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Source link: http://archive.mises.org/16359/fda-and-uspto-joint-killers/

FDA and USPTO: Joint Killers

April 5, 2011 by

In my posts Update: Patents Kill: Compulsory Licenses and Genzyme’s Life Saving Drug and Patents Kill: Compulsory Licenses and Genzyme’s Life Saving Drug, I noted that, due to the monopoly granted by patent, people suffering from the genetic illness Fabry disease are unable to obtain the drug Fabrazyme, which is in short supply because the sole, monopolistic manufacturer, Genzyme, can’t make enough quickly enough–and no one else is permitted to make it due to the patent.

In the latest round of this saga, lawyer Allen Black, representing two of the victims pro bono, filed a petition for “march-in” rights with the Secretary of the Department of Health and Human Services, requesting that the DHHS provide a license in order to manufacture Fabrazyme. Sadly, the NIH denied the march-in request in December. But, as Black explained in an email,

the NIH denied the petitioners march-in request stating that they did not believe that allowing other manufacturers to make the patented product would remedy the shortage because administrative laws of its sister agency (the FDA) make it impossible to timely manufacture the drug.

Or, as Black’s press release notes, “the NIH stated that the FDA regulations prevented a manufacturer from entering the market in time to remedy the current shortage.”

So: government issued patent monopolies cause a shortage. The government that grants these odious monopolies has statutory authority to issue compulsory licenses–i.e., to partially weaken the monopoly privilege they previously granted. But they choose not to here, because the FDA’s regulations would prevent any competitors from using the license in time to meet the shortage. This resembles the law school hypos about cause-in-fact (sometimes called “but-for” causation): if A and B both shoot C at the same time, A can say he is not a cause-in-fact of C’s death since even if he had not pulled the trigger, B’s bullet would have killed C. Of course, B can make the same argument. If such legal legerdemain is permitted, both A and C could avoid responsibility by pointing the blame at each other. The proper approach is to consider A and B to both be C’s murderer. And so it is here: the combined effect of the FDA and patent office is killing people–in other words, the American central state.

{ 13 comments }

Brooks April 5, 2011 at 11:50 am

For the sake of argument let’s assume this drug cannot be reverse engineered and Genzyme decided to keep it as a trade secret instead of getting a patent.

Should the government intervene to break up this “private monopoly” and force Genzyme to disclose how the drug is made?

Inquisitor April 5, 2011 at 11:59 am

No one has a right to the product, so no, but that isn’t the argument in question. Rather, it is whether the government has the right to restrict production by other firms who could reverse-engineer it or otherwise acquire the information. Were Genzyme to keep it a trade secret at its own expense, there would be no issue.

Brooks April 5, 2011 at 12:19 pm

No argument here on the perversity of government-enforced monopolies and ludicrous FDA rules, but replace the word “patent” with “trade secret” in the first paragraph in the article and read it again.

I think an argument against IP based on the fact that patents create artificially low supplies of products falls a little flat. The same artificially low supply of a drug can occur through private means, i.e. trade secrets. I think calling the USPTO and FDA “killers” is a bit of hyperbole because I doubt the author would call Genzyme a “killer” if it kept the drug as a trade secret.

In other words, I think patents/copyrights are bad because of the government force involved, not because they create product shortages. If you use product shortages as the basis of your argument, you can’t really defend trade secrets.

J. Murray April 5, 2011 at 12:23 pm

Trade secrets can be discovered via reverse engineering. It’s likely that numerous companies can produce Fabrazyne quite easily with a simple protein sequencer.

Brooks April 5, 2011 at 12:39 pm

That’s why I prefaced my first comment with “for the sake of argument…”

However, it’s not true that all trade secrets can be reverse-engineered. It’s not a trade secret if it’s easy to reverse engineer. Obviously any mechanical device can be reverse-engineered, but it can be impossible to reverse engineer chemical compounds because the finished product might not tell you much – you need to know the process. Think metallurgy, for example. Even if your million dollar engineering team has a hunk of “Rearden Metal” to study, that doesn’t mean it’s possible to figure out the precise temperatures, materials and heating/cooling cycles required to produce it.

Theoretically there could be an artificial shortage of Rearden Metal due to a government enforced patent, or there could be an artificial shortage of Rearden Metal because it’s a trade secret that no one can reverse engineer. The artificial shortage is not the immoral part; the government enforcement is.

I don’t think many anti-IP people would argue that keeping trade secrets is an immoral business practice, so I don’t think making an anti-IP argument based on an implied immorality of artificially created product shortages is very strong.

Anti-IP Libertarian April 5, 2011 at 2:06 pm

“so I don’t think making an anti-IP argument based on an implied immorality of artificially created product shortages is very strong.”

Yeah that (stating that patents lead to possible shortages) is a typical utilitarian argument. They are all flawed as a basis for justice.

They can imho only be used to show what else is possibly a problem with certain actions but not as a basis for deciding what’s right and what’s wrong.

J. Murray April 5, 2011 at 3:31 pm

Molecular medicine maybe, but most medications are based on proteins and those can be reverse engineered and produced rather simply. Additionally, I can get a pretty good idea of what is in Rearden Metal using atomic mass spectrometry and then doing a fine tune of the component parts of the alloy. Molecular medication would be a bit more difficult as it would then be trial and error to figure out how the compound was formed, but I’d still know what was in it. I did a bit of that when I took a course on physical chemistry back in my “I have no idea what I’m doing in college, so I’ll take a bunch of random courses and see what’s fun” days.

You’d be surprised there’s amazingly little out there that can’t be easily reverse engineered by a competent individual. Even things like recipes at a restaurant are remarkably easy to reverse engineer. I’ve figured out Skyline chili to perfection, for instance and like to engage in little competitions to see who can be the first to figure out how a special sauce or other dish at a restaurant is made. Only managed to pull off the chili one, but out of about 8 of us, we typically pull it off without fail within a week.

In any case, I would say that trade secrets are the best way to keep your product close to the cuff. Patents tend to ruin everything by putting up drawings and explanations on how the product is made. Relying on a government to protect your product once the secret is out is pretty ridiculous. If you do come up with something next to impossible to copy, by all means, don’t tell anyone how to make it if you so choose. There’s nothing stopping you from withholding information, just like there’s no stopping someone else from competing when they figure out how you did it.

Anti-IP Libertarian April 5, 2011 at 2:01 pm

No.

If you keep your information to yourself, why should anyone be allowed to pry it out?

On the other hand: If someone gets to know the information without (!) committing a real crime (not those statutory law infringements) than why should he not be allowed to use his own property with that information?

Wildberry April 5, 2011 at 3:13 pm

@Brooks April 5, 2011 at 11:50 am

Right. And what if the patent holder was just mean and withheld the medicine from the market entirely? Does Stephan advocate something like patent eminent domain?

Anti-IP Libertarian April 5, 2011 at 3:53 pm

“Does Stephan advocate something like patent eminent domain?”

Do not be dishonest. There is no information right. If someone wants to keep an information for himself he shouldn’t tell anyone WITHOUT a NDA.

Walt D. April 5, 2011 at 3:14 pm

Patent or no patent,this makes no economic sense.
What you are saying is that if A is making a profit on a particular product and can not meet demand, then it is in A’s economic interest not to expand nor to sub-contract the production to someone else under a license agreement?

Sione April 6, 2011 at 1:57 am

Brooks

“Obviously any mechanical device can be reverse-engineered, but it can be impossible to reverse engineer chemical compounds because the finished product might not tell you much – you need to know the process. Think metallurgy, for example. Even if your million dollar engineering team has a hunk of “Rearden Metal” to study, that doesn’t mean it’s possible to figure out the precise temperatures, materials and heating/cooling cycles required to produce it.”

Not so.

Once I have the sample in the lab I can rapidly discover what is in it, what the microstructure is like and from there it is all standard engineering practice. Rearden metal would give up its secrets pretty much as J Murray illustrates. It is what it is. Each constituent has particular attributes and properties. One can work out what processes to try. Some trials and you’re on-track soon enough.

Anyway, the best thing to do with a new product is to get it on the market. Take first mover advantage and go as far as you can as fast as you can. The trouble with IP nonsense (like patents) is that it encourages slothful delay, rent-seeking activities, priviledge hunting and the like, to the expense of the entrepreneurial innovator. An extremely interesting example is disclosed in the introductory chapter to Boldrin and Levine book “Against Intellectual Property”. It would appear the industrial revolution was delayed by a generation…

Sione

Walt D. April 6, 2011 at 1:13 pm

Sione:
“Once I have the sample in the lab I can rapidly discover what is in it, what the microstructure is like and from there it is all standard engineering practice. Rearden metal would give up its secrets pretty much as J Murray illustrates. It is what it is. Each constituent has particular attributes and properties. One can work out what processes to try. Some trials and you’re on-track soon enough.”
I’m not sure it is that easy. It is not easy to make a Samurai sword. If I gave you a metallic glass golf club, I don’t think you could copy it. If I gave you hardened plastic, I don’t think you could copy it. The reason for this is that you would need to understand the manufacturing process.
Here is an anecdote – back in 1984 a friend who was a mining engineer went to China to work at a coal mine. The US company shipped a Caterpillar drill. He saw it unloaded off the plane. It arrived 6 weeks later at the mine site. It had been dismantled and reassembled – presumably every part had been measured. He went back 2 years later. The Chinese had cloned the drill. However, their drill kept on breaking down. Although they had the blueprints, they did not have the quality of steel, nor the precision engineering tools to manufacture an equivalent product.

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