Do Patents Increase the Price of Drugs?

Last Updated at: Jul 25, 2020
Do Patents Increase the Price of Drugs
Two health activist groups have called on the Indian government to suggest rescinding the patents for remdesivir from Gilead Sciences so that it can be distributed more widely to coronavirus people around the globe, especially in poorer nations.


Innovation is what gives life to the whole pharmaceutical industry because it is primarily a knowledge-driven field. Without inventors striving for innovation, people would never have access to generic pharmaceutical drugs. However, these generic drugs sell for a much lower price, which, while benefiting the poor, might not do a lot of good for large companies. Furthermore, the cost of research and innovation in the field of pharmaceuticals is massive and quite unpredictable. Patents help large pharmaceutical companies legally protect their intellectual property.

Too often, though, individual drug companies patent several features of drugs that don’t require a lot of innovation. These are attempts to bury their competition from creating generic drugs, which makes things difficult for ordinary people. Therefore, people need to strike a delicate balance between patenting for protection and patenting to make more money. How does one create a divide like that? Do patents increase the price of drugs? Let us take a look at both sides of the argument and come to a conclusion.

  1. Debating Drug Policy

  2. Generic Drug Manufacturers

  3. How do medicine prices increase?

  4. Are medicines in India expensive?

  5. How are things abroad?

  6. How to Solve the Problem of Drug Pricing Surges

Debating Drug Policy

Growing concerns that people are not getting the right access to drugs and that the healthcare industry is not financially accessible are evolving. Around the world, medicines are getting pricier, which makes things difficult for the middle-class. India’s health care system took up only 1% of its GDP, up until a few years ago, whereas the world’s average was 6%. Hence, it is clear that we need to develop a better understanding of what policies affect drug prices so that we may control them and prevent inflation.  

Patents are very useful in innovative sectors, as they give companies incentives to invest in research and experimentation. However, studies show that only 5% of the drugs made in India are patent-protected. For instance, India has over three million people who suffer from cancer. However, in the last few years, only seven new cancer drugs have come out into the market, whereas around the world, there have been over 50 new therapies. Studies done by MIT show that out of 184 drugs approved by the FDA to be sold in India, over 50% faced delays due to marketing approval. These delays sometimes lasted up to five years, meaning that they found their way into India only much later.

get your idea patented 

Generic Drug Manufacturers

After receiving marketing approval, these new drugs will quickly be manufacture and sell as various generic drugs by Indian manufacturers within one year. Researches say that this shows how much people have lost faith in the patent regime. If these studies are indeed accurate, then it spells bad news for both pharmaceutical companies and patients. The WHO had recently announced that the world would soon run short of antibiotics, due to the evolution of drug-resistant infections. They believe that the speed of growth of such drug-resistant microbes would be faster than the speed of making new drugs. Most of the world’s major drug companies are shutting down their antibiotics research, opting instead to focus on drugs for diseases. This happens because specific drugs are more profitable than necessary medications like antibiotics and antivirals.

How do medicine prices increase?

As per studies done by the WHO, over 50% of a drug’s final market price is due to factors external to its manufacturing process. Most drug price regulation techniques are ineffective as their mechanisms are not connected to the factors that result in the price surge. Furthermore, poor implementation of such methods due to inefficiency and a lax attitude from the government results in further surges. China’s strategy to counter the increase in prices of patented drugs is an interesting one that deserves mention here. China recently cut costs of patented medicines by around 70% when it comes to government insurance schemes. However, they did so without tampering with the process of granting patents. Therefore, this helped make the drugs affordable to patients while also ensuring a consistent revenue stream for the pharmaceutical companies.

Are medicines in India expensive?

Studies by Bloomberg show that drug prices per monthly unit in India for diseases like diabetes, hepatitis, and asthma were 4%, 2%, and 3%, respectively, when relate to the US prices. Therefore, people in India pay less for their drugs compared to those in the US, China, and Brazil. However, cheaper drugs come at the cost of time. As these drugs take a lot longer to be available in the Indian market. The excessive delay in availability and weak incentives for innovation amongst Indian pharmaceuticals is a problem that we need to face. To uplift our pharma industry even further, the government must build an ecosystem that inspires and promotes medical innovation. 

How are things abroad?

A recent study of the American pharma industry showed that the price of branded drugs rose by 68% since 2012. With only one pill in the top 12 has become cheaper. Furthermore, more than half of this top twelve has over 100 patent attempts per pill. To showcase how to patent monopoly works, let us take a look at an example. HUMIRA, manufactured by AbbVie, is the world’s best-selling prescription drug, and sales in the US alone exceed $12 billion annually. Approved in 2002, the drug has been minting money for its parent company since then, and its patent ran out in 2016. However, AbbVie filed for 75 other patents from 2013 onwards to ensure that its monopoly extends well into 2034, making the drug inaccessible to many!

How to Solve the Problem of Drug Pricing Surges

  1. Eliminate bad patents efficiently to ensure that only innovation is promoted and not greed. 
  2. Bring a better structure to the governing body to make sure patent examiners do not get overloaded.
  3. Eliminate invalid patents to end the monopoly and allow free-market competition.
  4. Ensure that patents do not create problems for biosimilar competition after its expiry.

The foundation of the patent system must be to strike a balance between the interests of the public and pharmaceutical companies that promote innovation. Extending patent protection by covering off rights to treatment methods, active ingredient use, and drug molecules limit people’s access to drugs at more affordable prices. Off-patent competition does not start once. The patent expires due to other subsidiary patents that cover every aspect of the medicine. However, the expiration of a license does not always ensure lower prices. It is because generic firms refrain from entering large numbers or very quickly so that they can get higher profits. It is therefore clear that the high cost of drugs is not entirely due to the Indian patent system. But, rather due to a combination of factors which we must combat to improve drug accessibility and affordability.