A Word About "Authorized" Generics

Patents are valuable, often enough, and economic value attracts the sort of attention that honey elicits from bugs. And so whole industries evolve around legal challenges to patents, and the more valuable a given patent, the stronger the incentive to use the courts to redistribute wealth. Moreover, litigation is expensive, and the risk of losing a pharmaceutical patent to a challenger---to a generic drug producer in this context---analytically is equivalent to a shortening of the patent period expectationally. The process, therefore, reduces the expected returns to investment in the research and development of new medicines, and reduces as well the development of me-too drugs, that is, competition in the pharamceutical market.

And that is why the geniuses in Congress who want to limit the ability of innovative pharmaceutical producers to settle such lawsuits with payments to the challengers are utterly myopic in their view that such limits would increase (generic) competition and thus lower prices. In the very short run, maybe. But the increased challenges to patents would have the longer-run effect of reducing the flow of new medicines, and thus competitive pressures from them with respect to older, more-established drugs. That this is so obvious is the central reason that many in Congress cannot understand it.

[cross-posted from www.medicalprogresstoday.com/blog/]