A Straightforward Solution to the Drug Patent Dilemma?

I'm sitting here grading essays on pharmaceutical drug patents for my business ethics class. These patents generate a serious problem (which 'll describe in a second), and students were asked to think about how that problem might be addressed. What many of them proposed in their essays is so sensible--indeed, so obvious--that it's a wonder that some version of the strategy hasn't become part of our public policies.

Or maybe it isn't such a wonder after all. Maybe it's what we should expect in a world where business exert enormous influence on government policy.

Big Pharma has lots of money to lobby congress. They have lots of money to finance politicians' election campaigns. And the solution that some of my students propose (the same solutions that some of my brighter students proposed last year, and the year before that, and the year before that) might be great for everyone on planet earth except Big Pharma. But it's not as good for Big Pharma as the status quo.

Here is the problem, in a nutshell: When a drug company invests in the research and development of a new drug, they need the assurance that others who haven't spent the money on R&D won't just step in and effectively steal their intellectual property. Once a new drug has been developed and has passed clinical trials, the actual manufacture may be cheap. So in the absence of intellectual property protections, a predatory company could just wait for others to do all the risky and expensive R&D, and then swoop in and start making the drug for next to nothing. The incentive to actually invest in developing new drugs would disappear, and we'd all be sicker for it.

Furthermore, the payoff needs to be pretty big. Investing in drug R&D is risky, because it may not yield a usable product. A drug needs to meet some pretty exacting specifications in order to be approved for patient use. If it fails the clinical trials--if the side-effects are too severe or the benefits too limited--the R&D investment will have no payoff at all. So, the payoff for a successful product needs to be high enough to motivate taking those risks.

Enter the 20-year drug patent. A patent protects intellectual property, and a 20-year patent offers a big payoff for risky investments. It does all this by giving the company a 20-year monopoly on what they have invented.

Such a monopoly might not stifle all competition. After all, a drug company might develop an effective treatment for MS and a rival company, pursuing its own R&D, might develop an equally effective treatment. Each company holds a patent on its drug, but they compete with each other.

But that doesn't always happen. Sometimes one company has a drug that is substantially better than existing rivals, or has the only treatment for a life-threatening condition that actually works. When that happens, it's great for the company--but the rest of us have a problem.

In a free market, there are two natural constraints on product pricing. First, there is competition among businesses selling comparable products. Second, there is the fact that when prices get too high, potential consumers may decide to walk away and do without rather than buy the product. Raise your price too high, and whatever benefits come from the higher price are offset by lost sales.

But when you have a monopoly on a product essential for life, neither of these natural market constraints applies. And so when a pharmaceutical company has a patent on that kind of drug, they can pretty much ask whatever they want. And they do. According to the textbook my students were using to write their essays, relative to the cost of ingredients, some prescription drugs have mark-ups of 500,000 percent (although 5,000 percent may be more typical).

So--you need patents both to protect intellectual property rights and to incentivize risky R&D. But in the drug industry, eliminating competition for 20 years can mean a total lack of natural market constraints on prices, leading to skyrocketing healthcare costs, people coming out of serious illnesses saddled with crushing debt, rising insurance premiums...you get the idea.

So what's the solution? There's one approach, repeatedly proposed by my students, that's actually pretty simple. Confer patents with conditions. Two of my students this semester independently came up with the idea of imposing these conditions in the following way: Bestow short-term renewable drug patents (say, 5 years), and impose conditions on renewal (for up to 20 years) based on living up to reasonable pricing standards.

Such legal constraints on pricing wouldn't be illicit government interference in the market, since the government is already regulating the marketplace by bestowing the patent. They'd just be bestowing the patent with conditions, instead of in the essentially unconditional way they do now. They'd be interfering with the market in a way that did something to replace the market constraint on overpricing that their interference (through conferring the patent) has eliminated.

The conditions would have to be reasonable enough that the payoff for developing a new drug would still motivate risky R&D. In fact, the imposition of such conditions could be paired with other reforms that are favorable to drug companies. For example, as things are now, drug companies apply for their patent before the drug has been approved by the FDA, and in some cases the approval process may take years--meaning that the clock on their patent has run down by many years before they can actually start making money. What if an initial 5-year patent, renewable for up to 20 years, didn't kick in until the drug was approved for sale--but was conferred with a range of conditions that curb exploitation of the unique position drug companies sometimes find themselves in? If a company fails to meet the conditions, the drug patent is not renewed after its initial 5-year term. If it meets the conditions, it can continue to enjoy the patent for another 5 years, renewable for up to 20.

These time-frames are mere placeholders for whichever actual time-frames make the most sense in terms of incentivizing R&D while protecting the public welfare. And the conditions on retaining the patent can be reasonable enough to allow drug companies to make healthy profits without risking losing their patents. The precise conditions would be established by independent research informed by prevailing public values, rather than corporate-sponsored research informed by the profit interests of drug companies.

The aim here is to allow drug companies to do well, to make their R&D risks worth it and to protect their intellectual property rights, but to put fair limits (limits that reflect public interests and values) on how much a drug company can take advantage of the desperation of sick and dying people when there aren't competitors vying for the dollars of those same sick and dying people. Because the life-saving treatments are the result of their labors, we let the drug companies enjoy a payoff for their work. But we don't give them unfettered freedom to extract whatever they can get from the desperate people who would die or wither without their help.

The basic strategy strikes me as so reasonable and straightforward that I would almost expect to see some version of it already in place. But while I am no expert on patent law, I can't find anything like it at work curbing drug company exploitation of patent-conferred monopolies. Am I missing something obvious? If not, why is nothing like this in place?

The simplest answer I can find is this: It's not as good for drug companies as the current system, and the interests of drug companies are doing more to influence public policy than the interests of the American people.

Does any other explanation make sense? Are there problems with the solution my students keep coming up with, year after year, that we haven't seen? If so, what are they?

When to Boycott

A few weeks ago, in response to my first Chick-fil-A post, someone left the following comment:

"We should boycott OPEC by not purchasing gasoline. After all, Saudi Arabia executes homosexuals."


At the time I ignored the comment for a few reasons:  (a) the comment was off-topic, since I wasn't arguing in the post that we should boycott Chick-fil-A (although I certainly won't be caught eating there); (b) the commenter, in leaving something so brief and glib anonymously, didn't strike me as likely to be interested in a genuine exchange; (c) Patrick offered a fine response a few days later; and (d) the comment struck me as obviously silly in any event.

But I've since learned from my wife that this comment has become something of a meme. People in her circle of acquaintances keep repeating it, mostly on social media. And things don't become memes unless there are a significant number of people who don't find it obviously silly--who, on the contrary, think it's a good point well made.

And as I reflect more on the issue, it seems that taking the time to actually engage with this comment can offer some insight into a broader question with some social significance: When should we boycott?

There are actually two questions here: First, when do you have a duty to boycott? Second, when is it a noble or praiseworthy thing to boycott, even if you don't have a duty to do so?

In considering these questions, we need an understanding of what boycotting is. Boycotting a business or a product is more than just choosing not to frequent that business or purchase that product. There are all sorts of reasons you might not go to a particular restaurant: you don't like the food, you hate the atmosphere, the manager's your ex. To boycott involves not only withholding your business, but doing so for reasons of conscience: the business is engaged in practices that you find morally objectionable, practices that at a minimun you don't want to underwrite with your dollars.

It typically also involves an effort at collective action: you encourage others to withhold their business as well, or join in with others who are already deliberately and publicly withholding their business, again for reasons of conscience. And associated with this collective action is the aim of putting pressure on the business to change the behavior you find objectionable (or, if not that, to send a message to other businesses that it might not be wise for them to behave in similar ways, since they may lose customers).

Those with a moral conscience anything like mine, however, have a problem in this world: There are so many businesses doing so many morally questionable things that it's hard to keep track of them all, and it would be practically impossible while still living in the world to withhold your business from every company that did something you found morally troubling (or that used raw materials from a supplier that did something morally troubling, etc.).

The example of OPEC oil is actually an excellent one for the purposes of highlighting the problem. Basically, fossil fuels are so implicated in our way of life that to boycott them would require that we remove ourselves from society in a rather decisive way. After all, fossil fuels are used in the growing of our food, in the production and transport of most goods, in powering our homes, as well as in getting us to and from work, getting our kids to and from school, etc. It's not as if our world is set up so that we can easily distinguish between goods that were brought to market only using fuel derived from non-OPEC oil fields. We can't even choose a gas station that can give us such a guarantee.

And this means that the decision to boycott OPEC is the decision to fundamentally withdraw from modern social life, to turn our lives radically upside down. It would likely involve giving up our jobs and homes and communities in order to...well, maybe hope the nearest Amish community will take us in, and failing that learning to hunt with a homemade bow and moving into some remote wilderness.

Now I don't want to say that people can never have an obligation to so radically change their lives, to make staggering sacrifices. But it does seem that as the cost to oneself of boycotting something goes up, the presumption of a moral duty to boycott weakens. And so the case for such a duty must become correspondingly weightier.

There are, I think, at least three distinct factors that make the case for a duty to boycott weightier: (1) the gravity of the wrong; (2) the chances that boycotting will do any good in reducing or eliminating the wrong; (3) the level and directness of your own complicity in the wrong (were you not to boycott).

If a wrong is very grave, but boycotting would probably do no good and it's not the case that your dollars are being used to directly finance the wrong, then the overall case for a duty to boycott may not be especially strong even though the wrong at issue is serious. Still, the seriousness of the wrong all by itself may be enough to generate a duty if there's little or no cost to you--if you can get by just fine without the product. But if the cost to you is a complete upheaval of your life, even if the wrong at issue is grave you may not have a duty to boycott. It might be a noble or praiseworthy thing to do, but it wouldn't be a duty.

So, bringing this to bear on the difference between Chick-fil-A and OPEC: To boycott Chick-fil-A costs me very, very little. Unlike my wife, I don't actively dislike the taste of their chicken. But I don't especially crave it or anything. And there are countless alternatives for getting fed each day.

When the costs are that low, a duty to boycott might arise when you have a significant wrong (e.g., the business finances organizations that actively seek to perpetuate the social discrimination against and marginalization of my gay and lesbian neighbors), some chance of sending a message that could make some difference in the world, and some direct complicity in the wrong were one to give money to the business (since a percentage of Chick-fil-A earnings are donated to anti-gay groups).

On the issue of when it is praiseworthy to boycott, even if not a strict obligation, we need to think about some other issues. For example, boycotting something may not merely create hardships for me, but for others who are dependent on me. As a father, were I to boycott OPEC I would be choosing the weighty implications of this choice not just for myself, but also for my children. And so we need to see how those implications relate to my duties to my children--what I have a right to choose for them and what I don't, how I ought to provide for them, etc. Taking these things into consideration, boycotting OPEC might not be praiseworthy at all. It might even be impermissible.

More broadly, if a boycott has ripple effects that do more harm than good for all those affected, then a boycott might not be praiseworthy even if the wrong one is protesting against is significant.

Finally, while boycotts can be a powerful tool for influencing corporate behavior, their potential to be such a tool may depend on a certain selectivity in their use. If I call for a boycott whenever there's a business misstep, I may have far less effect than if I save that call for those issues that score high with respect to at least one of the factors (1)-(3). And so it may not be praiseworthy to call for boycotts too often or too indiscriminately.

When it comes to the Chick-fil-A controversy, it may be that culturally we have reached a juncture where boycotting a business that funnels profits towards the marginalizations of LGBT persons acquires a certain symbolic significance, one that resonates beyond the particular controversy and succeeds in calling widespread attention to the issue of why so many in our society regard the marginalization of sexual minorities as being the very opposite of the morally upright choice that the Chick-fil-A leadership takes it to be. If  so, then a boycott in this case, at this time, may actually make a difference in a way that it wouldn't have at another time and place. So, perhaps, it wouldn't have been praiseworthy to call for a boycott against Chick-fil-A fifteen years ago, but now it is--even if the wrong being committed, and the consumer's complicity in the wrong, hasn't changed.

In any event, these are some of the factors that I think need to be weighed when deciding whether to boycott a business. Since this is the first time I've ever thought explicitly about this question, I'd be especially curious to know what other people think.