Patent law and drug regulation traditionally function within distinct, and largely adversarial, domains. That is, patent law's aim to encourage invention counteracts the costs and uncertainty associated with drug regulation's efforts to ensure the safety and efficacy of drugs. But this traditional view needs revision. In fact, their domains are merging, and their relationship is more the reverse: drug regulation's costs and its growing number of market-exclusivity provisions protect drug manufacturers against their weakening patent rights.

This counterintuitive twist on tradition derives from the logic of the public goods problem. Because ideas cost more to create than to copy, unregulated markets are thought to be incapable of sufficiently rewarding innovation. Yet creation costs alone do not trigger the public goods problem; rather, its extent is determined by the ratio of the cost of creating to the cost of copying. Thus, goods that are expensive to make but equally costly to copy, such as handmade furniture, evade these problems entirely. In fact, with a ratio close to one, copying becomes a socially desirable mechanism for generating competition. Accordingly, patents, and intellectual property in general, strive to adjust the public goods ratio so that it approaches one and thereby ensure fair competition between creators and copiers...

 

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