THE US Supreme Court recently began deliberations in a case that highlights a deeply problematic issue concerning intellectual property rights. The court must answer the following question: can human genes be patented? Put another way, should someone be permitted to own the right, say, to test whether you have a set of genes that imply a higher than 50% probability of developing breast cancer?
To outsiders, the answer seems obvious: no. You own your genes. A company might own, at most, the intellectual property underlying its genetic test; and, because the research and development needed to develop the test may have cost a considerable amount, the firm might rightly charge for administering it.
But a Utah-based company, Myriad Genetics, claims more — to own the rights to any test for the presence of the two critical genes associated with breast cancer. It has ruthlessly enforced that right, although its test is inferior to one that Yale University was willing to provide at much lower cost. The consequences have been tragic: thorough, affordable testing that identifies high-risk patients saves lives. Blocking such testing costs lives.
This is a particularly poignant case. Usually, economists talk about trade-offs: weaker intellectual property rights, it is argued, would undermine incentives to innovate. The irony here is that Myriad’s discovery would have been made in any case, owing to a publicly funded, international effort to decode the entire human genome. The social benefits of Myriad’s slightly earlier discovery have been dwarfed by the costs that its callous pursuit of profit has imposed.
More broadly, there is increasing recognition that the patent system not only imposes untold social costs, but fails to maximise innovation — as Myriad’s gene patents demonstrate. After all, Myriad did not invent the technologies used to analyse the genes. If these technologies had been patented, Myriad might not have made its discoveries. And its tight control of its patents has inhibited the development by others of better and more accurate tests for the gene. The point is a simple one: all research is based on prior research. A poorly designed patent system can inhibit follow-on research.
Fortunately, what motivates most significant advances in knowledge is not profit, but the pursuit of knowledge itself. This has been true of all of the transformative discoveries and innovations — DNA, transistors, lasers, the internet and so on.
A separate US legal case has underscored one of the main dangers of patent-driven monopoly power: corruption. With prices far in excess of the production costs, there are, for example, big profits to be gained by persuading pharmacies, hospitals, or doctors to shift sales to your products. One New York legal official recently accused the Swiss pharmaceutical giant Novartis of doing exactly this by providing illegal kickbacks, honoraria and other benefits to doctors — exactly what it promised not to do when it settled a similar case three years earlier.
Sadly, the US and other advanced countries have been pressing for stronger intellectual property regimes around the world. Such regimes would limit poor countries’ access to the knowledge that they need for their development — and would deny life-saving generic drugs to the millions of people who cannot afford the drug companies’ monopoly prices.
The issue is coming to a head in World Trade Organisation (WTO) negotiations. Its intellectual property agreement, called Trips, originally foresaw the extension of "flexibilities" to the 48 least-developed countries, where average annual income is less than $800. The original agreement seems remarkably clear: the WTO shall extend these "flexibilities" upon the request of the countries. While these countries have now made such a request, the US and Europe seem hesitant to oblige.
Intellectual property rights are supposed to improve social wellbeing. But unbalanced intellectual property regimes result in inefficiencies — including monopoly profits and a failure to maximise the use of knowledge — that impede the pace of innovation. And, as the Myriad case shows, they can even result in unnecessary loss of life.
The US’s intellectual property regime — which the US has helped to foist upon the rest of the world through Trips — is unbalanced. We should all hope that, with the Myriad case, the Supreme Court will contribute to a more sensible and humane framework.
© Project Syndicate, 2013.
• Stiglitz is a Nobel laureate in economics and a professor at Columbia University.