Rights.
Stim, Rishand. 2006. Profit from Your Idea: How to Make Smart Licensing Decisions.Berkeley: Nolo.