Have you ever wondered why your antibiotic is so expensive? The answer is not as simple as it would seem. The answer is much more simple. The drug company is doing the imperative of every company in the capitalist paradigm. Making the maximum return on investment is the paramount objective. If the company is privately or publicly owned there is no difference.
A key component of profitability is the company’s ability to have “pricing power” in the marketplace. In lay terms, can the company price its products to maximize profits per item? A key component of pricing power is the presence of or not of competition. Competition reduces pricing power; without which pricing power can be maximized. Consequently, the ability to decrease competitive risk is vital. A not often examined part of the profitability paradigm is the patent system.
Most of us know enough about patents to continue to support their continued presence and influence over our economy. Unfortunately, what we know is inadequate to make good decisions. The patent system was designed to give inventors the ability to protect their work for a finite period from theft while allowing others to see the details of a novel work. At the birth of the system it was argued that it would encourage inventors to develop on the works of others while allowing the original developer to have protection from loss of economic benefit. It can be argued that the system has worked very well. However, the current incarnation of the American patent system has drifted significantly away from the original intent.
With the only goal of modern corporations being to maximize profitability the patent system as been adjusted significantly to make it work for big business. The protected period as lengthened over the years. Various legal and technical methods have been used to extend the protected period. This time is used to maximize pricing and profits from the protected product. This is not a bad thing for the company that is benefiting. It is following the primary objective of capitalism, maximize return on investment.
For the individual that is not a shareholder the system is not as beneficial. There are two things that disadvantages the individual, she is deprived of the potential of a better product from the work of another developers improvement on the original and she is deprived of making a better return on her resources secondary to the excessive cost of the product she is buying. The lack of competition is further detrimental to the community as a whole for the same reasons. Even the company that is doing all to maintain its competitive edge by excluding others from the marketplace is losing. The company loses by the loss of the competition that would push it to bring a much improved product to the marketplace.
If the system is objectively examined there is only one conclusion, the patent system as significantly deviated from the original design and should be abolished. I would completely abolish the patent system and unleash real competition into the marketplace. What say you?