Policy Analysis United States

US Pharmaceutical Patents: Who do they Benefit?

Around the world, August 4th was a day to remember.

On that day, infamous ‘pharma bro’ Martin Shkreli was found guilty on three counts of fraud in a New York federal court.

Shkreli became a household name in 2015 when his company, Turing Pharmaceuticals, bought Daraprim, a lifesaving drug used to treat toxoplasmosis. Overnight, Shkreli hiked the price of the drug from $13.50 to $750, an increase of over 5,000 percent. (It is worth noting that Shkreli’s trial was not related to this infamous price hike, but instead to hedge funds that he had been running long before it made the news).

To many, Shkreli embodies everything that is wrong with the American health care system. Some say he is the personification of the American pharmaceutical industry: one that often cares more about profits than it does about people.

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But Shkreli was not the only one to commit such acts. Rather, he is one of many. Between 2008 and 2015, drug makers increased the prices of almost 400 generic drugs by over 1,000 percent. One famous example is the Mylan price hike scandal, during which the price of the EpiPen was raised by more than 400 percent.

It was this disturbing trend that prompted former U.S. presidential candidate Hillary Clinton to propose a series of policy changes to make prescription drugs more affordable for Americans by speeding up the availability of generic versions of specialty drugs. In her opinion, “price-gouging in the specialty drug market is outrageous”.

The actions of the pharmaceutical industry serve as living proof of how America’s prescription drug patent system can be – and is – abused.

Is there a case to be made for the system? This article will summarize some of the common arguments for and against it.


Proponents of pharmaceutical patents argue that it encourages innovation among pharmaceutical companies, who in turn may discover medicines for new diseases.

In order to unpack this argument, let’s examine what patents actually do. Pharmaceutical patents are licenses that give companies the exclusive right to produce and distribute a particular medicine. This also gives companies the exclusive right to the profits reaped from the sale of that medicine.

In the pharmaceutical industry, the cost of research and development for new drugs is extremely high. According to Stanford University, a new medication can cost $500 – $800 million dollars to develop. Only 30% of these medications ever make a profit. Meanwhile, the production of an existing drug costs only cents per pill.

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Without patents, companies could copy the formulas for medicines developed by other companies, and produce them at a fraction of the price – without needing to worry about recovering huge R & D costs.

It is obvious that without a patent system, drug companies would not have the incentive to invest millions of dollars into the creation of new drugs, which is an incredibly bad thing. Out of the 300 products on the WHO’s list of essential medicines, most were intensive in research and development that relied on patent protection.

Because of our patent system, we have diverse and effective medications for many diseases on the market. Looking forward, this diversity in medicines will be needed more than ever, as mortality rates for diseases without cures increase rapidly.


On the flip side, pharmaceutical patents often place the interests of pharmaceutical companies above the needs of vulnerable populations.

Pharmaceutical patents are inherently different from other kinds of patents, because sickness is coercive. None of us can entirely control when we will need medicines. And when those medicines are lifesaving, we have no choice but to buy them, since our life depends on it. This is unlike most other patents, which concern products that are non-essential.

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Pharmaceutical patents grant companies a monopoly over the sales of particular medicines. As a result, companies can gouge medicine prices to ensure large profits, even if these medicines cost close to nothing to manufacture. Pharmaceutical patents are disproportionately harmful to individuals of low socioeconomic standing, who cannot afford to purchase the drugs.

It is also worth noting that many of the companies initiating price hikes do not even develop the drug themselves. Like Turing Pharmaceuticals, they are manufacturers that acquire the drug and then raise the price. Arguments that concern the protection of innovation are irrelevant in these cases.

In any case, no matter their personal beliefs on healthcare, most people agree that patients should not die from diseases that are treatable.

Ultimately, the issue of pharmaceutical patents is not as black and white as it may seem. Pharmaceutical patents play an important role in our society, but when abused, can wreak havoc on the healthcare system and toy with the lives of those who are vulnerable.

Political leaders must be called upon to direct attention to the abuse of pharmaceutical patents, and create policies that prevent unjustified price hikes.

Will the pharmaceutical industry continue to let its desire for profit override its humanity? Only time will tell.

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