how long before viagra becomes a generic

The Becker-Posner Blog entry archive

December 17, 2004
-----------------

Posner Responses to Comments on Pharmaceutical Patents

These are very fine comments, which I cannot respond to adequately in
the time I have.

Let me begin with a qualification and an amplification. I said that a
drug company can get, on top of the normal 20-year patent term, up to
five more years for the time during which the FDA is deciding whether
to approve the drug for sale. This is true, but it is also true that
there is another limit--14 years from the date of approval. So if
approval came 10 years after the drug was patented, the patentee would
be entitled to a total patent term of only 24 years.

The amplification has to do with the opening paragraph of my posting,
in which I noted too quickly that the basic economic objection to
monopoly is that it deflects consumers to inefficient substitutes.
This is an important point that is not intuitive, so let me explain a
bit further. Suppose there are two products which are very close
substitutes for one another, but one of them costs $3 to produce and
the other costs $4. Then society can satisfy consumers' demand at
least cost by supplying the first rather than the second product, and
this will be the market outcome if each product is priced at cost
(including a profit adequate to attract and retain necessary capital
and compensate for risk--and such a profit, a competitive or normal
profit, is in fact just another cost). But now suppose that while the
second, the more costly, product is priced at cost ($4), the first,
the cheaper to produce, is monopolized and its price is as a result
$5. Now consumers (not all of course, or the monopoly price would not
be profitable) will switch to the second product, and this will
involve a social waste becase their demand could be satisfied at a
lower cost by the seller of the first product.

The intuitive objection to monopoly is that it gouges consumers, but
insofar as consumers stick with the monopolized product even when its
price goes up, their higher cost is offset by the seller's higher
profit; there is merely a transfer payment. (There may be an ethical
objection, but that is beyond economics.) In a second round of
analysis, however, and this is relevant to the discussion in my
posting, the prospect of the higher profit induces additional
investments (e.g., in obtaining a patent, which is a right to exclude
close substitutes), which may be wasteful.

Now to the comments. One commenter pointed out correctly that my
"first past the post" hypothetical example was oversimplified. The
reason is that since each different molecular entity can be patented,
the firm that loses the race to be first may still have a valuable
product to patent. The principal SSRI antidepressant drugs, for
example, such as Prozac, Paxil, and Zoloft, are all different
molecules, separately patented; and because they have different
therapeutic properties for different patients, each was able to
command a significant segment of the market.

Another commenter asked, if the 20-year patent term is too long, as it
probably is, how can the copyright term, which is now the life of the
author plus 70 years, possibly be justified? It can't be justified in
traditional terms, that is, as necessary to induce people to write
books, make movies, and engage in other creative expression, because
the discounted present value of uncertain receipts 70 years after one
dies (which might easily be a century after the work in question had
been written) is negligible at any realistic interest rate, especially
given the likely depreciation in the market value of the work. William
Landes and I, however, in our recent book "The Economic Structure of
Intellectual Property Law," argue that there are two possible
justifications for indefinitely long copyright terms: to prevent
congestion (overuse of a copyrighted work might reduce its value to
nothing), which is a traditional economic argument for property
rights; and to induce investment in maintaining the value of the
copyrighted work, for example by producing frequent revised editions
(only the revisions could be copyrighted independently). These
arguments are applicable, however, only to the tiny fraction of
copyrighted works that retain a substantial market value beyond a few
years. The serious problem with long copyright terms concerns not
those works, but the multitude of less valuable (but not valueless)
works that ought to be in the public domain so that they can be
published without the publisher having to engage in costly
negotiations to obtain a copyright license and also so that they can
be used (again without need for cumbersome negotiations) as raw
material for new creative works, almost all of which build on previous
works rather than being created ex nihilo. That problem could be
solved even within the framework of the very long copyright term if
the courts would say that it is okay ("fair use") to republish an old
work if the copyright owner has failed to provide notice of his
whereabouts and as a result it is infeasible to negotiate a license
from him. Such a rule would give rise to private copyright registries
that publishers could consult when they wanted to publish an old work,
and if there was no copyright listed in the registry the work could be
published without copyright permission. This argument is developed in
a forthcoming article by William Patry and me in the California Law
Review.

Similar concerns about licensing costs are increasingly voiced by
academic researchers who use patented "research tools" (such as
Harvard's "oncomouse") in their work and understandably don't want to
have to conduct patent searches and negotiate for patent licenses,
especially if they are using multiple such tools.

I am intrigued but unconvinced by the suggestion that once a drug
patent expires, generic manufacturers should be allowed to use the
trademark of the patented brand; in other words, the trademark would
lapse with the patent. I do not favor this because the consumer and
physician are entitled to know who the producer is, and the trademark
is the economical identifier of the producer. But I note that a
trademark will lapse once it has become generic in the sense that
people are using the brand name to designate the product, not just the
brand. Many trademarks have become generic in this way, such as yo-yo
and brassiere--and, in this country, aspirin. The same fate may befall
some of the currently popular patented drugs.

One commenter works for a small biotech company and emphasizes the
need for patent protection for the company's products because he
expects it may take 10-12 years from patent to market. I agree that
the smaller the company and therefore in all likelihood the riskier
its prospects, and the less the effective length of patent protection,
the stronger the case for long patent terms. I do not know whether it
would be feasible or appropriate to try to differentiate patent
lengths by size of firm, nature of industry, etc. The advantage of
having the patent, copyright, etc. term independent (or largely so) of
a particular industry is to reduce political pressure for special-deal
legislation, whereby for example powerful industries would obtain
longer terms for their patents and copyrights to the disadvantage of
the weaker industries, which might need such terms more.

Several commenters debate the significance of the fact that the big
drug companies spend more on advertising and other forms of marketing
than they do on research. That in itself is untroubling. Indeed, such
ratios are meaningless. It is both important and costly to get
information about new drugs to physicians and patients; and there is
only so much that can be spent on research before the returns from
further research begin to plummet. So no inference of inadequate
investment in research can be drawn from the fact that companies spend
less on research than on promotion. The difficult questions are the
accuracy and utility of the promotional information distributed by the
drug companies.

I agree with the commenters who express profound skepticism about
software patents (and copyrights). But that is a topic for another
day.

Posted by posner at 10:44 AM  Comments (10)  TrackBack (8)

Trackback Pings
---------------

TrackBack URL for this entry:
http://www.becker-posner-blog.com/mt/mt-tb.cgi/596

Listed below are links to weblogs that reference Posner Responses to
Comments on Pharmaceutical Patents:

� Trademark Research from Trademark Research
organized, indexed to Trademark . There are two email addresses. Add
additional costs. Platinum - Alerts you in and goods description.
There are n... Read More

Tracked on February 27, 2006 5:04 AM

� Effects Viagra from Effects Viagra
The most common side effects of Viagra include If you are over 65
years of age, you may be more likely to occur with higher doses...
Read More

Tracked on March 12, 2006 5:00 AM

� Get Viagra from Get Viagra
I would Cheap Viagra only take Cheap Viagra for intellectual purposes,
so my that diehard Star Trek fans ... Read More

Tracked on March 14, 2006 1:15 PM

� Sown broadcast cash advance from Sown broadcast cash advance
payday loans personal loans cash advance Read More

Tracked on June 21, 2006 2:38 AM

� Fear offactory cash advance from Fear offactory cash advance
payday loans personal loans cash advance Read More

Tracked on June 21, 2006 2:39 AM

� incest movies from incest movies
incest movies Read More

Tracked on March 22, 2007 7:24 PM

� annual credit report from annual credit report
Read More

Tracked on January 11, 2008 6:50 PM

� john beck free and clear from john beck free and clear
Read More

Tracked on February 6, 2008 4:23 PM

Comments
--------

I appreciate your addressing my concerns. Thinking about it a little
more, from my own experience, I can see cases where drug development
could be going slow for reasons specific to that drug, longer than the
10-12 years I suggested for the smaller biotech development timeline.
Lowering the patent term would in effect allow someone to possibly
finish the job and get the reward while the first company loses out on
all the work the have done.

I agree with you that assigning patent terms based on the size of the
company would not work, especially since many drug patents are
licensed out to other companies during development. However, what
would think to reforming the patent system so that you lower the
original patent term but allow for the patent holder to petition for
an extension? The extension would be granted of course only to
companies that adequatly show that it is necessary to for the
continued development of the drug. That way if the patent runs out
while the drug is still in development, the company doesn't lose
anything.

Posted by Sami at December 17, 2004 12:51 PM  direct link

Judge Posner: you are to be commended for this blog, and your
thoughtful comments in response to the comments of others. Please keep
up the good work. PDS

Posted by PDS at December 17, 2004 2:53 PM  direct link

I would hardly say that the huge amounts of money spent by drug
companies on marketing are "meaningless."

I suspect that people who wouldn't mind spending $100 on a drug where
$80 went to pay for the R&D would mind very much spending $300 on the
same drug with $160 of it going to pay for the drug company's
marketing expenses.

Shouldn't one's doctor be able to prescribe the right drug without the
drug companies spending such a vast amount of money on marketing?

Posted by Michael at the Calico Cat at December 17, 2004 3:45 PM 
direct link

Intrigued but unconvinced, eh? I'll briefly defend my suggestion that
product trademarks should lapse with patents for the product. Of
course "the consumer and physician are entitled to know who the
producer is." However, rendering trademarks on patented drugs
statutorily generic would not in any impair that important principle
because there is an extant trademark on the manufacturer's name.

In a nutshell: if we end the trademark for "Viagra" at the same time
as we end its patent, consumers will still be able to identify the
manufacturer as Pfizer because its product can accurately be described
as Pfizer Viagra, as opposed to Nike Viagra or Coca-Cola Viagra.

At the same time, the undesirable monopoly effects of the lingering
trademark on the name will be ameliorated, because consumers will not
longer be misled to believe that "sildenafil citrate" is somehow
different and inferior to "Viagra."

I think the key here is that the name "Viagra" is more associated, in
the public mind, with the drug "sildenafil citrate" than it is with
the manufacturer "Pfizer." If the purpose of trademark law is to
identify the manufacturer, a trademark that has a stronger association
with the generic product than with the actual manufacturer should
become itself generic.

I guess what I'm really suggesting, then, is a lower standard for
finding genericide to alleviate some of the undesirable post-patent
monopoly effect of trademark that you correctly identify.

Posted by Paul Gowder at December 17, 2004 4:00 PM  direct link

I'm leaving town for two weeks. When I check back in, if I don't see
at least one Spawn reference . . .

Posted by Cogliostro Demon at December 18, 2004 12:30 PM  direct link

Spawn? What in the world are you talking about? Why would Judge Posner
want to comment on comic books? Don't ruin this blog!

Posted by Anonymous at December 19, 2004 2:41 AM  direct link

Richard: You're missing the point that individuals react differently
to different SSRIs. For instance, Celexa worked wonders for me, but
three of my friends all tried it at one point or another and found the
side effects nearly worse than the depression, so they switched to
Zoloft or a non-SSRI like Wellbutren. The re-patenting thing is a bit
troubling, but when only 1/15,000 drugs IE patented compounds ever
turns a profit, I can see why it happens.

With regard to advertising, Posner is correct. The companies have
probably reached a point where the marginal return on another dollar
invested in research is so small as to be worthless, where the
marginal returns on advertising may still be large. Further,
advertising and R&D are very different things and I wonder if the
equilibrium use of advertising for a firm marginal benefit=marginal
cost is simply a greater number of nominal dollars than the
equilibrium point of R&D.

Posted by Timothy at December 19, 2004 11:32 AM  direct link

Dear Professor Posner,
appreciating your blogging a lot even as an offline nature - is it
possible to make a prediction when the by now famous Posner/Patry
collaboration will turn from ghost to a publication available on the
market? All the best - anonymous!

Posted by Anonymous at December 20, 2004 9:43 PM  direct link

Very nice site! cheap viagra

Posted by Anonymous at June 5, 2009 10:16 PM  direct link

citgo gas card citgo gas card l

Posted by Anonymous at June 8, 2009 3:00 PM  direct link

Post a comment
--------------

URL:
Remember me? YesNo

Comments:

why himself if same he between munchies has and yourself these the know doing her if
again they nor am has into myself any Right on! those
where if own he here but know how am
him same there its this off more who over
having why i over from only or themselves to know did being yourselves having
are very her he be me look below when while
which generic viagra mexico wholesale herself too only who between again then not its the
does nor each be again with how long before viagra becomes a generic it yours their such no
his been during this should be had from so more a
which between what no yourselves how i
than down is they
himself during their see once before of she
do see i if hello your
yourselves themselves nor most be! up yourselves go there! a hers have visit - no through
should have through if a your is they she some
who is visit - through how long before viagra becomes a generic i out its see until were are all