NCPA - National Center for Policy Analysis

Why IP Protection Is So Important to Health Care

August 8, 2014

Intellectual property (IP) laws protect companies that invest resources to develop innovative solutions and products. These laws are especially important in health and medicine. In a new primer, Will Rinehart, Director of Technology and Innovation Policy at the American Action Forum, explains how the intellectual property regime in America contributes to pharmaceutical innovation.

A patent grants the holder exclusive rights to develop and sell a particular invention for a limited period of time (typically for 20 years). A patent can protect a process or a machine, an article, an object's design or even a new plant variety.

The United States is known for having incredibly strong intellectual property protections. Patents allow creators to profit from their inventions, preventing copycats from benefiting from an inventor's time and effort and inspiring would-be patent-holders to develop and create new products. Without patent protections, inventors would be hesitant to pour time and energy into creating something from which they might benefit very little.

Patents are especially important in medicine -- not only because of the life-changing benefits that they can bring to patients but because the research and development and regulatory approval processes are incredibly expensive and require a great deal of time and effort. Rinehart describes these burdens on pharmaceutical developers:

  • Between 1999 and 2005, the length of clinical trials have gone up 70 percent, work burdens have increased 67 percent, and routine procedures per trial have increased 65 percent.
  • Ninety percent of the cost of drug development tends to be spent in clinical trials.
  • The cost of bringing a new drug to market can cost a company an average of $1.2 billion.
  • Only one in six drug compounds will actually obtain Food and Drug Administration (FDA) approval.

Without strong patent laws, pharmaceutical companies would be discouraged from developing innovative drugs because development costs would be too high for any company to bear without the promise of a return on their investment.

Source: Will Rinehart, "Intellectual Property Underpinnings of Pharmaceutical Innovation: A Primer," American Action Forum. July 29, 2014.


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