Update: IP Thought Experiment

Per my recent post, I revieved a comment that made me think that maybe my hypo wasn't very clear.  Here's the comment (all emphasis added):

To paraphrase: Someone produces a very cheap chemical duplicator that accepts a substance in pill/powder/liquid form in one end and is able to reproduce it (given raw materials) out of the other end - AND is able to provide a recipe file that can be shared on the web.

This is not inherently wrong, unfair, or unethical. It simply means that the ability for the drugs companies to obtain revenue at the point of sale of the drug is no longer viable - given they can no longer enforce their exclusive control over the source(s) of the drug.

There is something wrong if the compound is under patent, which it is in my hypo.

The drugs companies would then have to adopt a new revenue mechanism, e.g. a subscribed commission. The drugs companies are still the only ones that provide new, tested, improved drugs. There is still a demand for this - despite far cheaper drug production technology.

So it would go something like this: we drug companies are testing 26 different drugs, of which none may turn out to be viable.  Or maybe all 26 will be blockbusters.  We don't know.  But we want you to pay ahead of time because one or some of the drugs may be of value to you.  This seems like an impossible business model.  Or, you could say this already exists, in the form of publicly traded stocks.

I find it strange that people can so readily imagine that a highly valued product (development of new drugs) will suddenly cease to be sold simply because it can't be sold in the traditional way. Anyone who sells anything knows that you don't part with your product UNTIL you're assured that you'll be paid. New drugs would still be developed, but the drugs companies wouldn't reveal or release the recipe until they'd been paid for it.

But drug companies do release the recipe before they''ve been paid for it exactly because they can count on the strong IP protection, as well as the fact that most individuals can't readily make the drugs themselves.  I guess my hypo wasn't very clear, here's what I was trying to get at.

With music, I can make my own album and record it sell it for under $100.  I grab my guitar, sing some songs into my laptop, record them, and sell them on my website.  Most likely, no one will buy my music, but I could do still do this if I wanted to.  When record labels spend millions into an producing and promoting an artist, they are making an investment that they hope will return a greater amount.  They depend on strong IP protection to make this happen.

There is nothing similar for drug companies because individuals, on the whole, are unable to make their own version of prescription drugs in a cost effective way.  This was the case when records first came out: individuals couldn't "copy" records in any cost effective way either.  The "hypothetical" part of my hypo was to get rid of this difference; to remove the technological barrier  the same way it has been removed for "content." 

However, a key difference is that some costs in bringing a drug to market are unavoidable and they run close to $100 million dollars.  Human trials are done at three different phases of drug development and can not be done for less then $100 million dollars.  Only 22% of drugs that enter the human trial phase receive FDA approval.  This makes it very different from "content" type IP where the amount minimum amount spent is low, but the total amount is elastic. 

My point is this: Simply because technology has made it easy for individuals to infringe on IP doesn't make it right.  My hope was that the drug company hypo would offer an example of why this was the case.  There, technology hasn't reached that point.  But if we assume that it has, as I tried to do in my hypo, we can see the obvious bad results.  We can all agree that broad human trials are a good thing before drugs are released on the market.  We can also agree that human trials are necessarily expensive.  We also agree, that if drug companies knew that they could not get that money back, plus the money invested in all the other failed drugs, they would not invest money into developing it.  In this sense, the drug companies are similar to record companies in that they have a "blockbuster" business model.  They research multiple drugs and depend on a few blockbusters to recoup the costs of all the others.

You offered a "subscription model" as an alternative.  Since this is my hypo, let's assume that there is no other viable model for the drug companies to sell these drugs; the current one is the only one.  And remember what Prof. Solum says, "don't fight the hypo!"  Would you still be in favor of such loose IP enforcement if you knew that it would ulitimately lead to less drugs, or drugs that were less safe? 

I would hope not.  Just because some new "technology" came along and allowed people to cheaply "copy" drugs doesn't make it right, or more importantly, even a long term net gain for society.  With "content" type IP we can loosely throw around arguments like, "they'll figure out some other way to make money," or "they never deserved it in the first place" to justify the rampant IP infringemnet that is going on.  Most of the class seems to think that if the content industries flounder, it's no big deal - after all, my favorite artists will continue to make content.  We can't be so casual with the drug industries.  We'll all be old some day; popping 15 drugs a day for the various ailments we'll inevitably have.  I want those drugs around when I'm old dammit, stop trying to screw it up for me!  :)

Comments

[Crosbie Fitch]

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Yes. But, they wouldn't do this in the hypo, in the absence of strong IP. That's my point. Simply because you can't see that they'd simply stop releasing their drugs until they'd been assured of payment, simply because you can't see how the drug industry would remain commercially viable, DOES NOT MEAN it would be unviable.

It's like you're saying ooh, but say someone's walking along and they come to the edge of a cliff, well obviously they'd be mortally insured. Ipso facto cliffs are bad news for walking. Well, I'm saying it's a pretty silly observer who believes the walker will fail to stop, or will walk on air. If you think about it, the walker will stop, take stock of the situation and adjust their route.

My point is that in the advent of a domestic drugs duplication machine the world will have a great new technology (along with the downside of readily available narcotics). The drugs companies who don't like the prospect of changing their business model will no doubt winge about how unfair this new technololgy is, but hey, that's just new technology for you. It's not wrong, it just causes a tad of upheaval.

Sensible drugs companies will then sell their drug development services to governments, health insurance companies, and cartels of sufferers of particular diseases and their families. They'll also sell off their manufacturing plants given they're now largely redundant - which is fine (despite a load of people having to find new jobs).

IP protection, patents and copyright were designed for situations where they could be easily enforced. Moreover they were not intended to define what is ethical, right, or morally inalienable, but to provide commercial incentive to industry and the arts for the benefit of society.

Industry has no god given right to be protected from technological change.

You don't outlaw rainwater butts in order to protect the revenue of the national water industry. Well ok, maybe some countries do, but they're bloody stupid.